Advice To CIOs: Don’t Do What I Did…

by drjim on May 25, 2011

Aaron Beam Now Knows That What He Did Was Wrong

Aaron Beam Now Knows That What He Did Was Wrong

How long until you end up in jail? They say that power corrupts and that absolute power corrupts absolutely, so it sure seems as though just about every CIO will eventually become corrupted. How far along that path are you? Would it help if you had a chance to talk to someone who had already screwed up – do you think that maybe what they’d have to say might cause you to sit up, take notice, and stop doing bad things and start doing the right things?

Say Hello To Aaron Beam

Aaron Beam was the CFO of HealthSouth, a very large company that provides rehabilitation services. Aaron worked as their CFO during a period of incredible growth.

HealthSouth had grown to become a Fortune 500 company by 1994. At the time they had over 40,000 employees in all 50 states and in Alabama alone they were the largest company. Their annual growth numbers were in the range of 20% – 30% which is fantastic for any company.

The company’s CEO, Richard Scrushy was not a nice guy. Former employees report that he was a very hard man to say “no” to. His personal style was that he would become very angry over even the smallest things. His employees were actually afraid to be in the same room with him when he blew his top.

How Did Things Go So Very Wrong?

As any CIO can tell you, working for a young company that is growing like a weed is a great place to be. In Aaron Beam’s case, however, it quickly went all wrong.

As with all such ethical lapses, it started out innocently enough. HealthSouth could not keep up with its furious growth rate. This was going to cause a problem because if investors saw its growth rate start to slow down, the value of HealthSouth’s stock would start to decrease.

In order to prevent this from happening, Beam started to decrease the amount of money the company set aside to cover bad debts. He also started to change the estimated value of the companies that they were buying because they could then apply those estimates to the company’s earnings as they went forward.

These actions were shady, but not out and out illegal. Then Beam did a very bad thing. The finance team finally reached a point where changing estimates would no longer produce the kind of numbers that they needed to show solid growth. Something else needed to be done.

What they ended up doing was fraudulently entering a lot of small entries into their books that they hoped would slip by the auditors. The first time that they did this was in 1996 and the company kept on doing it through 2002.

As is always the case, the fraud was eventually found out. Beam ended up spending three months in a minimum–security prison. He’s had to give up his earnings in order to pay fines and his legal bills. He now operates a lawn mowing business and speaks on ethics at universities.

The lesson here for CIOs is that the temptation to do wrong is always out there. It never shows up as a clear “right / wrong” type of decision. Instead, it starts out as a small ethical decision and if you choose the wrong path, you’ll end up making many more decisions that you’ll eventually come to regret.

What All Of This Means For You

CIOs wield a great deal of power and it can be easy to start to think that we don’t have to play by the same rules as everyone else. Nothing could be farther from the truth.

Aaron Beam was the CFO for HealthSouth when he faced an ethical dilemma: should he commit financial fraud to keep the company growing, or should he tell the truth and perhaps cause serious harm to the company. He chose to commit the fraud and ended up spending time in jail for doing so.

The real world that CIOs live in is not made up of nice black and white decisions. There’s a lot of gray out there. CIOs need to have spend the time taking ethical training and thinking about different situations that they may find themselves in. Only by doing this will they be ready to make the right decision when the day comes that they’ll be tempted to make the wrong decision.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: If you were in Aaron Beam’s position, do you think that you would have been strong enough to make a different decision?

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What We’ll Be Talking About Next Time

Everybody loves the cloud. Or at least that’s pretty much how it seems if you’ve pick up any of the IT trade rags in the past 18 months. They are filled with articles talking about how the cloud is going to save IT departments tons of money and how it’s the next great thing. Well, not all CIOs are convinced of this and considering some of the humongous security issues that are popping up, you might want to rethink some of your cloudy thoughts…

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{ 1 comment… read it below or add one }

Vaclav Zid June 9, 2011 at 5:36 pm

Interesting. What was the background? Aaron Beam was thinking only about stakeholders and employees? And the ends always justify the means? Or he was driven by fear of failure, fear of bonus loss, self-interest or self-promotion. CFO or CIO must act as a leader. True leaders demonstrate integrity. Integrity is about doing the right thing.
Cloud (as cited by Udechukwu, 2007), found that integrity enhances the formation of appropriate character and that character, “(1) creates and maintains trust, (2) is able to see and face reality, (3) works in a way that brings results, (4) embraces negative realities and solves them, (5) causes growth and increase, (6) achieves transcendence and meaning in life”.
When I am led astray I think of integrity.

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