Schroth, Richard J.

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SCHROTH, Richard J.

PERSONAL:

Male. Education: Western Illinois University, B.A., University of Illinois, M.A., Indiana University, Ph.D.

ADDRESSES:

Office—c/o Perot Systems, 2300 West Plano Parkway, Plano, TX 75075. Agent—c/o Rhoda Dunn, Random House (Crown Books), 1745 Broadway, New York, NY 10019.

CAREER:

Management consultant and technology strategist. Marriott Corporation, senior vice president and chief technology officer; Index Vanguard, founding member; CSC Research, senior vice president; Index Research and Advisory Services, senior vice president; Executive Insights, Ltd., president and CEO; Executive Viewpoints, Inc, president and CEO; Perot Systems Corporation, chief technology officer, 2001—. Member, A.T.& T. Executive Education faculty; Net-Base Corporation, member of board of directors, 2000—.

AWARDS, HONORS:

Western Illinois University, Outstanding Alumni of the Year, 1989; Indiana University, Outstanding Alumni of the Year, 1996; Aresty Institute, Wharton School, University of Pennsylvania, senior fellow.

WRITINGS:

(With A. Larry Elliott) How Companies Lie: Why Enron Is Just the Tip of the Iceberg, Crown Publishers (New York, NY), 2002.

SIDELIGHTS:

Richard J. Schroth has worked as a management consultant and technology strategist for more than thirty years, advising and directing some of the world's top executives of the largest international companies. Among his customers are General Electric, Pfizer Pharmaceuticals, Monsanto Corporation, Bank One Corporation, and Royal Dutch/Shell. One of his first positions was with the Marriott Corporation. Later, he founded his own company and most recently has joined Ross Perot's company, Perot Systems Corporation, as chief technology officer. Schroth is well known as a leading nationwide consultant of emerging technologies and is well informed on the topic of how businesses succeed and fail. With this background, he has joined with co-author A. Larry Elliott and produced How Companies Lie: Why Enron Is Just the Tip of the Iceberg, a book that teaches investors how to evaluate those corporations.

In the late 1990s few Americans knew who or what Enron was, but within only a few years Enron was synonymous for corporate greed and corruption. It was one of the first companies to be exposed as having lied about its profits in order to secure investors. Using deceitful accounting practices, Enron inflated its worth to lure investors, then abruptly announced bankruptcy. Investors lost everything. Subsequent investigations showed that other companies were employing the same fraudulent accounting systems. Investors began to ask who they could trust.

According to a Publishers Weekly writer, Schroth argues that many corporations have so manipulated investors' perceptions of their worth "that the stock market has become little more reliable than a casino." Enron was not the first company to do so, and according to Schroth, it will hardly be the last. He states that since almost fifty percent of American households buy stock in large corporations, it is essential to restore trust to the practice of investing. Yet a remedy, Schroth writes, will be difficult to achieve. "Lies and deception at their basest level help the inner circle achieve personal goals of greed and cover up their incompetence as executives," he writes, citing dishonest accounting practices in such companies as Cendant, Waste Management, Sunbeam, Global Crossing, and Tyco International.

To help investors, Schroth offers a checklist of indicators that might signal financial corruption of a particular company. These include an abrupt turnover at key executive positions of the company; insider stock trading in large volumes; restatements of earnings; reduction in shareholder equity; elaborate compensation and stock option plans; sudden downgrades in credit ratings; and withdrawals of hedge funds. However, Schroth points out that no checklist will provide foolproof evidence. He states that fraudulent companies will adjust their plans to make their false accounting practices less easily detected. "Keeping up with the indicators of lies and deception," write Schroth, "is like trying to paint a moving train." To balance this out, he suggests that investors need to ask "hard, even rude, questions."