Interview with Mr. Phillip Schenkler, Vice-President
of Finance for CBS’s CSI: Crime Scene Investigation. In this interview, Mr.
Schenkler shares his experiences in how financial statements have played an
important role in some of Hollywood’s most popular television and film
productions.
Q-1a) In your opinion, how can an
annual financial statement say something about a company or organization?
A-1a) “In
the entertainment communications industry, the largest producers of content are
publicly traded companies either directly or as subsidiaries of a parent
company. As publicly traded
companies, strict government guidelines and mandates are set forth with regard
to disclosure. The annual
financial statement reflects both the profitability, stability (and therefore
risk level) of that particular company.”
Q-1b) What does it
communicate to the public and how?
A-1b) “In
theory the information offered to the public in the annual statement communicates
the level & degree of transparency. Such
information is a measure for evaluating the relative “health” of the company
and allows the public to make informed determinations as to the advantage or
disadvantage of conducting business with or directly investing in said
company. Some of the
critical areas of information would be sales, cash on hand, debt to revenue
ratios, P/E multiples of the company’s share price v. net asset value, whether
said company’s stock shares offer regular distributions and/or dividends etc.”
Q-2a) In your opinion, how easy is it to
falsify or manipulate the data on the financial statement of a corporation?
A-2a) “The question is not the ease with which
this can occur, but rather how long a company can get away with it. If recent history limited to as small
a sample as the last 15 years has taught us anything, it’s that manipulating
financial records of public companies eventually comes to light. Either the real implications of false
data juxtaposed to actual operational costs general grow to proportions so
threatening to the very existence of a company that the scheme breaks down. One need look no further
than the examples of Enron, WorldCom, Adelphia and, more recently, Bernie
Madoff.”
Q-2b) Can you provide an
example of how companies falsify information on a statement?
A-2b) “Because there may be hundreds or even
thousands of people involved in the compilation and subsequent revue of
financial data of an entity of that magnitude, reporting decisions are usually
made at the top of the company’s command chain – near the CEO, COO, CFO level. I believe it has more to do with
manipulation of data through questionable reporting practices such as how and
when write-offs, losses, charges, tax benefits etc. are reflected on the books
from reporting period to reporting period or year to year – and whether those
actions are acceptable or legal. It
could also be as simple as reflecting full value of leveraged assets, delayed
or inappropriate reporting of losses or outright deceptive non or inaccurate
reporting (i.e. reporting a loss as a gain or not reporting a loss at all.)”
Q-3a) Do you think there
should be some sort of reform in the industry to protect the investors and
stakeholders from organizations misrepresenting their financial statements?
A-3a) “A
litany of legislation already exists on the books in the forms of law and
government regulation. Additionally, more laws and regulations at the local,
state and federal levels of government are passed each year – each more stifling
from a reporting and fiscal conduct the ones before so my answer is no.”
Q-3b) If so, what type of solution would be
feasible?
A-3b) “Having
said that, the problem lies not a lack of legislation but rather the lack of
enforcement of existing legislation and regulations, in large part due to
insufficient budgets to fund appropriate regulative and investigative manpower
and/or the initiative or lack of interest on the part of government and our
elected officials – most of whom at the state and federal levels are beholden
to lobbyists and special interests and are immune from prosecution for acting
on inside information made available in the course of executing their official
duties. Furthermore, no bigger examples of potential areas of threat exist
than those in the banking, energy and pharmaceutical sectors.”
Interview
analysis
The interview was conducted via email. Mr.
Schenkler’s interview confirms the many possibilities of both concealing and
exposing the truths about a company’s financial health. It also proves that it
is very easy for organizations to gain the support of stakeholders and
investors while concealing from them the actual financial stability of the
company. Mr. Schenkler mentioned that it is only a matter of time until the
truth is exposed when companies seek to mislead and they have made headlines when
finally exposed. Looking back at the previous weeks reading material, it’s easy
to tie in the financials to the strategic communication of an organization. As
we worked in our groups to analyze a company’s financial statement, we read the
messages from the upper management that discuss the future of the company and
what direction they are taking with their investments as well as the future of
the company. Along the same lines, strategic ambiguity also plays an important
role in the company’s financials because too much information may impede the company’s
goal. Too little information can leave the stakeholders wondering, which can
result in less support.
Mr. Phillip
Schenkler graduated from the University of Texas at
Austin with a Bachelor of Science in Radio-Television-Film. He is a member of
the Writers Guild of America, West and has worked in various positions in the
finance departments of several major productions since graduating college. He
has worked for Buena Vista Pictures and Dreamworks Television. In 2006, Mr.
Schenkler was promoted to work in the studio executive level and oversaw the
productions of NCIS, NUMB3RS, Ghost Whisperer and Criminal
Minds. He has worked on CSI: Crime
Scene Investigation for the past 6 seasons.
CSI:
Crime Scene Investigation has aired on CBS since 2000. It employs over
1,500 people in a typical season.
References
(2012) Retrieved from http://www.imdb.com/name/nm0770939/
Merrill Lynch. (2000). How to read a
financial report. Retrieved from http://www.docstoc.com/docs/71461133/How-to-read-financial-report
Michael David
- Week 07 Assignment 01: Application Assignment
Hi Michael,
ReplyDeleteInteresting interview, I thought that the comment about all of the financial legislation, Dodd Frank being probably the most recent, was interesting. I agree that the legislation exists, but the enforcement of the legislation isn't necessarily there yet. It's fine to have all of the rules written, but if there are loop holes or no one to enforce the rules, then they don't do any good. I think corproate greed will continue to drive financial fraud until the punishments (which need to be enforced) outweigh the benefits.
Do you think the internet and the fact that it's incredibly easy to obtain financial reports improved transparency? I was thinking that it did originally, until reading the Enron article where it said that financial gurus couldn't even figure out Enron's books. It seems like the fact that the information is available doesn't prevent fraud because someone still has to be able to interpret the information. I think this is where companies use stategic ambiguity, like you mentioned, to their advantage.
Hi Melanie, I think the internet creates easier access to the financials but for the average person (which many of us are), it's difficult to understand what exactly is going on. Enforcement will be difficult because you can't arrest every person guilty of financial fraud because there may not be enough manpower to investigate, arrest, convict and punish the many offenses that are committed in this industry.
DeleteHi Michael,
ReplyDeleteI also enjoyed your interviews. Coincidentally, I used CBS in my piece but a 60 Minutes story explaining how AIG defrauded so many people for so long. To Melanie's point, yes the rules are there but there are so many ways to work around them while still being technically within the law. CBS is owned by Viacom so it is possible there are many sets of eyes looking over production budgets of the network.
However, I can also see how studios and networks might goose the numbers or try to hide costly missteps like releasing a summer blockbuster that brings in tepid earnings. If that were to happen, the entertainment media isn't exactly pouring over the financials and being a watchdog, so I guess investors and Wall Street would have to sniff that out. J
Hi Michael,
ReplyDeleteAs you know, CSI (the original) is one of my favorite shows (although not as much now that most of the original cast is gone). I think John's point about studios and networks trying to work the numbers to make themselves look better is an excellent one. I recently read a biography about Michael Eisner (can't remember the title at the moment), and it seemed like board directors, CEOs, presidents, division heads, etc., were coming and going at an alarming rate. As the saying goes, you needed a scorecard to keep up with the players. Obviously, aside from ratings, media is driven by numbers.
I also agree with Mr. Schenkler's observation that it isn't more legislation that's needed but more oversight. Why create more rules when you can't even enforce the ones you've got?
Great interview!
K
P.S. If you communicate with Mr. Schenkler again, ask him if he knows Stacy Murphy. She's a friend of mine that's worked on CSI as an assistant director and/or second unit director since 2003.