Two good things can be said about last year. First, it's over. Second, the proliferation of scandals forced us all to focus on what is wrong in corporate finance today. True, the hangovers from the boom persist, but at this point we are really beginning to learn from recent painful experiences. Case in point: bankruptcy. "What's Wrong with This Picture?", by staff writer Kris Frieswick, documents for the first time the chronology of the Polaroid bankruptcy, until recently considered the textbook case of how to conduct a Chapter 11 filing. What Frieswick demonstrates, though, is that Polaroid's bankruptcy offers a window into abuses of the bankruptcy-court system. Shareholders, employees, retirees, and unsecured creditors at UAL and the Boston Archdiocese would do well to pay close attention.
Meanwhile, CFOs would do well to pay closer attention to incentive compensation, based on the charges brought against Idea Integration (an Atlanta-based technology-consulting firm) by a former employee. Tim Reason's "Incentive Confrontation" offers a firsthand look at the kind of management foul-ups often spawned by fast-growing rollups. We suspect the conflicts over incentive compensation detailed here are being played out in companies all over the country.
In both stories, as well as in our column on pension accounting, the message that emerges is one that we have been hearing consistently since the scandals broke: transparency and disclosure cure many ills.
Here's hoping that 2003 will see an increase in both, in the federal government as well as in Corporate America. May we all have a prosperous and peaceful new year.
Julia Homer, Editor-in-Chief