Accounting, tax and consulting firm Deloitte's retired chief executive James Copeland Jr. takes issue with much in the corporate management and accounting world today. Take "best practices," for example. Much of this is being pushed as a panacea "without a shred of evidence that they are in fact 'best practices,'" Copeland told attendees at Deloitte's annual oil and gas conference in Houston recently. "...It drives me crazy to hear people force these practices upon everyone" without documentation that these are, in fact, remedies. As for financial reporting, investors and regulators today are expecting perfection. "It is impossible to provide. Financial statements are inherently imprecise." Assuming statements are perfect results in poor financial decisions. Investors shouldn't rely on these reports alone in making decisions. Inaccuracies easily result from forecasts in financial statements, such as pension-fund and health-care costs, for example, that are plausible at the time they are made but easily can become wrong. "So, what then is the right or accurate [assessment] of this company's [future]?...Would you really buy or sell shares of Shell Oil Co. on the basis of [its proven reserves]?" What about advancements in technology and changes in future energy prices? These are also important. Perfect financial statements are an "illusion," he said. Instead, the statements are "rough estimates of operating results." Another issue is what is "material" to investors, and whether the information therefore should be reported. "What is important to investors?...I would ask you how you might know that before the fact." Fair-value reporting is another matter, "to make matters worse." With it, "we will guarantee a continuation of investor disillusionment...as [reports] fail to live up to accuracy." Judging enterprise risk is also a difficult measure. "The real challenge is recognizing all the risk we face." The oil and gas industry is confronted with considerable risks-commodity prices, cost of capital, geographical, political, technological and more. "This is not an industry that will ever allow you to get comfortable with risk." On the subject of executive compensation, Copeland believes perks and employment contracts have become bad words. "Kill all the trivial perks: they are 1% of the [compensation] value and 90% of the headaches in executive compensation." It seems that "good, old cash is making a comeback." And, employment contracts are going away; they've become "radioactive," he said. Copeland, who has retired to his native Georgia, sits on three boards currently: Coca-Cola, Equifax and ConocoPhillips. All three boards experienced succession in one year. Management teams should work at development of future leadership, Copeland believes. Directors should be informed of all issues affecting senior management-even as far as having access to hospital records. As for director compensation, "everyone should have some skin in the game. If they are representing investors, they should be an investor." He is personally invested in each company of which he is a director. He wonders about the value of paying the audit committee chairman more than other audit committee members, such as $5,000 a year. The chairman is criminally liable for errors but what is a dollar amount that can compensate a director for that risk? "That extra $5,000 will buy you time with your lawyer," Copeland quipped. "...Does it compensate you for that risk? Yes, if nothing goes wrong." Industry should consider the difficulty of discovering collusive fraud. Extensive fraud is oftentimes brought to light as a result of stupidity on the huckster's part or by lucky auditors. What is the secret in the desk drawer? "Someone would have to tell us what that is other than rifling through desks at night." At the end of the day, management, directors and investors have to accept that there is some risk that cannot be eliminated, he said. As for Sarbanes-Oxley 404 compliance, "will the value outweigh the cost?...The jury is still out for me." One result is certain: "We've seen a diminution of last-quarter acquisitions." He joked that one may question whether this is a bad thing. The decline in fourth-quarter deals occurs while potential buyers are uncertain if they can close and bring their financial statements into compliance with 404 by year-end. But he is sure "we're going to see some benefit" from 404. It will depend on attitude. Compliance could be a "chance to significantly improve the internal operations of a company...Don't go too negative on [it] until we see the results." -Nissa Darbonne