Opinion: A high-flyer crashes and burns

Taking the American dream too far may have been the cause of Richards' downfall

New Zealanders have long been accused of trying to pull down anyone who achieves great success. The name for this “who the hell do they think they are” attitude is the Tall Poppy Syndrome.

When a tall poppy falls from grace, the media has, at times, gone for the jugular, seemingly taking great glee in the fact that some former high-flyer has crashed and burned.

The IT industry has generally not been subject to this, being a rather specialised area. Few in the computing field have fallen from grace and been subject to the sort of hounding inflicted on sports people, business people and politicians who become engulfed in scandal.

That’s all changed in the last few days with the New Zealander, and former CA world sales head, Stephen Richards pleading guilty to fraud charges in the US.

Richards was a great Kiwi success story, rising to head CA’s local operations at a young age and then moving on to greater things in Australia and the US. That he rose to be head of sales at a very sales-driven US multinational is nothing short of remarkable.

That’s what makes his expected conviction for falsely booking sales revenues all the sadder.

He represented the American dream, going to the US and, through ingenuity and hard work, achieving great success.

However, taking the American dream too far may have been the cause of his downfall. That dream caused more than a few executives to strive so hard for money and success in the crazy days of the late 1990s and early this century, that they cut corners and broke laws in an effort to keep their company’s stock price high.

The ultimate example of this phenomenon is Enron, but many other companies, including WorldCom, have seen executives convicted for fraudulent transactions. CA is just one of a number of US corporations in this situation.

The obvious question is: why did the executives charged at CA, Enron and other US companies feel the need to go to such extraordinary lengths to keep their company’s share price riding high?

We’ll never really know but, to hazard a guess, financial incentives in their employment contracts to keep the stock price high seem a likely factor.

With analysts, boards and shareholders breathing down their neck, the temptation to bend the rules must have been overwhelming.

Yes, they stood to benefit a lot personally, but fulfilling their job brief and keeping themselves employed must have played a part, too.

Indeed, the whole saga raises the question of how sensible it is to base so much on share prices and quarterly earnings targets.

Building a software company and taking it public has made Bill Gates and Larry Ellison multi-billionaires. It has also given many IT companies a great financial shot in the arm and provided shareholders with the chance of prospering.

However, this fixation, when combined with a heady, euphoric atmosphere, can tempt some to take desperate and illegal measures.

Business intelligence vendor SAS is one example of a multinational IT firm that has achieved success without going public, as is IDG Communications, the publisher of this magazine.

That’s not to say that either the public or private path is the right one. It’s just wise to note there are other ways of assessing a company’s worth than its share price and that longer planning and reporting time-frames than every quarter are desirable.

— Watson is deputy editor of Computerworld.

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