Archive for the ‘Business Ethics’ Category

Through the Boardroom Lens

July 25th, 2014 | By

Directors attending the recent NACD Directorship 2020® event in Denver, Colorado engaged in group discussions about how boards can anticipate and effectively respond to environmental and competitive disruptors in the marketplace.

The half-day symposium at the Ritz-Carlton on July 15 was the second of three NACD Directorship 2020 events this year addressing seven disruptive forces and their implications for the boardroom. Summaries of the Denver speakers’ main points are available here.

Following each speaker, directors developed key takeaways for boards. Those takeaways fell within the parameters of the five elements of effective board leadership defined at last year’s NACD Directorship 2020 forums: strategic board leadership and processes, boardroom dynamics and culture, information and awareness, board composition, and goals and metrics.

Environmental Disruptor Takeaways

Strategic Board Leadership and Processes

  • Crisis response plan. Ensure that the company has a contingency plan in place that takes into account a potential environmental crisis. The plan should include how the company will respond to disruptions in the supply chain and production cycle, as well as to employees, customers, and investors.

Boardroom Dynamics and Culture

  • Culture. Boardroom culture should reflect that directors are ready and willing to be held accountable for environmental or climatological issues that arise for the company.

Information and Awareness

  • Engagement. The company should have an established communications plan to use in response to requests from shareholders and stakeholders regarding environmental matters.

Goals and Metrics

  • Green metrics. Becoming a sustainability-focused company requires adopting a long-term commitment to the cause. The board can communicate that commitment by establishing environment-related performance metrics that align with the corporate strategy.

Competitive Disruptor Takeaways

Strategic Board Leadership and Processes

  • Board agenda. Set aside time on the board agenda to discuss forward-looking strategy, so that the board’s focus is not limited to reviewing the company’s past performance.

Boardroom Dynamics and Culture

  • Culture. Fostering innovation requires risk. The culture throughout the organization should support failure and risk taking within the company’s tolerances. Also invite outside experts—or “white space” teams—to help trigger new, innovative thoughts.

Board Composition

  • Composition. Board composition should reflect a diversity of thought and experience. Regardless of background, directors should be willing to ask probing questions and stay aware of marketplace trends.

Goals and metrics

  • Understanding the marketplace. Management should be able to answer who future competitors might be and what trends might gain traction.

Trust but Verify: The Power of Skepticism in the Boardroom

October 25th, 2013 | By

Bribery and corruption risk continue to be big issues for companies—especially with the increasing number of reported incidents and regulatory enforcements in recent years. This panel of audit, legal, and governance experts discussed cultural factors that can breed fraud, and they also discussed what directors should know about combatting fraud. The experts outlined steps that boards can take in their oversight role, as well as the importance of that role in transactions.

Highlights:
1. Tone at the top is paramount. The CEO sets the tone for the company, and the board should be aware of the specific tone that has been set. Directors should attend management meetings from time to time, make note of any problem areas, and reiterate to the company that the board is watching. The ethics and compliance leader should report to the board periodically, as well. Sometimes, the presence of the general counsel at a meeting can help deter fraud.

2. The internal audit and compliance teams need to coordinate on who will be covering which issues. This is not to make them competitive with one another, but instead will help ensure efficient and complete coverage.

3. Boards need enough time to give ample consideration to significant transactions. For example, does a transaction fit in with the strategic direction the company wants to take? Boards should have a similar thinking in regard to the divestment of current business, and must be fearless in exercising responsibility in this area.

Speakers:
Andrea Bonime-Blanc
CEO and Founder, GEC Risk Advisory LLC

Cynthia Fornelli
Executive Director, Center for Audit Quality

Michele J. Hooper
President and CEO, The Directors’ Council

Vikramaditya Khanna
Professor, University of Michigan Law School; Director, Directors’ College for Global Business and Law, University of Michigan

This summary provided by PricewaterhouseCoopers.

Michael Woodford: CEO Turned Whistleblower

October 14th, 2013 | By

Today marked an anniversary for former Olympus Corp. President and CEO Michael Woodford: the day he was fired from the camera and medical products manufacturer. What brought him to that day is a series of events that kicked off when Woodford had no choice but to blow the whistle on his own company after discovering a serious fraud.

Before being asked to assume the role of president–which he very gladly accepted–Woodford had a 30-year career at Olympus. Nevertheless, he knew that he wanted to make changes within the company, and soon into his presidency, an article in a business magazine titled Facta, ran an article about odd acquisitions Olympus had made and the high fees it paid a management consultancy.

When Woodford raised the issue with two managers in Japan about the article, he was told that CEO Tsuyoshi Kikukawa had advised them not to bring it up to Woodford. After demanding to speak to Kikukawa and Executive Vice President Hisashi Mori about the questionable acquisitions, Mori told Woodford that he worked for Kikukawa and that he was loyal to him.

Seeing no other option to raise the issue, Woodford wrote letters to the Olympus board and management and copied their auditor, Ernst & Young, on two of the letters. Instead of addressing the issue of the dubious acquisitions, the board unanimously ousted Woodford.

For more on the Olympus fraud, read an NACD Directorship magazine interview with Woodford from the March/April issue: http://www.directorship.com/exposing-fraud-at-any-cost/.