Category Archives: Duty of Care

MetLife

“Suit Against MetLife Spotlights Problems From Old Business,” The Wall Street Journal, February 22, 2018 B12.  MetLife sued over its failure to pay proceeds of an annuity to the right person.

MetLife has a business that takes over the pension payment obligations owed by private plans.   “MetLife has said it failed to aggressively search for people as they neared pension-eligibility age.”  As a result, about 13,500 retirees weren’t getting their benefits, after MetLife had released some reserves (and thereby increased profits) related to the payment obligations.  That reserve release has now been reversed, hitting fourth quarter results.

How does your company keep from losing contact with people to whom it owes money?  Are they swept under the rug, and ignored unless they complain?

Is this information governance or ethics or something else?

See also Snoopy cried.

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Filed under Governance, Protect assets, Duty of Care, Controls, Third parties, Internal controls, Compliance, Board, Oversight, Oversight, Duty, Directors, Accuracy, Corporation

Two to tango

Two interesting stories on page B1 relating to governance:

“Ford Official Fired for Misconduct,” The Wall Street Journal, February 22, 2018 B1. Top executive fired for unspecified bad conduct.

“Disney Producer’s Behavior Criticized,” The Wall Street Journal, February 22, 2018 B1. Successful producer may act and speak inappropriately, but is still running the high-profile “Frozen” production.

How important is context?  One would think that the entertainment industry would be more sensitive than other industries in avoiding any hint of inappropriate (the PC term) behavior, and Disney in particular.

How does your company manage its culture?  Does it enforce the rules against top managers, or big money producers?  What does the Board say, both now and when something goes wrong (or is discovered) later?  Are violations and punishments publicized internally?

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Filed under Board, Communications, Compliance, Compliance, Controls, Corporation, Culture, Culture, Directors, Duty, Duty of Care, Employees, Governance, Inform market, Inform shareholders, Internal controls, Oversight, Oversight, To report

Cost of (non-)Compliance

“U.S. Bancorp Is Charged, Fined in Laundering Case,” The Wall Street Journal, February 16, 2018 B2.  Bank fined over $600 million and criminally charged with laundering money.  And placed under a deferred prosecution agreement, which is always an adventure.

Bank allegedly constructed and operated its controls on money laundering “‘on the cheap.'”  Think of the money they saved!

Their shareholders, not so much.

How much would having adequate controls and filing required suspicious activity reports have cost?  More or less than $600 million?

A key compliance requirement for banks is to have adequate money laundering controls.  What does it say about the directors and officers that this bank didn’t have them?  Who’s responsible for this failure (i.e., who’s duty was it to prevent this?)?  Who’s getting canned?

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Filed under Board, Compliance, Compliance, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Internal controls, Oversight, Oversight, Protect assets, Protect information assets, To report

Can information have a negative value?

Doug Laney has done a lot of good stuff on infonomics, and the value of information.  But can information have a negative value?

“FBI Didn’t Follow Up Tip By Person Close to Shooter,” The Wall Street Journal, February 17, 2018 A1.  FBI got a tip on January 5 about the person who ended up shooting up the school at Parkland on February 14.  Failed to act on it.  Seventeen people died.

Do you have a duty to use information you have?  What if you have important information and you don’t use it, or can’t use it because you can’t find it?  Is that a liability (i.e., a “negative asset”)?

Do your internal controls make sure that critical information gets to the decision makers promptly?  If not, who’s responsible?

Look at the past year or two in industry and you will find several examples of the cost of not having important information reach the right people at the right time.  For example, Wells Fargo management didn’t learn of the account cramming until months or years later.  The Board at GE didn’t know about the two-plane approach the CEO was using.

Which is worse, knowing or not knowing?  Don’t know, but certainly knowing and not doing anything is the most expensive.

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Filed under Access, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Government, Information, Internal controls, Oversight, To report, Value

Stop digging

What’s the first step to get out of a hole?  Stop digging.

“Wells Errs in Bid to Make Amends,” The Wall Street Journal, February 12, 2018 B1.  Wells Fargo, a frequent star in this blog, was trying to reach out to the 600,000 – 800,000 customers it screwed over by forcing them to buy auto collision insurance.  It couldn’t even do that.

First, it reportedly sent refunds to some non-customers.  Second, it told some customers that they would be paid the wrong amount. Third, it said it was going to pay refunds to people who hadn’t even bought the insurance. Affected: 38,000 folks.  Cause: a vendor’s coding error.

Fourth, Wells Fargo still hasn’t contacted the 110,000 people it overcharged for mortgage insurance rate locks.

And they are in charge of your bank deposits?

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Filed under Accuracy, Controls, Corporation, Duty, Duty of Care, Governance, Internal controls, Oversight, Supervision, Vendors

Uber settles

“Uber Settles Trade-Secrets Case,” The Wall Street Journal, February 10, 2018 B1.  Uber pays more than $240 million to settle case, and agrees not to use certain technology on self-driving cars, allegedly belonging to Waymo.  The agreement not to use was worth perhaps $250 million.

How does your company make sure it isn’t using a third party’s intellectual property without permission?  Is this an important part of your compliance program?  How does your company manage its acquisitions of new companies, some of whom (or their employees) may not have been as diligent in avoiding trade secret theft?

How can you prevent people from bringing information that you do not want into your company?  What are your processes?

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Filed under Board, Compliance, Controls, Corporation, Duty, Duty of Care, Employees, Governance, Information, Internal controls, Oversight, Ownership, Ownership, Policy, Protect assets, Protect information assets, Supervision, Third parties, Value, Vendors

Lessons learned?

I am not sure what to say about the Nunes memo about the DOJ and the FBI and the FISA court, and classified information and governance and compliance.  Too political to be educational.

So, the right-hand news item instead.  “Fed Limits Wells Fargo Growth, Replaces Directors,” The Wall Street Journal, February 3, 2018 A1.  Following a pretty bad year or two, following the customer cramming schedule or the auto insurance.  A former CEO. Lower bonuses.  Now the government takes control of a large bank and replaces the directors.  Restricts the bank’s future growth.  A 6% stock value drop, before this week’s really bad sell-off.  Cost: $300-400 million. Government says, “We cannot tolerate pervasive and persistent misconduct at any bank ….”

What’s the value of compliance?  Is it the possible loss of your ability to control your company?  Is this a lesson for directors, in that they may lose their positions (but they don’t have to refund their fees)(yet- the derivative suits are coming soon).  They didn’t even do that to BP!  The Chief Risk Officer is also retiring later this year.

Business case for compliance or better risk management?  For knowing what’s going on in your company?  Not sure what the lesson is for the shareholders.

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Filed under Board, Business Case, Compliance, Compliance, Compliance Verification, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Inform market, Inform shareholders, Internal controls, Oversight, Oversight, Protect assets, Risk, Risk Assessment, Risk assessment, Supervision, To report