The bad news about good news (Editorial)

By John Hobel
|Canadian HR Reporter|Last Updated: 04/13/2005

During his fraud and conspiracy trial, former WorldCom CEO Bernard Ebbers used what is being referred to as the “I know nothing” defence. Among North American executives charged with illegally bilking their firms and shareholders this seems a popular tactic. We’ll see if Ebbers’ conviction in the record-breaking $11-billion (U.S.) fraud trial, which has him facing up to 85 years in prison when sentenced, will throw cold water on the strategy.

But “I know nothing” is hardly new. Back in 2001 when Nortel’s stock price collapsed as revenues unexpectedly dropped, then CEO John Roth was criticized for ignoring the warning signs. He would later say he had stepped back from business as he prepared to hand over the reins. Insiders have said Roth never liked to hear bad news, so people avoided discussing things like unachievable forecasts.

Can CEOs with million-dollar salaries really say they aren’t involved in corporate details at this level?