Category Archives: Compliance

What happens when the boss gets jailed?

This blog tends to mention cases where senior executives get (or don’t get) punished for their alleged misdeeds.  The spin is often that the seniors don’t get punished as hard as the worker bees.

But what happens when the CEO gets put in jail for his or her alleged misdeeds, which may have led to under-reporting in the company’s financials for the past five years?

“Carlos Ghosn’s Arrest Rocks Auto Empire,” The Wall Street Journal, November 21, 2018 (online).  Nissan’s CEO jailed for allegedly under-reporting his earnings by several tens of millions of dollars.

How do you explain this to the worker bees?  What’s the culture at the top?  How did the Board not catch this?  Were there not controls in place?  Might the shareholders be a bit upset?

More a Governance and a Compliance issue, perhaps, although if one looks, one could find some information-related failures.

 

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Filed under Board, Compliance, Compliance (General), Compliance Verification, Controls, Corporation, Culture, Culture, Data quality, Directors, Duty, Duty of Care, Governance, Internal controls, Oversight, Oversight

Another one

“UC System is Sued for Data On Admissions,” The Wall Street Journal, November 16, 2018 A2.  Is the state university using race inappropriately in making admissions decisions?

The government has different obligations with respect to information than a private company.  Government also collects a lot of information.  What controls are in place to allow and to prevent the disclosure of this information?  What about for non-core activities, like running the state’s university system?

 

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Filed under Access, Collect, Compliance, Compliance, Controls, Duty, Governance, Government, Internal controls, Management, Third parties, To report, Use

External governance

“Rebuke at Wells Shows Clash,” The Wall Street Journal, November 15, 2018 B1.  Chief administrative officer (and former head of HR) at Wells placed on leave after the Office of the Comptroller of the Currency criticizes the oversight that she and the bank’s chief auditor provided.

If your company interacts with government regulators (and whose doesn’t?), is the government effectively a part of your governance structure?  Or is government a separate component of Governance, whether that is Compliance Governance or Information Governance?  Or just “Governance”?

And what does it say about communications when the government holds up a senior official for poor oversight?  What about the board?  Highly visible to the worker bees.

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Filed under Board, Communications, Compliance, Compliance, Compliance (General), Controls, Corporation, Duty, Employees, Governance, Government, Internal controls, Management, Oversight, Oversight, Third parties, To report

Indicted

A Tesla employee is indicted for creating fake documents to cover up a fake-payment scheme.  “Former Tesla Employee Is Indicted,” The Wall Street Journal, November 12, 2018 B5.

Companies have a lot of controls to prevent fraud by employees, and often these controls work.  Why are there more such controls to prevent financial fraud than to prevent violations of other company procedures, such as those related to document creation, retention, and storage?

One wonders whether, in the aggregate, companies lose more money through poor document management and control than they lose through financial fraud.  How would one conduct such a study?

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Filed under Accuracy, Compliance, Compliance (General), Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Information, Internal controls, Oversight, Protect assets, Records Management, Security, Third parties, Value, Vendors

Management of change

How do you make sure that your policies are keeping pace with law and society?

“Google Changes Harassment Rule,” The Wall Street Journal, November 9, 2018 B4.  Following an employee walkout over how the company handles/handled sexual harassment claims, Google will no longer require that such claims be subject to arbitration.

This ties to Governance (what rules do you have in place, and when do you update those), Compliance (how do you handle claims of policy violations), and Information (a claim is one type of information).

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Filed under Communications, Compliance, Compliance (General), Controls, Definition, Governance, Information, Oversight

Too much sharing

I’m a bit of a knowledge management wonk, having been involved in the then-nascent KM movement within the inhouse legal community in the early 2000s.  But there can be too much sharing.

“Sinclair Settles With U.S. on Ad-Sales Data,” The Wall Street Journal, November 8, 2018 B2.  A media group settles lawsuit over alleged sharing of information among television station owners, that may have led to higher advertising rates.

An interesting side note is that this all came to light when Sinclair proposed to buy another company and had to undergo a government investigation.

Are there restrictions on how much information can be shared between and among competitors?  Yes.  They are call “antitrust laws.”  And is there a risk of making a deal that subjects you to government scrutiny?  Yes.  The may discover all manner of minor and major sins.

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Filed under Access, Communications, Compliance, Compliance (General), Controls, Corporation, Discovery, Duty, Governance, Information, Internal controls, Knowledge Management, Oversight

Better than nothing?

Have you ever misused your company credit card?  How about used a company asset for your personal business?

“Gulfport CEO Exits Following Review,” The Wall Street Journal, November 2, 2018 B2.  CEO resigns after investigation into his use of his company credit card (he had paid the charges back, eventually, without interest) and the company plane.

On departure, he gets $400,000 and 6 months of health care coverage.  I don’t know whether that’s better than nothing.

The ground troops learn from their “betters.”  Seeing the CEO get canned for policy violations firms up the perception of the seriousness with which the company treats violations of policy or procedure.  More so than a ground troop getting canned.

Does your company publicize these stories?

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Filed under Compliance, Controls, Corporation, Duty, Employees, Governance, Internal controls, Oversight, Policy, Protect assets

Fraud at the top

“Former Goldman Bankers Charged,” The Wall Street Journal, November 2, 2018 A1. “Two senior … bankers allegedly paid bribes and stole and laundered money … [in] one of the biggest financial frauds in history.”

What does it say when two of your 435 partners and one of your managing directors commits a fraud?  Failures in systems/controls?  Bad culture?  Do you have a “cowboy atmosphere” in Asia?  Poor training?  Are these rogue employees?  What’s the impact on your reputation?  What was the tone at the top?

This is primarily a Governance point.  How will the new CEO handle?

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Filed under Compliance, Compliance (General), Controls, Corporation, Culture, Directors, Duty, Duty of Care, Employees, Governance, Oversight, Policy, Supervision, Who is in charge?

Cheaters

“Market Cheats Get Caught More Often,” The Wall Street Journal, November 1, 2018 B10.  Traders manipulating prices by spoofing real futures trades are getting caught and prosecuted for criminal violations.  Exchanges cooperating with enforcement authorities.

If accurate information is worth X, what is inaccurate information worth?  It depends, whether you are buying or selling based on it.

So, this is both Information (information includes both accurate and inaccurate information) and Governance (manipulating market trades with false information is a crime that the CFTC and DOJ prosecute).

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Filed under Accuracy, Compliance, Compliance (General), Controls, Corporation, Data quality, Definition, Duty, Duty of Care, Employees, Governance, Information, Oversight

Chinese hacking alleged

“U.S. Charges Agents Of China Hacked Aviation Firms,” The Wall Street Journal, November 1, 2018 B4. Agents of the Chinese government indicted for trying to steal airline industry technology.

This is getting to be rather routine.  One part of this is the value of Information, and the importance of information security.  One part of this is Compliance, of course, as the US government is trying to protect the US information assets (although the company at issue probably had some responsibility for this as well, as well as their board of directors).  And, of course, Governance, as the US government is prosecuting.

We all know the business case for cyber-security.

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Filed under Access, Compliance, Compliance (General), Controls, Corporation, Duty, Duty of Care, Governance, Government, Information, Interconnections, Internal controls, IT, Oversight, Protect assets, Security, Third parties