Monthly Archives: May 2016

May 31, 2016 · 6:39 pm

What does everyone earn?

On Friday, the post was about using numbers to rank employees. And what numbers rank employees more than salaries + benefits?

“Why Being Transparent About Pay Is Good for Business,” The Wall Street Journal, May 31, 2016 R2. Research shows that maintaining secrecy on employee salaries reduces employee performance.

Who owns the salary information? What right does the employee have to prevent his or her employer from posting that information on the web? Would you be embarrassed to have your salary data posted on the door to your office or the wall of your cubicle? Why? Does management’s use of publication of salaries to manage people’s expectations and performance violate some unwritten rule?

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Filed under Access, Accuracy, Controls, Data quality, Duty, HR, Information, Internal controls, Management, Ownership, Privacy, Use, Value

May 31, 2016 · 6:27 pm

Changing culture

The government wanted to change the cultures at the big banks. Enter Dodd Frank.

“Nuns With Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators,” The Wall Street Journal, May 31, 2016 A1. The raft of new regulations has resulted in a vast expansion of the staff functions involved in training internal employees on what the regs require. Over $70 billion in compliance costs at the six largest banks. 43,000 staff to oversee and enforce “‘controls'” at J.P. Morgan.

How do small players survive? Is a training slide showing the inhouse compliance people dressed as nuns with guns sending the right message?

The government forces change by adding regs and enforcing them. A corporation forces change by enacting policies, training employees, and monitoring what the employees actually do.

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Filed under Board, Compliance, Compliance, Compliance Verification, Controls, Culture, Culture, Directors, Duty, Employees, Governance, Internal controls, Legal, Oversight, Oversight, Policy, Requirements, Third parties

May 31, 2016 · 4:08 pm

Seeing green

Should enterprises be required to disclose who their investors are?

“Hulk Hogan Case Stirs Funding-Disclosure Debate,” The Wall Street Journal, May 28, 2016 B1. An investor loans Hulk Hogan $10 million to help fund the suit over the release of a sex tape by Gawker Media, which resulted in a huge verdict for the former wrestler.

Would knowing that the plaintiff is well-financed affect the defendant’s strategy, as some opponents of this practice claim? Is this information relevant at all to the resolution of the dispute on the merits? If the defendant has insurance, that is often discoverable.

What’s this information worth? What is it worth not to have to disclose such investors? What’s fair?

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Filed under Definition, Discovery, Information, Legal, Value

May 27, 2016 · 5:00 pm

Participation trophies for employees?

How do you rate your employees and how often do you do it? Annually, quarterly, or real time? Who’s above average, who’s a potential star, who’s average, and who’s in trouble?

“Goldman Sachs to Stop Rating Employees With Numbers,” The Wall Street Journal, May 27, 2016 A1. Goldman to do away with its 1-to-9 rating scale for employees. Some companies worry about “grinding down employee morale” by saddling employees with a number rating.

One would think that different employees get paid differently, and that you need a process to figure out who gets a bigger bonus than someone else. Or maybe everybody in the same employee class should get exactly the same amount, which is the equivalent of handing out participation trophies to the six-year olds on the soccer team. But then you would need to assign people to classes, leading to the same issues. (Or avoid telling them that they are 6).

Does an employee benefit from being told where he or she is on the performance continuum? If you rate employees but don’t tell them where they rate, why not? Should you keep this information secret from them?

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Filed under Collect, Controls, Definition, Duty, Information, Internal controls, Management, Use, Value

May 26, 2016 · 12:35 pm

Why corporations have policies

Corporations are potentially liable for any violation of law by corporate employees committed in the course of the corporations’ business. There are so many applicable laws that the employees can’t know the details of them all. So the corporations establish policies that, if followed, reduce the risks of the employees inadvertently violating the law.

“State Department Watchdog Chastises Clinton On Email,” The Wall Street Journal, May 26, 2016 A1. Inspector General report on Hillary Clinton’s violation of State Department policies on emails.

The State Department policies were in place for security reasons and to avoid inadvertent violations of the Freedom of Information Act and the various record retention requirements applicable to the federal government. But for those policies to work, the employees would have had to follow them.

And what are the chances that other employees at the State Department complied with those policies? Or other policies the State Department had in place? Is it better now?

Who had the duty to confirm that the policies were being followed? What’s happened to them?

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Filed under Board, Business Case, Compliance, Compliance, Compliance, Controls, Culture, Culture, Directors, Duty, Duty of Care, Employees, Governance, Internal controls, IT, Management, Oversight, Ownership, Policy, Requirements, Risk, Security

May 25, 2016 · 4:28 pm

Whose information is it, anyway?

Corporations are owned by their shareholders and managed by their management. You’d think the owners could see the books.

“Startup Employees Invoke Obscure Law to Open Up Books,” The Wall Street Journal, May 25, 2016 B1. Companies confront problems when they try to deny shareholders the right to look at the companies’ books.

The shareholders of a Delaware corporation have the right to see the financials. Not sure how obscure it is – as homeowner, I can see the HOA’s books, too.

What reasons would you give to deny the shareholders the right to see the books? What does it say about the company who resists this move? What else is the company hiding from its shareholders? Whose information is it, anyway?

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Filed under Access, Accuracy, Collect, Communications, Compliance, Controls, Culture, Data quality, Duty, Governance, Information, Investor relations, Management, Ownership, Protect assets, Third parties

May 24, 2016 · 10:02 am

Actions speak louder than words

This is more compliance-related than information-governance-related. But the link between the two is strong.

How do you set the tone at the top of an organization? One way is to prosecute senior managers.

“Criminal Trials of Former Health-Care Executives Set to Begin,” The Wall Street Journal, May 23, 2016 B1. A former division president and two former senior officials are going to trial, facing allegations of health-care-related crimes.

This is consistent with the Yates memo from September 2015, which said that the Department of Justice will be looking to prosecute more individuals for corporate crimes.

Is this a necessary part of the business case? Is compliance with law substantially different from compliance with company policy? If employees – senior or junior – violate the law, they may be prosecuted. If they violate company policy, should they be disciplined or dismissed, and perhaps sued as well?

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Filed under Board, Business Case, Communications, Compliance, Compliance, Compliance, Controls, Directors, Duty, Employees, Governance, Management, Oversight, Policy, Risk

May 21, 2016 · 1:29 pm

Real time information

How long will it take to get accurate information on the cause of the EgyptAir crash this week?

“EgyptAir Flight 804’s Systems Detected Smoke Before It Disappeared,” The Wall Street Journal, May 21, 2016 A1. Automatic messages from onboard systems tell of smoke in the plane. The search goes on for the cockpit flight recorders.

Condolences to the families of those lost. But watch as the information dribbles in. First, loss of radio contact after the plane leaves Greek airspace. Plane assumed lost. Messages about smoke sent automatically. Plane wreckage reported, then found. Multiple sources, sometimes with conflicting reports – typical of the aftermath of crises. News stations have their experts speculating fulltime. Donald Trump opines on the obvious cause.

Looking at this from the airline’s viewpoint, how important is having the information in real time? How important is that to the families of the passengers and crew. How does the news business deal with the absence or dirth of hard information? Expect renewed calls for real-time transmission of cockpit voice recorder data. How important for the Egyptian government? For other politicians?

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Filed under Access, Accuracy, Collect, Communications, Controls, Culture, Data quality, Governance, Inform market, Inform shareholders, Information, Internal controls, Management, Use, Value

May 21, 2016 · 1:13 pm

Self-dealing at a bank?

Hard to believe that employees could (try to) take advantage of their employer’s lack of controls.

“Deutsche Bank Probes Trades That Made Employees Millions,” The Wall Street Journal, May 20, 2016 C1. Employees accused of profiting at the company’s expense in a series of trades. Maybe the employees disclosed the conflict, maybe they didn’t.

Well, at least the employees didn’t cheat the customers, as far as we know. But have they checked? If the employees (or the employer) could ignore this conflict of interest, what else do they ignore?

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Filed under Compliance, Controls, Culture, Directors, Duty, Employees, Governance, Internal controls, Oversight