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Monday, December 04, 2006

Brand people failures: Arthur Andersen

Shredding a reputation

If the Enron scandal proved anything, it was the interconnected nature of the modern business world. After all, Enron had a lot of corporate connections, particularly in its home state of Texas. ‘Within two or three degrees of separation, virtually everybody would have a connection to Enron,’ said Richard Murray, director for the University of Houston’s Centre for Public Policy.

However, while the Enron association has had a negative impact on the Texan corporate community, for those firms directly involved with Enron’s day-to-day business practices, the result has been catastrophic. For Enron’s accountancy firm, Arthur Andersen, the association has proved fatal.

After all, if it was about anything the Enron scandal was about accountancy. Specifically it was about shredding documents relating to Enron’s accounts and concealing massive debts, a fact that immediately implied a considerable element of complicity on the part of the accountancy firm. This complicity was implied further when David Duncan, Enron’s chief auditor at Andersen, appeared involuntarily at the first investigation into the scandal and then refused to speak in order to avoid incriminating himself. Even when Joseph Berardino, Andersen’s chief executive, vigorously defended his firm’s role in the affair, he was unable to undo the damage. Once it was found guilty of deliberately destroying evidence, the firm suffered severe brand damage and the tremors were felt throughout the entire accountancy industry.

Lessons from Arthur Andersen

Understand that businesses are interconnected. No firm is completely immune from other businesses. Andersen and Enron’s actions have been impossible to separate, at least in the mind of the public.

Don’t send mixed messages. As the plot thickened, different versions of events started to emerge from inside Andersen.

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