Go With the Flow

August 1, 2002
Wayne Koberstein
Pharmaceutical Executive

Just when pharma companies finally awake to the need for a good reputation, the stakes go vertical. The long-perceived and possibly illusory gap between shareholder behavior and public outrage suddenly disappears. And each company stands or falls on its revealed record.

Just when pharma companies finally awake to the need for a good reputation, the stakes go vertical. The long-perceived and possibly illusory gap between shareholder behavior and public outrage suddenly disappears. And each company stands or falls on its revealed record.

A single issue now supersedes all others that confront the industry: Accounting. Pharma has come under scrutiny because public concern over corporate accounting has spread to encompass all industries.

Accountants steer the corporate world the way court magicians once held sway over the royal house. Their power to measure, predict, and, yes, obfuscate often wins the ear of the king. Today's corporate courtesans, CEOs and board members, love to manage by the numbers-for how else are they rewarded? To many, apparently, a good accountant is worth more than a master chef, based on the ability to cook.

This is right where you would think the pharma industry's natural conservatism would pay off. After all, most pharma companies use GAAP and other measures to ensure the most reliable bookkeeping possible. But, because US accounting regulations and standards have undergone a general relaxation in recent years, even the most diligent company may easily step over a line later viewed as an ethical boundary.

If no industry transgressions existed-and we all know they do-pharma companies would still pay a price for the post-Enron mood. People now distrust corporations in general. Most of all, they distrust the corporations they once trusted most. They expect betrayal and will demand proof of innocence before changing their minds. They now show their skepticism by bailing out of the stock market, including traditionally hearty pharma stocks, in a big way.

At such times, public opinion gathers the overwhelming momentum of a rushing stream. Resistance is futile. Don't fight it. Go with it.

I don't know who invented the phrase "Go with the flow." Surfers? Kayakers? Plumbers? It now has a pejorative meaning, perhaps the opposite of its original intent. Most often, it evokes the passive image of taking the easy way out. Yet, surfers and kayakers, at least, would give the phrase an active connotation-especially when the water gets rough.

On still waters, it is possible to reverse direction. But when the water froths and the waves grow high, only one alternative presents itself. Here, going with the flow demands the greatest skill and attention-along with physical courage-as one rides the waves and avoids "wiping out."

In corporate boardrooms and CEO offices, that metaphor translates into a clear test-restoring confidence in the numbers companies publish for public consumption. Some will capsize and drown because of the encumbrances they carry from upstream; others, because they lack the required agility. Beyond that, it becomes a matter of character.

Honesty and transparency of purpose help one battle through even the roughest waves. Though executives and companies may negotiate the raging flow at some peril, they will find it offers the only way forward-and out of the current whitewater of public distrust.