Emory University News Release

Release date: Aug. 6, 2002
Contact: Elaine Justice, Associate Director, University Media Relations,
at 404-727-0643 or ejustic@emory.edu

Emory Profs Say Students Can Learn From Corporate Debacles

Recent corporate scandals may not revolutionize the way business is done in America overnight, but the bitter lessons are likely to be dissected in the nation’s business schools for years to come, say ethics and business professors at Emory University.

"These events offer highly relevant examples of what we’ve been teaching all along," says Al Hartgraves, professor of accounting who teaches financial reporting and cost management in the MBA and Executive MBA programs at Goizueta Business School.

Hartgraves predicts that recent events will result in a shift in what gets talked about in the nation’s business classrooms. "Academics haven’t paid much attention to topics such as accounting for special purpose entities (SPEs)," says Hartgraves, but they will now.

"In the case of Enron, one of the problems was SPEs, which typically had not been covered in the curriculum in the past. Briefly in the financial reporting class for MBAs, we alluded to off-balance sheet liabilities, but now professors are likely to take a closer look at those topics," says Hartgraves.

The biggest challenge for educators, in Hartgraves’ view, is changing the mindset of the accounting profession. "Accountants had become too focused on how you manage profits," says Hartgraves, who teaches MBA students with five to seven years of corporate experience. "The whole approach to accounting has become a search for loopholes to make the company look better. Accountants too often are geared to finding accounting methods to meet their profit maximization goals rather than the best methods that reflect reality."

But many of these methods which enhance current earnings have the effect of decreasing earnings in the future, Hartgraves tells his students.

"That’s a flaw that the accounting community has to deal with," says Hartgraves. "It’s a problem that pervades our whole society. Everyone wants to look good now."

Diana Robertson, associate professor of organization and management at Goizueta and a specialist in business ethics, echoes Hartgraves’ sentiments that attitudes are ingrained, widespread and sometimes difficult to change. "You have to look at incentive structures, reward structures, monitoring schemes and how they align with ethics codes and formal ethics messages," says Robertson. If these don’t reinforce one another, there may be trouble down the road.

"One of the messages I convey in class is how strong corporate culture is; the culture either reinforces or doesn’t reinforce the company’s formal messages on ethical conduct," says Robertson. In the case of Enron and Arthur Andersen, for example, the pressure to serve the client overcame any kind of formal ethics program. "If the culture doesn’t support ethics, you can throw policies out the window," she says.