Professional Accountability?

I found it more than a little ironic to watch today’s news and see George W. Bush signing corporate responsibility legislation. Could it be that the defender of the free market has realized that corporations, existing only to exact profit, ultimately succumb to their own greed when left to their own devices? While it is hardly surprising that fatcats at the top of the corporate food chain effectively absconded with their investor’s money and employee’s retirement nest egg, what does surprise me is how little was said by the accounting firms, or individual accountants within those firms. What ever happened to professional accountability?

Professions, by their definition, are designed to be self-regulating bodies created by an act of legislation to work in the public interest in a specific area of expertise. This legislation restricts the practice in the field of expertise to those individuals licensed by the professional body, and provides the framework for the basic operation of the professional body. For example, in British Columbia the Association of Professional Engineers and Geoscientists is responsible for regulating the practices of engineering and geoscience, as specified in the province’s Engineers and Geoscientists Act (APEG-BC). Practice in either field is restricted under force of law to those licensed by APEG-BC. Members of the Association are also required to abide by the Code of Ethics, which define basic ethical rules by which the Association’s membership must abide. The Association is also responsible for disciplining those guilty of professional misconduct.

Professional bodies for accountants, such as the Chartered General Accountants or the American Institute of Chartered Professional Accountants, surely have similar rules of discipline. Where was that keenly honed sense of ethics and responsibility to the public interest when Enron execs were shifting money around to make the books look good? Did the little angel on their left shoulder just take that year off?

Of course, in some people’s minds it’s easy to dismiss the obligation to the public interest in matters of accounting, isn’t it? After all, it’s not like a building falls down, a plane falls out of the sky, or a nuclear power plant implodes. Nobody ever died due to an accounting error that I know of, and I’m willing to bet that the tally of spreadsheet-mishap-related fatalities is destined to stay eternally low.

We shouldn’t care about professional misconduct in accounting because nobody dies, is that it? I don’t think so.

To truly remedy this situation, the appropriate professional bodies in the United States should throw the book at those professionals responsible for perpetrating these crimes. Strip them of their professional designations, fine them the maximum amount, and make it widely known that this type of behaviour is unacceptable. While the masterminds behind the corporate shell game may be able to plead the fifth, no such right exists for professionals before their professional body’s discipline committees. If we can’t get the real crooks, then we should make like Elliot Nest and go after the accountants.

The Hard Way

It’s amazing to watch as the RIAA and the MPAA attempt to screw consumers even more than they already do. This week, Congress is set to consider legislation that would allow copyright holders to hack your PC to disable “publicly accessible peer-to-peer networks” with immunity from state and federal laws. Waitaminute. Isn’t this the same administration that made hacking a terrorist offence, punishable by life imprisonment?

This announcement is part of a multi-pronged attack on fair use, complemented by Microsoft’s proposed Palladium technology and proposed legislation to plug the “analog hole”. The part that leaves me dumbstruck is the sheer amount of money that’s being thrown at the problem of content piracy, while little attention is actually being paid to the one thing that might actually make piracy a redundant practice: giving the consumer value for their money!

Let’s examine the reasons that I might pirate content:

  • Price: For about $20 I can buy a CD that cost about two cents to manufacture. True, the manufacturing costs are miniscule compared to the actual production process, but how much of that money actually went to the production of the music? Chances are, most money went to the marketing, the distribution, and buying shelf space (yes, they have to do that) at Virgin. I, as, a consumer, don’t care about that. The only thing I’m interesting in doing is paying the artist for their music.
  • Choice: When I buy that $20 CD, what do I actually get? Probably 1 or 2 worthwhile songs, and 12 songs of “filler”. Why am I paying for filler? It’s like paying for the air in a bag of potato chips. In most cases, I’m interested in a specific song or two, not the album. That said, there have been times that the popular song has turned out to be the worst song on the CD.
  • Convenience: If I want new music right now my choices are: a) Leave work and go find a record store; or b) fire up Kazaa and download the song I want now.

Despite the Internet’s capacity to ruthlessly eliminate middlemen, I believe that media companies still have an important role to play in bringing quality entertainment to the public. However, their ham-fisted attempts to become players in the digital media marketplace has betrayed how little they understand or respect their customers:

  • Subscription-based music services: These services, such as PressPlay and MusicNet, offer the illusion of a product competitive with P2P download services, but fail to deliver. They fail to deliver convenience by using proprietary file formats that can’t be played on popular MP3 players (such as Apple’s iPod), and tie you to the service (once you stop your subscription, you lose access to the downloaded music). They fail to deliver on choice, providing a limited catalogue of artists.
  • DVD region codes: VHS technology suffered from the problem that you couldn’t take a tape from the UK and play it in the US. With the advent of DVD technology, a reasonable consumer would assume that they could now move freely around the world with their DVDs. Guess again. DVDs include a region code that specifies the region in which DVDs can be played, and manufacturers of DVD players are required by the DVD technology license to only play DVDs from their region. The restriction was incorporated to allow the movie industry to continue to release movies at different times in different regions without the risk that foreign DVDs cutting into domestic box office sales. Of course, this restriction means that a laptop DVD player is essentially useless when travelling to other regions.
  • Electronic Newspapers: The clumsiness isn’t limited to the music and movie industries. Newspapers, such as The New York Times, are turning to technology from NewStand Inc. to deliver electronic version of their newspapers. These electronic versions are identical to their paper-based cousins, with the exception that they can only be viewed for 21 days. And despite the fact that the electronic versions are probably produced for near-zero cost, the cost of a subscription is almost identical to that of a paper newspaper. Same price, less convenience.

The common theme here: the media companies are producing the same product, packaging it in a less convenient form, and charging the same price. Of course, these companies aren’t stupid. They realize that digital technology offers them the opportunity to reduce costs while maintaining (or even increasing) revenue. All they need to do is figure out how to make people buy their product instead of pirating it. They have two choices:

  • The Easy Way: First, media companies need to drop their prices in recognition of the cost-effectiveness of digital distribution. Second, they need to adopt standard technology that allows people to use the media they have purchased without restriction. Finally, they need to open their entire catalogue of artists and movies, and license them promiscuously. Taking these steps would allow the media companies to compete with P2P technologies by offering people what they want, at a reasonable price that is competitive with the cost of the time they would spend searching P2P services.
  • The Hard Way: First, restrict the capabilities of digital technology through strategic partnerships with manufactures and technology companies. Second, make it illegal to circumvent copyright protection by pushing through draconian legislation (such as the Digital Millennium Copyright Act). Third, create solutions that restrict fair use. Finally, lay back and count the cash as it rolls in.

Of course, the industry is choosing The Hard Way because, at the end of the day, they’re sure to make more money. Doing things The Easy Way would require the media industry to be producing a quality product by developing promising artists. Instead, The Hard Way allows them to continue to pump out the flavour of the week and not worry that people might just be deleting the songs as fast as they download them.

What a shame that The Hard Way is a sure way to Easy Money.