The recent Satyam and Madoff scandals in India and the US raise the spectre of other recent financial scandals such as Enron and Parmalat.
At Satyam it seems that fictitious assets and non-existent cash created a £1bn gap that could no longer be concealed; this would be straight from the Parmalat stable. The Madoff case appears, on the face of it, to be a classic 'Ponzi' scheme. We shall have to wait for the judicial processes to take their course.
With every major scandal we hear the inevitable 'this must never happen again' and questions about the effectiveness of the regulatory and legal framework.
But while our profession and regulators will, of course, have to explain our parts and maybe learn hard lessons, I think other stakeholders should be looking to their roles.
What about investors and their analysts who seem to have forgotten the first principle of 'let the buyer beware'? Maybe they should have been sharper in spotting potential warning signs - based on the simple premise that if something looks too good to be true, it probably is.
I also wonder about the role of the media in business. While there is so much focus and intrusion into celebrity lifestyle, isn't there a case for more resources to be put into exposing issues which materially affect millions of people? There are some excellent business commentators in the media who have, in many cases, forecast serious problems. Isn't it time that resources were diverted from showbiz gossip to the business desks to enable them to help root out abuses earlier?
As always, comments are welcome!
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