Andersen Effect

  

In 2001, energy trading company Enron had well, let's call it a few problems. For that matter, so did Arthur Anderson, the company’s accounting firm...but we’ll get to that.

A handful of Enron executives had spent the previous few years using a variety of accounting tricks to hide massive losses at the firm. As a result, they got rich off of stock options and self-dealing side hustles using the company’s assets.

Through it all, Arthur Anderson, acting as the company’s auditor (meaning the firm was fundamentally in charge of making sure Enron’s books were correct) signed off on the dodgy balance sheet. It all came to a head in 2001, when the company imploded in a flurry of massive write downs and indictments of top executives.

Eventually, Arthur Anderson itself was found guilty of various infractions, including shredding documents in an attempted cover up. The conviction was eventually overturned, but the scandal led to the so-called “Anderson Effect”...basically, after that, auditors would be reluctant to be push overs for the companies they worked for and conduct a more stringent review of results.

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Finance: What is an Ethical Fund?22 Views

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Finance allah shmoop what is an ethical fund an ethical

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fund the political weapon of unsophisticated finance people throwing straw

00:13

at brick houses everywhere Well unethical fund is one that

00:16

has no ah sin or no investments in what they

00:21

perceive as bad things like you know porn google images

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and snapchat facebook tobacco philip morris altria arguably the best

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investments over the last century Guns and boeing rockwell bomb

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gambling a vegas casino caesar's sands yeah that's not really

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oil chevron shell bp hollywood it is neat bike on

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the other and then there's technology which delivers all of

00:52

the above and let's not forget about telecommunications which lets

00:56

people converse Teo then deliver all of the above way

01:00

Going too far here Yeah and that's the problem with

01:03

quote ethical funds unquote healthy ethics are in the eyes

01:07

of the beholder Go to a church service in the

01:10

deep south and it's likely the congregation will give you

01:13

a completely different quote It's ok to invest in unquote

01:18

portfolio then what A bunch of hippies in marin county

01:21

california So who's to say what is ethical and what

01:24

is not Well actually it's the gang marketing the mutual

01:29

fund which named itself to be and ethical fund Who

01:32

determines what investors would feel good about investing in and

01:37

hey that's fine Someday it's him up We want to

01:39

start a fund investing on lian companies who are funny

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like intentionally funny not like you know g and those

01:46

guys Well the problem is that for better or worse

01:49

a large portion of the name's actively omitted from the

01:52

list of buyable stocks in and ethical fund are often

01:56

actually really good Businesses like oil and gas for example

02:00

has been a stalwart for a century in the u

02:02

s so has tobacco And oh by the way most

02:04

technology companies early histories were driven by profits in and

02:09

around porn So there is in essence a price that

02:13

investors historically seemed to be paying for the privilege of

02:16

being all judgy about what ethics are meaning that results

02:21

in ethical funds tend to lag their competitors by a

02:24

few percent each year and over a couple of decades

02:27

While that means that ethical funds end up being worth

02:29

a lot less than unfiltered funds their funds who just

02:33

are out there trying to make money for shareholders and

02:35

then the big question gets asked from the ethically rich

02:38

and financially poor from the poor house i shouldn't The

02:42

best ethics just revolve around legally producing the best financial

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return for investors Know what a concept investing in order 00:02:52.165 --> [endTime] to make more money Who'd a thought

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