“Annuities Soar After Rule’s Demise,” The Wall Street Journal, October 29, 2018 B1. More annuities sold after failure to pass rule about disclosure of conflicts by investment advisers.
If you don’t institute controls on behavior, what will enterprising (sales)people do? What’s it worth to you to know whether the person advising you is getting a large commission? Would that information influence your financial decisions? Do investors need to be protected from salespeople offering “free” meals? And if investors either (a) are or (b) are not so protected, what are the consequences on the other decisions those investors make in their lives? Do we rely on the government to protect us from our dumb decisions?
Caveat emptor? Is this an Information post or a Governance post?
“Advertisers Allege Facebook Put Off Disclosing Error,” The Wall Street Journal, October 17, 2018 B1. Facebook sued two years ago for knowing the statistics on how long users were looking at videos were flawed, overstating the average time videos were viewed but failed to let the advertisers know. So advertisers paid for posting videos based on inaccurate information from the seller (Facebook).
I guess one could comment on the culture at Facebook that would permit this behavior, or upon the Compliance implications of the apparent failure to punish anybody (employees, directors) for this apparent breach of customer trust. But instead one could focus on how much value Facebook derived from not disclosing information about known defects in its processes. So, either (a) the definition of Information includes information you don’t disclose or (b) the value of information can include the value of not disclosing it.
The documents turned over in discovery are not favorable to FB.
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Often, one has information but doesn’t act immediately, or require others to act on it immediately. But there have been several instances of the government sitting on information that later turns out was really important. Is this just not recognizing the risk? Would they have done anything differently?
“FAA Was Slow to Act On Engine Warning,” The Wall Street Journal, May 21, 2018 B1. FAA (and the airline industry) knew of the potential for engine blades to crack for 2 years. The manufacturer increased inspections. Then one blade cracked, destroying an engine and killing a passenger on the Southwest airlines flight in April.
This seems to link Governance (Who was responsible for deciding that the risk was adequately managed?) and Information (Did everyone have the same level of information?). Is there also a Compliance vector? The airlines were complying with government directions.
And how much does the flying public rely on the government to take care of such things?
The adventure continues, after Kobe Steel announced earlier this month that workers at several different facilities had fudged paperwork on product quality, dating back to at least 2007. Apparently, getting that type of paperwork accurate is important. To someone.
“U.S. Looking Into Kobe Steel Scandal,” The Wall Street Journal, October 18, 2017 B3. Department of Justice kicks off a request for information after company disclosures about practices in Japan. Affects product sold into manufacturers of train, planes, and cars.
More to follow. Expect Congress to weigh in shortly. Again, the problem occurred in more than one facility, over a period of years. Is that a failure of compliance, or culture, or both?
An example of the intersection of governance, compliance, and information.
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It is not uncommon for a manufacturer to fail to disclose (voluntarily) data about defects.
“Probe Points to Nuclear Coverup,” The Wall Street Journal, December 14, 2016 B1. A supplier to the nuclear industry hid manufacturing defects and falsified records for as much as 50 years. Record falsification reportedly stopped four years ago “when oversight of quality control was removed from an internal office at the factory to a different … factory….” Concerns about a quality culture. They marked which files shouldn’t be shown to regulators.
Talk about a culture problem. Interesting case study.
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“H-P Deal Leads to Indictment,” The Wall Street Journal, November 12, 2016 B4. Autonomy’s former CFO indicted for fraud in the sale of the company to Hewlitt-Packard.
This was fairly bog-standard alleged fraud, albeit on a much grander scale (nearly $9 billion). Follows a $100 million payment by H-P to some of its shareholders.
Is this a value-of-information case or a value-of-compliance case (for Autonomy)? Or just poor due diligence by H-P? How did Autonomy’s board miss this? How did H-P (and it’s lawyers and investment advisers) miss this, pre-acquisition? Might this be worthy of another post- Caremark decision on negligent oversight? If not, what will it take to hold a board liable for failing to meet its fiduciary duties?
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Following up on the previous post.
“Pollsters Face Hurdles in Changing Landscape,” The Wall Street Journal, November 11, 2016 B1. Possible answers to why things were so wrong:
- Move from landlines to cellphones and internet
- Fewer people willing to answer surveys
- Assumptions pollsters make about who’s going to vote
- Sample size
- Reliance on poll methodology from 4 years ago
- Who’s willing to answer questions
- Technologies used more by millennials than older folks
- Building an accurate sample is hard
Other than employing lots of folks, filling a lot of “news” presentations, and disturbing a lot of dinners with yet another phone call, what is polling worth? “‘It’s going to go away in its current form.'”