Who do you trust?
At the end of 2002 that's an important question, because 2002 was the year that trust unraveled. Answering that question will be a big agenda item in the year ahead.
If you can't trust a church, who can you trust?
Throughout 2002 we heard story after story about Catholic priests who abused and molested boys and girls. As horrible as that is, it's not the worst part. The worst part is that members of the Roman Catholic hierarchy, top management, if you will, not only knew about the abuse, but shifted predators from parish to parish while they scrambled to cover things up.
Top management in the corporate world was not to be outdone by all of this. Stories about abuses of trust by top corporate executives filled the news in 2002. It all started with Enron.
We found out that Enron's top management had played a shell game with their accounting and vastly inflated their results so they could get their stock price to go up. And why was that so important?
It was important because the way that top execs get rich these days is through stock options that are awarded and valued based on the market performance of a company's stock. So the boys at Enron found ways to pump up the stock price.
Even worse, they mislead the folks who worked for them at Enron. Those were people who trusted their leaders and who had their savings and retirement plans heavily invested in Enron stock.
Enron Chairman Ken Lay sold $101 million in company stock as he urged workers to continue to hold the Enron stock they had and even to buy more. CEO Jeffrey Skilling walked away with $67 million and CFO Andrew Fastow grabbed $30 million. In the meantime regular old cubicle dwellers and field workers saw their retirement plans turn to rubbish.
While all this was going on the Enron board, who also held stock in the company, waived the company's ethics policy to allow some of the accounting shenanigans. Stock analysts played right along. They touted Enron as a great buy, while they turned a blind eye to evidence that might not be so wonderful.
And the auditors, the folks who are supposed to dig deep into the books and give us all an honest, professional opinion, those folks put profit from their consulting work with Enron above principle. Instead of guarding the hen house, auditors from Arthur Andersen cut a deal with the foxes in the hope that everyone would get rich and no one would notice.
So, auditors ignored their professional and ethical responsibility. Directors and stock analysts looked the other way. And top executives lied to us while they hauled money away by the trainload.
And Enron was just the beginning. Before the year was out MCI Worldcom, Tyco, Adelphia, Qwest, Sunbeam, Vivendi, and Conseco had their top executives hauled off to face charges. It began to seem like handcuffs were the new fashion wristwear for top management.
Things would have been bad enough if these guys were just crooked. But they were also outrageously, extravagantly arrogant.
The poster boy for greedy arrogance is almost surely Dennis Kozlowski of Tyco. Sure, Bernie Ebbers borrowed $408 million from MCI Worldcom, but he never had the company pay for a giant ice sculpture for his wife's birthday party. Kozlowski did that.
Kozlowski even made the Pentagon look like a piker when it comes to extravagant spending. Remember a few years ago when there was a giant brouhaha over toilet seats that the government was buying for a whopping six hundred bucks? Well, Kozlowski spent almost five times that, $2900 of company money, on a set of hangers.
Trust issues in the corporate and church executive suite were big issues in 2002 and they'll set some of our agenda for 2003 and beyond. Trust is a fragile thing. It is woven slowly, contact by contact and transaction by transaction over time. But trust can unravel in the blink of an eye. And it takes a long time to reweave.
The beginnings of that reweaving will occupy us in 2003. Legislatures will hold hearings and draft bills. The accounting profession will review its guidelines and sanctions. The rest of us will mostly stand back and watch and do what we can. In the meantime other issues that sprouted in 2002 will claim our attention.
2002 was the year that shopping online from reputable merchants became routine. People learned from their own shopping experience and the experience of their friends that you could shop online without having your credit card stolen by evil hackers. They also learned that online shopping is wondrously convenient and a great companion to catalog and store shopping and they don't have to fight the mall crowds.
Three businesses helped build this trust in simple online transactions. The first one was Wal-Mart.
Wal-Mart doesn't have the greatest Web site, or even the greatest Web strategy. What Wal-Mart has is a name that millions of people recognize and trust.
One of the biggest trust builders for online shopping was the simple fact that stores like Wal-Mart were online. If any company is the opposite of a dot-com, it is surely the Bentonville Behemoth. Shoppers know that. Wal-Mart's net presence advertised the fact that reputable businesses with long histories have made the Web part of their marketing mix.
The second company that helped build trust is eBay. The auction site has gone to great lengths to provide shoppers with ratings and comments about the sellers they encounter. They've harnessed Web technology and used it to help build trust.
Finally there's Amazon. Amazon has always made it easy for folks to shop for books. This year Amazon extended its range to include toys and clothing and all kinds of other goods from name-brand sellers. In a sense, Amazon has recreated the online shopping mall and, as mall operator, Amazon has effectively vouched for the companies represented on its site.
This portends good things for online shopping in 2003. Even more people will have been online long enough to shop for the first time. The ones who have shopped will probably do more. Online merchants had big sales increases this Holiday season. They'll probably do even better next year.
We learned to be wary this last year and one of the things we learned to be wary about was news coverage. In the past we could usually count on top news organizations to bring us finished, fact-checked stories. No more.
Whether it was the operations in Afghanistan or coverage of the DC sniper we had the same problem. Last year news changed from being finished stories to being works in progress. Reporters gave us their reports as they gathered information and often before anyone had been able to check the facts or confirm with multiple sources.
During the time snipers terrorized the DC area what was presented as news came to mean whatever had been heard. Comments from unnamed sources and material lifted from Internet discussion groups was mixed with polls of reader or viewer opinion and the opinions of expert sources. We were left to sort things out for ourselves.
The DC sniper case was one of the factors in 2002 that showed us that our technology really isn't as good as we like to think it is. After the accused snipers were caught it turned out that they'd been stopped by police several times near the scenes of their crimes. They should have been caught earlier or at least questioned.
They weren't because the special computer system being used by the investigators never got enough information about the different stops into the system. It simply took too much time to put it in, keystroke by keystroke.
That might make us feel better about the US government's idea to put together a giant database that they can mine to help stop terrorists. Government folks call this "Total Information Awareness" and imagine it including credit card, medical, travel, school and other records which will be mined with sophisticated software.
Privacy activists call Total Information Awareness dangerous. They assert that the government will almost certainly use the data in ways that will be harmful to citizens and violate their civil rights.
It all boils down to "Who do you trust?"
That's the great question that faces us in 2003. Who do you trust as an investor, as an employee, as a customer and as a citizen?
Created/Revised/Reviewed: 30 December 2002
