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Corcoran for the defence

I generally like Terence Corcoran. He can take on issues of government waste or boneheaded intervention in the economy like a pitbull with razor sharp teeth. But he's also what I call a 'business fundamentalist'. Whenever some business leader is getting grief in the news, Terry will rush to their defence. To him, business people are all pure of heart and honourable, and only government is corrupt and greedy.

But his column in the Post today (unavailable online) goes beyond his typical defence of capitalism towards outright paranoia. He says that the firing of the head of a private company by the representatives of the company's shareholders is because of, get this ... the government. Here's how he summarizes the case against Dunn:

There's a constant buzz around that Nortel's earnings were made to look good in 2003 to enable Mr. Dunn and all Nortel executives and employees to collect fat bonuses earlier this year on the basis of the company's 2003 profit report. This theory, based on what we know, makes little sense. Even after restatements, he company still appears to have been profitable in 2003. More importantly, it implies that Mr. Dunn et al deliberately orchestrated bigger losses in 2000, 2001 and 2002 so that they could report higher profits in 2003. Mr. Dunn would have had to be monumentally ignorant of the corporate world to have attempted earnings manipulation through that period.

Given the massive size of Nortel's financial numbers in recent years, the restatements border on the trivial. This is especially true given the accounting issues. The company is talking about changes to accruals and provisions -- notoriously hoary issues -- worth a few hundred million dollars in a company whose assets and revenue figures ran up and down by tens of billions of dollars every year.

So Corcoran's defense -- if I understand it correctly -- is: there's no motive because Dunn could have used his time machine to go to the future and see that the company would be profitable without having to manipulate the figures, Dunn would have had to be stupid to do it because he would probably be caught, and it's not such a big deal anyways -- only few hundred million dollars shuffled around. Somehow I'm not convinced, but Corcoran declares case closed anyway:
OK, so if there's no fraud and no scam and no malfeasance, what exactly is the "cause" for firing Mr. Dunn?
Cue the Twilight Zone music. Just as for Michael Moore and Paul Krugman there's nothing wrong in the world that's not the fault of George Bush, for Terry the source of all darkness is the government. (Whereas in truth it's only the source of most darkness.)
Could Nortel be trapped in a post-Sarbanes world in which the company's board, facing regulatory an legal nightmares created by laws and regulators, is forced to sacrifice its CEO so as to protect the company and the board?
Well, you can guess what his answer is. Corcoran probably imagines he's defending capitalism by sticking up for Dunn and other white-collar criminals, but I think he's doing it a disservice. Humans are always looking for ways to enrich themselves, and sometimes they they try to do it through deceit and corruption. When someone is responsible for other people's assets -- whether they are a government program administrator or the CEO of a large company -- that temptation may be very large. For capitalism to shake its bad rap we have to show that it has an effective way of dealing with corruption. To me, that way is to have those who have taken advantage of the trust given to them be punished for what they have done. As we've seen with Adscam and UNSCAM, government bureaucracies are terrible at doing this. Those that believe in free enterprise can set an example by not making excuses for immoral practices like Dunn's.


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