PAUL HOLMES: Ongoing corporate shenanigans stay under the radar as media remains focused on war

The fact that there is a war going on means scant attention is being paid to corporate news, which is bad if you have a great new product to unveil, but good if you want to draw as little negative attention as possible to controversial announcements. And there has been no shortage of depressing news over the past week or two - most of it pointing to the fact that corporate America has failed to learn any lessons from the scandals of the past two years.

The fact that there is a war going on means scant attention is being paid to corporate news, which is bad if you have a great new product to unveil, but good if you want to draw as little negative attention as possible to controversial announcements. And there has been no shortage of depressing news over the past week or two - most of it pointing to the fact that corporate America has failed to learn any lessons from the scandals of the past two years.

First, there was good news for CEOs upset that they can no longer call on Andersen to undermine the credibility of their accounting. Now they are able to turn to Deloitte Touche Tohmatsu (DTT), which announced last week that it would not be joining other big firms in separating their accounting and consulting practices. The company made the announcement late Friday night, which suggests it knew what the media reaction would be. And sure enough, by the middle of the week, The Wall Street Journal was reporting that General Motors had dropped DTT's consulting units. Then came news that Hewlett-Packard - once considered a progressive leader, mindful of its key stakeholders' concerns - had decided to oppose shareholder proposals that called for mandatory expensing of its stock options, and to secure shareholder approval to set up a new poison-pill scheme. Company management won on the former issue - although the victory is likely to be merely temporary - and lost on the latter. Perhaps more important, it also forfeited an opportunity to reposition itself as a leader on corporate governance issues. And finally there was EDS, which lost $24 billion in market value in 2002, and thus decided to get rid of CEO Richard Brown. Presumably, the board could have made a pretty good case that Brown was being dismissed with cause, but the CEO's contract indicated he could only be terminated with cause for outright dishonesty, so he's collecting $37 million in severance. That may be a small price to pay compared to the damage he might have done given another year at the helm, but Brown's bounty stands in stark contrast to the fortunes of thousands of EDS employees who were terminated as a consequence of their leader's incompetence: Brown had ordered their severance pay to be cut from 26 weeks to just four. So much for the idea that the CEO should share the sacrifice of his troops! Perhaps these stories will all be forgotten six months from now, but if they are an indication of the prevailing attitude in corporate America, there will be many more incidents to reinforce investor and public cynicism and dampen whatever post-war rebound the economy might experience.
  • Paul Holmes has spent the past 16 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of www.holmesreport.com.

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