Compensation, bribes, whatever
If you're a company who likes to push the envelope with its financial reporting, you may be struggling with how to ensure that your employees look the other way when it comes to aggressive accounting. Sure, threats and intimidation are popular methods, however, it's worth considering a softer approach:
Companies that violate financial reporting rules are far more generous than their peers when granting stock options to rank and file employees, possibly reflecting an attempt to discourage whistleblowing, according to a new study.
By giving employees a monetary incentive to keep quiet, they will do just that, according to Shivaram Rajgopal, a co-author of the study.
“It’s a straightforward story,” said Mr. Rajgopal, a professor of accounting and auditing at Columbia Business School. “Companies compensate you for not speaking up.”
Yes, when a company or a person does something they shouldn't and they want to keep it on the down low, nothing works so well as a good ol' fashioned bribe. This is convenient for businesses because they're already paying you a salary and if it just so happens that TPTB want to get creative with the accounting, they can throw some stock options your way and call it "compensation." Just like with bribes, however, you hope that stock options will be effective in convincing someone to keep their mouth shut, but there's no guarantee that it will work.
Fortunately for businesses, whistleblowing it is not an attractive option either! Although the SEC, CFTC and other agencies have award programs, you have to consider that your life and career may be ruined for awhile:
“When the whole bounty system came out, there was a lot of press about how a whistleblower could make a lot of money,” said Mr. Rajgopal. “That totally ignored that whistleblowing is very difficult.”
It is a case of risk outweighing rewards. “If they are cooking the books, there’s no incentive for people to say anything,” he said. “Whistle blowing is extremely costly. There is so much downside.”
In other words, there are bribes everywhere. It's just a matter of which one you're going to take.
Hiring Watch: EY Luxembourg
Since we're on the subject of whistleblowers, if that's a career goal for you, it's worth considering one of the 400 openings at EY Luxembourg. I imagine there's ample material for anyone pursuing an international tax avoidance opportunity.
Accountants behaving badly
Every accountant is responsible for his or her own actions, however, I can't help but think that on the occasions when you have clients are up to some shady business, you might find yourself roped into said shady business.
A criminal complaint, filed three days before a seven-year statute of limitations was to expire, charges owners Charles Prindiville, 64, his ex-wife, Catherine Prindiville, 56, both of Middleton, and the accountant for the business, Donald W. Goodweiler, 69, of Madison, [WI] with operating the bathhouse at 117 W. Main St. as a place where customers paid money for sex acts, described to police by former Rising Sun workers as running the gamut from touching and fondling to intercourse.
I suspect that the Rising Sun Bathhouse didn't have an advertising campaign, but if they did, it could've featured Goodweiler saying, "Not only am I the accountant for Rising Sun Bathhouse, I'm also a client."
Another former employee told police that she was assigned to Goodweiler, the accountant, as a regular client whenever he came to the business.
“I would call our time together ‘the boyfriend experience,’ ” the woman said, because in addition to sex, they also talked about their personal lives. She said that after three months, Charles Prindiville gave the two permission to “date” in public. She said Goodweiler set strict rules about how she was to act and what she was to say on those occasions. But they never went out.
See, and this client was even more demanding than average. Seems like a good one to drop…about 7 years ago.
Has Donald Trump released his tax returns?
Nope! And David Cay Johnston thinks there's a decent chance that DJT has committed tax fraud in the past so we should never expect to see them, even if Trump wins the election.
Previously, on Going Concern…
In other news:
- BlackRock has a lot of money.
- Good records do not a business mile make.
- Will Californians Triple Their Cigarette Tax?
- The Final Presidential Debate Calls for Yoga
- Candy Crush: The Game Show
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