Archive for the ‘Business Ethics’ Category

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/.

In Conversation with Laban Jackson

October 13th, 2013 | By

JPMorgan Chase & Co. has frequently made headlines since news of the London Whale broke. In a candid interview with Jeffrey M. Cunningham, managing director and senior advisor of the National Association of Corporate Directors (NACD), Director and Audit Chairman Laban Jackson shares how the company is navigating current challenges and preparing for future ones.

The London Whale Investigation

Jackson noted that one of the root causes of the London Whale was tied to culture. “The culture totally broke down,” he explained. “The real culture at JPMorgan–or at any great company–is if you have a problem and you raise your hand, it becomes everyone’s problem. If you don’t raise your hand, it’s your problem.”

On CEO Jamie Dimon

“Jamie Dimon is the best manager I’ve ever seen, and I’m old,” Jackson said. “He has absolute integrity.” Jackson went on to note that Dimon is human and has flaws as every human being does.

“One thing to do as a director–and I didn’t learn this early enough–the first job you have is to get the CEO right. The second is to get the next CEO right,” Jackson explained. “But while you have that CEO, figure out his or her flaws and help them with them.”

Ramifications of the London Whale

The board fired five people and clawed back $100 million and cut the CFO and CEO salaries in half. “We wanted to get the respect back of the people at the company,” Jackson said.

When asked by the Council of Institutional Investors if JPMorgan had done enough, “We said well, we can’t shoot ‘em,” Jackson said.

Big Enough to Succeed?

In a business where the motto is often “go big or go home,” laws and regulation play key roles in ensuring companies are operating in an effective manner. Some regulations, however, may be difficult for companies that do not have the same scale as JPMorgan to comply with.

“We move trillions [of dollars] a day in and out of JPMorgan in 156 countries,” Jackson said. “I don’t know many companies that can do that. If big banks are broken up, I don’t know who can do this.”

Around the World

Jackson spends several weeks a year visiting JPMorgan offices across the globe and meeting with regulators. He notes that he has started meeting with up-and-coming JPMorgan employees: “I learn so much from them–it has been a wonderful thing for me.”