I haven’t been updating my blogs very frequently because of what is now the routine I have to go through and hence, I thought of writing a few specific updates about some people I got to meet and listen to recently. First, I attended a speaker series on ethics in corporate world that had two different speakers on two of the biggest corporate scandals in early 2000, the collapse of WorldCom and Enron, by one who committed one of the crimes and the other who investigated the other scandal. I also got to listen and later meet two senior vice presidents of two interesting companies, Pepsi Co and Emirates.
Walt Pavlo was an Engineer and later did his MBA to join one of the largest long distance call service provider known as MCI. His job was to manage the collectables from his customers and when he realized those credit could never be repaid, he did certain manipulations in the accounts and made the book look good. The company and the top management loved the fact that numbers were very good and he was rewarded with a promotion. Later, the company got acquired by WorldCom and later WorldCom collapsed due to a huge write off in the accounts receivables. Walt was then serving his term in prison and informed the authorities of where the bad debts (that were written off) came from and was later interviewed by FBI. After serving his term of 2 years in prison he started a second career in public speaking. He also told that he was helped by Frank Abignale (The name must be familiar from the movie “catch me if you can”). Around the same time another big company, the seventh largest corporation in the US then, Enron, collapsed. This is a pretty interesting case from an Organization Behavior point of view. As Enron issued many employee stock options and bonuses based on stock performances, the primary goal of the company/ management became “To increase the stock prices”. When they felt that the company was not meeting targets they found ways to cook the books and look good in the market. They found loopholes within the laws/ regulatory body and found many creative ways to show their numbers good including ways of how to book profits much in advance for an asset they didn’t even purchase. They were smart!
One common thing among both the crimes was that these crimes were not well planned or intentional, rather were things that just happened out of coincidence to make everything look good. When Walt Pavlo first reported that the creditors were not paying the dues, his boss was not happy about it and asked him to somehow make the numbers look good. Similarly when Andy Fastow, the then CFO of Enron was interviewed by the FBI, he said that he is not a criminal as all that he did was for his employees. When the final draft of the annual report used to come to his table with numbers cooked, he couldn’t refrain from signing the report as it would effect the bonuses of his colleagues. Second thing is that these white collar crimes happen because no one asks questions when there is some good news. We have a tendency to introspect only when there is any bad news or results and when everything is good, we just don’t bother about anything. So, its very important to be honest and not lose it for the temptation of being praised by the boss or an extra bonus, else one could land up in prison.
Pepsi Co has been an interesting company especially its marketing has fascinated me ever since childhood. I got more fascinated about Pepsi Co after reading the book by Roger Enrico “The Other Guy Blinked”. In fact Sr. Vice president Luis Montayo started his speech with “We are the No. 2 company in food and Beverages industry and No. 1 is not the company in Atlanta”, it reminded me of the book a lot and wondered whether their rivalry against Coke would ever end. But there is another reason to why I like Pepsi Co. Pepsi Co has been doing well in the environmental sustainability since a long time, even before 1990s, when many corporations didn’t even know about Environmental sustainability. In fact a recent report (I don’t remember where I read this) said that Pepsi Co is the reason why India’s Production of potatoes increased and India, which was once importing potatoes has now started exporting potatoes. It would be interesting to see whether the increase in production was an increase in supply or an increase in quantity supplied. Anyway this was an interesting topic to discuss with him later during the reception.
“When was the last time you tried something for the first time. Fly Emirates” was an interesting caption (not the current one though) that captures anyone who likes to be challenged once in a while. Emirates has been in the international airlines services since 1985 and became the most preferred airlines in the whole of 2000 with their flagship campaign where they could fly you from any source to any destination with just one stop in the middle. That has to be Dubai. The company is an interesting case because in an industry where macro economic factors affects the most, and most airlines show losses or go bankrupt during recessions, this company has been in profit for 22 years consecutively. When the Senior vice president, Dr. Brenden Noonan visited our campus, someone did ask him whether it was because the company was strategically located in UAE as the fuel cost is the major cost component in airline industry for which he replied that UAE can only produce crude oil while the airline fuel has to be purchased from a refinery abroad at the same price as everyone else. Also, he spoke about marketing by sponsoring sports teams/ events. Interestingly, they constructing a new stadium for an English club “Arsenal” has got them a market in South America! Also, they got a contract from ICC to sponsor T-Shirts of umpires for all ICC matches for some no.of years for just $10,000 simply because they were the first to spot an opportunity (which the ICC also didn’t notice). But, what an opportunity it is; no matter who plays, the umpire has to be on the field whole day!
One common thing among all the people I’ve mentioned above, the guys at Enron or WorldCom, the FBI agents including Frank Abignale or the executives of Pepsi Co and Emirates, is that they are all exceptionally smart. Its been a long post, but that’s a price one has to pay for not regularly updating the blog. I’ve to get smart here, maybe.
