B-school prof discusses scandal at Fannie Mae

David Sherman, an accounting professor at the College of Business Administration at Northeastern University, recently addressed the scandal at Fannie Mae.

“Regarding them [Fannie Mae] ‘righting themselves,’ I think that it is a bit of a love fest, in that things seemed so bad and it was not clear when the new numbers would arrive,” Prof. Sherman states. “They also did eliminate some of the board members that were not able to catch these problems or prevent them. The accounting problems do add up to big absolute numbers but smaller percentages than some would have liked. The net adjustment to equity was really only about $2billion, they reported restating retained earnings down by $6B and other equity went up $4B. The press underemphasizes the lattter because it is less dramatic and the net of $2B over several years is related to total assets of almost $1Trillion, so it is less than 1% per year.”

Prof. Sherman was an academic fellow at the SEC last year, and was integrally involved in the analysis that led to them requiring a restatement. He also was at the House hearings and some of the internal enforcement hearings, so he also understands the accounting issues and observed the many political elements that influenced the resolution.

Below is Prof. Sherman’s bio:

H. David Sherman, Professor, Accounting Group. A member of the CBA faculty since 1985, Professor Sherman also serves as an adjunct professor at the Tufts University School of Medicine. He has been on the faculty of the MIT Sloan School of Management, and was visiting faculty at INSEAD in Fontainebleau, France, in 1999. He teaches executive and MBA courses in accounting, control, and global financial statement analysis with a focus on high technology, medical technology, financial services, health care, and nonprofit organizations. His current research focuses on financial literacy issues for management and boards in global businesses, financial reporting issues, improving shareholder returns in bank mergers, and managing health care service cost and quality. He is an expert on developing and using financial and nonfinancial measures to evaluate and manage performance. Professor Sherman has served as director, manager, and consultant to financial, healthcare, and high technology businesses, including BankBoston; EMC; KLA; A.T.Kearney (BankAmerica); U.S. Bancorp; Fidelity Brokerage Services (FMR Corp.); CRESAP; U.S. Department of Defense - managed health care programs; Department Of Supply and Services - Government of Canada; and INSEAD. He has also served as a board member and manager of several new ventures from start-up to IPO and sale to acquiring private and public companies. Professor Sherman holds DBA and MBA degrees from Harvard Business School and an AB in economics from Brandeis University. A Certified Public Accountant, he has practiced with Coopers & Lybrand and served on an advisory task force of the Financial Accounting Standards Board (FASB). Professor Sherman has authored two monographs: Accountability - A Key Obligation of Management and Service Organization Productivity Management. His research has also appeared in such publications as Harvard Business Review, Sloan Management Review, Accounting Review, Bankers Magazine, Interfaces, Management Accounting, Journal of Banking and Finance, American Banker, and Medical Care. He is the co-author of Profits You Can Trust: Spotting and Surviving Accounting Landmines (2003).