Governance Center Blog

Jan
18
2011

CAQ Report Accentuates Ways to Battle Financial Fraud

With all that has been written and discussed about in the aftermath of the great financial crisis of 2008-2009, there hasn’t been a lot of focus on the detection and deterrence of financial reporting fraud. Granted, fraud might not have been at the center of the crisis like it was in the late 1990s and early 2000s when Enron and WorldCom made headlines for their large accounting scandals.

But when you start to look closely at the subprime mortgage mess and the subsequent mortgage securities meltdown, and fair value debate that followed, it makes more sense to look at what happened through the fraud lens. (If you think about it, probably the only reason the Bernard Madoff Ponzi scheme was revealed was because of the depth of the financial crisis and recession that followed. I remember some pundits comparing the discovery of the Madoff scandal to the large rocks along the coastline that only show up when the tide goes out. Everyone knows they are there but they don’t worry about them because they don’t usually see them.) Read the rest of this entry »

Posted by Gary Larkin at 4:56 PM | 2 Comments »

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Jun
25
2010

Is There a Crisis Management Plan Crisis?

In light of the fallout from the BP oil spill, I scoured the web sites of some of the Fortune 100 and Googled the words “corporate crisis management plans.” I was unable to find any such plans for those corporations. I believe the reason is either the companies keep such plans private or that many companies just don’t have any.

After watching and reading some of the testimony given by the heads of five of the largest oil companies before U.S. Rep. Edward Markey’s Energy and Environment Subcommittee earlier this month, I am inclined to believe the reason is the latter. If you remember, it was during this hearing that Rep. Markey made the following revelation: [Read Markey’s speech here.] Read the rest of this entry »

Posted by Gary Larkin at 11:03 AM | 3 Comments »

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Jun
08
2010

Diebold Case Shows Breakdown in Board Processes

As U.S. public companies continue to recover from the financial crisis, there were some reminders in the past couple of weeks about how the pressure to perform can lead chief executives to commit financial fraud to meet analysts’ expectations.

That was what happened in the Diebold Inc. case in which the SEC on June 2 charged the ATM, bank security system and election machine-maker and three of its former executives with engaging in an accounting scheme to inflate earnings. The SEC announcement comes a year after the company announced a settlement in the case. Read the rest of this entry »

Posted by Gary Larkin at 4:28 PM | No Comments »

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May
14
2010

Executives Worry as Financial Reform Nears

If you have been following the debate on the financial regulatory reform bill in the Senate, [See Wall Street Journal coverage here.] you are probably starting to realize that change is coming. In the past two days alone, the Senate approved amendments that would remove the SEC certification of rating agencies and have the SEC create a self-regulatory body to assign credit rating agencies to assign initial ratings.

If those actions aren’t proof that Congress is serious about following through on its promise to reform Wall Street to avoid another financial crisis like that of 2008-2009, then maybe you should take a look at the recent survey results released by KPMG LLP, the audit firm that operates Audit Committee Institute A separate survey commissioned by ACI also listed uncertainties of economic/legislative environments as a No. 1 concern among directors this year. [Read that report here.] Read the rest of this entry »

Posted by Gary Larkin at 4:09 PM | No Comments »

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Mar
26
2010

Directors May Have to Deal With Reform this Year After All

Now that all the excitement about health care reform in has begun to dissipate in Washington, D.C., the focus is back on financial regulatory reform. Or so it seems.

According to the latest comments [Read The Hill blog’s coverage.] coming out of Senate Banking Committee Republican Ranking Member Richard Shelby’s (R-Alabama) camp on Friday, there’s a chance for a bill to clear the full Senate before Memorial Day. This follows the news that two fellow Republicans on that same committee – Bob Corker of Kentucky and Judd Gregg of New Hampshire – announced Monday that the Democratic bill could receive strong bipartisan support in the Senate.

And then there were Treasury Secretary Timothy Geithner’s comments [Read here.] on Monday to the American Enterprise Institute on Financial Reform. They are as eye-opening and harsh as his predecessor, Henry Paulson, in the fall of 2008 when he revealed just how deep the financial crisis was. Read the rest of this entry »

Posted by Gary Larkin at 4:50 PM | No Comments »

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Mar
03
2010

Worth Reading … Financial Crisis

At this point, a lot has been written about the causes of the financial crisis of 2007-2009. From the toxic mortgage-backed securities market to the lax regulation of derivatives to the creation of financial institutions that were too big to fail, many experts have written about their take on this historic collapse.

But what’s more important now for those boards and companies trying to move forward is real advice about what to do next … as in the next two to five years. Those analyses from such service providers as KPMG’s Audit Committee Institute, Deloitte , PWC and Ernst & Young as well as the Committee for Economic Development and the American Institute of Certified Public Accountants (AICPA) are providing that much needed advice. It is up to the boards and the company counsel to pore over these and integrate any appropriate actions in their strategic plans.

In its Director Notes series on the 2010 Proxy Season, The Conference Board Governance Center has tackled the challenges posed by the financial crisis. The January installment by John Wilcox, chair of Sodali Ltd., titled From Compliance Governance to Strategic Governance, [Membership required] focuses on how corporate boards will come under pressure to explain how they integrate governance with performance and long-term strategic business goals. “In addition to steering their companies through difficult times, business leaders must work to restore public trust in private enterprise…,” Wilcox wrote.

The financial crisis is also addressed in The Conference Board Governance Center’s The Role of the Board in Turbulent Times: Leading the

The Role of the Board in Turbulent Times

Public Company to Full Recovery [Click on cover image on right.]

Wilcox surmises the 2010 proxy season will focus on the following corporate governance issues:

Integration of governance decisions with business strategy and performance goals
Board oversight of risk management and internal controls
Corporate culture, ethics, internal equity, and leadership style set by the CEO and board
The board’s strategic competence in executive pay, CEO succession planning, and board self-assessment
Quality of disclosure and communication between the board and shareholders.

The following are recent reports, papers, and articles on the financial crisis that I think are worth reading: Read the rest of this entry »

Posted by Gary Larkin at 3:44 PM | 1 Comment »

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