OVERVIEW

The world changed in 2001. Terrorists attacked the U.S. homeland, the economy plunged into recession, and corporate fraud destroyed the pensions and retirement plans of millions of people. The competitive landscape in the 21st century has become brutal with global outsourcing of jobs. The speed of innovation accelerated, with the customer becoming the focus of attention. Corporations are learning that knowledge management and intellectual capital have become a strategic and competitive necessity. These issues have challenged corporate leadership and created pressure that produced fraudulent and illegal activities at the highest corporate levels, which continue to capture newspaper and television headlines. CEOs and CFOs were being judged by how effectively they managed their quarterly earnings and not on the value created by the corporation. Likewise, audit firms became focused on cross-selling nonaudit services, not on the quality of audits being conducted. These corporate scandals involving fraudulent accounting not only rocked investor confidence, but also exposed the weaknesses in business processes and internal controls that have eroded corporate competitiveness.

It has become the trend to mix black and white with varying shades of grey. Financial statements within the guidelines of generally accepted accounting principles (GAAP) have become the tools to drive stock prices and increase executive compensation by making one plus one equal three. The average CEO's paycheck was more than 500 times that of the average production worker's by the year 2000. Stock options or other performance-based pay have become almost 80% of CEO compensation. It is little wonder that...