Trust but Verify: The Power of Skepticism in the Boardroom
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.
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.
CEO and Founder, GEC Risk Advisory LLC
Executive Director, Center for Audit Quality
Michele J. Hooper
President and CEO, The Directors’ Council
Professor, University of Michigan Law School; Director, Directors’ College for Global Business and Law, University of Michigan
This summary provided by PricewaterhouseCoopers.