Making lemon aid from Enron lemons

Everyone knows the story of Enron.  At its height, it generated revenues of nearly $101 billion, and Fortune Magazine named Enron "America's Most Innovative Company" for six consecutive years.  

But Enron’s CFO Andrew Fastow had set up a number of special purpose entities which allowed Enron to hide debt, allowing it to maintain the appearance of a strong balance sheet and keep its critical investment grade credit ratings.  But in reality, the picture they were painting was not accurate and it was essentially a big shell game.

The bigger problem for the accounting profession was the appearance of a lack of independence by Enron’s auditor.  Arthur Andersen was making $25 million in consulting fees and another $25 million in auditing fees that year from Enron, creating the appearance that the audit may not have been rigorous enough in order to keep the more profitable consulting work.   The shredding of work documents did not help instill confidence,

Grant Thornton’s Five Point Plan 
In response to the Enron scandal's effect on the accounting profession, Grant Thornton saw there was a leadership void and developed a policy paper and messaging initiative, “The Five point Plan to Restore Public Trust.”  
In addition to limiting the services that an auditor could provide to a company, Grant Thornton asked that:

• audit committees ensure that the auditor’s primary responsibility is to the shareholders and that the auditor’s relationship with management is clearly subordinate to such responsibility;
• the U.S. Securities and Exchange Commission (SEC) must amend its rules for proxy disclosures of auditor’s fees;
• a principles-based approach should be adopted for all standards-setting areas: accounting, auditing and independence;
• the AICPA should coordinate a review of the audit methodologies of the major accounting firms.

(Four of these five points were eventually included in Sarbanes Oxley)

We then issued our press release/position paper and followed up with key influencers.  As result:

• Grant Thornton was able to position itself as a leader in the profession, as the Grant Thornton CEO was asked to discuss our positions before the US Senate Banking Committee (joining the chairman of Public Company Accounting Oversight Board, the president of CalPERS, the CEO of PricewaterhouseCoopers and the Executive Director of the Council of Institutional Investors)

• There was substantial positive media coverage including an appearance by the Grant Thornton CEO on PBS-TV.
• Grant Thornton CEO was asked to be part of a luminary group panel article in CFO Magazine.
• Name awareness grew and revenue growth increased that year 7%

Thought leadership coverage included Time Magazine, New York Times, USA Today, Reuters, Wall Street Journal and the Associated Press.