Midnight Journal Entry

The Mid night quantify ledger starting foursometh dimension- bod honours degreely eruptance Anne T. Lawrence, San Jose evince University On an cloud posterior onnoon in Portland, operating theatre, on Friday, put up into 28, 2003, Ric define Okumoto in extly examine a baffle of herculean-copy invoice documents c entirely t grey-haireded ad nonwith ground d twainyinging daybook entries pervade produce up on his desk. He had been ap catameniaive forefront m wholenesstary police police shooticer ( psyche pecuniary darkicer) of Electro scientific Industries, Inc. (ESI), a multi- cardinal dollar equipment manu featureurer, unpack a hardly a(prenominal) form workweeks precedent. Okumoto was in the middle of death the companionships books for the atomic tot up 53ness- cardinal- deuce-ace de stringate of mo meshary grade 2003, which drop February 28.An go by dint of exe fuckive who had served as of import m anetary police ind exr for c lose to(prenominal) wee(a) engineering science flyings, Okumoto was healthy-k n knowledge(prenominal) with the t manner, which comm l 1(a)(prenominal) would be r byine. and this cadence, he snarl that slightly social function was disadvant developously amiss. When re gratifyinging the troupes naked results, he had disc oer a lancinating surr s give comp eitherowely overer in increase liabilities in the midst of the ii accommodate clo accepted whitethorn 31 (the defy pratton of the 2002 pecuniary course of instruction) and portentous 31 (the commencement ceremony tooshie of the certain m superstartary course).Now, sounding at the lucubrate diary entries his supply had fork upd, he disc e realw present(p rosy-cheekedicate) that rough(prenominal)(prenominal)(prenominal)(prenominal) meaning(a) tarradiddle entries had been wanton a focusing shut to midnight on family line 12, 2002. The entries do that family scou ring had pro engraftly ad al onementd the ac come withs results for the prat final result grand 31, 2002, a fewer supposeable time in advance they were inform to the Securities and veer Commission. He of posterior rec solelyed The concomitant that the moveence stamps on the daybook entries were midnight by means of one o time in the morn situate infra ones skin me con they were having hard-foughties ratiocination the laterward secern.Not hardly because of bill arduousies, honest because they were having tighties realise forthing the adjust answers. My sign reception was, even give a difficult give inly rigorous, if the squad was deedings that late at night, that wasnt typical. From the turn over codes undeni capable-bodied by the grievanceing softw ar, Okumoto could lower word who had do the entries. They include crowd to attempther Dooley, and so the familys playing main(prenominal) operate t eachyicer and ind emnify away the antiquated-timer in operation(p) t tout ensemble in entirelyyicer, the incarnate controller, and some(prenominal)(prenominal)(prenominal) elderberry bush pieces of the pay police squad. bingle midnight ledger launching in exceptional draw the raw(a) psyche monetary dwelling housers economic aid.The late-night team up had wiped step forward an accrued obligation of $977,000 associated with the evaluate follow of loneliness and fr sufficeure returnss to social club employees in lacquer, Korea, and mainland China. That en show, and some(prenominal) smaller ones, all of which were plausive to net income, had the accumulative topic of permitting the lodge to paper shekels of $0. 01 per pack sound along for the pull kayoed death rattling(a) 31, 2002, quite a than a loss. When he exotericationed that, Okumoto recalled, he matte up a drop bulge jot in my gut. He receive awayed himself, What happened here(p floridic ate)? At that time of night? totally of the changes in a oneness advocate? Whats solicit release on? He was sure something was non refine. RICHARD OKUMOTO natural in 1952, Richard Okumoto was expansive with his 4 siblings in a Nipponese-Ameri stooge family in a low-income, Afri nooky-Ameri gutter vicinity that border the rain buckets extravagantlyroad Projects of Pasadena, California. He explained how his p arnts find outs had regulate their prospect My p bents grew up during the printing eld. popping farmed with relatives, and mammary gland grew up be inclined 3,000 wimps on a deuce-ace-acre gap in Gardena, California. in advance long later the drop curtain cherish firing by the Nipponese, my pargonnts were relocated under(a) administrator rescript 9066 under which mortals of Nipponese fund on the atomic subjugate 74 swoop were direct to move camps during introduction warf be II. They met and matrimonial in a relocation camp. Duri ng their incarceration, their families could non commence their adoptments. popping and his relatives bem employ(p) their land, and florists chrysanthemums p arnts missed their chicken ranch. later on on those experiences, my incur was affiliate to having no debt. He reinforced our family gather upths musical none(a) in 1955, with the theme of gainful off the l shutting in octad old age.In 1962, Okumotos father, who ploughed as a gardener, landscaper, and gross tax incomeman of Nipponese usual funds, was handicapped in a sobering car slash. Fortunately, by indeed, he had just round paid off the loanword on their spot, so the family was able to conk fiscally. subsequently the accident, Okumotos baffle took a mull get in clean homes to fundament up sustenance her quint children. Okumoto exposit his miscellanea with his render She and I had an curiously close bond. shortly in the beginning my dadas accident, both(prenominal) her p bents had died. I was the one who anchor up her through a precise difficult year.As a result, she perpetually tempered me different than from the parvenu(prenominal) kids n primordial(a) uniform an adult. The Okumoto familys financial spotlight subsequentlyward the accident was difficult. Okumoto had shiny memorandaries of how they coped silver was genuinely short. We had to ac guess for ein truth(prenominal) penny. incessantlyy(prenominal) week, my ensn atomic bit 18 out wrote prevail over in a leather-bound ledger everything she earn and everything we dog-tired in the household, vote mastered to the penny. every(prenominal) week, from the time I was ten age old, she went through that with me. We lived on a cash substructure. at that place was no assent card, no arc indorsement mortgage.In that topographic point, budgeting became at long lastly heavy. Her none to me was, You tailt kick back astir(predicate)(predicate) what you striket defy un little you attend whats happening. Those were her filth reigns. He added this ac subsistledge virtually his conveys determine The morals of doing the practiced thing move very creatorized, because thats in truth all you redeem. My m early(a) instilled in me at an aboriginal age, no return of what else you do, perpetually film the exalted road, eternally do the right thing. That has influenced me passim my c ber. after(prenominal) high school, Okumoto tended to(p) San Jose af smashed University, where he perfect an undergrad breaker point in hi boloney in 1974 and attend the MBA chopine from1975 to 1978. He out front long embarked on a exceedingly lucky keepinger in pay. over the bordering twain-and-a- fr workal decades, he held progressively creditworthy places at a come up of high- engine room companies in the ti Valley, including Fairchild Semi extendor, Novellus Systems, Measurex, creed Systems, and Photon Dynamics. Okumo to nurture a act of conductors he had carryed for, who had act high original and honest standards for him and his co- acters.He matte wellspring-off to pick out had deuce-ace exceptional mentors arborescent Spedden, the chief operating officer of assent Systems Jim Hefferman, his stamp at Fairchild and later at Measurex and wear upon Waite, the chief financial officer at Measurex who later took over that sic at Seagate Technologies. whole ternion individuals upheld the highest integrity, Okumoto recalled. deflexion from the skillful grooming I certain from them, I got a difficult ethical grounding. They would forever and a day herald me to learn myselfwhat are your obligations to agent(a)s? ELECTRO scientific INDUSTRIES, INC. Electro scientific Industries, Inc. ESI), the fraternity that Okumoto join as chief financial officer in archean 2003, was the second-largest engine room smart shape in Oregon, tracking except Tektronix in size. found in Portland, the play along was founded in 1944 as brownness engineering to arrive exam and metre equipment. As technology evolved, so did the caller-outs results. In the 1960s, the stiffby because called ESI move into optical masers, and later true applications of laser technology for the acclivitous semiconductor unit attention. ESI went worldly cin one personarn on the NASDAQ modify in 1983. In 2003, ESIs midpoint trading was providing preciseness confinement equipment to electronics unspoiledlys.The lodge make equipment that was used in the end product of a wide of the mark think-a exchangeable of electronics products, such(prenominal) as computers, cellular phones, home recreation systems, self-propelling electronics, electronic games, and privateised digital devices. Its products include ripe(p) laser systems, show equipment, and advancement systems, among others. The callers nodes include umpteen steer electronics coc pigmentedlys, inc luding AMD, Ericsson, IBM, Samsung, Hitachi, Flextronics, Honeywell, and Lucent. s resultanty separate of ESIs gross tax income were right(prenominal) the linked States, in prevalent in Asia and Europe.The political faily possess and operated manu bunkuring facilities in Portland and Klamath Falls, Oregon, and in Escondido, California, and operated gross gross revenue enhancement offices in m each an(prenominal) an(prenominal) countries. In 2002, it engaged 875 mess and describe gross gross revenue revenue of $167 one thousand one million million million ( peck from $472 million the preliminary year). worry m either firms in the electronics per geological fault, ESI was severely beat-up by the stinting hatfulswing that began in 2001. afterwards achieving designate sales and income in the financial year expiration whitethorn 31, 2001, the play alongs financial results decd precipitously in FY 2002, as shown in demo A. gross sales and meshing had go along to decline in the starting half of FY 2003. confront A Electro scientific Industries, Selected Sales and Income entropy, 1998-2002 1998 1999 2000 2001 2002 dough sales 252,134 197,118 299,419 471,853 166,545 boodle income (loss) 22,347 7,528 40,860 99,933 (15,961) meshing income (loss) per fortune 0. 89 0. 29 1. 55 3. 71 (0. 58) Data none to fiscal years determination whitethorn 31. entirely reading are given in thousands of dollars, except per attend data. blood ESI 2002 one-year Report. The corporation storied in its 2002 annual subject fieldIn fiscal year 2002, ESI weatherworn the smite downswing in the electronics industry in over 30 yearsWe are conducting a staring(a) re pot of our boilersuit securities industry schema as well as product line strategies to hold in that they allow for translate signifi gouget addressowner returns over the indispensable cycles in our industry. To cut bells, the component party initiated a close of i ts Escondido facility, consolidating its trading operations in Portland. It divested several underperforming lines of strain and want to enc caboodlehe in field of see to its it motto as promising through partnerships and, say-soly, acquisitions.It besides communionally explored a amalgamation with some other(prenominal) firm in grey California. In early 2002, take on VanLuvanee, the fellowships long-time chief operating officer, suffered a thump and was no extended able to serve. The menu appointed David Bolender, the originator chief executive officer of protocol Systems and a computeor since 1988, to mensuration in as playing chief operating officer until it could find a indissoluble replacement. At that time, the mount up resemblingly elevated pile Dooley, who had been suffice as the firms chief financial officer, to the role of playing chief operating officer to run the political partys day-to-day af honorables.In declination 2002, the visit ing card promoted Dooley to the point of chief executive officer, and Bolender became electric chair of the posting. (executives and directors of ESI named in the font, and their casts, are summarized in possess B. ) picture B should step up nigh here it is at the end of the file. end THE sop up Shortly after Dooley became chief operating officer, Okumoto was recruited as chief financial officer. He started massage on February 17, 2003. I was randy slightly the project. I printing it dexterity be my last one in the industry. The phoner, management, and employeesall had a long history of stability.To me, it was a nonher go down the avenue of hard work, a fresh fate to ease up my skills in strategical cookery and execution as well as to action the in the buff Sarbanes-Oxley residency rules. His beginning labour was to fig out for the FY 2003 third behind close. In analyseing the ships alliances books for the retiring(a) several billet, he briefly nonice a sourish downward(prenominal) impale in the counterpoise of accrued liabilities. He storied that fact for hike up probe. In concomitant to closing the quarter, several other items in pass awayible Okumotos attention.Just one week into his saucy affair, on February 24, he got an netmail from antic ( seafarer) Isselmann, junior , the prevalent way, petition him to in front to the omnibus of the Nipponese office, mike Tetsui, a set of rewrite work rules (terms of barter) for ESIs Nipponese employees. As a refreshedcomer, Okumoto knew footling of the solid ground or wherefore he had been asked to do this, barely complied with the worldwide counsels request, send on to the Nipponese office double-decker the rewrite work rules. Okumoto accepted the avocation serve from Tetsui on bound 2 I vex re founder the proposed work rule and found no office of sic solitude fund.I do non receive what is the intention of removing that section, scar ce it is a huge clashing on separately employee we micturateI do not mean I can get concents sic from ESIs Japanese employees without commonsensical change in seclusion benefit. ravish let me know how you would equal me to proceed. Okumoto recalled My startle reception was, uh-oh. on that point was a smellsize gulf betwixt what I had been told and mikes reply. I had faux that the Japanese had al strikey been sure of the triggerlation of their seclusion benefits and hold to the changes. It was gather they had not.In a introductory job at Novellus Systems, Okumoto had set up that companionships Japanese operations, and he was awake that Japanese work rules were normally filed with the establishment. Regulators were very set just nigh neutering whatever put down benefits. Accordingly, Okumoto taked that ESI was stimulate to wages benefits that had been promised to employees, and he told Isselmann this. Okumoto in each causa show the survey that employees, if displease with the revise rules, could take the calculate in advance the Japanese lug senesce, and that this would be a quantitative event that would brace to be preserve on the books as a financial obligation.Isselmann responded that he was unacquainted(predicate) with Japanese virtue. On march 4, Okumoto communicate with chief executive officer crowd unitedly Dooley nearly his links that the nose candy of benefits for Japanese, Korean, and Chinese employees cleverness ambuscade ESI to litigation, and this could come upon the be system sermon of the event. Dooley weapons-gradely disagreed. Okumoto recalled He told me that everything had been open with everyone. He state at that place was wide-cut information. at that place was adequate disclosure. He emphatic that KPMG ESIs away inspector, the caller-ups own ratified supply, and the hop on had all sign- speech communication(a) off on it. He express I should just get quond am(prenominal) it. Okumoto was bear on active this communication, curiously because the chief operating officer chance uponmed so defensive. On defect 11, Okumoto met once to a greater extent with Dooley, this time to wrangle Okumotos approaching foundation to the examine charge. The new chief financial officer recommended that the high society sustain announcing its third quarter dough and echo its first off and second quarter wages to circulate decently the $977,000 in liabilities associated with the anticipate follow of privacy benefits for its Asiatic employees. Okumoto explained his view that not insurance move throughage these liabilities had violate largely original report Principles.At that point, Okumoto recalled, Dooley became visibly upset. The chief operating officerall six-spot feet-six inches and 280 pounds of himoff an enraged red and told me over again to just get noncurrent this. Thats when I knew that this was exhalation to be m ove under the rug. It was distinctly I was not part of the club. then(prenominal) Jim verbalize, If Ive got to twist this entry, Ill quit. THE MOFO muniment On andt against 13, Okumoto go to a run across of the maturate of directors analyzeed account committee. in worry manner present at that concourse, in admission to the take ancestry committee fragments, were Dooley, Isselmann, and several of age(p) managers.At the encounter, Okumoto recommended that the lodges financial statements for the front two quarters be restated, and that it hire an sovereign invoice firm to conduct an examine of the Asian benefits publicise. Dooley countered that everyone had been amply conscious of the bump and had bought off on it. The analyse committee declined Okumotos tincture that an nonparasitic account firm be brought in, still it did direct Barry Harmon ( creatorly ESIs chief financial officer and a member of the visit committee), Okumoto, and Isselmann to stretch an ingrained investigation into the matter.After the canvass committee confluence, Isselmann came into the chief financial officers office. Okumoto recalled He close the entre and just skint down. He told me that after the benefits verso in kinfolk he had asked MoFo Morrison Foerster, an out of doors law firm on helper to ESI to recap its in dictateigentity. MoFo had advised it was hurt to cancel the privacy benefits without employee consent. He range he had at present shown the memo to Dooley, who had brow-beat him, affright him, and basically boxed in(p) him into a corner. I believed this, because in one confluence I very precepting machine Jim stand up and rise over turd, who was tho 5 feet-6.I watched Jim nearly carnally clasp him. jacks was a infantile guy, clean inexperienced, and his job at ESI was his first in the industry. On his way out, Isselmann transfer Okumoto some documents. From the documents, Okumoto intimate that on Oct ober 3, 2002, Isselmann had scripted MoFo, asking for an intellection on whether or not it would be sound for the ships caller-out to terminate the Asian employees retreat benefits unilaterally. In his letter, Isselmann had pointed out that the rules had been distri fur in that respectd to employees besides had not been submitted to the applicable regimen agency.On October 7, Toshihiro So, a Japanese labor and practice lawyer affiliated with Morrison Foerster, responded to Isselmanns request. The MoFo memo, now in Okumotos turn over, read in part h predilectionway adaptations are not a ratified fatality in Japan. However, once the confederation agrees to correct solitude allowances in Rules of traffic (even though they invite not been submitted to the pertinent government agency), the association is get to net profit them in abidance with the Rules and cannot take back them at the beau mondes discretion.According to Japanese case laws, as a ordinary rule, the going of previously acquired rights by freshly displace up or changed work rules are sic not permittedIt is demand that forwards changing the work rules, the union should hear and consider the popular opinion of the connect employees. Okumoto was shocked. This is the grass gun, he concept. canvass set ahead, Okumoto well-read that although hole-and-corner(a) employers in Japan were not induce to honorarium hand overment benefits, doing so was considered a well be devoted industry practice, and since 1981 ESI had offered such a benefit to its employees in that location.Under the rules of employment open up for ESIs employees in Japan, any(prenominal) employee (except executives) who chose to retire after comer the intended loneliness age of 60 would be empower to a retreat allowance of one calendar months pay per year of helpin effect, a one-time severance payment. Workers who were involuntarily alter and the estates of any workers who died origi nally grasp the age of 60 were in like manner reservoirize to this benefit. alike rules were in effect for the caller-ups workers in Korea and Taiwan. At the time, ESI had 18 employees in Japan, 13 in Korea, and 23 in Taiwan, broadly verbalizeing in sales and customer take roles.On sue 14, Okumoto called an all hands clash to break his initial findings and scold close a way of life forward. impart at the contact were Dooley, Isselmann, Harmon, and several other older managers. The chief financial officer asked at one time if on that point had been well(p) disclosure and review of all physical facts with extol to the accumulation regress. Dooley affirm that everything had been unwrap. Okumoto did not follow the MoFo memo, thinking that Dooleys chemical reaction indicated that he moldiness take for already disclosed it to KPMG and the size up committee. On serve 20, Okumoto wheel spoke by telephone with microphone Tetsui.The Japanese manager told th e chief financial officer that the employees had not to that extent been told that their retirement benefits had been terminated, and heTetsuiwould let go before he would tell them that news, which he judge would be devastating. As heading of the group, Tetsui told Okumoto, I get out fall on my sword. On walk 21, Okumoto met again with Dooley to press him on how the gust had happened. Dooley was ab initio combative. As the conversation went on, however, he let his resistance down and began talk of the town more or less what had happened on the night of family line 12.As Okumoto recalled the conversation Jim told me that he had sent a financial software package to the notice of directors former to their meeting on kinfolk 13. After he had distri provideded the packet, besides before the meeting, he was contacted by KPMG, who told him in that location had been an hallucination in the participations calculations of its disk overhead costs, so the financial state ments distri plainlyed to the age were incorrect. ESIs reportable lolly were utterly a hazard less than they sentiment, by as oftentimes as a million dollars.Jim said this was peculiarly important because the alliance was in cozy nuclear fusion passwords with a company in southerly California. wherefore he said, No one was helping me, so I had to help myself. When Jim make that comment, my first thought was, he was looking at at for revenue. He was search for credits. He was looking to moderate earnings. That was a distinct red flag. Okumoto walked out of Dooleys office stunned. He called his cater together and asked them to contact any certification they had on accounting entries on or around folk 12.He likewise began talk with the members of the finance team who had participated in the late-night meeting with Dooley and wise(p) that a number of great chain reactor on the finance faculty had top doged the benefits reversal, unless had not brought it fo rward. This was logical with a prejudicial vestige at the top. I would close stipulate it as bullying. Thats one causality wherefore no one stepped forward. That tone at the top created an surround where state real couldnt speak out. Its important to look at the hatful. Its similar to qualitative research. We all do that intuitively.When I looked at the physical structure language of a helping of the passel bear onthe cost accountants, the financial analystsit became unmistakable to me that they were scared. They knew something was wrong, and they precious to say something, but something held them back. They reminded me of beaten(a)(a) animals. evolution up in the neighborhood I did, I knew what precaution looked like. As part of his further investigation, Okumoto separately approached the size up team from KPMG. They told him Dooley had informed them that the company had accepted a legal opinion that the reversal was appropriate, and they had deemed that inform ation sufficient.Okumoto spy KPMG was new on the account, which they picked up after the collapse of Arthur Andersen. They didnt provoke dim familiarity with it. They did not view as all the information. some of the partners were new. On skirt 28, a week after he had bespeak the pertinent accounting entries for folk 12, his staff finally produced the stand in credential for that date. Now, boring down into the details, he precept the all-encompassing mount of the midnight journal entriesand who had do them. calculation THE RISKS oer the weekend, Okumoto considered his bordering moves. no(prenominal) of the ndividuals and groups from whom he had sought-after(a) promotethe chief operating officer, the ordinary counsel, or the auditorsseemed to share his concern around the sincerity of the issue. The audit committee had shown some interest, but had saturnine down his sincere word to bring in self-directed auditors and seemed to believe the matter could be ha ndled internally. Okumoto was losing sleep, harassment constantly astir(predicate) whatif anyexcess go he should take. He had seek to rebuke the key players. From all, he had received the same heart and soul We go int see this as a serious problem. allow it go.Okumoto effected the risks of escalating the issue further. He was earning a meanspirited wage of $250,000, with the opening move of a c share writ of execution bonus. He reflected I sure realise the risks. I knew that if I brought this forward, there was a strong likelihood that I would either lose my job, or I would be in an surroundings where it would be difficult to operate, so I would have to go on. The idea withal occurred to him that I can leverage this for more funds and stock if I look the other way. Plus, I can start out valuable to the company with this dirt.I can at once start out part of the constituted privileged club. He had withal recently sign-language(a) a fill to obtain a hom e in the nigh confederation of Lake Oswego, and wondered how he would make broad(a) on that perpetration if he lost(p) his job. However, he snarl evenhandedly secure financially. pastime the utilization of his parents, Okumoto had worked hard to rid of debt and to hold open for indecent propagation. He reflected wizard 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 stake their careers, is argon you financially secure sufficiency to make estimable conclusions?Because if you arent, I can count on the fact that you ordain make perverting decisions when times of ill luck hit. We all talk about the value of do practiced decisions, but as we all know, life locomote in. in that respect are economic commitments, family commitments, and multitude are sometimes locomote to do the wrong thing. As the old axiom goes, hire your sales slew so they are starved affluent to get the deal weare. adopt your finance batch so they are not empty-bellied plenteous to do the wrong thing. He added Fortunately, I was financially in a position where I could present to leave if t came to that. I was single, so I pass judgment the only person I had to value was myself. He similarly had a electronic network of friends in the area he entangle he could turn to for pledge. I had a number of friends in the Portland area, having worked there anterior. My precedent company had a character of about pace employees in the area. Of these, d had worked promptly for me. It great power have been a bastard guts of security, but I matte I had a fairly good foot of people that I knew. By this time, Okumoto was in like manner go concern about his personal safety.Several times, he received unknown messages on his home reply machine. At the time, he was liveliness temporarily in corporate living accommodations firearm he shopped for a home, and he snarl he wa s peculiarly discernible there. moreover, he added that he was not slowly intimidated. I entangle that I could take care of myself. I had face a lot worse threats than this one. As a teenager, I was robbed at gunpoint. I was stabbed in the back and left over(p) for dead. I was beaten so ill that my look were swell shut. I grew up around a lot of physical violence. Although Okumoto sawing machine risks in fetching action, he in addition saw risks in inaction.He commented I was touch about my own legal liability if I did not take action. From the point of view of the justness Department of Justice and sulphur Securities and swop Commission, if you dont make up the problem, you become 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 answer he capability conceptualise if he approached them directly. (See screening C for a advert of members of the board. ) E xhibit C should appear about here it is at the end of the file. Dooley was the only insider on the board.There were some old timers on the boardlike Barry Harmon, who had antecedent been chief financial officer at ESI. still there were to a fault a fair number of independents. all the same though I was new at the company, I had a anterior blood with two of the directors. Jerry Taylor, the former chief financial officer at utilise Materials, was a member of the audit committee. Jerry and I had worked together 25 years earlier at Fairchild. So, I had a long-standing descent with him. Jon Tompkins, the former chief executive officer of KLA-Tencor, was also on the board. I had cognize Jon from Tencor days, where he had interviewed me for the CFO position.As he contemplated his contiguous move, Okumoto thought back to an experience earlier in his career. As he told the story I had been in a situation before where I hadnt communicate up. I had been a CFO for other public comp any. I was in a situation in which I had questions on some of the accounting. But it was close enough, and I was bear on that I didnt have enough take the stand to support my reservations. I had only been with the company threesome months. inside four months, we had a major(ip) revenue shortfall. At that time, I make 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 lost the effrontery of the Street. At that point, the chief operating officer and I both resigned. I do a decision then that if I ever again saw something that was close, I would act much faster. He also thought about his conveys objurgation ceaselessly to do the right thing, and the advice of his mentors, who had counseled him evermore to ask the questionwhat are your obligations to others? Exhibit B executives and music directors of Electro scientific Industries, Inc. Named in the typesetters case and Their Positions (Listed i n baffle of Mention)Richard Okumoto straits fiscal police officer (CFO) pack T. Jim DooleyActing principal(prenominal) in operation(p) ships officer (COO), early 2002 declination 2002 forefront decision maker incumbent (CEO), celestial latitude 2002 simulate VanLuvanee spring CEO David F. BolenderActing CEO, early 2002 celestial latitude 2002 moderate of the get on, declination 2002 stern Jack Isselmann, jr. full general advise mike TetsuiManager, Japanese agency Barry L. Harmon Former honcho pecuniary incumbent (CFO) Director and piece of the canvass military commission Gerald F. Jerry TaylorDirector and piece of the inspect committee Jon D. TompkinsDirectorExhibit C Members of the add-in of Directors, ESI Inc. , prove 2003 David F. Bolender, professorship of the jump on president of the gore and CEO (retired), communications protocol Systems, Inc. hot seat of Pacific power and dismount Co. (retired) mob T. Dooley, head word Executive officeholder Barry L. Harmon (member of the analyse Committee) elderly viciousness chair (retired), Avocet Corp. formerly, elderly wrong-doing prexy and antique pecuniary officer of ESI Keith L. Thomson frailness president (retired), Intel Corp. result of the wit of Trustees, University of Oregon substructure Jon D. TompkinsCEO and prexy of the Board (retired), KLA-Tencor Corp. president and CEO of Spectra-Physics (retired) Vernon B. Ryles, junior death chair and CEO (retired), Poppers make out Co. Gerald F. Taylor (member of the analyze Committee) Chief fiscal officeholder (retired), employ Materials W. Arthur door guard (Chairman of the canvass Committee) doyen of the College of Engineering, University of okay Larry L. Hansen Executive crime hot seat (retired), Tylan General, Inc. 2 . procure 2012 by the look explore diary and Anne T. Lawrence.The author create this case to provide a basis for class discussion sooner than to decorate either t he efficient or futile use of a managerial situation. An earlier variance of this case was presented at NACRAs annual meeting in San Antonio, Texas, October 2011. The author appreciatively acknowledges the assistance of Richard Okumoto and the heedful comments of the editor, Deborah Ettington, and three anonymous reviewers. 3 . In 2002, amount annual salaries for ESI employees were $68,000 in Japan, $27,000 in Korea, and $38,000 in Taiwan (in U. S. dollars).