According to Ms Murphy, the accounting methodology had nothing to do with [br] X

As a survivor of trials by fire, Xerox Corp. Chief Executive Anne M. Mulcahy has few rivals. She became president of Xerox in May, 2000 -- a month before the SEC, that’s Securities & Exchange Commission, launched its investigation of the copier maker’s financials-- and stepped up to the top job last August.
   On a recent afternoon, Mulcahy had a talk with Business Week Associate Editor Robert Byrnes.
   Xerox has been hit in the press and in the stock market because the restatement of revenue was about double what had been expected. Is that reaction fair?
   This accounting issue tends to be somewhat miscast.  That was all about an accounting methodology that had to do with the timing of revenue, not the authenticity of revenue.
   What have you changed at Xerox in light of the question raised about the company’s accounting and management over the past few years?
   Historically, we were trying to run the business by product, by industry, by segment and by geography. And when you are into a multidimensional approach, it tends to get a little cloudy as to who is actually responsible. So we did clean up the organizational structure so that everybody sitting at the table has a clear responsibility.
     I think that has helped everyone deliver on very concrete, deliverable objectives. And then we have held people accountable, and that is critically important when you are in the midst of a turnaround where you can’t afford to waste a lot of time.
     Some observers have been questioning whether, as a Xerox insider, you are the right person to turn around the company. Is it hard to make the tough calls, to tell a colleague you have known for years that they are just not measuring up?
     I think that in the past two years I have probably made tougher decisions than most CEOs. We have had to shut down businesses. I don’t think those are easy choices. I think they are really tough to do, and I don’t think I want them to get easy.
     What experience have you drawn on the most in the past two years?
     Customer focus has to be at the top of its list. Most of my career has been in sales. I spend 50% or more of my time with customers and employees, and I can’t wait for it to be more than 50%.
     The SEC ordered you, as part of the settlement, to reevaluate your internal financial controls. What are you doing in that regard?
     That’s not a new project. Over the last few years there have been a lot of changes. We outsourced internal audit to Ernst & Young to bring in more skills. I do an internal controls review at every operations review I do. We have also done things like a hotline for any kind of issue that popped, and that gets reviewed regularly and also gets reviewed with our audit committee. We do training for our management team on all sorts of ethics and compliance issues.
     Xerox has been criticized for having a culture of denial. The SEC criticized the company for a lack of cooperation. Has that culture changed?
     When a company goes through a crisis -- and we have -- it’s an opportunity to face problems squarely and address them. We must spend all our time understanding what’s not working well, what our customers want to see from us that they’re not getting from us, and creating an environment where we can get in front of problems and not wait for them to become glaring that we have a crisis on our hands.
     Why -- in the summer of 2001, when you became CEO -- didn’t you immediately settle with the SEC?
     At that point in time, people were being called to court, and documents were still being subpoenaed. There were all sorts of investigations still going on. It wasn’t ready for a conclusion. We reversed the accounting. I don’t think it’s terribly productive for us at this point to spend a lot of time dissecting the past defending the past or, quite frank]y, critiquing the past.