#7372
Janet TaylorJanet Taylor
Participant

As I read through the case I noted the cultural change at Arthur Anderson. The expansion into consulting increased their revenues but also changed the intrinsic culture of their organization. Earlier on they were high principled and set the industry standard and over time that shifted to less principled and an industry loser. The board was responsible for the change since they voted down the proposal to separate the auditing and consulting practices. They made the choice to have the Arthur Anderson focus on profit over principles. Management worked within that guidance from the board to the detriment of the organization.

A different decision on dividing auditing and consulting practices could have changed the outcome. The auditing part of the organization could have remained principled while the consulting part focused on profit. The two parts of the organization would have needed to seek separate clients and perhaps the audit portion would have failed due to financial distress however given their track record that seems unlikely.

This case highlights how there needs to be a strong relationship between the board and management. Understanding changes in culture can be hard to see and even harder to predict future success or challenges.

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