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In a 2004 essay titled "The Unthinkable...and the Mundane:
Guts in Chess and Life," retired world-class chess champion
Gary Kasparov said, "Ultimately, what separates a winner from
a loser at the grand-master level is the willingness to do the
unthinkable."
Later, in an interview with the Harvard Business Review, he
compared the strategic acumen and competitive fortitude it
takes to be a top-ranked chess player with that of a successful
business executive. In the interview he shared several rules that
businesspeople can learn from winning a chess match. One of
those rules is to "make yourself comfortable in the enemy’s
territory." While Kasparov’s observations were part of a much
larger discussion about the lessons business executives can
learn from chess about strategy, competition, and winning in
the corporate world, some executives have taken those lessons
and turned them into a blueprint for fraud.
Lawrence Brown, J. Mack Robinson Distinguished Professor of
Accountancy, said that chess is a great analogy for the corporate
scandals that have dominated headlines over the past several
years. "It comes down to greed. As long as greed exists, no
matter what rules and laws are put in place, those managers
who are solely interested in personal gain will figure out a
way around them. It’s just like chess: the regulatory agencies
make one move, the managers make another move." Brown,
a corporate governance expert, said that the latest scandal
to rock corporate America – backdating stock options – is a
perfect example of the moves and countermoves that take
place when managers are intent on circumventing the system.
According to Brown, stock options were designed as an
incentive tool. However, during the tech boom of the 1990s,
employers were scrambling to hire executives and were short
on cash. Many companies resorted to using stock options
not only as a way to pay more but also as a way around an
IRS rule that says companies can not take a tax deduction
for compensation paid to an executive exceeding one million
dollars. "What happened was that most companies paid their
executives below the million-dollar limit and used options as a
way to make up the difference. According to the accounding
rules in effect at that time, as long as the options were not ‘in
the money,’ at the time of the grant the company did not have
to recognize an expense for the options, enabling it to boost its
earnings," said Brown.
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