I Ask Gordon Gekko- Is Greed “Really” Good?

By Rick Gould, CPA, JD

Today is the anniversary of a day most Americans want to forget.  December 11 is often called “Madoff Day”, in celebration of the arrest of Bernie Madoff, who was convicted of the largest and most costly corporate fraud in U.S. history.  $70 Billion dollars is estimated to be the amount his clients lost.  For many of them it was their life savings.  Madoff was arrested on December 11th, 2008.

There were other major Ponzi scheme frauds uncovered in 2008.  Two that stood out: Mark Dreier, Managing Partner of the Dreier Law Firm was arrested for defrauding clients of three quarters of a billion dollars, and R. Allen Stanford, ultimately convicted of a $7 billion dollar fraud in his Houston, Texas headquartered bank. 

These three men, as well as others who found similar fates, would have been wealthy in their own right; certainly multi-millionaires.  But instead of being satisfied with that hard to fathom amount of money, they wanted more.  They believed that, as Gordon Gekko coined in the 1987 movie “Wall Street” -- “Greed is Good.”  Their only goal seemed to be to make more money, no matter whose lives they financially crushed in the process.

The only message I see here is this: those who invest their hard-earned dollars must thoroughly check out the track record and reputation of who they are investing with, whether it be a financial institution, advisor, investment counselor, or a “trusted” Managing Partner of a law or CPA firm.  Unfortunately, the few that believe “Greed is Good” taint the credibility and reputation of the rest of us that are ethical and honorable.  December 11, 2008 should not be forgotten.  It should serve as a war cry for increased transparency and accountability, and a sobering reminder of the importance of due diligence when choosing investment partners and business advisors.

The “Science” Of Benchmarking

By Rick Gould, CPA, JD

We study success. We study what makes firms “model firms”, even during a recession– keeping labor below 50% of net revenues: operating expenses below 25%.

Our “scientific” process, as it has been coined, is Benchmarking. Most world-class firms study benchmarks to improve their operations.

Our benchmarking is a continuous exploration of and application of the best practices that lead to excellence in competitive performance. Benchmarking has been our niche, without any competitors.

We believe both success and failure in the PR industry are largely the result of pinning down the process and making it better each year. It will never be perfect, but maybe “more” successful. Working smarter, not harder is the goal. The “science” of benchmarking is the method.

To get more on Benchmarking

Please visit our website www.stevensgouldpincus.com       

 

and our corporate blog www.stevensgouldpincusblog.blogspot.com/ 

Ten Years Later-Harvard Business Review Article Affirms “Entrepreneuring”

By Rick Gould, CPA, JD

The article by Carl Schramm in the July/August Harvard Business Review supports a concept I promoted ten years ago, but just appears to be catching on.

In 2002 I created and taught a graduate course at the Parsons School of Design in New York City. The course was called “Entrepreneuring- The Business of Creative Businesses.” It was geared toward very smart, creative graduate design students that dreamed about someday starting their own design firm.

As was almost universal in academia offering a course on “Entrepreneurship” was non-existent. Thousands of MBA’s were turned out every year but few universities and colleges offered a practical, no-nonsense course on starting a business, running a “profitable” business and “selling” that same business. Yes, “selling” the business not yet started. I have often said that if you run your business as if it will be sold in the immediate future it will automatically become more profitable. You will learn how the business is valued and the models a buyer may use in an acquisition. You will become a sharper business person and street smart.

In my 15 week graduate course that I taught for three and half years. I started with the formation of the business- the legal and accounting requirements. I then went through the various operating issues. Billing and collections, cash flow projections, key benchmarks of a service business i.e. total labor cost should not exceed 50% of net revenues, operating expenses should be no more than 25%.

We went through how to calculate billing rates, what percent of each level of staff’s time should be billable (productivity benchmarks) and other very key operational concepts of running a successful business and building value to that business. We researched several case studies using real firms with actual situations.

The article in HBR by Mr. Schramm questions the way we teach our students the business of Entrepreneuring. He challenges “a system that leaves the education of entrepreneurs to school teachers (whose choice of profession displays little appetite for economic risk taking and thus may be ill-equipped to convey what entrepreneurs actually do). He asks if they have what it takes to get a business up and running, none the less making it profitable.

He mentions two programs Startup Weekend and Launch Pad (U of Miami, founded 4 years ago). The instructors are successful business entrepreneurs.

I agree with Mr. Schramm that we need to change the University Model in teaching entrepreneuring to rely less on textbook theory and more on the proven business models and benchmarks, taught by those that have been successful in attaining these objectives.

Ten years later- Have we learned from ENRON?

by Rick Gould, CPA, JD

December 2, 2011 was the tenth anniversary of the bankruptcy filing of Enron. The demise of Worldcom, Healthsouth, Tyco International, Global Crossing and other high profile public firms followed soon after that event in 2001. I recall vividly the time I taught the Entrepreneuring graduate course I created at Parsons School of Design and how I specifically chose these firms as model case studies. The relevance was there 10 years ago. But I wonder in the context of today’s business environment… have we really learned from these examples?

The downfall of these firms and the liquidation of Arthur Andersen, the CPA firm for many of these firms, generated millions of dollars for other companies. The bankruptcy law firms, the movie industry, as well as the cable specials and books that chronicled the drama, all profited from the failure of these firms and their corrupt executives.

For these past ten years, those of us in the business community and corporate governance heard about and preached about the importance of ethics, transparency and integrity. But have we really absorbed the lessons learned from the ‘Enronrisque’ culture? Have we fully addressed the fallacies that so devastated our feelings of trust and accountability in large companies? That distrust exists more than ever now, as fully exhibited in the NYC Zucchotti Park Wall Street protest and the wider “Occupy” movement.

What is really in place to stop the cover-ups and off-balance sheet transactions that Enron’s Ken Lay, Jeff Skilling and Andrew Fastow so neatly orchestrated? How can the practice of using a business as a personal piggy bank, replete with illegal and immoral abuses that Dennis Koslowski was convicted for as CEO of Tyco, be eradicated?

In light of all the rules and regulations imposed by the SEC, by FINRA and the “Enron Act,” renamed as Sarbanes-Oxley, I have to truly wonder: how effective are they, and how far we have truly advanced in the areas of ethics and transparency?