Good governance is not a new concept, yet many companies still struggle to fully understand how to practice it.
In Ten events that have shaped corporate governance (see Corporate Secretary July 2012, page 21), I explored the new regulations and trends that have helped governance evolve from its concept stage. But it seems that governance has more gray areas than we thought.
Unfortunately, companies continuously make the same mistakes because of the gaps that exist in their processes. As things stand, going beyond the bare minimum of a good governance program may be seen as costly and time-consuming; many boardrooms are likely to put any gray issues on the back burner until – inevitably – regulators come knocking for answers.
Most recently, there has been a host of cases that signal gray areas in governance that companies neglect to take seriously. Here are a few cases making the headlines this week:
i) Citibank helped cover Dewey’s losses: According to court filings, ex-Dewey & LeBoeuf partner Steven Otillar claims Citibank assisted executives of the now-defunct law firm in covering financial losses prior to Dewey’s collapse.
ii) NY attorney general investigates private equity firms’ tax strategies: News sources reveal Attorney General Eric Schneiderman is looking into unfair tax practices at some of the nation’s largest private equity firms.
iii) Former Detroit mayor accused of fraud and kickbacks: Kwame Kilpatrick’s trial begins on Thursday. He faces up to 30 years in prison for bribery and spending charity funds while serving as mayor.
iv) Directors are lacking financial skills: The Australian Financial Review claims directors consider their knowledge of accounting and foreign exchange relatively poor.
Clearly, many executives are not carefully considering the ethical implications of their actions. Corporate officers should start putting a company’s governance structure through a series of litmus tests. Not only will this shine a light on complex issues, but it can also help identify areas that deserve immediate attention.
