The Cable Gamer doesn't normally chronicle issues of corporate governance, but when one of the companies involved is CNN, and when the overall market is in such trouble--well, both of those concerns attracted my attention to this story.
Indeed, at a time when corporate honesty--especially on Wall Street--is at such a premium, it's interesting, and disturbing, that Richard Parsons, chairman of the board of Time-Warner, has become such a well-connected fellow in Washington. He is now a member of the Transition Economic Advisory Board for President-elect Barack Obama.
So what, you ask. So this: Bloomberg News' Jonathan Weil did something brave when he wrote this stinging commentary on T-W wheeling and dealing, suggesting that T-W trickery could soon become part of national policy:
At Cable News Network, the motto for Anderson Cooper's show is ``Keeping Them Honest.''Campbell Brown's credo is ``No Bias. No Bull.'' Here's a story for them: Time Warner Inc.'s biased B.S. -- balance sheet, that is.
The company that used to broadcast the Goodwill Games is playing fast and loose again with a different kind of goodwill.
At $8.61 a share, Time Warner has a stock-market value of $30.9 billion. Yet according to the balance sheet Time Warner released last week, just one of its assets, goodwill, by itself was worth $42.5 billion as of Sept. 30. The company, which owns CNN, also showed $52.1 billion of other intangible assets, mostly cable-television franchise rights.
The market knows those asset values can't be right. Time Warner executives just won't admit it. Meanwhile, Time Warner said its net income last quarter was $1.1 billion, down slightly from a year earlier. The stock, down 48 percent this year, now trades for about half the company's official book value, or assets minus liabilities.
The pretend asset values should concern all Americans, not just Time Warner stakeholders. That's because Time Warner's chairman, Richard Parsons, has Barack Obama's ear as a member of the president-elect's Transition Economic Advisory Board.
It's a safe bet that Parsons, who also is a member of Citigroup Inc.'s board, won't be pushing Obama to champion straight talk in financial reporting. While slogans about truth- telling might help CNN's ratings, implementing those values at headquarters would hurt Time Warner's profits.
Weil is saying that T-W is claiming $42.5 billion in "good will." Good will is a legit accounting concept, but as Weil observes, it seems over-large relative to T-W's overall book value of $30 billion. In other words, T-W's good is a third larger than the value of all of CNN's programming assets, down to Anderson Cooper's emo, or John King's computer screens, or Larry King's suspenders.
As Weil makes plain, such dubious accounting tactics are not unique to T-W:
As of yesterday, there were 165 U.S. companies worth less than their goodwill that also traded at a discount to book value, according to data compiled by Bloomberg. Combined, these companies had $364.8 billion of goodwill on their books. That was $137.6 billion, or 61 percent, more than their market values. (The figures exclude companies with market capitalizations of $100 million or less.)
And Weil seems to skeptical of most,if not all, of them.
But the point, of course, is that unlike all those other companies, Parsons is wired into Washington. And now it seems that Parsons-type accounting is destined to infect Washington, and our national policy on accounting and finance issues.
Sell!
