Last Updated May 3, 2011 7:56 PM EDT
I decided that I would research this hypothesis in more detail.
There is a book about the collapse: Inside Arthur Andersen: Shifting Values, Unexpected Consequences written by four former Andersen Consulting Employees. Their argument is that the seeds of the destruction of Andersen Auditing were planted when the organisation started to do consulting work for its clients soon after its beginnings in 1913. The book spends much time of the differing and, to the authors, irreconcilable cultures of consulting and auditing. However as several of the Amazon reviews have remarked, if the problem is one of differing cultures in an organisation, why haven't the other major accounting firms also collapsed because they too all have consulting divisions? In addition Andersen Consulting (which became Accenture) physically separated from Andersen Auditing in 1988.
Why did Arthur Andersen really collapse? You need to look at the history of the company. Arthur Andersen was founded in December 1913. The next year Andersen himself was asked by the president of a local railroad, which was also its largest client, to approve a "peculiar" transaction. His reply was famous.
"Not enough money in the city of Chicago to make me do that."
Andersen was replaced as the auditor but the railroad company filed for bankruptcy months later. Thus the legend was born. Of all the major auditing firms Andersen was regarded as the most logical and principled. The motto of the company became "Think straight, talk straight".
AA was the first major auditing firm to introduce management consulting. This of course had great potential for conflict of interest as it would be difficult to qualify the audit of a major consulting client. To ensure probity Andersen introduced the Method everything was codified and done by the book (presentations, hiring staff, etc). Every office had a senior partner who acted as the methodology coordinator and keeper of the flame of integrity.
Subsequently because Myers-Briggs appeared so systematic it was embraced and positively ingrained into the corporate culture; everyone in AA knew the 16 MBTI types.
After the separation of Andersen Consulting, Andersen Auditing decided to re-enter the consulting market at the Small Business end (where small was defined as annual sales less than $175 million) to replace declining audit revenues. This again lead to conflicts and in 1989 John Edwards, then Worldwide Managing Partner, gave the Eye of the Tiger presentation in Dallas at the Annual Partners conference. He walked on to the stage with a tiger on leash and gave a speech that it was a jungle out there, and that every partner had to double his fee income. Naturally many partners, particularly the old guard, failed to achieve this goal and in 1992 there was the Great Partner Purge. Profit had replaced probity in the AA culture.
This is why Andersen collapsed. It was not just the introduction of profit culture (that had been there from the beginning) but because Andersen was now being led by a corporate psychopath who had slipped the MBTI net. Unfortunately Myers-Briggs is really a profiling technique which is based on how we make decisions. It does not tell you whether someone has Psychopathic, Narcissistic or Machiavellian traits. Edwards was obviously Hustler with low Normal, and he surrounded himself at the top with similar types. This is not the first time someone of this type has caused the destruction of a company and it will not be the last.