NEW YORK — Every Friday morning, Barbara Ley Toffler tries to show a class of students at Columbia Business School that lessons in leadership can be learned from Shakespeare's plays.
In “Final Accounting”, Toffler's new book about the decline and fall of Arthur Andersen, she tells a tragedy worthy of the Bard himself.
Like King Lear's daughters, who turn on their father after he gives them his power, the last generation of leaders at the accounting firm turned on the industry titan who bequeathed them a legacy of integrity: founder Arthur Andersen.
Like Hamlet, whose indecision prevents him from seizing the throne in Denmark, the indecisiveness of Andersen's leaders following Enron's collapse prevented the firm from seizing the high ground and transforming itself into a model of what auditing firms could be.
Toffler, who headed Andersen's business ethics consulting practice from 1995 to 1999, and departed before Enron imploded, focuses on the causes of Andersen's downfall: a corporate culture that put loyalty to the firm above loyalty to the client or the investing public.
By the 1990s, the Andersen culture had changed completely from the one that its founder had created. Andersen started the firm in Chicago in 1913. His motto was, “Think straight, talk straight.”
After refusing a client's demands to fudge some unpleasant numbers on an earnings report, the company's reputation for integrity set it apart from competitors.
By the 1980s, Andersen, like most big accounting firms, had branched out beyond auditing, offering business-consulting services to complement their auditing capabilities. As part of that push, it hired specialists such as Toffler to offer new services to existing clients. Toffler had run a consulting firm, counseling corporations on the importance of ethical business practices. Andersen wanted her to build up a practice in that area.
The irony, she notes, is that Andersen had almost no interest in the meaningful application of business ethics to its own business.
Instead, Toffler was thrown into what she describes as a dysfunctional situation where she had to compete against fellow Andersen partners to offer additional services to audit clients.
Her book describes business pitches in agonizing detail. They followed a pattern: An Andersen auditor set up a meeting with the client's chief financial officer. A handful of partners got a few minutes each to make their pitch.
Because partners competed against each other for fees, they criticized each other during the pitch, or extended their presentation so their colleagues would have less time in front of the client.
Even at an auditing firm, it was all about money. At firmwide meetings, Toffler says business units were saluted for the amount of money they brought in. Nobody was saluted for standing up to demanding clients, as Arthur Andersen himself had done.
Adding to the unpleasantness, Toffler writes, was the sense that she was an outsider. The book describes a corporate culture that sought out like-minded recruits on college campuses and trained them at Andersen's facility in St. Charles, outside Chicago. “The loyalty of the partners was something akin to that of a military unit,” Toffler says.
These lifers, who referred to themselves as Androids, knew that for the firm to grow, they had to hire outside specialists such as Toffler. But most outsiders never fully mastered the nuances of the Andersen culture. Many washed out.
That's what happened to Toffler, who was exhausted from the constant internal battles. “The thing that ripped my guts out was the constant fighting, and that my skills and the skills of my group meant nothing,” says Toffler, 61, in an interview. In 1999, she wanted out. The firm did not try to keep her.
Toffler acknowledges some former Andersen partners will dismiss her book as sour grapes. But she says it's a cautionary tale about what can happen to a company that loses its bearings.
“I'm hoping people will see that it's not just a nasty tell-all book,” she says, adding there were Andersen partners who were respected immensely. She includes in that list C.E. Andrews, who became the public face of Andersen after CEO Joseph Berardino quit last March.
Today, nearly a year after the Department of Justice indicted the firm for obstruction of justice, Toffler cites a variety of reasons for Andersen's collapse. But ultimately, she argues, Berardino could have saved Andersen, but didn't.
Unlike Hamlet, Berardino was decisive, Toffler says. But the firm's top managers acted like Richard II: blind to the dangers they faced until it was too late.
