Controllability Principle in Responsibility Accounting

Controllability Principle in Responsibility Accounting One underlying concept of the traditional management control system is the responsibility accounting. It is viewed as an important feature because it permits the ease of decentralization in M-form organizations. It distributes accountability and provides accounting reports on these distributed accountabilities. It provides a way for large unmanageable organizations to be managed such that all subsystems have similar goals. It can be defined as a system where managers are held responsible for activities under their leadership. Built on responsibility accounting is the principle of controllability. This principle has been viewed as the cornerstone of responsibility accounting (S. Modell and A. Lee, 2001). The principle states that managers should only be evaluated on elements that are within their control. Research literatures on responsibility accounting point to the fact that responsibility accounting and the controllability principle cannot be made independent of one another. The re lationship becomes obvious when both are looked at together; responsibility accounting holds the manager responsible for a particular division but the controllability principle ensures that the managers are held responsible only for factors that they can control. For this reason, Ferrara (1964) called responsibility accounting a communication system with the sole purpose of helping the organization achieve its goals. The controllability principle, therefore, serves to make this communication channel clearer and understandable. The role played by the controllability principle makes it an appealing notion. However, much research articles have argued for the observance of controllability principle as well as against its observance in responsibility accounting. This paper seeks to evaluate the arguments for and against the observance of the principle of controllability. Arguments For and Against the Observance of Controllability Principle Recent research concludes that there are two types of uncontrollable factors within the borders of controllability; internal uncontrollable and external uncontrollable factors. Studies also show that when it comes to controllability, managers consider responsibility accounting fair when the effects of internal uncontrollable factors on their performance is negated in appraisal. The concept of fairness was given in McNally G. (1980) as one of the rationales for observing the principle of controllability. He stated this using the expectancy theory of motivation. The notion of fairness makes the observance of controllability desirable when performance evaluations are carried out on the managers. The controllability principle makes the appraisal a fair one. This is as a result of the appraisal done in consideration of the controllable factors and uncontrollable factors. The result of the appraisal would be a satisfied and possibly motivated manager. Choudhury N. (1986) goes further to sa y that this conforms to the commonly held principle of justice. The equity theory of motivation also helps to explain it further the theory says a fair days work for a fair days pay. In the case of the manager and controllability, this would be a fair assessment for a fair periods work. Achieving organizational goals are very important for any firm and the means of doing that is through the managers of the decentralized firms but if the managers perception of the performance appraisal is unfair, he is demotivated and unsatisfied. He also loses focus and possibly direction. Going by McGregors Y theory of motivation, this could damage the managers perception of his work. He wants to work and put in his best but if his best is judged against things out of his control, this could lead him to learned helplessness or to leave the firm (Nandan C, 1986). For such an organization whose appraisal system is deemed to be unfair, they would have a high turnover rate. The implications of this are far reaching as harmful managerial behaviour might crop up. With fairness in place, observing the principle of controllability helps managers to pay attention to uncontrollable factors. The responsibility accounting holds them accountable for what goes on in their divisions; controllability principle makes the uncontrollable factors obvious. Managers will direct corrective efforts to these uncontrollable factors (McNally G., 1980). This in turn would help to influence the managers behaviour such that it aligns with organizational goals. The knowledge that his appraisal is a fair one would motivate him to try to exert some influence over these uncontrollable factors. If the influence pays off, then he is one step closer to achieving organizational goals. This also induces him/her to pay more attention to factors previously perceived as uncontrollable but now influenceable because of the effort he has applied (F. Giraud, P. Langevin and C. Mendoza, 2008). In the agency theory framework of management control where all information is used to appr aise the managers performance in line with the controllability principle, the appraisal report highlights the controllable and uncontrollable factors. Senior management can attach rewards to these seemingly uncontrollable factors to ensure that managers do their best to attain them without neglecting other duties necessary for the organizational goal attainment. S. Modell and A. Lee (2001) refer to the influence over seemingly uncontrollable factors when they noted that reliance on controllability principle helps to enhance managerial control of powerful institutional actors such as managers. The empirical study carried out by Frow N, Marginson D, and Odgen S. (2005) at Astoria PLC also points out the fact that factors that cannot be controlled can be influenced with some effort; they found out that the firm uses the AIP (Astoria Improvement Process) to reinforce influenceablity. They noted that the AIP helps the manager retain some form of control where they have only partial contr ollability but the AIP also imposes expectation on the managers. This would ensure that the managers make extra effort to influence these factors to meet the expectation laid up on them. Controllability principle helps to neutralize the effects of uncontrollable factors on a managers performance, thus giving a true picture of the managers efforts. This is another appealing notion of the controllability principle. It has been argued that the organization is a social system that grows in complexity like the biological systems. This complexity brings with it constant changes and in the organizational context, this would mean unforeseen changes that can have positive or negative effects on the efforts of the manager. One of such complexity is the competitive and economic elements. Both of these can affect the managers effort in a positive or negative way. An appropriate example is the financial crisis of 2007-2010 which has caused a downturn in stock prices. This in turn affects the profit and investment levels but the controllability principle neutralizes the effects of the financial crisis on the managers performance. Giraud et al (2008) noted that neutralization of un controllable factors can take two forms; ex-ante neutralization and ex-post neutralization, both of which have the same the same result, neutralizing the effects of uncontrollable factors on the performance of the managers. The Controllability principle provides a reliable assessment of the managers performance. When all uncontrollable factors have been neutralized, the assessment will be based on the efforts of the manager in improving the division under his control. Choudhury (1986) notes this when he says that the results of the division under the mangers control is a combination of the managers efforts and the uncontrollable factors. Separating managers effort from uncontrollable factors provides a better basis for assessment. In the principal agent framework, this would be a very necessary basis for rewards, the principal uses everything in his disposal to appraise the manager but when controllability principle removes the uncontrollable factors, the managers efforts are clearly seen. The rewards can then be based on the managers efforts at controlling the factors that he could to achieve organizational objectives. Ferrara (1964) argues that the controllability principle in responsibility accounting helps the organization to grow in that it helps to locate the errors and mistakes of the organizational members. He argues that errors and mistakes are the stuff of which progress is made . He also argues that controllability is a means of locating those activities and people in the organization in need of help so that assistance can be rendered and scarce resources of the organization would be more utilized. This would mean that controllability principle works in line with the organizational goals and where a positive attitude about it is inculcated in managers, the organization should move at the targeted pace. The responsibility accounting reports will make clear the controllable factors and the uncontrollable factors but amidst the controllable factors, a well prepared report will reveal where there might be problems. These problems can be considered and worked on or used as a base for future st rategic plans. When all errors and mistakes are corrected, they make room for improvement. In spite of these appealing advantages for controllability principle, there have been arguments against its observance in the responsibility accounting. Choudhury (1986) argues that controllability principle is not sacrosanct. Considering the size of big firms, a lot of factors hinder the practicality of the controllability principle. The interdependencies of the divisions within these firms create an unclear line with respect to divisional boundaries and places difficulty on the responsibility accounting process. One such factor is the task complexity of some divisions. If a particular manager works with another divisional manager to accomplish a difficult task, it becomes difficult to appraise the managers efforts because supposedly, the manager with the task had control over the particular task but performance appraisal with controllability principle makes this difficult. The manager had the task under his control but the other manager that helped had no control over the task but had ideas and participated in accomplishing the task. In this aspect Amey (1979) compares organizations to biological systems that grow in complexity. The complex growth makes controllability impossible. Observing the controllability principle in complex organizations is limiting on the innovativeness and the creativity of managers in the organizations. When managers are aware that they are being assessed on controllable factors, they would not be willing to take on risky ventures that have potential benefits for the organization. In their examination of the limitations of controllability principle, Antle and Demski (1988) conclude that the limitations of controllability on organizational growth can be modified through the information content notion. The limitation of the controllability principle is a hindrance on the positive results of team work. M-form organizations require team work to succeed, however, the observance of the controllability principle in the principal-agent framework breeds competition and this affect team work negatively thus a sales manager might have a good idea on how to achieve the tasks of the marketing manager but because he does not want the marketing man ager to do better that him in their performance appraisal, he would not assist or offer advice. Team work is therefore placed at the bottom of the list of useful organizational ethics. On the contrary where both managers would work together without neglecting their divisional duties, they could achieve desired results and if possible, meet their separate targets. The study carried out by Frow et al (2006) supports this fact; their findings revolve around accountability without controllability and the results also shows that the Astoria Plc. encouraged more co-operations because of organizational promotion of greater interdependencies. Another aspect where the observance of controllability principle is limiting is the area of performance evaluation. It limits the use of market measures in evaluating the managers performance. The use of market measures is one of the ways of evaluating senior management employees and the limiting effect of the controllability principle weakens the effe ctiveness of these measures (Merchant, 2006). The limitations of the controllability principle lead to rigidity in organizations. The controllability principle does not allow room for organizational flexibility. It limits the organization to growth based on only controllable factors. Modern day organizations are very dynamic and this constant change is not compatible with the concept of controllability. If controllability principle is been observed in an organization, the organization would not allow change such that it is flexible and easily adaptable to changes in its environment. Amey (1979) argued that businesses needed to maintain flexibility in internal arrangements such that adjustment would not be impeded and its links with its environment would grow stronger. Observing controllability principle in responsibility accounting involves some elements of subjectivity. This occurs when the basis for establishing controllable and uncontrollable factor are unclear. The performance evaluation team will have to set a criterion to use when carrying out an appraisal; this criterion would be based on what they think and probably not what they are aware of. In doing this, they become subjective in the appraisal. This would be perceived by the manager as unfair appraisal. He would view himself as being unfairly treated without consideration of factors contingent upon his performance. As a result of this perception of the performance appraisal, the manager could behave in a dysfunctional way. Such actions would be detrimental to the organizational goals. A manager who perceives an unfair system would also be demotivated. The findings of the research done by Giraud et al (2008) concluded that managers do not want uncontrollable external factors neutralized because of the level of subjectivity involved in it. Similarly, drawing from the study carried out by Modell and Lee (2001) institutional factors affect the controllability principle, in turn these factors affect the efficiency of the responsibility accounting system. The controllability principle is also expensive to maintain in an organization. I would argue that the process involved in ensuring the observance of responsibility principle is not cost efficient. The process would require constant research into the market forces so as to distinguish controllable factors from uncontrollable factors; where it is not possible to make such a distinction, the organization would have to incur more costs to ensure that the performance appraisal system is perceived as fair by its managers. The energies and costs that would be consumed by such a process would be effectively used in another part of the organization where it would be beneficial. Giraud et al (2008) also argues on the difficulty of evaluating uncontrollable factors, they specifically note the difficulty as regards the impact of economic recession. Thus, I would also argue that payment for the services of qualified experts on the distinction between controllable and uncontrollable factors for p erformance evaluation is an unnecessary cost to the organization. Research has also shown that observing the controllability principle leads to dysfunctional behaviour of managers. Hirst (1983) noted that reliance on performance measures that capture uncontrollable factors promote dysfunctional behaviour. This as a result of the managers perception of the performance evaluation system; he wants to avoid the effects of uncontrollable factors and he does that by engaging in activities that do not promote organizational objectives. Giraud et al (2008) mention such activities to include data manipulation, creating slack and developing an excuse culture. He narrows his focus to just the factors that he knows he would be appraised by and where he fails, his self-efficacy is reduced. Observing controllability principle in responsibility accounting can have consequences for organizational goals. It can lead to short termism on the part of manager. In narrowing their focus, managers focus on the components of the performance evaluation system and not on the organizational goals. This would lead to the neglecting of organizational long term goals. Thus, a manager with a long term goal of improved return on investment but with a sales division short term goal of number of user complaints per month and percentage variation from budgets will focus only on reducing the percentage variation from budgets thereby maligning the chances of improving the ROI. This might mean inferior sales strategies that would result in a drop in sales figures which have negative effects on the ROI. Conclusion Theoretically, observing the controllability principle in responsibility accounting has been perceived to have its advantages and disadvantages to the organization. The definition of the controllability principle indicates that there is a clear distinction between controllable and uncontrollable factors. This distinction supposedly makes it easy to observe in responsibility accounting. However, empirical studies reveal that organizations do not fully observe the controllability principle. Findings indicate that there is some sort of continuum that has controllable factors on one end and uncontrollable factors on the other end with varying degrees of control in between. Studies also show that some managers do not see themselves on either end of the continuum but somewhere in the middle. This means that strict observance of the controllability principle is impractical. Choudhury (1986) argues that the responsibility accounting concept should not be hindered by controllability and that it should be interpreted independently of controllability. Moreover, controllability should be defined contingent upon the contexts of the organization. McNally (1980) also argues that controllability can be applied in a modified version. Recent literature also indicates that organizations tend to hold managers for factors that they can influence rather than factors that they can control. This lies somewhere between controllable factors and uncontrollable factors on the controllability continuum. Giraud et al (2008) refer to this as the influencable factors. In addition, the interdependencies of organizations blur the lines separating controllability and other sub-systems in the responsibility accounting system (Hirst, 1983) as well as the uncertainties of the organizational environment. Consequently, I would argue that strict observance of the controllability principle is unrealistic. The modification and the re-definition of the controllability principle is a gradual shift away from the premise of the controllability principle. The difference between controllable and uncontrollable factors is lacking in clarity as regards modern organizations. It also does not align well with the structure of modern day organizations. Similarly, factors that can be influenced today might not be influenced the next day or next operating period because of the unpredictability of the environments of the organizations. Besides, can the ability to influence an event be measured and to what extent can it be measured?

Analysis of Dickinson’s I heard a Fly buzz - when I died Essay

Analysis of Dickinson’s I heard a Fly buzz - when I died Emily Dickinson wrote hundreds of poems during her lifetime that dealt with death. She seemed to have an almost morbid fascination with the subject. Her poem "I heard a Fly buzz - when I died" is one of the many poems she wrote about this ghastly topic. The symbols she used make this poem interesting because they can be interpreted on more than one level. The punctuation and capitalization used also give the poem an abstract quality. Like much of Dickinson's poetry, this poem is both startling and somber. One thing that stands out about this poem is that the word fly is capitalized throughout. It makes one wonder what the fly actually represents. Flies often gather around death and dead things, and on one level, the fly can be seen as a representation of death. Death, the perpetual fly on the wall, is finally making itself noticed. Although the speaker has always known that death is going to come, when it finally arrives, its modest appearance is disappointing. The fly can also be seen as an interruption in the narrator's process of dying. The fly can be heard buzzing above the "Stillness in the Room." The fly also comes between the speaker and the light in the last stanza of the poem, which is another disturbance in the speaker's dying process. The fly can also be seen in an ironic light. The speaker, like all of us, is expecting death to be an important, grandiose experience in our lives. Her own death, however, is interrupted by something as insignificant as a fly. The insignificant quality of the fly could represent the commonplace nature of death and the relative irrelevance of the death of one person. The fly is unimportant, an... ...e describing a sort of spiritual death, since she talks about the fly cutting her off form the light, which could represent God. This interpretation has some difficulties, however, since family members probably would not be present during a spiritual death. (Dickinson 1146) Dickinson's poetry is both thought provoking and shocking. This poem communicates many things about Dickinson, such as her cynical outlook on God, and her obsession with death. It is puzzling to me why a young lady such as Emily Dickinson would be so melancholy, since she seemed to have such a good life. Perhaps she just revealed in her poetry that dark side that most people try to keep hidden. Works Cited: Dickinson, Emily. "I Heard a Fly Buzz When I Died." The Norton Anthology of American Literature, Vol. 1, 2nd Edition. Ed. Nina Baym, et al. New York: W.W. Norton, 1985

William Shakespeares The Winters Tale Essay -- William Shakespeare W

William Shakespeare's The Winter's Tale In Shakespeare’s The Winter’s Tale, the playwright introduces his audience to a world blending natural imagery with that of ancient religion. Appearing as nature’s child, Perdita fails to realize her own identity and does not recognize that the flowers she describes mimic her own image. Just as gillyvors are a result of crossbreeding, the shepherdess is essentially one of nature’s bastards since she eventually discovers Porrus has been an adoptive father for her, and Leontes is her biological father. Perdita not only shares her natural image with the goddess Proserpina, but also shares in the goddess’ fate as a lost daughter. Much like Proserpina who represents the springtime, Perdita exemplifies the natural growth and prosperity that accompanies the season. When Antigonus agrees to take up Perdita and leave her to chance, he understands that she is nature’s child since â€Å"Some powerful spirit instruct the kites and ravens / To be thy nurses. Wolves and bears, they say, / Casting their savageness aside, have done / Like offices of pity† (II.iii.185-8). Nature then raises the infant as her own when Perdita takes on natural attributes uncommon among humankind. Before Antigonus abandons the infant Perdita in accordance with Leontes’ orders, he addresses the babe, â€Å"Blossom, speed thee well† (III.iii.45), as though Perdita resembles a flower in full bloom. As Perdita grows older, the shepherdess imparts her â€Å"blossoming† image on others, particularly on the courtiers who greet her in the country. After asking Dorcas to â€Å"Give [her] those flowers there,† she distributes â€Å"rosemary and rue [which] keep / Seeming and savor all the winter long† (IV.iv.73-5). The flowers ... ...u might well enjoy her† (V.i.214-5). Perdita’s beauty surpasses her lowly stature to the point where she is not regarded as a shepherdess to Leontes, but rather as a higher power. Perdita ultimately takes on the natural image of Proserpina as well as her role as a lost daughter. Through the flowers Perdita mentions, she effectively manages to describe not only her own identity, but that of the goddess. Even though Antigones abandons the shepherdess at birth, Perdita’s missing person and questionable identity causes others to also lose the ones they love and opportunities they could have had. Because the loss of Perdita creates significant loss for others, it is as though the maiden has a hand in others’ lives, much like the gods. Thus her indirect intervention, image, and role as a lost daughter all play a key part in her representation of Proserpina.

Essay on What Dreams May Come :: What Dreams May Come

What Dreams May Come    When mortality is contemplated, issues of life, death, and the hereafter are usually the first of a myriad of topics to spontaneously arise as if they are from the dark depths of a person's soul. I believe that this is most eloquently stated by Hamlet:    For in that sleep of death what dreams may come, When we have shuffled off this mortal coil, Must give us pause. (III. i.)    This passage served as inspiration for Richard Matheson, the author of the novel, What Dreams May Come. This essay is in two parts: discrepancies between the book and the movie, and views of life/death in the movie and book.    Part I: Discrepancies The first noticeable discrepancy between the book and the movie is that the movie is a movie (meaning that the movie progresses with the characters for the most part except for the occasional flashback) while the book is a retrospective by Chris of his life and escapades written after he is dead. The first chapter of the book opens with a medium at Richard Nielsen's (Chris's brother) door. It appears that after rescuing Annie in her very own, limited edition, private hell, Chris finds a medium, and he pesters her until she agrees to transcribe his journal (it took her six months) and hand deliver it to Richard.    Another major discrepancy between the movie and the book is that in the book the children do not die. In fact, the children are they way that Chris can find his way back to Annie; through their thoughts and prayers. Before Anne dies, Chris gets Albert (not his son in the book) to look up how long Anne is to naturally live. Albert comes back and reports that it is twenty-four years. Chris becomes devistated and worries about it. Then, Anne kills herself. In the book, Anne would not be in her own patented hell forever but for the time she was to live (she still committed suicide). So she would be in her desolate hell for twenty-four years. That doesn't seem too bad but Chris would not hear of such, and then proceeded to persuade Albert to help him get in touch with Anne again.    Richard Matheson became a new-age metaphysical expert in order to write What Dreams May Come. He wanted the book to be as realistic as possible, so he acquired dozens of books (all listed in the Bibliography) and first hand Near Death Experience accounts from people from all walks of life.

The Painted Veil – Presentation Note

Lift Not The Painted Veil Which Those Who Live Lift not the painted veil which those who live Call Life: though unreal shapes be pictured there, And it but mimic all we would believe With colours idly spread,–behind, lurk Fear And Hope, twin Destinies; who ever weave Their shadows, o'er the chasm, sightless and drear. I knew one who had lifted it–he sought, For his lost heart was tender, things to love, But found them not, alas! nor was there aught The world contains, the which he could approve. Through the unheeding many he did move, A splendour among shadows, a bright blot Upon this gloomy scene, a Spirit that stroveFor truth, and like the Preacher found it not. Percy Bysshe Shelley Charlie Townsend Post: married British vice consul = smart, sensible and he knows very well of what’s going on evidence – after walter walked away when he first found them in Kitty’s room, kitty was so panic but townsend knows that Dr. Fane will do nth. To cause any sc andal – when he’s discussing about the dealing with strikes(walkouts)/ boycotts in Shanghai with businessmen in the Colony Club, he banned the suggestion of seeking help from Chiang Kai-Shek as he knew that he’s a nationalist that must stand on the side of Chinese, he will not help them suppressing the strike. mature and experienced woman-hunter , very dissolute person and he’s unfaithful to his wife Evidence –flirted kitty from the very first moment they’ve met when they’re watching the Chinese opera ?Telling kitty what happened to the actor in the opera which he thinks that it may be similar to Kitty (she weeps for the lively, vivacious girl she once was? the lonely woman she has become; she weeps for the love she’ll never feel, for the love she’ll never give) to flirt Kitty ? made Kitty believes that he understands her, admire her ? Charlie Townsend found it so easy to get hold of her As described by Waddington: he ha d his little flirtations +As described by Dorothy: the women who fell for her husband were so consistently second-rate ? even his wife knows that her husband is a gallant/licentious/dissolute person that flirts many women +having an affair with Kitty? adultery, he only sees Kitty as his mistress to satisfy his physical needs (attachment: lever) Dorothy is more important to him because â€Å"whatever happens, we must try to keep Dorothy out of it† ? did not want to hurt Dorothy and nth in the world could induce him to divorce herWomen are always under the impression that men love them more that they really do. Film language – = selfish, vain and incapable of caring for anyone but himself Care for his reputation/ job/ post: â€Å"do you have any idea of the importance of my station here? † – at that time, there’ll be many rumors that ruin the reputation of a man if anyone divorce his wife and marry another woman. Therefore he cares more about his rep utation, his position than what will happen on Kitty if he does not marry her, as Kitty is just someone means very little to him.Film language – =a person who made false promise Evidence – sent kitty a ring as a gift – RING: symbolize love, faith and commitment. He proclaimed that he loves Kitty when he was having sex with Kitty, actually he does not love her, it’s just a way to flirt Kitty and make Kitty willing to continue the affair with him. – promised that he would help solve the problem when Kitty was forced to be divorced. After 5 years, at last, he still did nth, not even a letter to show his concern. â€Å"I should have written†Film language – Why Townsend treat Kitty as close as 5 years ago when he later met her in London? =the only one that failed to change in the film He never learn from any experience or errors that he has made; Besides, he does not think that he had done sth wrong? does not feel sorry /guilty for breakin g Kitty’s marriage He tried to date Kitty again in his later few weeks in London (to see if there’re any more chances for him to flirt kitty again, like 5 years ago) – described by Kitty – â€Å"no one important† 0th century that artists began to use it fully; a pipe would stand for thoughtfulness and calm; the cigarette symbolized modernity, strength and youth, but also nervous anxiety; the cigar was a sign of authority, wealth and power. The decades following World War II, during the apex of smoking when the practice had still not come under fire by the growing anti-smoking movement, a cigarette casually tucked between the lips represented the young rebel, epitomized in actors like Marlon Brando and James Dean or mainstays of advertising like the Marlboro Man.It was not until the 1970s when the negative aspects of smoking began to appear; the unhealthy lower-class loser, reeking of cigarette smoke and lack of motivation and drive, especially in a rt inspired or commissioned by anti-smoking campaigns. [ Literature Just as in other types of fiction, smoking has had an important place in literature and smokers are often portrayed as characters with great individuality, or outright eccentrics, something typically personified in one of the most iconic smoking literary figures of all, Sherlock Holmes.Other than being a frequent part of short stories and novels, smoking has spawned endless eulogies, praising its qualities and affirming the author's identity as a devoted smoker. Especially during the late 19th century and early 20th century, a panoply of books with titles like Tobacco: Its History and associations (1876), Cigarettes in Fact and Fancy (1906) and Pipe and Pouch: The Smokers Own Book of Poetry (1905) were written in the UK and the US.The titles were written by men for other men and contained general tidbits and poetic musings about the love for tobacco and all things related to it, and frequently praised the refined ba chelor's life. The Fragrant Weed: Some of the Good Things Which Have been Said or Sung about Tobacco, published in 1907, contained, among many others, the following lines from the poem A Bachelor's Views by Tom Hall that were typical of the attitude in many of the books: The cover of My Lady Nicotine: A Study in Smoke (1896) by J. M. Barrie, otherwise best known for his play Peter Pan. â€Å"So let us drinkTo her, – but think Of him who has to keep her; And sans a wife Let's spend our life In bachelordom, – it's cheaper. † —Eugene Umberger[68] These works were all published in an era before the cigarette had become the dominant form of tobacco consumption and pipes, cigars and chewing tobacco were still commonplace. Many of the books were published in novel packaging that would attract the learned smoking gentleman. Pipe and Pouch came in a leather bag resembling a tobacco pouch and Cigarettes in Fact and Fancy (1901) came bound in leather, packaged in an imitation cardboard cigar box.By the late 1920s, the publication of this type of literature largely abated and was only sporadically revived in the later 20th century. [69] Cigarettes in old films were early forms of ‘product placement' 5. Cigarettes as Phallic Symbols Back during the Hays Code days, cigarettes were clever devices used as metaphoric hints at sexual activity. When characters shared cigarettes, such as in Now, Voyager, To Have and Have Not and Rope, it implied a sex act. When Marlene Dietrich held a cigarette in any of her films, the prop was a phallic symbol implicit in projecting an image of bisexuality.And ironically, in a film as explicit as 9 ? Weeks, a cigarette may have been a required stand-in for Mickey Rourke’s penis during a strip-tease scene, because male nudity continues to be a taboo while the naked female body is common on the big screen. However, not all cigarettes in films represent sex and/or phallus, but due to the heavy employment of the prop in such a way for so many years, it’s hard for moviegoers (particularly those of us with film studies degrees) to think of them as anything but sex symbols.Fortunately, Hollywood is being forced to censor out cigarettes from their movies (for even featuring a pack of cigarettes), and meanwhile they continue to break sexual taboos at the same time. So this cliche is likely to go way very soon. Friendship Since friendship is not a very important issue in the Painted Veil, Compared to love and death, I’ll just talk about the more significant one. = kitty and Waddington At the very first beginning: Then: At the end: = Dr Fane and Colonel Yu When Colonel Yu met Walter, Then, after At the end: =Kitty and sung chingAt first, Sung Ching was appointed by Colonel Yu to protect Kitty due to the anti-foreigner atmosphere in china, kitty felt like she was guard as a prisoner Then, she started to reject Sun Ching’s protection and treat him badly when she was finding Mr. Waddington for mailing the letter, tell him to go away and she does not need him At the climax of the anti-foreigner movement, Sun Ching saved Kitty and Walter from the crowd, on the next day, kitty then ask Sun Ching to come with her friendly. Mei-tan-fu Background info = a village mad up by the author, not a real village (at first ? lanned to build a new village of Mei-tan-fu in Guangxi, however, the cost is too huge and overwhelming ? sent a scout to find a village for the film ? found a completely untouched village = Huang Yao – 800 years history; untouched because there’s no telegraph poles or anything else to contact people in other places? perfect for shooting The rivers and mountains shoots are taken from Huang Yao, it’s from Guangxi ~> on-location (means the film is shot at the actual place where the action occurs) Mei-tan fu is a place with many significance in the film, please pick one to and explain why.Significances: = new home of the Fanes = the place where death rest – Chinese villagers/ walter/ kitty seeing two corpses + colour of lights 1st: the corpse of a villager pass along the same road of Kitty and Walter’s sadden chairs 2nd: the hut where kitty and walter stays – the doll on the bed of kitty’s room Walter: â€Å"I won’t touch that if I were you, they may have died in that bed† 3rd: the corpse of a villager on the side of the road when Kitty walked out from Mr, Waddington’s house 4th: the bodies are buried too close to the river th: the death of Sister Maryse 6th: the soldiers removing corpses from the villagers’ house 7th:the death of walter =a place for reunion -kitty and walter=a place where they fall in love again Before the union, Walter and Kitty were separated spiritually due to the affair . /. kitty and charlie How – after kitty had heard from the nuns about Walter helping the orphans? stating to know that he is a good man and wants to impro ve their relationship.After Walter had seen Kitty playing with the orphans, he started to have better feelings for Kitty After the union, their relationship has been recovered, they even have sex after drinking with Mr. Waddington and XX. Then they travel on the boat to let Kitty visit the water XX. =changes brought by cholera(+ve and -ve) – kitty(+ve)/ walter(+ve &-ve)/ colonel yu(+ve) Described by Kitty- no place for a woman; madness for me to go Described by Dr. Fane – small town on a tributary of Yangtze River, in the interior Film language: colour of light, long shot,

Tomb of Shihuangdi

Tomb of Shihuangdi Professor Carney Hum 111 Joanna Davis January 23, 2012 Qin Shihuangdi, born Ying Zheng was one of the most influential rulers of all China. It is believed that Shihuangdi was father by one of two men, Zichu a son of the king of Qin at the time. Zichu was sent as a hostage to the state of Zhao during a dispute between the two kingdoms (Lindesay p. 4). Eventually Zichu was allowed to live freely in Zhao. There he became acquainted with a rich, but conniving merchant named Lu Buwei, who had a concubine. When Zichu became interested in the concubine, Lu Buwei stepped aside and eventually helped them escaped to Qin where Zichu shortly became king (Lindesay p. 4). Shortly after arriving in Qin, Ying Zheng (later to become Shihaungdi) was born. It was never revealed whether Zichu or Lu Buwei was his father. At only thirteen Shihuangdi took control of the Qin Dynasty, which was a start of a great rule for the young emperor. Many accomplishments were accredited to his rule, The Great Wall, a road system throught the kingdom, a written script that unified all of China, and of course his mystifying tomb that contain life-sized soldiers of the Terra Cotta Army. Many theories surround his tomb. Probably one of the most fascinating archaeological discoveries was his tomb with over 6,000 life-size soldiers buried with the emperor. One theory that could be believable was that he feared death, therefore he was always in search of immortality. In seeking immortality Shihaungdi made at least three pilgrimages to Zhifu Island seeking immortality. In one case of he sent Xu Fu, a Zhifu islander, with ships carrying hundreds of men and women in search of the mystical Penglai mountain (Wintle p. 61, p. 71). Penglai mountain was said to be the home for the Eight immortals and the 1,000 year old magician Anqi Sheng who Shihaungdi supposedly met while traveling, invited him to seek him there (Pregadio p. 199). The people that was sent on the voyage never returned with any evidence of the immortal, or the magician, perhaps in fear of returning without any news they would be executed. Legend states they reached Japan and colonized it (Cavendish p. 17). Many of the Emperor’s best scholars were also executed for not being able to produce any evidence of supernatural powers. Since Shihaungdi was afraid of death he had workers build tunnels and passage ways to each of his palace, thinking this would protect him from the evil spirits, as he traveled unseen. Death In 211 BC a large meteor is said to have fallen in the lower reaches of the Yellow River. On it was the words inscribed â€Å"The First Emperor will die and his land will be divided (Liang p. 5). When he heard of this, he sent an imperial secretary to investigate this prophecy. When no one would confess, everybody living nearby was put to death. On September 10, 210 BC (Julian Calendar),while on one of his tours to Eastern China the Emperor died. Reportedly, he died from ingesting mercury pills, made by his court scientists and doctors (Wright p. 49). Ironically Shihaungdi ingested the pills thinking they would make him immortal (Wright p. 49). Perhaps there maybe some truth to this theory surrounding his death due to the fact high levels of mercury was found in his tomb. References Cavendish, M. (2006). China Condensed: 5000 Years of History & Culture. Liang, Y. (2007). The Leitimation of New orders: Case Studies in World History. Chinese University Press. Lindesay, W. (2008). The Terracotta Army of the First Emperor of China. Airphoto International Ltd. Man, J. (2008). The Terra Cotta Army. Da Capo Press, Cambridge, MA Wintle, J. (2002) China. Rough Guides Publishing. Wright, D. (2001). The History of China. Greenwood Publishing Group.

Fraud Case

THE NATION’S NEWSPAPER BS2003-01b Collegiate Case Study Adelphia founder, 2 sons, 2 others arrested in fraud By David Lieberman and Greg Farrell www. usatodaycollege. com Accounting fraud Part II: The results â€Å"Creative accounting† is not a new technique, but it can certainly be a costly one. Businesses feel the pressure to appear profitable in order to attract investors and resources, but deceptive or fraudulent accounting practices often lead to drastic consequences. Are these so-called creative practices always illegal or can they ever be justified? This case study will present examples of companies who have used inappropriate accounting practices, the results of their deceptions and the government's plan to avoid future incidents. WorldCom scandal brings subpoenas, condmnation By Andrew Backover and Thor Vladmanis Andersen’s partners chart firm’s future today By Greg Farrell Client-starved Arthur Andersen cuts 7,000 jobs By Greg Farrell Dominoes hit WorldCom partners, clients By Michelle Kessler Adelphia plans to file Chapter 11 Cable firm expected to seek bankruptcy protection today NEW YORK — The waiting should be over today. Adelphia Communications plans to file for bankruptcy protection, nearly three months after the onceproud No. 6 cable operator first disclosed dealings with the family of founder John Rigas that turned it into a symbol of corporate scandal. The company is expected to announce that it has raised as much as $1. 5 billion from banks led by J. P. Morgan Chase and Citigroup to keep operating while a bankruptcy judge decides how creditors will be paid. A Chapter 11 filing — the biggest in cable history — could help efforts to find a buyer for some, or all, of Adelphia's systems, which serve 5. 7 million subscribers. The court can protect an acquirer from unexpected liabilities, including those stemming from several shareholder lawsuits and investigations into Adelphia's finances by two grand juries and the Securities and Exchange Commission. The company could pay off its estimated $19 billion in debt if it can sell systems for $3,500 per subscriber, roughly the industr y norm. But stockholders could lose their entire investments. Adelphia shares closed Friday at 15 cents in over-the-counter trading. Case Study Expert: John D. Martin, Ph. D. Professor of Finance, Baylor University USA TODAY Snapshots ® Politicians role in monitoring business Opinion leaders1 say government should be more involved in oversight and regulation of private enterprise2: 52% 45% Agree Disagree Source: Edelman Public Relations Worldwide/ StrategyOne Research survey of 400 respondents. 1 – College educated 35- to 64-year-olds with household incomes of more than $100,000 2 – Does not add up to 100% due to rounding By Darryl Haralson Marcy E. E. Mullins, USA TODAY By Darryl Haralson andand Marcy Mullins, USA TODAY Reprinted with permission. All rights reser ved. AS SEEN IN USA TODAY MONEY SECTION, MONDAY, JUNE 24, 2002 And a sale may devastate Coudersport, Pa. , where Adelphia is headquartered. It's by far the largest employer in the rural, mountain town of 3,000. Meanwhile, Adelphia will tr y to reassure its subscribers. â€Å"Adelphia is committed to reversing its admittedly difficult present financial situation,† it wrote last week to 3,500 franchise officials. â€Å"Most importantly, there should be no change in service to Adelphia customers as a result of these developments. † Adelphia's downfall began on March 27, when it disclosed that a Rigas family partnership had borrowed $2. billion using company assets as collateral. The amount has since been raised to $3. 1 billion. That stunned analysts, who believed that the operator was already too deeply in debt. Barraged with questions, Adelphia put off release of its 2001 annual report. More questions were raised when it was confirmed that the SEC was investigating. As the stock plummeted, Nasdaq weighed delisting Adelphia shares. T hat took effect on June 3. After acknowledging that it would have to restate its earnings, Adelphia put several cable systems on the block. The company defaulted on bank loans and failed to make interest payments on bonds. And Rigas and sons Timothy, Michael and James were forced to relinquish their jobs and board seats. Then new interim CEO Erland Kailbourne stunned company watchers by disclosing a series of cases where the Rigas family allegedly used Adelphia for private gain. Among other things, the company paid for their apartments in New York, built a golf course on Rigas-owned land, helped the purchase of the Buffalo Sabres hockey team, created a Rigas-run investment firm and subsidized a documentary film. Cover story Adelphia founder, 2 sons, 2 others arrested in fraud Investigators say company was ‘personal piggy bank' By David Lieberman and Greg Farrell USA TODAY NEW YORK — For 50 years, John Rigas lived the American Dream. Half a century ago, the son of Greek immigrants left a job making TV picture tubes at Sylvania. The World War II veteran bought a small movie house and a newfangled business — a cable TV company — in the remote town of Coudersport, Pa. , and was on his way to making a fortune. But his oversized ambitions led him this week into an American Nightmare. Wednesday, Manhattan U. S. Attorney James Comey accused 77-year-old Rigas and two sons — Timothy and Michael — with â€Å"one of the largest and most egregious frauds ever perpetrated on investors and creditors. † Rigas attorneys were unavailable for comment. With TV cameras capturing the humiliating moment, the founder of Adelphia Communications, the No. 6 U. S. cable company, was led away in handcuffs here. He became the first CEO arrested in the latest wave of corporate accounting scandals and the most vivid symbol of whitecollar crime since Michael Milken and Ivan Boesky in the 1980s. Two other former Adelphia executives, James Brown and Michael Mulcahey, were picked up in Coudersport. Later in the day, Adelphia itself — which filed for bankruptcy-court protection last month — charged Rigas and his family with violating the Racketeer Influenced and Corrupt Organizations (RICO) Act, in a filing in Federal Reprinted with permission. All rights reser ved. Page 2 AS SEEN IN USA TODAY MONEY SECTION, THURSDAY, JULY 25, 2002 Bankruptcy Court in New York. The Rigases could be forced to pay three times any damages the court finds. The lawsuit alleges about $1 billion in damages. Behind their â€Å"small-town facade,† the Adelphia lawsuit says, the Rigases â€Å"used their domination and control of Adelphia, and their isolation from the scrutiny of the outside world, to engage in one of the largest schemes of selfdealing and financial wrongdoing in American corporate history. † The Justice Department and the U. S. Postal Inspection Service charged the five executives with securities, wire and bank fraud, saying they â€Å"looted Adelphia on a massive scale† and used it as a â€Å"personal piggy bank. Rigas private funds sloshed with Adelphia's in the same cashmanagement system. A U. S. judge set bail for the Rigases at $10 million apiece, secured by cash and property. Allegations against the Rigases range from big schemes to hide financial problems at the cable company to relatively small-scale thievery. For example, Timothy was accused of using a company jet for an African safari vacation in 2000. Adelphia's lawsuit adds that John's daughter, Ellen, used company planes to bring guests to her wedding to Peter Venetis, who became an Adelphia board member. The couple's cozy position enabled them to save $150,000 since 1998: They lived rent-free in two Adelphia-owned apartments on Manhattan's swank Upper East Side, the lawsuit says. In less than four years, the Rigases â€Å"stole hundreds of millions of dollars, and through their fraud (and) caused losses to investors of more than $60 billion,† Deputy Attorney General Larry Thompson says. The defendants could face jail time in the criminal case. By filing a complaint instead of a full-fledged indictment, the grand juries weighing evidence in the case can remain empaneled to approve charges against others. They have 10 days to indict those arrested, and 20 days to charge others. Also Wednesday, the Securities and Exchange Commission filed a civil lawsuit in U. S. District Court that's similar to the criminal complaint, and includes a third Rigas son, James. The SEC would bar the defendants from serving any publicly owned company. It also wants them and Adelphia to pay restitution and fines. Adelphia said in a statement that the claim against it would â€Å"only have the effect of further penalizing the company's stakeholders who were the victims of the Rigas' improper conduct. The Adelphia cases are low-hanging fruit for prosecutors eager to show that they're getting tough on white-collar criminals. â€Å"This is an old fashioned hand-in-the-till case that's easier to prosecute than an esoteric fraud like Enron,† says Jack Coffee, who teaches securities law at Columbia University. â€Å"To prosecute Enron, you're going to have to teach the jury an intermediate college course i n accounting. † Jacob Frenkel of Smith Gambrell and Russell agrees. â€Å"This could be sexiest of all the cases,† he says. â€Å"Here, you're talking about corporate looting. Every guilty disposition arising out of this indictment should become a show-andtell in all business schools as the antithesis of public company management and stewardship. † Talking tough, getting tough The arrests came as House and Senate negotiators agreed on tough measures, including jail time, for executives convicted of fraud. And Wall Street was impressed after weeks of growing fearfulness about a possible tsunami of corporate scandals. The Dow Jones industrial average soared 489 points Wednesday. That's the second biggest one-day point gain ever. That contrasts with the 179-point drop on July 9, when President Bush called for a new era of corporate responsibility. The arrests aren't â€Å"about Democrats and Republicans,† says Lynn Turner, former chief accountant of the SEC under President Clinton. â€Å"This is about investors, and they like what they're seeing now. † Even people who aren't obsessed with stocks seem to like the idea of big shots getting a comeuppance. â€Å"We are angry, and we have every right to be angry,† says futurist and consumer expert Marian Salzman of Euro RSCG Worldwide. There's a feeling that we need to kick out the evil-doers in the industry. † But some might recoil at the image of a dignified old man being led before the cameras in handcuffs. â€Å"They're actually going to look sympathetic,† says Robin Cohn, author of The PR Crisis Bible. â€Å"Why would you Reprinted with permission. All rights reser ved. Page 3 AS SEEN IN USA TODAY MONEY SECTION, THURSDAY, JU LY 25, 2002 handcuff an old man? He's not a murderer and a rapist. That's not to say they aren't crooks. But I think the public would rather see somebody they know in handcuffs — like (former Enron CEO) Ken Lay. And the incident could make the government look somewhat silly, she says. â€Å"I can't imagine Saturday Night Live not doing anything with this. † Corporate crime is in the spotlight these days. Last month, federal prosecutors arrested former ImClone CEO Sam Waksal on charges of illegal trading on inside information and obstruction of justice. Their investigation has expanded to include friends and family of Waksal, who also might have illegally traded on inside information about ImClone last December. Investigators are trying to determine whether any inside information was passed to Waksal's friend Martha Stewart, who sold her ImClone stock just before a Food and Drug Administration announcement, denying an application to market a cancer-fighting drug, drove the stock price down. In coming months, the Justice Department is expected to charge top executives of Enron and WorldCom with fraud. The department's Enron Task Force won one court battle last month when a Houston jury found auditor Arthur Andersen criminally guilty of obstruction of justice. It appears, though, that officials wanted to start off with a bang as they arrested the Rigases. â€Å"What's unusual here is the level of detail included in the criminal complaint, and the number of defendants arrested simultaneously,† says former prosecutor Robert Mintz, now at McCarter & English. â€Å"Usually, the government builds a case slowly, with eventual defections among defendants. Here, it has leveled a wide range of allegations against upper management. That suggests that the government believes it has strong case and that they expect a rush to the prosecutor's door by defendants who will vie to strike deals. The cases build on information that began to come out in late March. Adelphia disclosed then that the Rigases had used assets of the already debt-heavy company to secure loans to private, family-run partnerships. That borrowing is now put at $3. 1 billion. Independent directors forced the Rigases out of their executive positions and board seats, installing f ormer banker Erland Kailbourne as interim CEO. When they investigated the company's condition, they found and disclosed case after case in which the Rigases made no distinction between their personal funds and businesses and Adelphia's. Bad news gets worse But Adelphia was already in a tailspin. Investors lost confidence. Auditors refused to certify the company's financial reports. And lenders cut it off, leading the company to miss interest and dividend payments. Among the charges leading to the Rigases' arrest: u That the family began using Adelphia as collateral for private loans in 1996, even though the company â€Å"was one of the largest junk bond issuers in the United States. † Investors weren't told. u That the Rigases secretly inflated Adelphia's cable TV subscription numbers to make investors think it was still growing at a healthy pace. In 2000 they began to count subscribers from systems in Brazil and Venezuela, where Adelphia owns a minority stake. In 2001, Adelphia began adding customers who just ordered high-speed Internet services from the Rigases' non-Adelphia systems. And earlier this year, they folded in people who ordered home security services from Adelphia. u That they used accounting legerdemain to disguise Adelphia's actual expenses for digital decoder boxes. In 2001 the company claimed that it sold 525,000 boxes for $101 million to an unaudited Rigas-owned company that has no cable systems. That, starting in 2000, Adelphia spent $13 million to build a golf club on land mostly owned by John Rigas. u That in 1999, they told analysts that Adelphia could provide two-way communications to 50% of its customers. The real number was 35%. u And that the Rigases took more than $252 million from Adelphia to pay for margin calls on their purchases as the company's stock price fell. Contributing: Michael McCarthy R eprinted with permission. All rights reser ved. Page 4 AS SEEN IN USA TODAY NEWS SECTION, FRIDAY, JUNE 28, 2002 WorldCom scandal brings subpoenas, condemnation Accounting rumors rattle Wall Street By Andrew Backover and Thor Valdmanis USA TODAY The accounting scandal that enveloped WorldCom reverberated through Wall Street and Washington on Thursday. u Congress subpoenaed top WorldCom executives. u President Bush and Treasury Secretary Paul O'Neill separately railed at corporate wrongdoers. u Unfounded rumors of accounting problems hit stocks of other companies. WorldCom on Tuesday revealed what could be one of the biggest accounting frauds ever. Company officials said $3. billion in expenses had been hidden in financial statements, inflating profits in 2001 and the first quarter of 2002. The Securities and Exchange Commission has since charged WorldCom with fraud. Bush, at an economic summit in Canada, said he is concerned about the economic impact from â€Å"some corporate leaders who have not upheld their responsibility. † O'Neill, a former chief executive of Alcoa, said in an interv iew on ABC's Good Morning America that the people responsible should be prosecuted to the full extent of the law. WorldCom has raised fears and rumors about more business accounting scandals. Trading was halted for General Motors stock Thursday afternoon because of rumors of accounting irregularities. GM said they were untrue. Broadcast giant Clear Channel Communications denied it is under an SEC investigation, yet its stock fell almost 13%. The House Financial Services Committee set a July 8 hearing into the WorldCom case. Subpoenas went to: u Current WorldCom CEO John Sidgmore. u Former chief financial officer Scott Sullivan, who was fired this week. * Former WorldCom chief executive Bernie Ebbers, who was ousted in April and who owes WorldCom $408 million for personal loans. Salomon Smith Barney telecom analyst Jack Grubman. Once one of WorldCom's most bullish supporters on Wall Street, he has been criticized for possible conflicts of interest. His firm collected millions of dollars in fees as a WorldCom financial adviser. WorldCom spokesman Brad Burns declined comment on whether Sidgmore would invoke his Fifth Amendment right not to testify. Ebbers and Sullivan couldn 't be reached. Salomon says Grubman â€Å"will fully cooperate. † And there could be more investigations. The House Energy and Commerce Committee told WorldCom to turn over financial records by July 11. WorldCom, strained by $30 billion in debt, will cut 17,000 jobs, or 21% of its workers, starting today. Workers will get severance pay, Burns says. Reprinted with permission. All rights reser ved. Page 5 AS SEEN IN USA TODAY MONEY SECTION, THURSDAY, MARCH 28, 2002 Andersen's partners chart firm's future today By Greg Farrell USA TODAY NEW YORK — Arthur Andersen's U. S. partners will huddle in a nationwide teleconference today to determine the firm's immediate future. At issue: who should lead the firm's U. S. operations on an interim basis, and what steps Andersen should take to remain in business. According to senior partners briefed on the meeting's agenda, Andersen's 1,700 U. S. par tners will decide whether to ask Paul Volcker to assume control of Andersen's domestic operations. In February, Andersen CEO Joseph Berardino asked the former Federal Reserve chairman to head an oversight board dedicated to fixing the firm. A month later, a federal grand jur y indicted Andersen on a charge of obstruction of justice for its role in shredding Enron documents last October. Friday, in a last-ditch effort to stanch client depar tures and restore confidence in Andersen, Volcker offered to lead Andersen if its top par tners asked him. On Tuesday, Berardino resigned. Managing partner C. E. Andrews will meet with Volcker today to discuss his takeover plan. While many obser vers think Volcker's arrival could persuade the J ustice Depar tment to drop the indictment, some Andersen partners are wary of being the subject of an idealistic experiment in transforming the accounting industry. The partners will also discuss, and probably adopt, a â€Å"Renaissance† program aimed at returning Andersen to its roots as a highly regarded auditing firm. This proposal, supported by Andrews, has gained support among older partners who want to stay and rebuild the firm. In other developments: u At federal cour t in Houston, Contributing: Thor Valdmanis J ustice Depar tment lawyers will respond to Andersen's motion to halt further grand jury testimony prior to a May 6 trial. If Judge Melinda Harmon sides with Andersen, it will make the government's obstruction of justice case against Andersen more difficult to win. u Andersen's top global partners will meet Tuesday in London to pick an interim CEO. Andersen's global operations continue to fragment. Its Japanese affiliate, Asahi & Co. , announced plans to merge this fall with rival KPMG. Andersen has also discussed selling affiliates to Deloitte Touche Tohmatsu. Wednesday night, Deloitte spokesman Matthew Batters suggested the firm was only interested in hiring individual Andersen partners and picking up clients leaving the firm. Reprinted with permission. All rights reser ved. Page 6 AS SEEN IN USA TODAY MONEY SECTION, TUESDAY, APRIL 9, 2002 Client-starved Arthur Andersen cuts 7,000 jobs Long expected, layoffs offer first tangible sign of firm's distress By Greg Farrell USA TODAY WorldCom has engaged in what could be one of the bArthur Andersen fired one partner in January for his role in shredding Enron documents. On Monday, the auditing firm announced it will lay off 7,000 of its 26,000 U. S. employees because of the consequences of that shredding. The job cuts at Andersen have been expected for weeks, ever since the Justice Department unsealed an indictment against the firm for its role in destroying its paperwork just as a Securities and Exchange Commission inquiry into Enron was about to begin. Since the indictment, unsealed on March 14, scores of clients have deserted Andersen. As Andersen partners leave the firm for opportunities at other Big Five rivals, more clients are expected to migrate. So far, Andersen has weathered the crisis without filing for bankruptcy protection. But the layoffs, announced Monday, are the first tangible sign of financial distress at the firm. Of the 7,000 employees being let go, the vast majority are auditing staffers and managers, as well as administrative personnel. A small number of Andersen's 1,700 U. S. partners are also being let go. According to managing partner Grover Wray, most partners are still needed to serve Andersen's remaining clients. Rather than hand out severance checks to laid-off employees, Wray says Andersen is implementing a program called â€Å"salary continuation. † nder this plan, laid-off workers will continue to be paid for a certain number of weeks, depending on how long they've been with the firm. During that period, these employees will keep their benefits and be free to use their office space to search for new jobs. We are trying to treat our people with a level of dignity,† Wray says. In addition to client defections, Andersen also faces major liabilities for the role it played in Enron's collapse into bankruptcy last fall. Plaintiffs lawyer Bill Lerach filed an expanded complaint Monday against Andersen and former Enron managers in federal court in Houston. But the expanded lawsuit, on behalf of a major Enron shareholder — the Unive rsity of California system — adds nine Wall Street investment banks and two law firms to the list of defendants. Representatives from the banks — JP Morgan Chase, Citigroup, CS First Boston, Canadian Imperial Bank of Commerce, Bank of America, Merrill Lynch, Deutsche Bank, Barclays and Lehman Bros. — either declined comment on Monday or denied the complaint's allegations of complicity in Enron's collapse. Notably, Lerach's complaint leaves out two key players in Enron's demise — Michael Kopper, who headed some of the special purpose entities that kept Enron liabilities off the company's balance sheet, and Ben Glisan, the former Enron treasurer accused of facilitating some of Enron's dubious accounting practices. Glisan is now believed to be cooperating with the Justice Department probe of Enron's activities. Lerach would not comment on whether the pair supplied his investigators with information. But Larry Finder, a former U. S. Attorney now in private practice in Houston, doubts either is helping Lerach. Finder says that if either of them is providing information, it would be to the Justice Department first, where they face criminal liability. And the Justice Department wouldn't necessarily welcome a decision by a witness to cooperate in civil litigation. Reprinted with permission. All rights reser ved. Page 7 AS SEEN IN USA TODAY MONEY SECTION, TUESDAY, JULY 9, 2002 Dominoes hit WorldCom partners, clients Unpleasant ripple effect also spreads to vendors, charities, sponsored events By Michelle Kessler USA TODAY The WB television network, PGA Tour and Texas Parks and Wildlife service aren't in telecom, but they've already been hurt by the WorldCom scandal. That's because they all did business with WorldCom, as did thousands of other companies. Now they're all trying to figure out where they stand with the struggling giant — and coming up with backup plans. This is not going to be pleasant for a lot of companies,† says Kerry Adler, CEO of WorldCom customer Webhelp. Among those affected: u V e n d o r s . WorldCom repor ted that its capital expenditures dropped 42% to about $1. 3 billion in the first quarter from a year ago, yet it remained a big customer for many telecom equipment makers. While it's unclear how accurate WorldCom's numbers are becaus e of the accounting scandal, what is clear is that its spending has slowed. The hardest hit is Juniper Networks, says Banc of America Securities analyst Christopher Crespi. WorldCom provided about 10% of Juniper's annual revenue, including â€Å"less than $7 million† this quarter, Juniper says. If WorldCom stops buying, that could dampen Juniper's forecast for the year. â€Å"It could easily subtract $50 million or $60 million off their top line,† says Soundview Technology analyst Ryan Molloy. Customers Cisco Systems, Nortel Networks and Redback Networks could also get stung, but WorldCom accounts for just a small percentage of total sales, says U. S. Bancorp Piper Jaffray analyst Edward Jackson. All telecom equipment makers could be affected in coming months, even if they didn't do business directly with WorldCom, analysts say. WorldCom was known for buying the latest, most high-tech equipment, forcing competitors to do the same if they wanted to keep up. With WorldCom out of the picture, spending could lag. u Contractors. In 1999, when consulting firm EDS signed an 11-year, $6. 4 billion contract to provide technology services to WorldCom, telecom was a growing industry. EDS is stuck with the deal and a related pledge to buy $6 billion worth of telecom services during that period. Now, EDS says it no longer wants to spend that much with WorldCom. It's in talks to work out a deal. RMH Teleservices has a five-year contract to provide customer service for WorldCom's MCI division. That accounted for 19. 5% of RMH's revenue from October to March. â€Å"While we cannot predict the future . . . we expect to continue to provide these services for MCI,† RMH leader John Fellows said in a statement. u Business partners. Last year, WorldCom pledged to buy millions of dollars in advertising from AOL Time Warner over several years. The exact terms were not disclosed. Now, that deal could be off, meaning fewer ads for Time magazine, cable's TBS and the WB television network. WorldCom also provides service to the company's AOL Internet division. AOL says it has backup providers in case WorldCom service is disrupted. Satellite cable provider DirecTV is holding meetings to determine how to handle its 4-month-old partnership with WorldCom. WorldCom was to provide the underlying network for part of DirecTV's high-speed Internet access service. Similar questions are being asked at Internet Security Systems, a software company that agreed in May to provide security services to WorldCom customers. The value of the two deals was not disclosed. * Sponsored events. Last week's Fourth of July fireworks Reprinted with permission. All rights reser ved. Page 8 AS SEEN IN USA TODAY MONEY SECTION, TUESDAY, JULY 9, 2002 celebration on the Mall in Washington was supposed to be paid for by WorldCom, which has sponsored part of the festivities for five years. But the company pulled out. The National Parks Foundation scrambled to find new funding from AT. Also in Washington, the MCI Center arena might soon be looking for a new sponsor and name. The WorldCom Classic, an annual PGA Tour stop in Hilton Head, S. C. , is in the same situation. u Charities. Each month, about 10,000 teachers receive free training in math, science and the arts from the MarcoPolo project, which is sponsored by WorldCom's charity arm. Now, program administrators and partners — including the National Geographic Society, American Association for the Advancement of Science and The Kennedy Center — are tr ying to make the proj ect independent of the struggling company. Last week, they pulled WorldCom's logos from the MarcoPolo Web site. They're applying to make it a â€Å"public charity,† says Caleb Schutz, president of WorldCom Foundation. There's a lot to lose if the company . . . pulled the plug. † For now, WorldCom still funds MarcoPolo. u Customers. The Texas Parks and Wildlife department spent last week printing temporary fishing and hunting licenses as a quick contingency plan. The department relies on a WorldCom computer network to transmit license information to 2,500 vendors. †Å"We certainly have to consider what might happen to our contract,† says Suzy Whittenton, a wildlife director. Webhelp, which outsources customer service for companies such as Microsoft, uses WorldCom to connect its overseas technology specialists with help-seekers in the USA. Because of a contract, Webhelp can't switch providers but was forced to get a backup provider in case WorldCom fails. That means twice the bills. â€Å"It's expensive, and at the end of the day, our clients pay for that,† says CEO Adler. Reprinted with permission. All rights reser ved. Page 9 Behind the Story: A Reporter’s Notebook The collapse of Enron and WorldCom, precipitated by revelations that both companies had misrepresented how profitable they were, threatens the health of the the nation’s stock markets. If investors can’t believe earnings numbers issued by the biggest companies in the USA, they won’t put their money into the market. And when investors take their money out of the market, as they’ve been doing for more than two years, businesses suffer. They can’t invest, they can’t grow as quickly and they can’t afford to hire more people. Greg Farrell Money reporter USA TODAY As the Enron and WorldCom examples demonstrate, there’s no room in a public marketplace for â€Å"creative accounting. † Once a few cheaters are revealed, the integrity of the entire marketplace is open to question. Greg Farrell is a reporter in USA TODAY’s Money section. He writes about fraud and white collar crime. In the past year, he has been reporting on Enron, Arthur Andersen, Martha Stewart and the Securities and Exchange Commission. Page 10 For discussion ADELPHIA PLANS TO FILE CHAPTER 11; ADELPHIA FOUNDER, 2 SONS, 2 OTHERS ARRESTED IN FRAUD (LIEBERMAN AND FARRELL) 1. Adelphia Corporation was the sixth largest cable company at the time of its collapse. The company was accused of a number of fraudulent activities including the manipulation of its financial reports. Specifically, the firm was accused of misreporting its cable subscription numbers in order to give the impression that the firm was growing faster than it was. For example, they counted subscribers from systems in Brazil and Venezuela where the company owns a minority stake in the company’s total subscribers. They also counted customers who ordered high-speed Internet services from companies owned by the Rigas family and clients that ordered home security services from Adelphia. Why would Adelphia’s management engage in what appears to be blatant misrepresentation of their number of subscribers? 2. When CEO John Regas of Adelphia was led away in handcuffs on racketeering charges, some complained that the justice department was making too public a display of its tough stance on white-collar crime. This type of treatment is normally associated with murderers and rapists. How do you feel about the importance of making a public spectacle of white-collar criminals? 3. The Adelphia lawsuit stated that the Rigases â€Å"used their domination and control of Adelphia, and their isolation from the scrutiny of the outside world, to engage in one of the largest schemes of self-dealing and financial wrong doing in American corporate history. Financial economists refer to this type of behavior as an agency cost since corporate executives are the agents of the firm’s owners or principals. How can stockholders protect themselves from the potential for self-dealing by corporate executives? ANDERSEN’S PARTNERS CHART FIRM’S FUTURE TODAY (FARRELL) 1. Arthur Andersen was once the premier public accounting firm but a string of high profile financial reporting disasters that culminated with the failure of Enron caused the demise of the once proud firm. Andersen’s failure highlights the fact that the principal asset of a public accounting firm is the firm’s reputation. Once the firm’s â€Å"credibility† is challenged its clients are no longer willing to pay for its auditing services. What is it that a public accounting firm does that requires it to have a sterling reputation for honesty? 2. Anderson’s initial lay off was 7,000 of its 26,000 employees before the firm completely collapsed and all employees lost their jobs. However, all of Andersen’s clients still needed auditing services so in many instances the employees continued to audit the same firms they had audited for Andersen, just for another auditing firm. If the employees just moved from one firm to another, was there really a layoff? Did Andersen employees really suffer from the demise of Arthur Andersen? Isn’t this also true of the Adelphia, Enron, and WorldCom employees? For more information, log on to http://www. usatodaycollege. com Page 11 Future implications WORLDCOM SCANDAL BRINGS SUBPOENAS, CONDEMNATION (BACKOVER AND VALDMANIS); DOMINOS HIT WORLDCOM PARTNERS, CLIENTS (KESSLER) The financial press coverage of the failures of Adelphia, Enron, and WorldCom have focused principally on stockholders who have lost everything they invested and creditors who stand to lose a portion of what they have loaned the company. However, other important consequences of these high profile failures are often overlooked including: (1) the financial and emotional losses suffered by employees who lose their jobs and face the prospect of a lengthy period of unemployment and possibly the dislocation costs of moving to another community to find work, (2) the local community public services and school systems who lose valuable tax revenues, and (3) the budget crises created for local charities and the arts that depend on corporate contributions for their continued survival. Bankruptcy courts focus on the contractual obligations of the firm to creditors and suppliers. It has been argued that the corporation is a â€Å"guest† of the society and as such has obligations to the entire web of stakeholders that have a financial stake in the firm’s survival. Should the claims of these â€Å"silent stakeholders† also be considered when a firm fails? About The Expert John D. Martin,Ph. D. Professor of Finance Carr P. Collins Chair Hankamer School of Business Baylor University From 1980 until 1998 John Martin taught at the University of Texas at Austin where he was the Margaret and Eugene McDermott Centennial Professor of Finance. Currently holding the Carr P. Collins Chair in Finance at Baylor University in Waco, Dr. Martin teaches corporate finance and financial modeling. His research interests are in corporate governance, the evaluation of firm performance, and the design of incentive compensation programs. Dr. Martin publishes widely in both academic and professional journals. Included among his academic publications are papers in the Journal of Financial Economics, Journal of Finance, Journal of Monetary Economics, Journal of Financial and Quantitative Analysis, Financial Management, and Management Science. Professional publications include papers in Directors and Boards, Financial Analysts' Journal, Journal of Portfolio Management, and Bank of America Journal of Applied Corporate Finance. u Dr. Martin co-authors several books including the following: u Financial Management, 9th edition (Prentice Hall Publishing Company) u Foundations of Finance, 4th Edition (Prentice Hall Publishing Company) u Financial Analysis (McGraw Hill Publishing Company) u The Theory of Finance (Dryden Press) Dr. Martin consults with a number of firms including Citgo, Hewlett Packard, Shell Chemical, Shell E, Texas Instruments and The Associates. Additional resources Working Paper Series — Financial Engineering, Corporate Governance, and the Collapse of Enron http://www. be. udel. edu/ccg/research_files/CCGWP2002-1. pdf For more information, log on to http://www. usatodaycollege. com Page 12