Case_Study_Arthur_Anderson

Case Study: The Rise and Fall of Arthur Andersen Chapter 5 Anthony D. Davis, Sr. Keiser University MBA 572 Dr. Anne Nelson May 21, 2010 A small company that was founded by two men in 1913 grew to become a formidable accounting firm. His name was Arthur Andersen and his accounting firm that was cofounder with partner Clarence Delaney, who later left the company in 1918. Other was a humble man, who adapted the motto “think straight, talk straight" (Dyck/Neubert 2010p 164). To many of the people that knew him and worked with him, Anderson was known as a man of conviction. His reputation led him to always do the right thing but as we are aware of name alone does not guarantee that a great company with great stature and reputation can’t lose its way because of greed. There is a scripture in the Bible that paraphrased states there are three things that cause a man to fall. The first is lust of the eyes, and then lust of the flesh and the last the pride of life. Willingly, the Arthur Andersen Company fell in each one of those areas. They went from a company with a strong reputation and integrity to one that saw only profits. And it was the pursuit of profits caused those partners to vacate their high standard and adapt a life and practice of deceit. It was finally pride; that part of the person that refuses to acknowledge their wrongdoing that brought it down. But does a company have to fall' The answer is no. When entrepreneurs have an idea, trade, or vocation, and act on it to establish a company they maintain within themselves a vision. This vision is what carries a dream from conception to reality. Arthur Andersen built a company that had a reputation for hiring graduates and college and entrenching them into the business as a drill instructor indoctrinates a soldier. Unfortunately, when the vision bearer of a company dies, the only thing that carries on often is the moneymaking ways. This can not only be said of Arthur Andersen Consulting, but also can be said of Sam Walton of Wal-Mart and Dave Thomas, the founder of Wendy's. The many re-organizations of Arthur Andersen because of the fights to control the company caused an erosion of the principles initially established by Arthur Andersen. Divided into three areas; tax, auditing, and consulting, the success of Arthur Andersen derived from his simple motto of “think straight talk straight.” However, they had now become profit by driven. It's one thing for managers to operate under the mainstream management style, but it's and therefore with the owners to have the same style. The company had divided itself into auditing and tax divisions and the consulting division. And these two brothers never got along, and only argue over who should receive profits. It was that added to that found two entities existing after 2000. There was Andersen, and then as Accenture, and the last 20 years of infighting only resulted in every one on each side being driven by profits. This was about profits and the idea that more you get the more you want. A company's yearly projections aim to always show an increase in profitability, and it's in that profitability that the lines become blurry as to what is ethical. One of their largest clients was Enron. In 2000 they were enjoying $52 million in fees which “…expected to double in the following year.” (Dyck/Neubert 2010). And it was greed with Enron, which ultimately found Arthur Andersen's demise. One article clearly stated that former partner over a “consulting unit that offered clients advice on ethics and responsible business practices” Barbara Toffler stated that Arthur Andersen consulting was not murdered; it committed suicide (Gores 2003). As a matter of fact, she said it was said way before the governments’ actions the writing was already on the wall (Gores 2003). She added that her unit never bloomed because “Andersen leadership and structure already had been compromised in pursuit of fees, fees, and more fees” (Gores 2003) She said it was known as “billing our brains out” (Gores 2003). It’s important to note that Andersen was now a global company operating internationally. Consulting was big business, so much so that initially divided with tax and auditing on one side and consulting on the other side, because of the profit potential the tax and auditing division took on consulting too (Dyck/Neubert 2010). Toffler is noted in another journal as stating the fees she had charged a client for consulting was doubled because that’s the way things were done not to mention Andersen’s reputation was impeccable (Randall 2003). One could opine that a kill or be killed climate existed. Concerning the consulting aspect of the business it was noted that the bad apple in Eve’s garden was consulting. If one would hold up auditing and consulting in each hand, the majority would grab consulting because of its project nature (Chennai 2004). The sad part is that Arthur Andersen did not have to lose sight of the vision. They might not have been able to stay small like Andersen wanted but they could have continued to grow and still kept the unity and voice he wanted (Dyck/Neubert 2010 p 164). Arthur Andersen Consulting lost focus and forgot the need to stay within guidelines and produce a product that reflected its founder; honesty and integrity. It’s amazing how the mighty dollar can cause people to kill, steal, and destroy theirs and others lives. The bible says that the love of money is the root of all evil. And Arthur Anderson Company bought the whole plant, root and all. Those initial tale tale signs when the infighting was between Tax/Audit and Consulting and the profits they made, should have been warning to someone that we are headed down a dangerous path. The problem with Arthur Andersen going over the line and engaging in shredding and faulty books while pursuing profit is you don’t know where you, or if you, will stop on the other side. If they had hired graduates and not doled out the money so fast but set up gradual promotion programs then you could have gotten quality people, who desired to be the best with the opportunity to eventually make good money. But once you set a precedent, it’s hard to back track. Greed took out Arthur Anderseon. If it had not been Eron it would have been someone else but it would have happened. The company lost it way and the company was disbanded, however, today many of the same thousands that lost their jobs still have relationships with each other today. It’s said that employees stick together “like survivors of the Titanic” (Gullapalli 2005). So although a company died, its nucleus, the workers, live on keeping the unity that Anderson himself had hoped for (Dyck/Neubert 2010). References: Arthur Andersen: A case of Sucide, not murder. (2004, May). Businessline,1. Retrieved May 21, 2010 form ABI/INFORM Trade & Industry. (Document ID: 643491371 Chandra, G. (2003). The Enron Implosion and Its Lesson*. Journal of Management Research, 3(2), 98-111. Retrieved May 21, 2010, from ABI/INFORM Global. (Document ID: 1967146831). Dyck/Neubert 2010, Management: Current Practices and New Directions, Houghton Mifflin Harcourt Publishing Company Paul Gores. (21 April). Arthur Andersen’s Descent into Greed Leaves Integrity behind. Kinght Ridder Tribune Business News, 1. Retrieved May 21, 2010, from ABI/INFORM Dateline. (Document ID: 326545531). Diya Gullapalli. (2005, May 26). Party Isn’t Over for Arthur Andersen Alumni; Bonded by culture and tradgedy, Ex-Staffers Gather to Reminisce; “Like the survivors of the Titanic”. Wall Street Journal (Eastern Edition), p.C.1. Retrieved May 21, 2010, from ABI/INFORM Global. (Document ID: 844796221).