Andersen Surrenders Its Licenses - Its Legacy Lives On

Although it will continue in business, Andersen officially surrendered its state licenses on August 31, 2002 as agreed with the Securities and Exchange Commission. Observers are still trying to sort through the factors that led to the demise of the firm's audit practice and helped shape its legacy to the accounting profession.

A special four-part series in the Chicago Tribune describes a series of troublesome trends that developed over the past two decades. Examples:

  • Loss of respect for the role of auditor. The late Harvey Kapnick, former CEO of Arthur Andersen, is quoted as having said, "The culture changed where the auditor was no longer the guy people respected in the '80s and '90s."

  • Growing distance between the senior technical partner and the CEO. In the 1990s, the two were physically separated. Andersen's CEO maintained an office in New York, while the Professional Standards Group remained in Chicago. By the time, Enron's problems emerged, there were seven layers of management, as well as physical distance, between the head of the standards group and the top partner in the firm.

  • Spiraling salaries and tensions between merchants and samurai. In the early 1980s, the average Andersen partner earned about $130,000 per year. That grew to $200,000 in 1990 and nearly $450,000 in 2000. To sustain these numbers, the firm set aggressive revenue targets, leading to tensions between what former Andersen CEO Dick Measelle described as merchants (partners who are good at bringing in revenues) and samurai (partners who live by a strong sense of personal honor and ethics).

These trends notwithstanding, the firm has a reputation for being a solid training ground for future career advancement. Just last month, a survey of business students ranked Andersen as one of the ten most popular employers in the United States.

The basics of objectivity, skepticism, and independence, Arthur Andersen's famous "Think straight, talk straight" advice, Leonard Spacek's visionary proposal for an accounting court, the wisdom of nine decades of leadership - all these factors are very much a part of the firm's training and legacy. Andersen may hand down strategic problems and challenges to the remaining firms, but it also leaves a legacy of excellence in the hearts and minds of the men and women who were "proud to be Andersen."

-Rosemary Schlank

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