'The Number' written by Alex Berenson provides full details on the economy, comprehensive analysis, and profound facts on the overview of how both the Wall Street and corporate America lost their course to success the time of the renowned bull market which started in the year 1982. A broad historical perspective came up as a result. Berenson puts forward recent exclusive responsibility (or accountability) disasters in its actual context. Berenson further explains how the wagon wheels came off on its road to economic achievement. This paper seeks to identify objective criticism on Alex Berenson's opinions on his findings in his work 'The Number'. It will further express opinions of other economists on the same hence giving the readers comprehensive information and detailed analysis that is necessary for them to understand WorldCom, Enron, Tyco, Halliburton, and other corporate economic disasters of present times.
This book is written quite well, but on the other hand, Berenson is quite cynical and arrogant about the economic status in the United States. He does not give adequate information on the positive elements in the Wall Street. In my point of view, every stakeholder was considerably ignorant and did most of the analysis wrong; this was with the exception of Berenson, who took much of his time scrutinizing the trends in the economic relationship existing between the two. In the dawn of the spectacular Enron's implosion, there were scandals attributed to the collapse of the stock price at Tyco and revelations depicted that WorldCom had inflated its revenue by $9 billion. As a result, many wondered how auditors who were independent could overlook such distinct discrepancies in financial presentations especially through the performance records available. Other critics asked how the SEC never spotted corporate errors and fraud made by the accounting enterprises on the given scale when going through the annual financial reports.
The New York Times reporter, Alex Berenson explains his eye-opening findings to these and also provided other answers to disturbing questions of similar weight in the clearly-documented and hard-hitting report. With reference to background information of the fall in investment research that is independent and the changing shifts in client consistencies for investments such as houses from investors that are independent to corporations, Alex charts the impacts of earnings per share in his book "the number" to evaluate the companies' health and progress. Stock options have become a crucial element in corporate compensation and the auditing firms' role of consultation on the increased occurrences of economic fluctuations while the powerful SEC disregarded its obligation to follow up fraud cases on any possible scale.
Berenson further argues that, corporate individuals' motives to control "the number" met by a coinciding opportunity to rip unsuspecting investors of their financial capabilities, and unfortunately many of these investors could not resist. Berenson's coruscating character of the bravery and boldness has helped him reach of executive levels of fraud in the most recent years and is a clarion plea for comprehensive reforms. His discussion on the SEC's mishaps caused by lack of financial budget and qualified staff back in the year 2001, was in a position of only auditing 2,280 of the 14,500 yearly reports brought forward and he thoroughly looked into a mere section of all accusations of fraud and errors in organizations. This implies that the agency was founded to shield investors from similar mis-happenings in the constant state of emergency.
In his forecast, he adds that individual students and investors of economic markets in United States will be drawn to Berenson's model of wealth detail and independent accounting firm complicity and glaring attack on the corporations' greed. This book's historical investigative stance and general perspective should make it possible for a classical form of financial reporting on a relatively contemporary duration in the American financial provisions. In this comprehensive business picture evaluation of what led to the breakup of Wall Street and corporate America, Berenson, top level financial investigative New York Times' financial reporter, lays focus on the common link connecting Enron, Computer Associates, Tyco, WorldCom, Halliburton, and the various corporate scandals commonly referred to as cult of the number.
Every quarter a year, 14,500 elements traded publicly companies report profits and sales to their respective shareholders. Earnings per share are referred to be the most important in these quarterly announcements. This is contrary to the lodestar that investors have and similarly these days, it is the most of use to make conclusions on the health and welfare of America's corporations. Earnings per share are basically the number at which all other indices are sacrificed. American economists refer to it as the distilled truth of the health of a company. Unfortunately this does not hold much water as it does not contribute to the long term relationship building and is not wholly reliable to achievement of organizational goals on the long run.
Alex Berenson's 'The Number' comments on the corruption cases in the operations of the trade activities in the Wall Street. Berenson's idea on the contribution of corruption to the fall of the trade benefits between the two is that most of the output was sub-standard and poor hence the challenging the smooth running of the relationship. According to my understanding, corruption negatively contributes to the economy aims at benefiting individuals instead of the greater majority. This act is selfish and detrimental to the growth of the organizations. Corrupt deals and practices led to most acquisition irregularities and malpractices in the business practices. Most of those who were in power failed to deliver quality and efficiency despite having all public resources at their disposal. I most cases the poor in Wall Street were more vulnerable to corruption and its adversities.
In most cases they had themselves in a fix and have limited options on what to do other than circum to it either voluntarily or otherwise. Corruption affected the income equality in the United States and this led to distancing the existing gap even further instead of solving it. This would have been achieved by bridging the gap between income extremes hence raising the levels of disposable income available between the individuals. Berenson adds that the corporations' greed for quarterly earnings in corporate America led to many irregularities. The government also was reluctant in dealing with the fraud cases and as they accumulated with time, they became a burden to assess and administer justice where due. Too much work load was caused by the fact that corruption cases and instances of fraudulent acts and became impossible to work on the issues effectively.
Mr. Berenson distinctively sets out a stall with a relevant (and interesting) record of the legislations of corporate governance and modes of reporting, and an evaluation of the matters related to accounting of any kind. In two of his short clear theories, Berenson explains clearly the distinction between (including the pros and cons) of sale accounting and financial accruals, and the asset balance sheets other than the use of income statements. Those fundamentals are necessary for one to comprehend the day's activities while many of the authors in finance and economics have written on the topic have optimum regard for them.
Contrary to them, other authors have aimed big corporations such as the SEC, ISDA and other credit rating entities as the chief culprits though this has been with levels of persuasiveness, Berenson's interest remains very much on the corporate executives and the auditing accountants. Different sectors in the financial system took their focus off the critical stages of the process, but attributed the flexibilities and vagaries of accurate accounting policies and eliminate the greed of executives. This would have not been possible, at least not without the incorporation of different positive elements geared at improving the economy of the Wall Street. Through this argument, Berenson emerges convincing on both scales of these scores.
Indeed, while the actions of accounts auditors (considerably Andersen) are concrete, Berenson issues a sufficient and solid excuse for the exercise generally: on the properties of company accounts, he adds, basically involves a range of assumptions, approximations and profound guesses, even though they can be subject to disapproval, and those with the intention to cheat have an utmost infinite number of channels to do achieve their ill motive. Provided that the auditing department can to a great extent cost so much before a company is driven out of business by its very self, there should be solid policies to what any auditor that sets the boundaries of the auditing function to prevent ambiguity of opinion against organizational structure. In his defense, Berenson still argues that the profession should be as per the book. In practice this is not always the case, which he explains convincingly; Berenson says the "number" is totally unreliable and hence should be lesser of a trend determinant for drawing market conclusions than it actually was in the relationship between the Wall Street and the United states.
On the other hand, as Alex Berenson explains in his conclusion, even this theory of the fall of the Wall Street and the United states has its limits. Japanese markets had experienced stagnation of the in the recent years was a testament to the dangers of blindingly discarding the "number" theorem altogether. Japanese markets had not given this theory plenty of time in its focus hence left most of its financial trends loose. This in turn led to its decline and subsequent closure.
In my opinion, stock options were most precisely a way for top management to steal and rip off stockholders, but in his work, the author (Alex Berenson) does a detailed job of emphasizing the way the process should be carried out and also includes practical examples. If an organization does not put the interests of the stockholders to be crucial and top in the list, they risk mixing up their priorities and in the process diverting their efforts to self gains other than directing them to the prosperity of the organization. If the executive function of the organization thinks or acts otherwise they start deviating from profit making to countless losses. Berenson adds that this kind of action pushes away product consumers as an obstacle is built in between the provider and the final customer. In the long run, the trading engagements of such a system are bound to falling. To add insult to injury, the costs of such options are not deducted from company earnings so from a far it is assumed that there is no cost. Berenson is against crooked auditors and corporate management's in a much defined manner. In his big-picture evaluation, he presents a comprehensive analysis of financial trends in corporate America.
Elsewhere Alex Berenson is relatively guilty of sophistry. Berenson mentions the irony of the regulation of price of the existing commissions levied for trade activities on the NYSE, which is most likely the potent symbol of the independent market on the world. But later in this book he mixes up his examples. He says that Wall Street had always been associated to free markets, except times where they would cut into its fees. Presently, even the real estate agents are compelled to compete on basis of price; the current rates on commissions levied by grown investment financial institutions for initial public offerings are in most cases termed as sacrosanct. Commissions for under quoting IPOs are a different thing to those charged on brokering stock sales along the exchange process. The policies have never been subjected to any form of legislation, and in any case if the levies tend to appear constant at a given level, it ceases to have much related to price fixing, this is because of the hefty amount of work and high expense and diverse inherent risks required to get a given IPO away. This is called the recommended market level. Pitching the IPOs becomes risky and feverish to the economy as taking drastic and hastened may not meet the fluctuations in the given market.