Inside Arthur Andersen

Inside Arthur Andersen: Shifting Values, Unexpected Consequences
Susan Elaine Squires, Cynthia J. Smith, Lorna McDougall, William R. Yeack

 

Inside Arthur Andersen uncovers the roots of Andersen’s implosion, tracing its spectacular two-decade transformation from staid auditor to aggressive consulting firm-and the profound change in corporate culture that led to its self-destruction. The authors have spent many years studying the Andersen culture, and their story offers profound lessons for every organization.

Think Straight, Talk Straight

Arthur E. Andersen was bright and ambitious but he was also blunt, domineering, and unforgiving. From the beginning of Arthur Andersen & Co., the firm used Arthur’s experience, reputation, and vision as the foundation of its competitive advantage. But it was not just what Arthur did professionally that was so remarkable; it was the spirit in which he did it. Arthur Andersen could not be bought.

“Think straight and talk straight” was the principle on which Arthur E. Andersen built his accounting practice. It was a phrase his mother had taught him. It became the firm’s motto and appeared on many internal documents. The commitment to integrity and a systematic, planned approach to work is what he offered his clients, and this brand of audit proved attractive to both corporate clients and investors.

Within the firm, stories circulated for decades after his death about how he had done the right thing when it was not the only choice but when it was the less profitable or more difficult choice. In one such story, Arthur faced a client who had distorted earnings by deferring large charges, rather than reflecting them in current operating expenses. The president of the company flew to Arthur Andersen’s office in Chicago and demanded he change the audit certification to suit the client’s version of the truth. Arthur replied, “there is not enough money in the city of Chicago to induce me to change the report.” Arthur lost the client but gained something more important — a reputation for straight talking.

“I keep thinking of other cases where companies had done wrong. When the Exxon Valdez dumped oil in the ocean and destroyed the Alaskan coastline, Exxon pinned the guilt on the captain very quickly, paid their fine, cleaned up the mess, and are still in business. Or the Tylenol tampering case 20 years ago; it wasn’t Tylenol’s fault, nevertheless, they pulled their product off the market very quickly. They took responsibility for the situation to fix the problem. Andersen didn’t step up to take responsibility for the Enron problem. Granted, Enron had caused the problem by manipulating their books and by giving Andersen a false set of facts. They didn’t create the situation, but they did play a part. Andersen could have salvaged its reputation by taking some responsibility. I don’t think they recognized that they were losing the public relations war. It is amazing to me how quickly everything unraveled.”