Yes, I Still Blog on Business (Links for 053105)
Even in the midst of Ohio’s hot-and-heavy 2nd District congressional primary, there’s plenty of business news and views worth noting, which I will continue to review once each business day:
- Accounting firm Arthur Andersen’s conviction for destroying Enron-related documents was overturned today, unanimously.This is being seen as a defeat for the US Justice Department. But if the DOJ’s objective was to put Arthur Andersen out of business, the strategy worked just fine, though how that is “justice” escapes me.
There may be plenty of other substantive reasons to go after Arthur Andersen on Enron (like the accounting they allowed for the various related shell companies that sprouted like weeds), but shredding audit docs clearly has turned out not to be one of them. The may be other cases where Andersen may be convicted with finality (WorldCom perhaps).
But if I were among the 28,000-plus Andersen employees who had to look elsewhere for work after Enron, especially if I were among those who had a tough time finding work for a while, I might be thinking of former Reagan Administration Labor Secretary Ray Donovan:
“Where do I go to get my reputation back?” — Reagan Labor Secretary Ray Donovan after being acquitted of corruption charges in 1987.
As noted here (near bottom of page):
Donovan, of course, was asking a rhetorical question, knowing full well that his name had been dragged long enough and hard enough through the media mud that no legal victory could ever fully restore his reputation and vindicate him in the public mind.
Today, former Andersen employees can understandably ask: “Where do we go to get our company back?”
- (A major personal pet peeve) A Friday Opinion Journal editorial (link may require free registration) on academics and athletes in the NCAA notes that when all costs are considered, very few Division 1-A athletic programs may be breaking even:
Yet the most surprising figures to come out of this week’s meeting were not about graduating. They were about what some call an “arms race.” It seems that spending on college athletics has been growing four times faster than overall university spending. According to data compiled in several studies for the NCAA, the spenders may not be getting much bang for their bucks, either.
In 2001-2003, both revenues and expenditures of Division 1-A athletics programs rose by an average of about 17%. If you exclude the extra money universities cough up in “institutional support” for sports, only about 40% of all Division I programs report that they run athletics in the black. More ominous yet, that statistic doesn’t reflect capital spending, e.g. for building stadiums. If that’s factored into the equation, as few as 12 of the division’s 325 member programs may be self-sufficient.
Meanwhile, spending on scholarships and coaching salaries continues to soar. This despite studies indicating that, on balance, pumping money into athletics does not increase winning rates, or bring in more donations from alumni.
For the time being, a train wreck is being delayed in part by institutions contributing more out of their general budgets to sustain athletics programs. Then there’s the tax otherwise known as the “student athletic fee.” For example, one public university in Florida raised more than $11 million this way in 2003-2004 and students at another state school now pay more than $11 per credit hour to finance athletics, whether they have any interest in sports or not.
I can deal with nominal “general” fee charges for activities that improve campus life and enable activities that don’t make any money to function. But the Florida charge is NOT for those activities, and it works out to about $175 per term for a typical course load of 16 hours. To athletics, which is supposed to sustain itself? That’s an outrage. My position is: Not, one, dime. I know these examples aren’t Florida-related, but they make the point (and don’t tell me Florida college programs are any cleaner). That’s right–not one dime. Not when a basketball coach with a DUI is suspended with pay. Or when a bigtime football program has a newspaper headline list that looks like this (link should work; going to individual articles requires paid subscription). Or when college football coaches get paid like this (link may require registration).
- Good news for New Media and news content diversity–Bad news for Network TV newscasts (and presumably, their bottom line):
Between November 2003 and November 2004, ratings for nightly news fell 2% and share fell 5%. (despite the presidential election)
In absolute numbers, that means that in November 2004, 28.8 million viewers watched the three network evening newscasts, half a million less than in November the year before. That is a 45% decline from the 52.1 million people who watched the nightly newscasts in 1980, the year CNN began.
UPDATE on Andersen-Enron: Opinion Journal channels Bizzyblog on the Ray Donovan quote, but makes the point that individual wrongdoers instead of the entire firm should have been pursued: “As we argued at the time, it would have been wiser for the Justice Department to go after individual Andersen partners for obstructing justice while handing over the firm to Paul Volcker, who had a clean-up plan ready to go. Instead, with one exception–David Duncan, the Andersen partner who audited Enron and turned state’s evidence–no one was held responsible.” Thoroughly unsatisfying, to say the least.


