A COLLAPSED telco, auditors under fire, leading executives being subpoenaed, an integral part of the national transport infrastructure seeking a financial lifeline from the government to stay afloat … Does all this sound familiar?
No, its not Australia 2001, it’s the US today.
There is no doubt that the US is in the middle of a massive crisis of confidence, but only being here makes you realise how much of that is connected to the failures and excesses of the business community.
For many Americans business is more than some vague notion of employers that keep the economy ticking, and shares are not something you picked up in a privatisation and plan to hold forever.
Business is followed closely and the shareowners actively trade.
There are eight business channels on cable television, running around-the-clock commentary.
That has fuelled (and been fuelled by) a boom that outlasted even the most bullish predictions, whose end has left large swaths of corporate America in tatters.
Amid a sea of revelations about the inflation of profits, investors and regulators have turned the spotlight on the two key sectors of the business world, which were meant to guide them – the analysts and the auditors.
Analysts were supposed to offer accurate advice on the quality of stocks, while auditors were meant to review in detail the veracity of financial information supplied to the market.
They did not do their jobs well enough and it’s the investors who are paying, as company after company collapses.
It is also clear that, with no obvious end in sight for the corporate malaise, many are battening down the hatches for at least another year of pain.
The advertising industry here is not predicting an upturn until at least 2003-04.
All this has meant many investors are holding back their money, refusing to continue stoking the fires of corporate excess.
Millionaires are on skid row and billionaires are being indicted for insider trading.
Retail stockbroker Charles Schwab’s advertising is pushing the line that it doesn’t provide stock recommendations.
It is hoping to capitalise on poor investor sentiment.
The US Senate is looking at a bill that will change auditing and, with many analysts set to appear before an congressional inquiry, the chances are that industry will be forced to change too.
