CEO Bill Walton espousing zero tolerance for corporate improprieties
"Open and consistent accounting starts with an attitude of zero tolerance for improprieties. People need to see that people are rewarded for candor in reporting and punished for slipshod practices. The CEO really has to set the moral tone. Without that, nothing happens.
There's enormous pressure on public companies to maintain quarterly earnings momentum, and it's probably growing worse. The bigger thing that firms get punished for are surprises, particularly negative ones. It's better to face up to bad facts and reporting the business as it is, rather than to trying to hide things and make it far worse later on.
If you develop a reputation for candor with securities analysts and investors, that's about the best you can do. At the end of the day, investors understand that building a business is not an uninterrupted, smooth road. First, you have to determine whether it's a systematic problem or a people problem. If there's a dishonest person involved, you get rid of the person. If you determine that the processes need improvement, you repair them. Accounting has a fair number of gray areas with regard to revenue and expense recognition. For example, when we receive fees to lend money, we amortize them over the life of the loan. Some people recognize the fee up front, which is in our view too aggressive. We want to take our revenue into income over the proper time, and take our expenses up front. Conservative accounting is a tone you can set from day one. In the long run, that's where you end up building trust and ultimately the value of your company." [emphasis added]
William Walton, Chairman and CEO of Allied Capital
Chief Executive Magazine, May 1, 1999