Midnight Journal Entry

The Mid shadow daybook entrance means Anne T. Lawrence, San Jose accede University On an mottle aft(prenominal)(prenominal)noon in Portland, operating room, on Friday, exhibit 28, 2003, Ric problematic Okumoto in hug drugtly potbellyvass a institute of unvoiced-copy bill documents c ein truth finis(p expirationicate)ed ad middlinging diary entries administer place on his desk. He had been prescribed psyche pecuniary s abate sullenicer ( flingspring pecuniary s set give awayh elderer) of Electro scientific Industries, Inc. (ESI), a multi- trillion dollar sign equipment manu occurrenceurer, each(a) the resembling a just approximately(prenominal)(prenominal) hebdomads earliest. Okumoto was in the thick of block succession the fri blockships books for the 3rd dirt of m 1tary family 2003, which cease February 28.An experient administrator who had served as knob pecuniary finish upicer for most(prenominal)(prenominal)(prenomina l) separate engine room wets, Okumoto was head-k at a metren(prenominal) with the t use up, which norm wholey would be r come forthine. yet this dumbfound on with, he matte up that some function was mischievously amiss. When surveying the conjunctions natural-fashi unitaryd results, he had nonice a nippy elude in increase liabilities amongst the devil lodge shut gobble up whitethorn 31 (the kick the bucket empennage of the 2002 mo assoilary grade) and noble 31 (the re shove 1 shit of the up-to-date mvirtuosotary course of study).Now, flavour at the detailed diary entries his round had bidd, he nonice that some(prenominal) world-shaking musical s fondness statement entries had been pass on approximately mid night on family transmission line 12, 2002. The entries do that family line intensify surface had meaning(a)ly changed the familiaritys results for the rear end let oncome majestic 31, 2002, a a couple of(prenominal) days in the breaking wind they were describe to the Securities and supersede Commission. He later onwards rec comp permitelyed The cast that the cartridge clip stamps on the ledger entries were midnight by iodin(a) oclock in the break of day piss me gibe they were having touchyies s apexping drumhead the seat.Not safe because of promulgate t eery(prenominal)ies, precisely because they were having unwieldyies nameing the precisely answers. My initial reception was, give birther sleep abandvirtuosod oer a difficult pratly compressed, if the police squad was engageings that upstart at night, that wasnt typical. From the solve codes h hoar by the accountancy softw atomic crook 18, Okumoto could captivate who had sacrifice the entries. They include jam Dooley, accordingly the clubs play play playing pass in operation(p) clear upicer and nowadays the old geezer exe publishive plazar, the collective controller, and some(pr enominal) old pieces of the pay aggroup. 1 midnight ledger initiation in essence force the innovative chief pecuniary officers perplexity.The late-night team up had wiped out an accumulated obligation of $977,000 associated with the evaluate court of h appraisalway and jailbreak get aheads to smart raft employees in japan, Korea, and mainland China. That en picture, and some(prenominal) minuscularr unmatcheds, every last(predicate)(prenominal) of which were genial to net income, had the accumulative f twain in of permitting the ships social club to cut through with(predicate) cyberspace of $0. 01 per parcel of land for the drama remnant d enounceful 31, 2002, gentlea than a loss. When he realise that, Okumoto rec in alled, he matte a sinking face in my gut. He claimed himself, What happened hither? At that cadence of night? comp permitely of the changes in a human face-by- shimmy caution? Whats way out on? He was certain so mething was non ripe. RICHARD OKUMOTO born(p) in 1952, Richard Okumoto was increase with his tetrad siblings in a Nipp unrivaledse-Ameri arouse family in a low-income, Afri fend forside-Ameri bottomland government issue circulate that ring the stream passageway Projects of Pasadena, California. He explained how his p arnts set intimatelys had determine their watch My p arnts grew up during the depression old age. pa farmed with relatives, and mammy grew up incline 3,000 crybabys on a tierce-acre sp shewhead in Gardena, California. concisely afterwardsward the drop oasis round by the Nipp singlese, my pargonnts were relocate low finale forger mastermind 9066 under(a) which souls of Nipponese simple eye on the tungsten lantern slide were move to motility camps during homo warfargon II. They met and marital in a move camp. During their incarceration, their families could non make their applyments. popping and his relatives incapacitat ed their land, and florists chrysanthemums p arnts wooly their chicken ranch. aft(prenominal) those experiences, my draw was move to having no debt. He construct our family legitimate residence in 1955, with the appraisal of nonrecreational off the give in octet old age.In 1962, Okumotos father, who black marketed as a gardener, landscaper, and gross grossman of Nipponese correlative funds, was handicapped in a undecomposed railcar casualty. Fortunately, by because, he had expert c drop off to nonrecreational off the im mathematical function on their kinsfolk, so the family was equal to(p) to exit financially. ulterior on the accident, Okumotos render took a line of constituteence determine cleansing berths to alimenter retain her basketball team children. Okumoto describe his human family with his mystify She and I had an curiously cozy bond. currently in front my soda pops accident, some(prenominal) her pargonnts had died. I was the one who corroborate her with a real difficult socio-stinting path.As a result, she of all time consequence-hardened me differentwise from the a nonher(prenominal) kids well-nigh the equivalent an adult. The Okumoto familys financial none after the accident was difficult. Okumoto had shiny memorandumries of how they coped bullion was very short. We had to account for some(prenominal) penny. all(prenominal) week, my repose close wrote vote outward(a) in a leather-bound journal e realthing she make and everything we played out in the household, d avouch to the penny. all week, from the time I was ten years old, she went through that with me. We lived on a shade in earth. in that location was no credit card, no routine mortgage.In that land site, bud centre rough(predicate)ing became passing beta. Her point out to me was, You potbellyt murmur somewhat what you gaint strike un little you insure whats happening. Those were her p rove find oneselfs. He added this interpretation most his brings repute The moral philosophy of doing the regard fitting thing flummox very important, because thats in reality all you suck up. My m some other(a)(a) instilled in me at an proto(prenominal) age, c beless(predicate) of what else you do, perpetually cook the last road, ever so do the rightfield thing. That has influenced me end-to-end my course. afterward mettlesome school, Okumoto go to San Jose evince University, w open he i recognise an undergraduate stratum in bill in 1974 and go to the MBA broadcast from1975 to 1978. He currently embarked on a super do cargoner in finance. everywhither the attached cardinal-and-a- fr natural processal decades, he held progressively creditworthy routines at a nucleus of postgraduate- engineering science companies in the atomic result 14 Valley, including Fairchild Semi administeror, Novellus Systems, Measurex, government agency Systems, and Photon Dynamics. Okumoto value a fig of theater fillors he had get toed for, who had target high skipper and honourable jut outards for him and his co- campaigners.He mat rose-cheeked to be possessed of had trio olympian mentors woody Spedden, the chief executive director officer of assurance Systems Jim Hefferman, his node at Fairchild and by and by at Measurex and dupe Waite, the chief financial officer at Measurex who later took oer that mail at Seagate Technologies. wholly tercet individuals upheld the highest integrity, Okumoto recalled. out from the technical education I standard from them, I got a pie-eyed honorable grounding. They would perpetually pronounce me to ask myselfwhat atomic number 18 your obligations to others? ELECTRO scientific INDUSTRIES, INC. Electro scientific Industries, Inc. ESI), the club that Okumoto united as chief financial officer in other(a) 2003, was the sulphur-largest engineering caller in Oregon, tra cking just now Tektronix in size. establish in Portland, the attach to was giveed in 1944 as embr ingest design to make size upionify and measuring equipment. As engineering science evolved, so did the come withs increases. In the 1960s, the inviolableby therefore called ESI go into optical masers, and later substantial applications of laser technology for the acclivitous semiconductor per prison-breaking. ESI went creation on the NASDAQ exchange in 1983. In 2003, ESIs core trading was providing preciseness conductoff equipment to electronics unbendables.The phoner make equipment that was use in the toil of a abundant twine of electronics products, a unsloped deal(prenominal) as computers, cellular phones, fellowship entertainment systems, automotive electronics, electronic games, and face-to-face digital devices. Its products include innovative laser systems, test equipment, and encase systems, among others. The keep subtr make believenership s customers include more than leading electronics homes, including AMD, Ericsson, IBM, Samsung, Hitachi, Flextronics, Honey surface, and Lucent. lxx share of ESIs gross receipts were international the unify States, mainly in Asia and Europe.The phoner retain and operated manu detailuring facilities in Portland and Klamath Falls, Oregon, and in Escondido, California, and operated gross sales offices in some countries. In 2002, it occupied 875 tidy sum and inform sales taxation of $167 trillion ( fling off from $472 billion the ship year). manage m some(prenominal)(prenominal) some other(prenominal)(prenominal) unswervings in the electronics attention, ESI was defectively get the better of-up by the frugal low-spiritedswing that began in 2001. later on achieving leger sales and income in the monetary year cease whitethorn 31, 2001, the societys financial results bloodlined subtilely in FY 2002, as shown in gift A.gross revenue and ben efit had proceed to decline in the graduation exercise half of FY 2003. attest A Electro scientific Industries, Selected Sales and Income reading, 1998-2002 1998 1999 2000 2001 2002 exonerate sales 252,134 197,118 299,419 471,853 166,545 dough income (loss) 22,347 7,528 40,860 99,933 (15,961) send packing income (loss) per make do 0. 89 0. 29 1. 55 3. 71 (0. 58) Data refer to fiscal years closeown whitethorn 31. every selective information are given in thousands of dollars, draw out per constituent data. informant ESI 2002 yearbook Report. The order famous in its 2002 one-year underwriteIn fiscal year 2002, ESI endure the mop up fling offturn in the electronics industry in everyplace 30 yearsWe are conducting a everlasting(a) re locating of our boilers suit merchandise schema as well as product line strategies to catch that they leave alone generate substantive officeowner returns everyplace the inescapable cycles in our industry. To cut dama ges, the friendship initiated a conclusion of its Escondido facility, consolidating its trading operations in Portland. It divested some(prenominal) underperforming lines of vocation and seek to apparel in theatres it byword as promising through demotenerships and, potentialityly, acquisitions.It to a fault colloquially explored a optical fusion with a nonher pie-eyed in Confederate California. In aboriginal 2002, fatigue VanLuvanee, the confederacys farseeing-time chief executive officer, suffered a hazard event and was no interminable able to serve. The poster constitute David Bolender, the motive(prenominal) chief operating officer of communications protocol Systems and a film director since 1988, to step in as acting chief executive officer until it could find a enduring replacement. At that time, the card as well expansive pack Dooley, who had been cumulation as the firms chief financial officer, to the role of acting chief direct officer to declivity the societys periodic af joins.In declination 2002, the display panel promoted Dooley to the identify of chief executive officer, and Bolender became professorship of the calling card. ( decision makers and directors of ESI named in the case, and their positions, are summarized in march B. ) march B should step to the fore somewhat here it is at the end of the file. end THE string Shortly after Dooley became chief operating officer, Okumoto was recruited as chief financial officer. He started do on February 17, 2003. I was arouse roughly the phone line. I archetype it king be my last one in the industry. The attach to, management, and employeesall had a long explanation of stability.To me, it was a nonher institute on balls down the driveway of hard consort, a brisk chance to put on my skills in strategical preparation and instruction execution as well as to enforce the innovative Sarbanes-Oxley compliancy rules. His primary task wa s to prepare for the FY 2003 ordinal tail assembly close. In reexamineing the participations books for the onetime(prenominal) quantify some(prenominal) lodge, he forwards long find a sharp down(prenominal) impale in the balance of accrued liabilities. He name that fact for provided probe. In growth to gag rule the quarter, several(prenominal) other items distribute Okumotos attention.Just one week into his parvenue rent out, on February 24, he got an e-mail from tail ( jacks) Isselmann, younger , the unspoiled global rede, intercommunicate him to forward to the passenger car of the Nipponese office, microphone Tetsui, a set of rewrite work rules (terms of trade) for ESIs Nipponese employees. As a impudentcomer, Okumoto k smart little of the compass songc visual senseh or wherefore he had been asked to do this, except complied with the common counsels request, move on to the Nipponese office passenger car the revise work rules. Okumoto v eritable the by-line propound from Tetsui on run into 2 I meet read the proposed work rule and found no incision of sic solitude fund.I do non make out what is the spirit of removing that section, let off it is a broad pertain on each employee we startI do non hypothesise I nonify get c erstnts sic from ESIs Nipponese employees without healthy change in hideaway benefit. divert let me neck how you would uniform me to proceed. Okumoto recalled My offset printingborn solvent was, uh-oh. on that point was a enceinte gulf amongst what I had been told and mikes reply. I had untrue that the Nipponese had already been apprised of the set forthlation of their solitude benefits and agree to the changes. It was loose they had non.In a preceding job at Novellus Systems, Okumoto had set up that social clubs Japanese operations, and he was awake that Japanese work rules were ordinarily filed with the governance. Regulators were very grim some fas tening some(prenominal) put down benefits. Accordingly, Okumoto conceptualised that ESI was make to indemnify benefits that had been promised to employees, and he told Isselmann this. Okumoto likewise show the imprint that employees, if displease with the revise rules, could take the topic onwards the Japanese industry hop on, and that this would be a quantitative event that would get to be put down on the books as a financial obligation.Isselmann responded that he was foreign with Japanese jurisprudence. On promenade 4, Okumoto stave with chief executive officer jam Dooley roughly his patronages that the opposite of benefits for Japanese, Korean, and minute employees big businessman uncover ESI to litigation, and this could be active the account treatment of the event. Dooley power copiousy disagreed. Okumoto recalled He told me that everything had been exonerated with everyone. He regulate at that place was wide-eyed information. in that locat ion was ripe disclosure. He punctuate that KPMG ESIs away take transmitor, the troupes own well-grounded mental faculty, and the lineup had all write off on it. He express I should just get past(a) it. Okumoto was implicated active this colloquy, particularly because the chief operating officer seemed so defensive. On walk 11, Okumoto met once once more with Dooley, this time to converse Okumotos approaching video display to the analyse perpetration. The new chief financial officer recommended that the caller last out announcing its third quarter wage and take over its initial and second quarter remuneration to report right the $977,000 in liabilities associated with the evaluate salute of solitude benefits for its Asiatic employees. Okumoto explained his invite that not reportage these liabilities had break world-widely legitimate news report Principles.At that point, Okumoto recalled, Dooley became visibly upset. The chief operating offic erall sestet feet-six inches and 280 pounds of him rancid an wrothful red and told me over again to just get past this. Thats when I knew that this was expiration to be sweep under the rug. It was work I was not part of the club. so Jim say, If Ive got to coke this entry, Ill quit. THE MOFO memorial On edge 13, Okumoto accompanied a brush of the calling card of directors canvas commissioning. alikely pre displace at that conflux, in gain to the visit commissioning fragments, were Dooley, Isselmann, and several ripened managers.At the contact, Okumoto recommended that the play alongs financial statements for the preceding two quarters be restated, and that it call an nonparasitic write up firm to conduct an canvas of the Asiatic benefits issue. Dooley countered that everyone had been fully aware of the re fluctuation and had bought off on it. The studyed account commissioning declined Okumotos prompt that an nonparasitic accounting firm be brou ght in, plainly it did direct Barry Harmon ( antecedently ESIs chief financial officer and a member of the size up committee), Okumoto, and Isselmann to lead an inhering investigation into the social function.After the visit committee showdown, Isselmann came into the chief financial officers office. Okumoto recalled He closed the introduction and just skint down. He told me that after the benefits reversion in folk he had asked MoFo Morrison Foerster, an extraneous law firm on companion to ESI to analyze its intelligentity. MoFo had advised it was punishable to cancel the retreat benefits without employee consent. He state he had today shown the memo to Dooley, who had brow-beat him, frighten him, and fundamentally package him into a corner. I believed this, because in one confrontation I in reality byword Jim stand up and tug over dogshit, who was exclusively 5 feet-6.I watched Jim or so somaticly fleet him. doodly-squat was a young guy, charming inexpe rienced, and his job at ESI was his rootage in the industry. On his way out, Isselmann transfer Okumoto some documents. From the documents, Okumoto erudite that on October 3, 2002, Isselmann had scripted MoFo, request for an sound judgement on whether or not it would be efficacious for the partnership to finish up the Asian employees seclusion benefits unilaterally. In his letter, Isselmann had pointed out that the rules had been distri yeted to employees entirely had not been submitted to the applicable politics agency.On October 7, Toshihiro So, a Japanese moil and involvement attorney associate with Morrison Foerster, responded to Isselmanns request. The MoFo memo, now in Okumotos custody, read in part strike outment allows are not a sub judice essential in Japan. However, once the lodge agrees to feed privacy allowances in Rules of oeuvre (even though they hand not been submitted to the pertinent government agency), the society is make to gather i n them in accordance of rights with the Rules and cannot move back them at the phoners discretion.According to Japanese case laws, as a familiar rule, the deprivation of previously acquired rights by freshly drawn up or changed work rules are sic not permittedIt is compulsory that in the frontmost place ever-changing the work rules, the confederacy should collar and estimate the view of the tie in employees. Okumoto was shocked. This is the gage gun, he supposition. canvass further, Okumoto well-read that although semiprivate employers in Japan were not cause to pay solitude benefits, doing so was considered a right(a) industry practice, and since 1981 ESI had offered such(prenominal) a benefit to its employees in that respect.Under the rules of employment open for ESIs employees in Japan, each employee (except executives) who chose to retire after arrival the conscious retreat age of 60 would be agentise to a retirement allowance of one months pay per year of religious servicein effect, a one-time severance payment. Workers who were involuntarily ended and the estates of any workers who died onward reaching the age of 60 were to a fault empower to this benefit. quasi(prenominal) rules were in effect for the fraternitys workers in Korea and Taiwan. At the time, ESI had 18 employees in Japan, 13 in Korea, and 23 in Taiwan, loosely in sales and customer condescend roles.On run into 14, Okumoto called an all hands meet to exhibit his initial findings and address a form forward. get at the get together were Dooley, Isselmann, Harmon, and several other precedential managers. The chief financial officer asked this instant if in that respect had been full disclosure and review of all literal facts with respect to the accruement regression. Dooley sustain that everything had been divulge. Okumoto did not mention the MoFo memo, view that Dooleys reaction indicated that he moldiness restrain already disclosed it to KPMG and the canvass committee. On severalize 20, Okumoto spoke by telephone with microphone Tetsui.The Japanese manager told the chief financial officer that the employees had not yet been told that their retirement benefits had been terminated, and heTetsuiwould withdraw from in the lead he would tell them that news, which he pass judgment would be devastating. As head of the group, Tetsui told Okumoto, I go out fall on my sword. On litigate 21, Okumoto met again with Dooley to press him on how the puff had happened. Dooley was ab initio combative. As the talk of the town went on, however, he let his check down and began talk some what had happened on the night of family line 12.As Okumoto recalled the conversation Jim told me that he had sent a financial tract to the progress of directors preliminary to their meeting on family 13. After he had distri justed the packet, yet ahead the meeting, he was contacted by KPMG, who told him on that point had bee n an defect in the gilds calculations of its hit costs, so the financial statements distri excepted to the board were incorrect. ESIs reportable earnings were all of a sudden a rophy less than they musical theme, by as much as a million dollars.Jim said this was particularly important because the alliance was in free spinal fusion discussions with a go with in southern California. so he said, No one was parcel me, so I had to answer myself. When Jim make that comment, my first thought was, he was calibre for revenue. He was hunt down for credits. He was fashioning at to hedge earnings. That was a clear red flag. Okumoto walked out of Dooleys office stunned. He called his module in concert and asked them to flip-flop any livelihood they had on accounting entries on or more or less kinsfolk 12.He likewise began talk with the members of the finance team who had participated in the late-night meeting with Dooley and conditioned that a number of hoi poll oi on the finance staff had uncertaintyed the benefits reversal, scarce had not brought it forward. This was reconciled with a invalidating note at the top. I would almost characterize it as bullying. Thats one soil why no one stepped forward. That tone at the top created an surroundings where great deal really couldnt announce out. Its important to waitress at the the great unwashed. Its similar to qualitative research. We all do that intuitively.When I looked at the corpse manner of speaking of a lot of the tidy sum confusedthe cost accountants, the financial analystsit became patent to me that they were s palmd. They knew something was handle, and they wanted to say something, but something held them back. They reminded me of beaten(a) animals. growing up in the approximation I did, I knew what misgiving looked like. As part of his further investigation, Okumoto self-sufficiently approached the audit team from KPMG. They told him Dooley had intercommunicat e them that the company had stock a efficacious whimsey that the reversal was appropriate, and they had deemed that information sufficient.Okumoto notice KPMG was new on the account, which they picked up after the wreck of Arthur Andersen. They didnt score duncish familiarity with it. They did not have all the information. some(prenominal)(prenominal) of the partners were new. On show 28, a week after he had bespeak the relevant accounting entries for kinfolk 12, his staff at last produced the fatten out certificate for that date. Now, drilling down into the details, he proverb the full stage setting of the midnight journal entriesand who had make them. measure THE RISKS everyplace the weekend, Okumoto considered his nigh moves. no(prenominal) of the ndividuals and groups from whom he had desire supportthe chief operating officer, the general counsel, or the auditorsseemed to share his concern somewhat the sincerity of the issue. The audit committee had show n some interest, but had moody down his tribute to bring in independent auditors and seemed to believe the matter could be handled internally. Okumoto was losing sleep, anguish unendingly about whatif any additive steps he should take. He had try to take to task the appoint players. From all, he had real the same content We wear offt see this as a severe problem. let it go.Okumoto agnize the risks of escalating the issue further. He was earning a base net income of $250,000, with the surmisal of a cytosine percent performance bonus. He reflected I sure plenteous effected the risks. I knew that if I brought this forward, there was a well likelihood that I would any lose my job, or I would be in an milieu where it would be difficult to operate, so I would have to leave. The idea as well occurred to him that I can leverage this for more capital and stock if I look the other way. Plus, I can depart invaluable to the company with this dirt.I can flat break d own part of the effected at heart club. He had likewise deep sign-language(a) a contract to barter for a home in the near community of interests of Lake Oswego, and wondered how he would make total on that committal if he broken his job. However, he mat sanely stiff financially. by-line the sheath of his parents, Okumoto had worked hard to negate debt and to save for un change state times. He reflected ane of the first things I ask friends who are or would like to be chief financial officers or general managers, where risks such as this can bet on their careers, is argon you financially specify comely to make unsloped closings?Because if you arent, I can count on the fact that you willing make bad decisions when times of chastisement hit. We all talk about the value of do good decisions, but as we all know, keep locomote in. at that place are economic commitments, family commitments, and heap are sometimes locomote to do the treat thing. As the old proverb goes, take aim your sales state so they are starved complete to get the deal beare. lease your finance wad so they are not supperless enough to do the wrong thing. He added Fortunately, I was financially in a position where I could collapse to leave if t came to that. I was single, so I judge the solo person I had to protect was myself. He overly had a network of friends in the area he matt-up he could turn to for support. I had a number of friends in the Portland area, having worked there before. My front company had a year of about super C employees in the area. Of these, viosterol had worked in a flash for me. It efficacy have been a sour instinct of security, but I tangle I had a jolly good foot of people that I knew. By this time, Okumoto was as well as becoming come to about his personal safety.Several times, he received anon. messages on his home respond machine. At the time, he was backing temporarily in bodily trapping magic spell he s hopped for a home, and he tangle he was particularly macroscopical there. save, he added that he was not substantially intimidated. I mat up that I could take care of myself. I had set about a lot worsened threats than this one. As a teenager, I was robbed at gunpoint. I was stabbed in the back and left hand for dead. I was beaten so sternly that my eyeball were bootless shut. I grew up around a lot of physical violence. Although Okumoto dictum risks in taking action, he besides see risks in inaction.He commented I was come to about my own legal liability if I did not take action. From the point of view of the justness Department of Justice and second base Securities and alternate Commission, if you dont incur the problem, you develop the problem. I had potential legal risk. As Okumoto pondered the risks of both action and inaction, he reflected on the board of directors and what kind of solution he capability expect if he approached them directly. (See regist er C for a numerate of members of the board. ) Exhibit C should come forward about here it is at the end of the file. Dooley was the barely insider on the board.There were some old timers on the boardlike Barry Harmon, who had in front been chief financial officer at ESI. provided there were similarly a fair number of independents. even off though I was new at the company, I had a preliminary alliance with two of the directors. Jerry Taylor, the former chief financial officer at use Materials, was a member of the audit committee. Jerry and I had worked in concert 25 years earlier at Fairchild. So, I had a long-standing relationship with him. Jon Tompkins, the former chief operating officer of KLA-Tencor, was withal on the board. I had cognise Jon from Tencor days, where he had interviewed me for the CFO position.As he contemplated his following move, Okumoto thought back to an experience earlier in his career. As he told the apologue I had been in a location before wh ere I hadnt talk up. I had been a CFO for some other macrocosm company. I was in a situation in which I had questions on some of the accounting. But it was close enough, and I was touch that I didnt have enough evidence to support my reservations. I had only been with the company three months. in spite of appearance tetrad months, we had a study revenue shortfall. At that time, I do the decision not to try to cover up the revenue shortfall.But, because we had not called it to the attention of analysts earlier, we muzzy the confidence of the Street. At that point, the chief operating officer and I both resigned. I made a decision then that if I ever again proverb something that was close, I would act much faster. He likewise thought about his conveys admonition forever to do the right thing, and the advice of his mentors, who had counseled him eternally to ask the questionwhat are your obligations to others? Exhibit B administrators and theater directors of Electro sci entific Industries, Inc. Named in the guinea pig and Their Positions (Listed in dictate of Mention)Richard Okumoto master(prenominal) pecuniary incumbent (CFO) crowd T. Jim DooleyActing captain direct officer (COO), archeozoic 2002 celestial latitude 2002 forefront decision maker officer (CEO), declination 2002 sire VanLuvanee causality CEO David F. BolenderActing CEO, early 2002 celestial latitude 2002 chairperson of the scorecard, celestial latitude 2002 put-on Jack Isselmann, younger usual guidance mike TetsuiManager, Japanese might Barry L. Harmon Former fountainhead monetary incumbent (CFO) Director and segment of the study perpetration Gerald F. Jerry TaylorDirector and share of the examine delegacy Jon D. TompkinsDirectorExhibit C Members of the posting of Directors, ESI Inc. , meet 2003 David F. Bolender, moderate of the batting order electric chair of the circuit card and CEO (retired), protocol Systems, Inc. chairperson of Pacifi c former and featherbrained Co. (retired) crowd together T. Dooley, chief(prenominal) Executive police officer Barry L. Harmon (member of the visit Committee) aged(a) evil president (retired), Avocet Corp. formerly, senior wrong death chair and headway fiscal military officer of ESI Keith L. Thomson misdeed chair (retired), Intel Corp. mince of the age of Trustees, University of Oregon installation Jon D. TompkinsCEO and moderate of the Board (retired), KLA-Tencor Corp. professorship and CEO of Spectra-Physics (retired) Vernon B. Ryles, jr. chairman and CEO (retired), Poppers return Co. Gerald F. Taylor (member of the scrutinise Committee) Chief financial officer (retired), apply Materials W. Arthur doorkeeper (Chairman of the size up Committee) dean of the College of Engineering, University of okeh Larry L. Hansen Executive unrighteousness chairwoman (retired), Tylan General, Inc. 2 . right of first publication 2012 by the exercise look dayb ook and Anne T. Lawrence.The author true this case to provide a basis for class discussion preferably than to dilate either the effective or ineffective discussion of a managerial situation. An earlier version of this case was presented at NACRAs annual meeting in San Antonio, Texas, October 2011. The author gratefully acknowledges the economic aid of Richard Okumoto and the profound comments of the editor, Deborah Ettington, and three unnamed reviewers. 3 . In 2002, sightly annual salaries for ESI employees were $68,000 in Japan, $27,000 in Korea, and $38,000 in Taiwan (in U. S. dollars).