Why it pays to play it straight in business

December 29th, 2005

One of my favorite classes this past semester was Financial Accounting. What’s ironic is that my interest wasn’t exactly for the subject matter. (Quite honestly, if I don’t have to analyze another deferred tax asset situation, I’m fine with it.) On the contrary, it was really the professor that taught the course — Dr Eric Hirst — who made the classroom a fun place to be on a Tuesday evening.

Eric has very likeable qualities in a professor — honest, funny and sarcastic, but most importantly, a strong moral compass. He was constantly questioning the desire for some managers to manage earnings in financial statements. Most managers play it straight, he would say, but the small percentage of those that don’t are asking for it. A little bit here, a little bit there, what’s the big deal? Well, these things add up. And you will eventually get called on it, one way or another.

What really drove his point home, though, was when he brought up Richard Causey. Causey was a former graduate of McCombs (CPA ‘82), and used to attend the same classes we do now, sitting in the same seat we sit in now. And Causey made a mistake at his old job. He went along with Andrew Fastow’s schemes at Enron, presumably after he went through the same exercise in ethics we all received over the semester.

That fact really dove home the point for me. As a manager, it is imperative that you guide financial decisions using that moral compass. You can’t ignore it just because you think you won’t get caught. No, I definitely get it now.

At the very least, I am happy to see Causey admit wrongdoing to the courts the other day. In his lawyer’s words, “it was the right thing to do.” Damn straight.

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