Q. Last year our company instituted more aggressive accounting practices to increase our revenue. The new policy was not communicated to our investors, and I now have serious doubts about our revenue recognition. It’s awfully similar to Global Crossing’s. What should I do?
A. First, if you are not an accountant, don’t make a snap judgment until you have sat down and had the policy explained to you by the finance department. If you have serious doubts about the company’s revenue recognition, ask yourself if you really understand what the policy is and why it was chosen. If you don’t, head to the finance department and find whoever is responsible and have them explain it to you. But don’t stop there. Practice explaining it to an internal third party. Next practice writing it down and make sure it makes sense in writing. If you’re still not satisfied then go back again to the finance department and say the policy still sounds very dodgy – and unlikely to impress investors. Tell them why you think this might be seen as an unacceptable way to recognize revenue. Is the finance department willing to place the policy under review? If at the end of the day none of this works and you still think those policies look like a Global Crossing in the making, resign.
Q. We need to recruit independent directors and are very keen to communicate our willingness to do so to the investing community. However we can’t seem to find qualified directors.
A. It’s not surprising that you’re having a frustrating time finding independent directors. The ability to just bring in directors with links to management has been severely hampered by the Sarbanes-Oxley Act in the US. So this means your search will also be a time-consuming one; after all, who wants to become an independent director of a public company when they are on the hook both personally and financially? The good news is there are still good, qualified people around who are ready and willing. The bad news is it will take longer to find them. You can do two things: one is to identify people yourself through brainstorming and thinking about what you want your independent directors to bring to the table. What kind of background and expertise do you want them to have? If you need help establishing the responsibilities of an independent director, you can always check with your relevant institute of directors (for example, www.nacdonline.com in the US and www.iod.com in the UK). The other option is to go to headhunting firms who can do most of the legwork for you. In the UK one of the best services is provided by Harriet Tupper at Boyden International.
Q. I have joined a company where all the executives are a bunch of crooks. Although I’m suffering pangs of guilt, I keep thinking ‘better the devils you know…’ What should I do?
A. Hopefully, in this case, it doesn’t take one to know one. If you are truly the good guy in a bad bunch there are a number of options. You could give in and join the ranks, knowing, of course, that crime ultimately doesn’t pay. Second, you can try to reform the degenerates, find their redemptive qualities and encourage them to walk the straight and narrow. Finally when all else fails call the whistleblower’s hotline (in the UK call 020 7676 9200, in the US contact Niri) and head for the door, because your soul is priceless.
E-mail questions to Heather McGregor – [email protected]. McGregor is a former IRO and investment analyst who currently works on IR assignments for Taylor:Bennett, an executive search firm specializing in communications jobs
