Page 260 - Executive Warfare

EXECUTIVE W ARF ARE

sure on you. Word may come down from on high that you need to alter
your books slightly; some expense in your area ought to be reclassified or
ignored.
You may be inclined to be a good sport and just make the change. After
all, your day is probably so tied up in your organization that it’s easy to
forget that there are outside rules.
Even worse, much of your personal wealth may be tied up in your
organization, too, whether it’s $100,000 or $100 million, thanks to the rise
of equity-based compensation for executives. The lure of using some lit-
tle trick to prop up your company’s
share price can be overwhelming. This
ANY COMPANY THAT is especially true if you own a lot of
HITS ITS MARK stock options that will be underwater if
QUARTER AFTER the share price declines, or if you have
QUARTER IS been so foolish as to borrow against
MANAGING ITS your stock.
EARNINGS. AND THE It’s also easy to minimize this kind of
CONSEQUENCES OF accounting manipulation to yourself.
THAT LOOK LIKE A Maybe the expense you are supposed to
“LAW & ORDER” reclassify or not record is relatively
EPISODE. small, say $2 million.
The problem is that if you are being
ordered to do such a thing, it’s an excel-
lent bet that so is every one of your peers without your being aware of it.
If there are 30 divisions in your organization making similar changes,
that’s $60 million. If the company can’t make that $60 million up in the
next quarter and the tricks continue quarter after quarter, before you
know it, the total is hundreds of millions of dollars, which will probably
never be made up. That is how accounting scandals snowball. It’s like your
mother told you: Steal a penny, you’ll soon be stealing a dollar.
So do not give in to this temptation to prop up the stock price at all
costs. We didn’t at John Hancock. If you behave like a lemming and tod-

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