MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Andersen's ashes

Nir Kossovsky - Monday, August 03, 2009

We return from our summer holidays to see the stock price of Huron Consulting plummet in early morning trading.

We excerpt from the Reuter's story.

Huron Consulting Group (NASDAQ:HURN), a member of the Diversified Commercial & Professional Services sector, which rose in 2002 from the ashes of collapsed accounting giant Arthur Anderson, said late on Friday that its entire top management team would leave the company and that it would restate more than three years of results.

Oppenheimer analyst Scott Schneeberger said: "The damage to Huron's reputation will likely be significant."

Two law firms are investigating potential shareholder claims against Huron over possible securities violations, while an analyst raised questions about the company's ability to survive.

Huron, which was on Fortune magazine's 2008 list of the 100 fastest-growing U.S. companies, said it is also conducting a separate investigation into its allocation of chargeable hours in response to an inquiry from the U.S. Securities and Exchange Commission.

Chicago-based Huron was founded in 2002 by 25 partners from Arthur Andersen, the accounting firm that collapsed in connection with the Enron Corp accounting scandal in 2002.

Were there any warning signs? We look for indications in the Steel City Re IA (Corporate Reputation) Index.  The Index, which correlates with reputation surveys such as those published by Forbes, Fortune, and Harris Interactive, captures the financial implications of stakeholder behaviors and expectations of stakeholder behaviors as determined by corporate reputation. The Index is a good leading indicator of financial performance and returns on equity.

And indeed, there are indications and warnings of a reputation challenge. The Steel City Re Index shows that over a one year period, Huron rose meteorically from a low of 0.35 to a high of 1.0 and then back down to 0.83. That's a significant fluctuation in reputation in advance of any public disclosure.

At the end of trading today, Huron is down 69%.


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