The Number by Alex Berenson
How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America

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Synopsis

In this commanding big-picture analysis of what went wrong in corporate America, Alex Berenson, a top financial investigative reporter for The New York Times, examines the common thread connecting Enron, Worldcom, Halliburton, Computer Associates, Tyco, and other recent corporate scandals: the cult of the number.

Every three months, 14,000 publicly traded companies report sales and profits to their shareholders. Nothing is more important in these quarterly announcements than earnings per share, the lodestar that investors—and these days, that’s most of us—use to judge the health of corporate America. earnings per share is the number for which all other numbers are sacrificed. It is the distilled truth of a company’s health.

Too bad it’s often a lie.

The Number provides a comprehensive overview of how Wall Street and corporate America lost their way during the great bull market that began in 1982. With fresh insight, wit, and a broad historical perspective, Berenson puts the accounting fraud of the past three years in context, describing how decades of lax standards and shady practices contributed to our current economic troubles.

As the bull market turned into a bubble, Wall Street became utterly focused on “the number,” companies’ quarterly earnings. Along the way, the market lost track of what companies are really supposed to do—build profitable businesses with sustainable futures. With their pay soaring, and increasingly tied to their companies’ shares, executives were more than happy to give Wall Street the predictable earnings reports it wanted, what-ever the reality of their businesses. Accountants, analysts, money managers, and individual investors played along, while the Securities and Exchange Commission found itself overwhelmed and underequipped to cope with the earnings game.

The Number offers a unified vision of how today’s accounting scandals reflect a broader system failure. As long as investors remain too focused on the number, companies will find ways to manipulate it. Alex Berenson gives anyone who has ever invested in—or worked for—a public company the tools necessary to see beyond the cult of the number, understand accounting and its limits, and recognize patterns that can lead to fraud. After two decades of stock market hype, The Number offers a welcome dose of truth about the way Wall Street and corporate America really work.


From the Hardcover edition.
 

About Alex Berenson

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Alex Berenson is a former New York Times reporter whose work led to federal indictments and billions of dollars in corporate fines. His bestselling, Edgar Award-winning John Wells spy novels have sold more than a million copies.
 
Published March 4, 2003 by Random House. 336 pages
Genres: Biographies & Memoirs, Business & Economics, Travel. Non-fiction

Unrated Critic Reviews for The Number

Kirkus Reviews

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Tracing the economy’s boom-and-bust cycles over the last hundred years, Berenson does a fine job of showing how this idea and a host of smoke-and-mirrors accounting practices led to the latest bubble and its inescapable, if particularly devastating, pop, which demonstrated at least one bitter tru...

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Publishers Weekly

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As stock options became a major element in executive compensation and the consulting role of audit firms increased while the SEC neglected to pursue fraud on any major scale, Berenson argues, corporate executives' motives to manipulate "the number" met with a perfect opportunity to defraud unsusp...

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Star Tribune

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Review: New York Times financial reporter Berenson finds that the obsessive-compulsive focus on quarterly earnings by Wall Street and the public is the main culprit behind corporate America's financial scandals.

May 17 2003 | Read Full Review of The Number: How the Drive for...

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