Article July 29, 2002 Issue

THE TONE at the top

By Dave Hohle Senior Managing Editor

When energy giant Enron collapsed early this year, it seemed to be an isolated incident of financial malfeasance. But when WorldCom fired its chief financial officer recently for not reporting billions of dollars in expense, the question changed from "How could this happen" to "How widespread is this problem?" Research done at the Penn State Smeal College of Business suggests that it is pervasive. The study looked at how often the Securities and Exchange Commission (SEC) finds irregularities in corporate financial reports. During a period from 1987 to 1992, the SEC found reporting deficiencies in 25 percent of the reports it reviewed.

Does this mean unethical accounting practices are commonplace in a quarter of the corporations traded today? To gain some perspective on this, I spoke recently with Ed Harper, who splits his time between Washington, D.C. and Miami, Florida. For several decades Harper has dealt with finance at the highest corporate and governmental levels. In addition to teaching business and government at Rutgers University, he served on the White House staffs of Presidents Nixon and Reagan, and in the Bureau of the Budget (predecessor to the Office of Management and Budget) during Lydon Johnson's presidency.

He served as chief financial officer and executive vice president at the Campbell Soup Company, and has carried the title of chief financial officer, chief financial officer, chief operating officer, or chief executive officer, in a number of other companies. He is a past president of the Association of American Railroads, and is currently senior vice president of Fortis Insurance Company and chairman of the audit committee of another public company.

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