READERS of "Executive Read" have varied tastes and interests. The responses of readers-the ever increasing new and the loyal ones-have affirmed the decision of the Sunday Biz editor not to limit books to "strictly business," but to expand coverage to "books executives read."
This has virtually opened up this section to a vast array of books executives read-from the serious to the light-hearted, from the purely inspirational to those that demand analysis and reflection, from those with theoretical framework to personality profiles that flesh out theory with real-life accounts.
As a year-end treat to our readers, we have chosen the top seven books reviewed in the "Executive Read," based on reader responses mainly through e-mails and text messages (from those who know my mobile phone number).
Two more indicators of enthusiastic reader response come from publishers and bookstores - and, yes, request for copies from our growing network of friends and confirmed book lovers!
While some books received more responses than the others, it is not safe to assume that such books outsold everything else. For example, the book on dimensional leadership skills elicited several inquiries via e-mail, including a specific request from a CEO of one of the top five corporations. However, the book on "repairing a reputation" was declared out of stock by all bookstores, leaving me without a copy because I have given mine away.
So, the presentation of the top seven books executives loved to read in 2003 would be chronologica-and they are:
Reputation Marketing, Leading Quietly, Financial Shenanigans, The 21 Most Powerful Minutes in a Leader's Life, Living History: Hillary Rodham Clinton, Leadership Through People Skills, and Anyway.
1. Reputation Marketing. My review of Reputation Marketing, titled "Acquiring a deft hand in reputation repair," appeared early January, 20 days after the President of this country announced her decision not to run for President, calling such act as a "personal sacrifice."
And since the book is all about building a reputation or building a tarnished one, the review took off from the Presidential announcement, lauding such a move as "instructive to practitioners and students of corporate and marketing communication ... to create shifts among power centers and change the configuration of political forces." Almost. (Six months after such a declaration, the state leader made a turnabout.)
Of course, the book offers some hope. Author Joe Marconi observes: "The public has demonstrated an amazing capacity to forgive and, if not forget, to at least allow another chance."
John Rojo, who e-mailed me, and Bobby Manzano from Coca Cola who did not stop until I gave away the book, must have now found out useful insights in the book.
2. Leading Quietly. Subtitled the "unorthodox guide to doing the right thing," the book has received responses from young and promising leaders who found comfort in the review's statement that "there are quiet leaders who, behind the scenes, come up with substantive solutions for big and small problems.
The book brings readers up close and personal with corporate leaders who struggle over ethical issues, who finally end up doing the right thing, were shown the door-but were happy because their "morals were intact."
Readers like Lois Yasay, a pre-law student at University of the Philippines, said she was inspired by the book, perhaps by the statement of Albert Schweitzer quoted in the book. Schweitzer called these quiet leaders the "force that is content with small and obscure deeds, but whose sum is a thousand times stronger" than the "foam" (celebrity leaders) on the waves of a deep ocean."
3. Financial Shenanigans. "Be Sherlock Holmes in detecting accounting fraud" was how we titled an equally explosive title "Financial Shenanigans." The book details the many attempts to "window-dress" financial statements, conceal data, over-value some items, and other practices that auditors must know in order to catch the culprits.
Taking off from the debacle of multinationals Enron, WorldCom and other high-profile accounting crimes, the book-while a bit technical -drew responses from auditors, accountants and CEOs. A comptroller of the Securities and Exchange Commission and a trusted ally of receivers supervising ailing companies wrote to ask about this "eye-opening" book. My only copy was also given away to a senior executive for audit of a large bank-to serve the book's purpose: help detect gimmicks and fraud.
4. The 21 Most Powerful Minutes in a Leader's Day. Executives nowadays go for the "soft books" -meaning, those that don't demand too much analysis and require too much cerebral work. In a century where executives seek the "soul" of the corporation and even talk about the "spirit" of golf, we know that the hunger for books that touch the heart must be addressed.
We reviewed one such book, "The 21 Most Powerful Minutes in a Leader's Day, and titled it "Leadership is, first, an internal matter." The book by John Maxwell is packaged as a devotional material, to be taken in daily bites by executive readers- brief enough to leave some space for meditation and re-thinking.
5. Living History: Hillary Rodham Clinton. At the time when this book was reviewed, two books were bestsellers-a Harry Potter book and Hillary Rodham Clinton's "Living History." I made a wise move to reserve a copy at Powerbooks Alabang, and got mine in 10 days-which made the review possible.
The book on Hillary was attended by curiosity at first ("Is there a whole chapter on Monica Lewinsky?" many asked), and ended-after it was read-with a newfound respect and admiration for the famous First Lady of the United States. E-mails and text messages were a-plenty.
We noted that Hillary's formative years-from child to youth to youth volunteer-were consistent, and so we wrote: "Her youthful years showed a character formed by genes and her generation's burning issues."
6. Leadership Through People Skills. This book received the most e-mail and text messages from readers. It goes to show that executives and managers are ever on the lookout for new ways to deal with the most fascinating and inscrutable resource in organizations-people.
The book offers what it calls the "Dimensional Model of Behavior" and introduces a non-linear approach. That's why we titled the review "Calibrate your leadership approach" because the book guides leaders to fine tune the use of dominance and submission on one hand, and warmth and hostility on the other.
The book has its innate appeal. A chairman and CEO of one of the top energy companies expressed interest in the book. Also, I received an e-mail from Myriam Santiago, not our former Senator, but one simply interested in truly calibrating her leadership style- and perhaps gives her namesake a run for her money! The director of Holy Cross Press in the Archdiocese of Davao, Franklin Sanchez also wanted to get hold of the book. Jane David asked our help to locate a copy, since the bookstores either didn't have it or have run out of stock.
These responses give us a key message: Many of our readers continue to perfect their leadership styles and are always open to new ideas.
7. Anyway. This one book, found in Libris, a bookstore in BF Homes Para¤aque with a branch at the RCBC Plaza, has taken the book-reading public by storm. It is simply titled "Anyway." Gym enthusiasts talked about it, and wondered where to get hold of a copy. An enterprising friend made it a Christmas greeting card. My professor in my Ph.D. class in UP, known for her erudition, said the book "might be good"- based on the review.
And what does the book offer? It has introduced "Ten Paradoxical Commandments" which always ended with the word ... "anyway." For example, "Honesty and frankness make you vulnerable. Be honest and frank anyway."
I tried these in my lectures and other public speaking engagements-and the audience unfailingly responded with a chorus: "Anyway."
And so we bade goodbye to 2003. How did I keep the energy to read and then review a book twice a month? First, a good friend Filemon T. Berba Jr. sent me a New Year's text message saying, "Don't stop reviewing books." Second, I must really be a hopeless book lover. Book reviewing interferes with my Ph.D. studies, my professorial lectures and my public relations and advocacy practice.
However, I regularly turn in my "Executive Read" manuscript. Anyway.
Sunday, January 04, 2004
Sunday, December 21, 2003
One who mastered fiction in film used truth as the best weapon
“When Character Was King”
By Peggy Noonan
Penguin Books, 2001
Understandably, most people of this country struggle over one question: Who should be the next President of this not-so-strong Republic? The choices, until recently, were among the incumbent President who is rating low, a former Senator and Education Secretary who is concededly intelligent and seasoned on the political stage, and a Senator whose reputation, however, is stuck with his tour duty as a controversial chief of the national police.
All three have great issues attached to their aspirations: experience for the incumbent, education for the former Secretary, and peace and order for the top policeman. Is that all?
One doesn’t think so. An aspirant to the vice presidency, Senator Loren Legarda, after noting that aspirants can casually and conveniently address issues that endear themselves to the electorate, reduced the choice to one fundamental: the candidate’s character. The ultimate test is the character of the individual – his or her integrity, courage and demonstrated capability to do what is right, not what is expedient or popular.
What about competence, educational attainment, and preparedness for the job? These points have assumed larger significance with the entry of one of the most popular action stars joining the political fray – and some people were advancing arguments that were used to elect a former President who ended up in jail; the same argument that tries to establish affinity with the election of Arnold Schwarzenegger and, in the early eighties, the assumption to the U.S. Presidency of Ronald Reagan.
Our view of Ronald Reagan was too simplistic compared to the many-sided personality of this Great Communicator. The book, “When Character Was King,” a story of Reagan by one of his finest speech writers, reveals a lot about this highly successful and much-loved President the Americans ever had.
He controlled inflation, perked up the American economy, raised individual incomes, reduced taxes, and made the U.S. the pre-eminent player in the geo-political war where the antagonist, Soviet Russia, turned out to be a non-power at all.
What began the making of Reagan the communicative leader? Noonan is insightful: “As president of the Screen Actors Guild, Reagan learned how to negotiate, play tough and get tough, how to feint, stall and vamp for time, how to wait them out, how to smoke out the real reason for an impasse. He learned that it was not personal, it’s business. It’s politics.”
Reagan was generally a nice guy. One time, he lost his temper because his reserved room was given to someone else. He berated the man, was rude and impatient – and he left. Asked if the counter person saw Reagan again: “Oh sure, the next morning when he came to apologize.”
Soon enough, Reagan has perfected his way with words, and dished out his version of reality masterfully. On switching parties – from Democrat to Republican, Reagan said: “We didn’t change… they changed.”
From actor, Reagan increasingly was involved in talking about governance, about issues that citizens wanted to hear – from his denunciations of big government to criticisms of a heavy tax burden. As related by Noonan, the turning point of Reagan’s life was when he spoke for half an hour on NBC. That was the moment. Noonan says: “He stepped into national politics, became a presence in the nation’s political life. He stepped into history.”
He was fifty four when he ran for governor. The opponent, Pat Brown, dismissed Reagan as an actor, and implied “he was a phony, mouthing words as an actor does from a script he hasn’t written.” But Reagan was a good writer, had ear for music and employed cadence in his written and spoken words – in plays and his stories. As history would have it, Reagan won by a landslide over Brown.
After the governorship, the Presidency was not far behind. After the primaries, the Republican bet had to face the Democratic incumbent: Jimmy Carter. The high point of his campaign was at the “Reagan-Carter Debate” in 1980 when Reagan took command of television, and left these words ringing: “Are you better off now than you were four years ago?”
In a book that is full of insights about the man in private and the President in public, author Noonan observes: “Nothing internal, within him, changed. His character seemed to be an unbroken line that didn’t waver or soar too high or low. He was not given to conceit, didn’t play with people when he had the chance, didn’t show up places late because he’s the most important and interesting man invited, so the fun will have to start when he gets there.”
Reagan’s dealing with issues at home and abroad has been characterized by candor and devotion to truth, according to the author. Noonan says: “He loved the truth… He thought the truth is the only foundation on which can be built something strong and good and lasting – because only truth endures. Lies die. He wanted to crowd out the false with the true.”
When politicians in the past sidestepped the issue of attacking the Soviet Union, Reagan called it the “The Evil Empire.” In one speech, he told Soviet Union Secretary General Mikhail Gorbachev, “Tear down this wall!” referring to the Berlin Wall.
The author adds an insight: “He didn’t know how very soon the wall would fall, and literally a six-ton piece of it would be shipped to America to be installed at the Reagan Library.”
To many of us engrossed in comparisons and in our search for parallels, Reagan’s portrait can be used and misused by candidates. Surely, many of these aspirants pale in comparison with this President who happens to have been a university graduate, has ample gray matter between his ears, has the skills of a master negotiator, the courage to do what is right – and one who has found the truth as the best weapon to craft great policies, take resolute action, and gain victory.
By Peggy Noonan
Penguin Books, 2001
Understandably, most people of this country struggle over one question: Who should be the next President of this not-so-strong Republic? The choices, until recently, were among the incumbent President who is rating low, a former Senator and Education Secretary who is concededly intelligent and seasoned on the political stage, and a Senator whose reputation, however, is stuck with his tour duty as a controversial chief of the national police.
All three have great issues attached to their aspirations: experience for the incumbent, education for the former Secretary, and peace and order for the top policeman. Is that all?
One doesn’t think so. An aspirant to the vice presidency, Senator Loren Legarda, after noting that aspirants can casually and conveniently address issues that endear themselves to the electorate, reduced the choice to one fundamental: the candidate’s character. The ultimate test is the character of the individual – his or her integrity, courage and demonstrated capability to do what is right, not what is expedient or popular.
What about competence, educational attainment, and preparedness for the job? These points have assumed larger significance with the entry of one of the most popular action stars joining the political fray – and some people were advancing arguments that were used to elect a former President who ended up in jail; the same argument that tries to establish affinity with the election of Arnold Schwarzenegger and, in the early eighties, the assumption to the U.S. Presidency of Ronald Reagan.
Our view of Ronald Reagan was too simplistic compared to the many-sided personality of this Great Communicator. The book, “When Character Was King,” a story of Reagan by one of his finest speech writers, reveals a lot about this highly successful and much-loved President the Americans ever had.
He controlled inflation, perked up the American economy, raised individual incomes, reduced taxes, and made the U.S. the pre-eminent player in the geo-political war where the antagonist, Soviet Russia, turned out to be a non-power at all.
What began the making of Reagan the communicative leader? Noonan is insightful: “As president of the Screen Actors Guild, Reagan learned how to negotiate, play tough and get tough, how to feint, stall and vamp for time, how to wait them out, how to smoke out the real reason for an impasse. He learned that it was not personal, it’s business. It’s politics.”
Reagan was generally a nice guy. One time, he lost his temper because his reserved room was given to someone else. He berated the man, was rude and impatient – and he left. Asked if the counter person saw Reagan again: “Oh sure, the next morning when he came to apologize.”
Soon enough, Reagan has perfected his way with words, and dished out his version of reality masterfully. On switching parties – from Democrat to Republican, Reagan said: “We didn’t change… they changed.”
From actor, Reagan increasingly was involved in talking about governance, about issues that citizens wanted to hear – from his denunciations of big government to criticisms of a heavy tax burden. As related by Noonan, the turning point of Reagan’s life was when he spoke for half an hour on NBC. That was the moment. Noonan says: “He stepped into national politics, became a presence in the nation’s political life. He stepped into history.”
He was fifty four when he ran for governor. The opponent, Pat Brown, dismissed Reagan as an actor, and implied “he was a phony, mouthing words as an actor does from a script he hasn’t written.” But Reagan was a good writer, had ear for music and employed cadence in his written and spoken words – in plays and his stories. As history would have it, Reagan won by a landslide over Brown.
After the governorship, the Presidency was not far behind. After the primaries, the Republican bet had to face the Democratic incumbent: Jimmy Carter. The high point of his campaign was at the “Reagan-Carter Debate” in 1980 when Reagan took command of television, and left these words ringing: “Are you better off now than you were four years ago?”
In a book that is full of insights about the man in private and the President in public, author Noonan observes: “Nothing internal, within him, changed. His character seemed to be an unbroken line that didn’t waver or soar too high or low. He was not given to conceit, didn’t play with people when he had the chance, didn’t show up places late because he’s the most important and interesting man invited, so the fun will have to start when he gets there.”
Reagan’s dealing with issues at home and abroad has been characterized by candor and devotion to truth, according to the author. Noonan says: “He loved the truth… He thought the truth is the only foundation on which can be built something strong and good and lasting – because only truth endures. Lies die. He wanted to crowd out the false with the true.”
When politicians in the past sidestepped the issue of attacking the Soviet Union, Reagan called it the “The Evil Empire.” In one speech, he told Soviet Union Secretary General Mikhail Gorbachev, “Tear down this wall!” referring to the Berlin Wall.
The author adds an insight: “He didn’t know how very soon the wall would fall, and literally a six-ton piece of it would be shipped to America to be installed at the Reagan Library.”
To many of us engrossed in comparisons and in our search for parallels, Reagan’s portrait can be used and misused by candidates. Surely, many of these aspirants pale in comparison with this President who happens to have been a university graduate, has ample gray matter between his ears, has the skills of a master negotiator, the courage to do what is right – and one who has found the truth as the best weapon to craft great policies, take resolute action, and gain victory.
Sunday, December 07, 2003
Survive the dangers of leading
“Leadership on the Line”
By Ronald A. Heifetz & Marty Linsky
Harvard Business School Press, 2002
In a lunch with former Senate President Jovito Salonga, a friend made an obvious comment that “politics is dirty.” The venerable leader took a pause from taking his lunch and said: “You know, politics can be a noble calling.” And he narrated to us what obsessed him to run for political office – to achieve real freedom for the country – and to secure justice. His role in leading the Senate “that said No!” to the American military bases was one of the goals that gave him passion and intensity.
But there are risks involved in leadership. Senator Salonga almost did not survive the Plaza Miranda bombing. Still, this calling called leadership continues to beckon, and young and old, men and women respond, ignoring the dangers. This book is for such leaders – so they can master – if not survive – the perils of leading.
In politics, in the business world and in civil society circles – the same question resounds: Shall one take a leadership role, leave the peace and quiet of a low-profile job, and place your “leadership on the line”? It is actually putting your head on the chopping black, if you please pardon the shocking metaphor.
That is the title of this book, authored by professors of the Center for Public Leadership of the John F. Kennedy School of Government – where a number of our leaders had some training – with visible or invisible benefits!
The authors, showing intimate familiarity with the multifarious hazards of leaders, put it squarely: “To lead is to live dangerously …when you lead people through difficult change, you challenge what people hold dear – their daily habits, tools, loyalties and ways of thinking – with nothing more to offer perhaps than a possibility.”
And yet even if the dangers abound, some leaders – like Finance Secretary Jose Isidro Camacho – chose to leave the ordered life of a highly successful investment banker and join the “snake pit” in the Palace. The book says that there are indeed those who are driven by a genuine desire to serve.
The first part of the book does not mince words about the dangers. The authors warn: “When exercising leadership, you risk getting marginalized, diverted, attacked, or seduced. When people resist adaptive work, their goal is to shoot down those who exercise leadership in order to preserve what they have.”
If you are a leader, you can identify with many of the hazards of leadership – from being placed in a freezer to being led to lose focus; from being attacked (verbally -- and even physically) to being seduced to take up a cause for its fleeting appeal.
After amply warning the reader about land mines and traps along the way, the authors discuss at length the suitable responses to the dangers – or challenges. One of the more useful advice is to “get on the balcony.” The book explains:
“Any military officer knows the importance of maintaining the capacity for reflection, even in the ‘fog of war’. Great athletes can at once play the game and observe it as a whole – as Walt Whitman described it, ‘being both in and out of the game.’ … We call this skill ‘getting off the dance floor and going to the balcony… We all get swept into action when it becomes intense or personal and we need most to pause.”
The book is also instructive to people who, when a business plan has been written, look at it as one “cast in granite.” “Leadership is an improvisational art,” the book says. And it goes on to narrate the story of General Dwight Eisenhower.
After leading the successful D-Day invasion on the beaches of Normandy, the first thing former American President Eisenhower did was “to throw out the plan.” The authors enshrine two leadership qualities: discipline and flexibility. You take action, step back and assess the results of the action, reassess the plan, then go to the dance floor and make the next move.
“Think politically,” is another valuable advice, not for the practitioners of the art – the politicians – but for business executives who are so focused on results that they forget the need to have some political savvy. Many sad and happy stories are documented in the book.
More strategies -- orchestrating the conflict and letting the issue -- ripen will serve the leader in good stead after he places himself on the line. On anchoring yourself, the book tells the engaging story of two good looking American presidential aspirants – one lost, the other won.
The press accused both Gary Hart and Bill Clinton of philandering. They responded in very different ways. Hart counterattacked and got defensive. Bill Clinton took a very different road. He went on 60 Minutes right after the Super Bowl, sat before the cameras holding hands with his wife, and essentially admitted that he had strayed. Hart responded personally; Clinton, strategically and more honestly.
The book’s aphorism is packed with meaning: “Your management of an attack, more than the substance of the accusation, determines your fate.” The perils of leadership are like landmines in a political landscape. This book shows you how to gingerly – and confidently – side step or master the terrain.
By Ronald A. Heifetz & Marty Linsky
Harvard Business School Press, 2002
In a lunch with former Senate President Jovito Salonga, a friend made an obvious comment that “politics is dirty.” The venerable leader took a pause from taking his lunch and said: “You know, politics can be a noble calling.” And he narrated to us what obsessed him to run for political office – to achieve real freedom for the country – and to secure justice. His role in leading the Senate “that said No!” to the American military bases was one of the goals that gave him passion and intensity.
But there are risks involved in leadership. Senator Salonga almost did not survive the Plaza Miranda bombing. Still, this calling called leadership continues to beckon, and young and old, men and women respond, ignoring the dangers. This book is for such leaders – so they can master – if not survive – the perils of leading.
In politics, in the business world and in civil society circles – the same question resounds: Shall one take a leadership role, leave the peace and quiet of a low-profile job, and place your “leadership on the line”? It is actually putting your head on the chopping black, if you please pardon the shocking metaphor.
That is the title of this book, authored by professors of the Center for Public Leadership of the John F. Kennedy School of Government – where a number of our leaders had some training – with visible or invisible benefits!
The authors, showing intimate familiarity with the multifarious hazards of leaders, put it squarely: “To lead is to live dangerously …when you lead people through difficult change, you challenge what people hold dear – their daily habits, tools, loyalties and ways of thinking – with nothing more to offer perhaps than a possibility.”
And yet even if the dangers abound, some leaders – like Finance Secretary Jose Isidro Camacho – chose to leave the ordered life of a highly successful investment banker and join the “snake pit” in the Palace. The book says that there are indeed those who are driven by a genuine desire to serve.
The first part of the book does not mince words about the dangers. The authors warn: “When exercising leadership, you risk getting marginalized, diverted, attacked, or seduced. When people resist adaptive work, their goal is to shoot down those who exercise leadership in order to preserve what they have.”
If you are a leader, you can identify with many of the hazards of leadership – from being placed in a freezer to being led to lose focus; from being attacked (verbally -- and even physically) to being seduced to take up a cause for its fleeting appeal.
After amply warning the reader about land mines and traps along the way, the authors discuss at length the suitable responses to the dangers – or challenges. One of the more useful advice is to “get on the balcony.” The book explains:
“Any military officer knows the importance of maintaining the capacity for reflection, even in the ‘fog of war’. Great athletes can at once play the game and observe it as a whole – as Walt Whitman described it, ‘being both in and out of the game.’ … We call this skill ‘getting off the dance floor and going to the balcony… We all get swept into action when it becomes intense or personal and we need most to pause.”
The book is also instructive to people who, when a business plan has been written, look at it as one “cast in granite.” “Leadership is an improvisational art,” the book says. And it goes on to narrate the story of General Dwight Eisenhower.
After leading the successful D-Day invasion on the beaches of Normandy, the first thing former American President Eisenhower did was “to throw out the plan.” The authors enshrine two leadership qualities: discipline and flexibility. You take action, step back and assess the results of the action, reassess the plan, then go to the dance floor and make the next move.
“Think politically,” is another valuable advice, not for the practitioners of the art – the politicians – but for business executives who are so focused on results that they forget the need to have some political savvy. Many sad and happy stories are documented in the book.
More strategies -- orchestrating the conflict and letting the issue -- ripen will serve the leader in good stead after he places himself on the line. On anchoring yourself, the book tells the engaging story of two good looking American presidential aspirants – one lost, the other won.
The press accused both Gary Hart and Bill Clinton of philandering. They responded in very different ways. Hart counterattacked and got defensive. Bill Clinton took a very different road. He went on 60 Minutes right after the Super Bowl, sat before the cameras holding hands with his wife, and essentially admitted that he had strayed. Hart responded personally; Clinton, strategically and more honestly.
The book’s aphorism is packed with meaning: “Your management of an attack, more than the substance of the accusation, determines your fate.” The perils of leadership are like landmines in a political landscape. This book shows you how to gingerly – and confidently – side step or master the terrain.
Sunday, November 09, 2003
Change accounting rules to match new ball game
“Rethinking the Rules of Financial Accounting”
By Robert N. Anthony
McGraw Hill, 2004
You walk down the streets of the country’s financial district, Ayala Avenue, and you would note impressive high rise buildings. The same is true when – immobilized by the intractable traffic re-routing within the Ortigas Center – you are awed by rows and rows of edifices challenging the heights.
And you wonder: Are the companies which own or have naming rights to these buildings really viable. But, you quickly remember an old adage not to “judge the book by its cover” (or a recent one from the sister of a lovelorn mayor: “Don’t judge him; he is not a book”).
So, speaking of buildings, don’t judge a company by its façade or its giant signboard. After all, there is always “a small company with a big sign” in every square meter of Ayala, Ortigas, Alabang and Filinvest business districts.
So, if facades won’t do it, how do you know the company you are talking to or investing in is well worth its image? Thank God, there are accountants who make sure you can see the innards of the company – with its balance sheet of assets, liabilities and equity. In the past, we could truly say we trust the financial statement as a sacrosanct document, its integrity beyond question. And, so we always said: “Look at the figures.”
And yet after the debacle of Enron (which initially impressed me when top Enron executives Ken Lay and Rebecca Mark flew into town by private jet some years ago) and after the wholesale accounting fraud by WorldCom, the sacred balance sheet has fallen out of grace. Not only that. With the advent of companies whose assets are not, strictly speaking, “physical,” how can one now reduce these assets to pesos and centavos?
Thus, you have “creative accounting” on one side where you need new investigative tools to spot any shenanigan, and you have hi-tech firms whose assets while purely intangible are inestimably valuable. This backdrop encouraged accounting guru Robert Anthony to write the book, “Rethinking the Rules of Financial Accounting.”
Anthony lays his premises well, drawing from the rigors of sciences. He points out: “Most disciplines – physics, chemistry, economics, medicine, engineering, and mathematics – have a conceptual framework for reporting measurements and a set of rules consistent with that framework. Those frameworks and rules have to be examined from time to time as the world changes. Inconsistencies in the rules creep in over time, and the rules do not incorporate new measurement techniques.”
This book is meant for accountants, with technical terms that may be abstruse to the layperson. But, if you are an executive, who went through Accounting for Non-Accountants or have gone through the rigors of MBA training, the fundamental issues raised by the book yield to some, if not easy, understanding.
Thus Anthony begins with a basic truth, “Accounting rules are rules for measurement” – and proceeds to define measurement as ‘the process of associating numbers with physical quantities and phenomena.’ Financial accounting rules measure ‘physical quantities’ in three categories – assets, liabilities and equity – at one moment in time.”
Arriving at a company’s net worth or true value is the crux of the problem confronted by the author. And yet, at the end of every chapter or section, he wrestles with the same old question: How do you reduce to numbers the operating performance of the company – and then how do you “photograph” its financial condition in a balance sheet?
The author begins with the first hurdle: terminology. He points out that even the Federal Accounting Advisory Board of the U.S. showed in a 1998 study that companies have two names for the same item. “Operating income” was used 356 times and “operating profit” was used 146 times.
He moves on to discuss the “Financial Position Statement.” After he volunteers a historical tidbit that the balance sheet has already been used for 500 years, he makes a shocking statement: The balance sheet “does not report an entity’s financial position.”
He explains: “The asset side does not, and cannot, report all the resources that an entity owns or controls.” He cites as examples the value of brands, new products, and the quality of a firm’s management. He also notes the increasing importance of these “intangibles” as knowledge-based assets.
An interesting “did-you-know” info tip is in this book. Accounting’s “dual aspect concept,” according to Anthony, was first used in Italy in the early 15th century by Luca Pacioli’s Summa (1494) who stated that accounting should measure two equal aspects of every transaction. He labeled one aspect “debit” and the other “credit”. It was widely used by companies sending a fleet of ships at the end of the voyage.
In more chapters covering statements on income and cash flow, Anthony argues for the use of the same terminology, no-nonsense recognition of income, and takes to task many creative financial maneuvers of companies which “window dress” their financial statements or are “dressing up the bride” prior to a sale.
He also draws similar and different problems confronting accounting rules for non-profit firms and government institutions.
From talking about rethinking the rules, the author also takes up ethical behavior among auditors and accountants. He says: “If professionals steal money, lie, produce an inferior product, or commit other sins, their conduct is illegal and they can be punished in the courts.” However, some conduct may be legal, but it can be unethical, he points out.
Doubtless, financial accounting is a serious matter. An executive can be thrown to jail for accounting fraud. Or, on the basis of an auditor’s report, a Chief Justice may be impeached. The author has a word for auditors: They must exercise “due diligence.” And that simply means: They must do enough work with the satisfaction that their financial statements report what they are supposed to report.
But, first of all, change the rules, because the 21st century corporate world is an entirely different ball game.
By Robert N. Anthony
McGraw Hill, 2004
You walk down the streets of the country’s financial district, Ayala Avenue, and you would note impressive high rise buildings. The same is true when – immobilized by the intractable traffic re-routing within the Ortigas Center – you are awed by rows and rows of edifices challenging the heights.
And you wonder: Are the companies which own or have naming rights to these buildings really viable. But, you quickly remember an old adage not to “judge the book by its cover” (or a recent one from the sister of a lovelorn mayor: “Don’t judge him; he is not a book”).
So, speaking of buildings, don’t judge a company by its façade or its giant signboard. After all, there is always “a small company with a big sign” in every square meter of Ayala, Ortigas, Alabang and Filinvest business districts.
So, if facades won’t do it, how do you know the company you are talking to or investing in is well worth its image? Thank God, there are accountants who make sure you can see the innards of the company – with its balance sheet of assets, liabilities and equity. In the past, we could truly say we trust the financial statement as a sacrosanct document, its integrity beyond question. And, so we always said: “Look at the figures.”
And yet after the debacle of Enron (which initially impressed me when top Enron executives Ken Lay and Rebecca Mark flew into town by private jet some years ago) and after the wholesale accounting fraud by WorldCom, the sacred balance sheet has fallen out of grace. Not only that. With the advent of companies whose assets are not, strictly speaking, “physical,” how can one now reduce these assets to pesos and centavos?
Thus, you have “creative accounting” on one side where you need new investigative tools to spot any shenanigan, and you have hi-tech firms whose assets while purely intangible are inestimably valuable. This backdrop encouraged accounting guru Robert Anthony to write the book, “Rethinking the Rules of Financial Accounting.”
Anthony lays his premises well, drawing from the rigors of sciences. He points out: “Most disciplines – physics, chemistry, economics, medicine, engineering, and mathematics – have a conceptual framework for reporting measurements and a set of rules consistent with that framework. Those frameworks and rules have to be examined from time to time as the world changes. Inconsistencies in the rules creep in over time, and the rules do not incorporate new measurement techniques.”
This book is meant for accountants, with technical terms that may be abstruse to the layperson. But, if you are an executive, who went through Accounting for Non-Accountants or have gone through the rigors of MBA training, the fundamental issues raised by the book yield to some, if not easy, understanding.
Thus Anthony begins with a basic truth, “Accounting rules are rules for measurement” – and proceeds to define measurement as ‘the process of associating numbers with physical quantities and phenomena.’ Financial accounting rules measure ‘physical quantities’ in three categories – assets, liabilities and equity – at one moment in time.”
Arriving at a company’s net worth or true value is the crux of the problem confronted by the author. And yet, at the end of every chapter or section, he wrestles with the same old question: How do you reduce to numbers the operating performance of the company – and then how do you “photograph” its financial condition in a balance sheet?
The author begins with the first hurdle: terminology. He points out that even the Federal Accounting Advisory Board of the U.S. showed in a 1998 study that companies have two names for the same item. “Operating income” was used 356 times and “operating profit” was used 146 times.
He moves on to discuss the “Financial Position Statement.” After he volunteers a historical tidbit that the balance sheet has already been used for 500 years, he makes a shocking statement: The balance sheet “does not report an entity’s financial position.”
He explains: “The asset side does not, and cannot, report all the resources that an entity owns or controls.” He cites as examples the value of brands, new products, and the quality of a firm’s management. He also notes the increasing importance of these “intangibles” as knowledge-based assets.
An interesting “did-you-know” info tip is in this book. Accounting’s “dual aspect concept,” according to Anthony, was first used in Italy in the early 15th century by Luca Pacioli’s Summa (1494) who stated that accounting should measure two equal aspects of every transaction. He labeled one aspect “debit” and the other “credit”. It was widely used by companies sending a fleet of ships at the end of the voyage.
In more chapters covering statements on income and cash flow, Anthony argues for the use of the same terminology, no-nonsense recognition of income, and takes to task many creative financial maneuvers of companies which “window dress” their financial statements or are “dressing up the bride” prior to a sale.
He also draws similar and different problems confronting accounting rules for non-profit firms and government institutions.
From talking about rethinking the rules, the author also takes up ethical behavior among auditors and accountants. He says: “If professionals steal money, lie, produce an inferior product, or commit other sins, their conduct is illegal and they can be punished in the courts.” However, some conduct may be legal, but it can be unethical, he points out.
Doubtless, financial accounting is a serious matter. An executive can be thrown to jail for accounting fraud. Or, on the basis of an auditor’s report, a Chief Justice may be impeached. The author has a word for auditors: They must exercise “due diligence.” And that simply means: They must do enough work with the satisfaction that their financial statements report what they are supposed to report.
But, first of all, change the rules, because the 21st century corporate world is an entirely different ball game.
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