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Whether these proposals prove sufficient remains to be seen, for WorldCom-MCI's difficulties may rest at a deeper, cultural level. We won't debate that question in this column, but it deserves some deliberation before the organization emerges from Chapter 11.
One of the suggestions by the Breeden task force is for WorldCom-MCI to create an Internet site that fosters communication between the corporation and its shareholders. This idea has great merit and ought to be implemented by all public companies. Ru Sabre and I advanced this concept a decade ago in our book Corporate Planning and LAN: Information Systems as Forums. Our thought at that time was and remains that shareholders nominally are the owners of the firm but have so little power and so little information upon which to make rational decisions. We could increase this power and induce more rational behavior into the economic system by opening up means to have a dialogue. The benefits from creating a forum are many. A forum allows a quick way by which to provide shareholders information and also to avoid any questions about insider information. A forum permits shareholders to ask questions about items of concern to them, thereby informing management about these matters and possible anxieties. A forum lets shareholders provide ideas and inspirations to management. A forum changes the culture from a "them-us" mentality to a "we" ethos and facilitates organizational thinking about win-win opportunities. A forum also reminds everybody who the real owners are and who are the stewards. Besides these organizational advantages, there are some economic benefits as well. By having and by showing concern to shareholders, managers create an interest in the company by the investment community. By improving corporate governance, it helps to rein in managers and thereby decreases the chances of wayward activities that deplete the firm of its resources. It could improve relationships to an extent that it reduces lawsuits from shareholders. Finally, it would lessen the company's cost of capital and increase stock prices. Costs to creating and maintaining a forum are minimal. The firm likely would have to hire a few more people to manage the forum and it would require some hardware and software to implement. These costs are small compared to the benefits. The only real impediment to the idea is managerial arrogance that might view this effort as merely a good PR tool. If so, shareholders will soon pierce the mask and managers would face a loss of confidence, an increased cost of capital, and lower stock prices. Corporate forums that cultivate better communication between managers and shareholders are long overdue. Let's create these forums and work together to advance the economic interests of everybody. J. EDWARD KETZ is the MBA Faculty Director at the Smeal College of Business at The Pennsylvania State University. Dr. Ketz's teaching and research interests focus on financial accounting, accounting information systems, and accounting ethics. He is the author of Hidden Financial Risk, which explores the causes of recent accounting scandals. 2003 SmartPros Ltd. All Rights Reserved. Editorial content does not necessarily represent the opinions or beliefs of SmartPros Ltd. |
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