Customer Reviews

Building Public Trust: The Future of Corporate Reporting

5 star:		(11)
4 star:		(2)
3 star:		(0)
2 star:		(0)
1 star:		(2)

 

 

There is a risk that this thoughtful proposal for a new way of formatting business disclosure will be overshadowed by the spectacular bankruptcies and accounting scandals of the day. What the market appears to be looking for in the summer of 2002, with headlines of business disasters at Enron, Global Crossing, Adelphia Communications, and WorldCom, are corporate wrongdoers in orange jumpsuits and silver bullet solutions from the SEC and Congress. But "building public trust" requires a more patiently developed strategy as well as immediate action. The underlying issue here is a spirit of transparency, a charged word for anyone in the "corporate reporting supply chain" (viz., corporate captains, accountants, security analysts, investors). Transparency is nothing less than a legal and ethical obligation to make available sufficient information on which to base an investment decision. More transparency will not prevent business failure, the capitalist's place of Hell, but it does offer the promise of fewer shocks, less investor pain, and a more efficient deployment of capital. Samuel A. DiPiazza Jr and Robert G. Eccles call for a three tiered approach to reporting this information. It is a holistic approach in search of the "real economic entity" and an attempt to move away from the obsession with quarterly earnings numbers, the so-called "earnings game". Is there a place for pro forma earnings? Pro forma earnings, so maligned, may have a useful role for highly acquisitive companies where unusual events are a pattern. But pro forma should be supplemental to GAAP [Generally Accepted Accounting Principles] not a substitute. At the base of the authors' three tiered model is a reconciliation of GAAP with other country-based standards to achieve a Global standard. At a second level of disclosure industry specific issues need to be reported and evaluated. It makes sense that an R&D pipeline of new drugs is critical to a pharmaceutical company, while inventory turnover is paramount to a warehouse retailer, and market share gains the key value driver for a computer manufacturer. While progress has been made on setting global accounting standards, much work is needed by industry associations to define and measure values especially important within their sector. Tier three information would also report on many nonfinancial issues identifed by a company as important to them in particular such as initiatives on product and service quality, customer loyalty, employee satisfaction, etc. If these matters are, as surveys show, a high priority with companies, they should be reported, evaluated, and factored in investment decisions. The internet offers an opportunity to make this information available on a continuous basis. The use of XBRL (Extensible Business Reporting Language) by Microsoft, Morgan Stanley, and a few other companies allows information to be 'tagged' with a contextual description for retrieval wherever it is buried. Accessibility is just another aspect of transparency. This is a slim book with an ambitious agenda that should be read by board members of publicly reporting companies.

This book is not what I expected. A friend who knows I occasionally sit on boards passed it along. I was suspicious--most books by consulting firms are really pamphlets on steroids, a cute idea puffed up by a bit of bombast, some ambiguous examples, and a metaphor that the author thinks is profound but really reads like something from the margins of a high school year book. Still, you have to read your friends' book recommendations, so I did. Bottom Line: It's pretty good, and worth a read.

I found it a thoughtful and useful take on a very difficult problem. Over my career, I've worked in forty countries. The one difference I have found between those that work and those that don't is public confidence in the institutional fabric. The current loss of faith in the U.S.stock market therefore, is a really, really big deal.

This book tackles that issue head on, and offers some good ideas to fix it. Several pieces are particularly good. Directors of Boards should take a look at the Information Supply Chain framework, which is very good. CEO's and CFO's should look at Chapter 4 on metrics. Regulators should seriously tackle this issue of global gaap raised in Chapter 2. (Most large companies are no longer based in just one nation, and having different sets of rules encourages all sorts of gaming that is counterproductive.) Etc.

I docked it one star, perhaps unfairly, because of chapters 5 and 6, which I suspect were written by committee. At any rate, they were much less clear and the writing more convoluted than the first four, which were just plain well written.

At any rate, it is a well intentioned, honest and well thought out effort. I found it useful enough to put a few yellow stickies here and there, and will keep it on my bookshelf.

In the wake of the Enron bankruptcy, there has been plenty of teeth-gnashing about what went wrong, but far too little analysis of what we can do to make things better. Samuel A. DiPiazza, Jr., CEO of PricewaterhouseCoopers, and Robert G. Eccles, a PwC fellow and former Harvard Business School Professor, take a brave stab at addressing the fundamental shortfalls in the process through which companies report their performance. By proposing a new vision of corporate transparency, the authors take an important first step in reforming the corporate reporting system and restoring investor confidence. We from getAbstract highly recommend this book to any readers wondering where the financial community should go from here.

The public trust in corporate America has been shaken in the wake of several recent accounting scandals and, as a result, the capital markets are in upheaval. There is, rightfully so, a public outcry for reform - the government has cranked up its regulatory machine and members the class-action plaintiff bar are sharpening their litigation pencils. Many question, justifiably so, whether such attempts at reform are the legal equivalent of putting a bandage on a gunshot wound. In addition, investors and other stakeholders query whether there can be any meaningful reform to the extent that special-interests and their representatives (lawyers and accountants) are successful in jockeying for position in these efforts.

Messrs. DiPiazza and Eccles present a compelling blueprint for wholesale restructuring of corporate reporting and the concomitant rebuilding of public trust in the capital markets. The foundation for their model is built on the values of transparency, accountability and integrity. Their model -- development of a global GAAP, development and application of industry-specific standards, and establishment of guidelines for disclosure of company specific information -- makes sense given the expansion of capital markets across country-specific boundaries, but also is timely given the wide-availability of enabling technology (i.e., the Internet and XBRL).

Meaningful reform cannot be had solely through governmental reform, the lobbying of special interest groups, self-regulation or lawsuits by regulators and disgruntled investors. The end results will likely be half-baked attempts to address the symptoms of the breakdown in corporate reporting and the capital markets, rather than development of a cure. Accordingly, DiPiazza and Eccles stress that meaningful reform through development of their three-tiered model must be had through open dialogue and lines of communication with all members of what they term as the "Corporate Reporting Supply Chain" which, in a nutshell, includes all stakeholders in the capital markets.

"Building Public Trust: The Future of Corporate Reporting" provides, in plain English, a detailed description of the problems plaguing corporate reporting and roadmap to a meaningful solution. The road to reform, however, is long and, as DiPiazza and Eccles suggest, requires that the journey (read: participation) be undertaken by ALL members of the Corporate Reporting Supply Chain. The book is a must read for corporate directors and officers, regulators, lawyers, accountants, analysts, the investing public and all other persons who (or whose clients) have a stake in the smooth functioning of the capital markets.

The time for open debate on reform is now. It is up to members of the "Corporate Reporting Supply Chain" whether they want such reform to take the form of a lecture leading to mandates by the few, or an open dialogue leading to a consensus by the majority. This book provides its readers with a grounding for developing the tools to accomplish the latter...

A most insightful and timely book that is a must read for regulators, politicians, businessmen, investors, and everyone interested in - and worried about - the state of public trust today. A well written book that lays out some useful and practical advice for changing our approach to and processes for corporate reporting. Best of all the advice is applicable to the world of business immediately - without changing the way we do business completely as Congress is currently debating.

This book is destined to become a classic in its field. therefore, buy it, read it, but don't loan it - because you ought to keep it on your bookshelf and refer to it. If you ahve any interest in investing, this is the best [amount of money] you will ever spend.

The future of corporate reporting was a good read for someone with no background in accounting and auditing. It painted the after-Enron picture very clearly and described the necessary next steps to move the profession forward and rebuild public trust. As a former business reporter I found it very insightful to learn from the auditors' perspective how the different players impact the game.

In the current marketplace, its refreshing to see men of stature like Sam DiPiazza and Robert Eccles taking a step in the right direction. If you are an investor, if you have money in public companies, this is a book you must read!

A very timely and thoughtful work. It's quite easy to criticize our current system of financial reporting both in terms of stakeholder value and human consequences. The nightly business journals do their part by documenting the day's dismal financial calamities. Mr. Eccles takes the next step by offering concrete proposals for building an infrastructure to improve corporate transparency and investor confidence. We hope that all members of the Corporate Reporting Supply Chain will accept this work as a starting point for on-going discussions of this important topic.

Building Public Trust is a thoughtful reflection on the failure of corporate accounting to predict the collapse of Enron and other companies. Its authors - including the ceo of PricewaterhouseCoopers and an ex-professor from Harvard Business School provide a welcome analysis of what's missing in the world of earnings reports. While some of their suggestions state the obvious - that managers should be honest people, for instance - others are more daring. DiPiazza and Eccles propose, for instance, that the internal data managers use to make operational decisions within their company be made available externally. The authors also suggest that each industry follow sector-specific rules, and that accountants be granted more flexibility when they write their audit opinions to reflect what they Really think of the numbers. Let's hope some of our lawmakers take the time to read this.

Amid all the media hype about the worst corporate scandals since the 1920s, this quiet, cogent book tells how to fix the system. The authors clearly understand every step in the financial reporting system and aren't afraid to expose the weak links. They show the big difference between the positive effects of creative destruction and the corrosive effects of creative accounting. Let's hope a lot of people on Capitol Hill read it.