From the New York Times:
A decade ago, General Electric was the shining star of American business. Its longtime chief executive, Jack Welch, was named manager of the century by Fortune Magazine, and its stock seemed always to go up.
It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.
G.E. is different now. The stock has fallen and the aura has dissipated.
This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.
As is customary in such settlements, G.E. neither admitted nor denied the charges. But it sounded contrite. “The errors at issue fell short of our standards, and we have implemented numerous remedial actions and internal control enhancements to prevent such errors from recurring,” said a company statement.
Another view of G.E.’s accounting standards emerged a few years ago in a book written by a man who worked there for six years in the early 1980s, before concluding the corporate life was not for him and entering a seminary. James Martin may be the only Jesuit priest with a degree from the Wharton School of the University of Pennsylvania.
“The primary task of my first job was to issue very long, monthly statistical reports,” he wrote in his book, “In Good Company: The Fast Track From the Corporate World to Poverty, Chastity and Obedience.” “The first month,” he recalled, “I informed one executive that our results were coming in low” because of losses in overseas operations.
“So what?” replied the executive. “Just reverse a few journal entries.” Corporate headquarters, he explained, would come down hard on them if they missed the numbers.
Another boss told him he was “taking those accounting courses way too seriously.”>>>MORE