Alberto Mora — Profile in Courage
March 10, 2006 | Filed Under In the News
I may have been selling former Navy general counsel Alberto Mora short when I suggested last week that he was in the gold medal hunt as 2006 GC of the year.
The JFK Library Foundation announced yesterday that Mr. Mora will be one of the recipients of a 2006 “Profile in Courage” award.
Mr. Mora is being recognized:
… for the moral and political courage he demonstrated in waging a two-and-a-half year behind-the-scenes battle with Pentagon brass and civilian leaders over U.S. military policy regarding the treatment of detainees held by the United States as part of the war on terror…
This year marks the 50th anniversary of the publication of President John F. Kennedy’s book Profiles in Courage.
While not a gold medal, the award is rather impressive; a sterling-silver lantern symbolizing a beacon of hope…
L’éthique est Très Importante
March 9, 2006 | Filed Under Compliance, In the News
Continuing the compliance arc started on Tuesday, GE GC Brackett Denniston brings imagination to this important work.
In an interview in Legal Week with reporter Ed Thornton, Mr. Denniston makes a point that I agree with about the link between the corporate legal and compliance functions:
“Some companies have a separate compliance head, and you can debate that, but I think that it is better — at least for us — to have law and compliance combined because they intersect so much. They are all about law, reputation, and investigation.”
Then he mentions the familiar C-word, culture:
“Now more companies understand that you cannot just publish a code of ethics and have one person who teaches compliance,” he said. “You have to have it embedded in your culture and practices.
“I always say Enron had the prettiest code of ethics that you could find. It looked nice, and everybody saluted to it and purported to observe it, but it was not a value that went into their culture.”
And finally a reminder that the GC is an advisor and a leader in the compliance process, but not a magician:
“The general counsel has to be a counsellor,” he said. “The general counsel helps bring compliance out, but the place where it becomes most effective is where the CEO and the other senior leader-ship lives it, breathes it, talks it and executes it.”
Mr. Denniston will be the keynote speaker at Legal Week’s Corporate Counsel Forum in May of this year. The conference sports an A-list of speakers, and will be held at the Westin in Paris. Not at the Paris Hilton.
Ah, Spring in Paris. When a lawyer’s heart beats briskly with thoughts of compliance. Or something.
Corporate Governance Rocks
March 8, 2006 | Filed Under Governance, In the News
Stanford Law School probably thinks so.
The school just announced a major $10 million gift to establish the Arthur and Toni Rembe Rock Center for Corporate Governance. Arthur Rock is a well-known venture capitalist (think Apple Computer, Fairchild, and Intel) and his wife Toni Rembe is a former partner at Pillsbury Winthrop and a director at AT&T and Aegon.
The Mercury News reports that the Rock Center will be co-directed by Stanford Law professors Robert Daines and Joseph Grundfest. Professor Grundfest told the paper that:
… corporate governance is a little like engineering, in that you need a good understanding of theory, but also need to be practical. “You need to understand how incentives work in organizations, how options are priced, combined with the complexities of the latest financial techniques,” he said in a phone interview. “But you need to make it work in the real world…That’s the gap we really want to bridge.”
He said the program is also going to be multidisciplinary, drawing on the efforts of lawyers, and faculty from business, law, political science, economics and communications.
The part about making it work in the real world really caught my eye. Progress in corporate governance needs input from people who have spent time in the boardroom, not just the classroom.
Arthur Rock and Toni Rembe deserve kudos for putting serious money towards corporate governance, rather than sinking $10 million into another house with a swell view of the Golden Gate Bridge. I see they have already supported a hall at UCSF Mission Bay, housing the Center for Brain Development.
Fannie Mae — The Lawyers or the Culture?
March 7, 2006 | Filed Under Compliance, Governance, In the News
It’s popular to play the blame game.
Two weeks ago, Fannie Mae released the report of an internal review conducted by former U.S. Senator Warren Rudman and Paul, Weiss, Rifkind, Wharton & Garrison. It is 2,652 pages, so please don’t just hit “print.” An executive summary is here.
The WSJ Law Blog had an early take, asking if the lawyers (particularly law firm WilmerHale) were to blame in part for Fannie Mae’s accounting problems. (The WSJ Law Blog had taken a similar line with Enron and its in-house lawyers; I’ll have a few thoughts on that next week).
Since I deal with many legal matters as a GC which involve corporate compliance, I have to do more than point fingers. I have to try to be part of a solution in making things better. One of the best ways I have found to do this is to try to foster a compliance-friendly culture (aka “do the right thing”), rather than just a prescriptive, command-and-control work environment (aka “do X and we’ll fire your …”).
It’s easier said than done.
Now comes an article in last weekend’s Seattle Times which sheds some light on the Rudman report and the compliance culture at Fannie Mae. Long story short: not good.
Consider this:
Buried in the 2,652-page report on Fannie Mae that was released recently was the transcript of a speech a Fannie Mae exec planned to make invoking the name of Franklin Raines, former chairman and CEO of the embattled mortgage giant.
Sam Rajappa, who at the time worked for the Seattle native as the head of internal auditing, told his employees that under Raines they had a “moral obligation” to make money.
“Remember Frank has given us an opportunity to earn not just our salaries, benefits, raises … but substantially over and above,” for meeting financial targets, Rajappa planned to say in a 2000 address to his underlings.
“So it is our moral obligation to give well above 100 percent and if we do this, we would have made tangible contributions to Frank’s goals.”
You have to wince when a “leader” in internal audit invokes a moral imperative along the lines of making money. The clear implication to those listening was likely to put it above all else. When this is the orientation of the auditors, you have to wonder what things were like among line managers with direct P&L responsibility.
By late 2004, when things were going off the rails and Mr. Raines was retiring under a looming regulatory cloud, he adopted a markedly different tone:
That fall, he had conceded in talking points for a speech to his fellow executives that Fannie’s culture had not served it well.
“We may have believed our own PR a little too much,” Raines’ talking points read. “We allowed ourselves to be arrogant. We thought we had a lot to teach and little to learn from others.”
When a culture is not supported by ethical behavior from senior management, it’s not surprising that compliance can take a back seat. This mis-alignment provides a fertile environment for improper activity to take place. People model and follow what leaders do (or they leave).
And the company’s lawyers, accountants and auditors have this to look forward to every day:
Update (8 Mar 06): Wal-Mart is getting on the compliance bandwagon; CNN reports that the mega-retailer is looking for a Director of Global Ethics. I found the position description here. Someone told CNN that Alan Greenspan might be a good candidate. I think he will be rather busy working to earn an $8 million+ advance for a forthcoming book.
AT&T + BS - Cingular = ?
March 6, 2006 | Filed Under Regulation, In the News
So AT&T is set to acquire BellSouth for $67 billion in stock.
I previously thought that eBay wildly overpaid for Skype.
But that deal, at a potential $4 billion or so, looks like a steal. There’s something vaguely reminiscent of AOL’s “acquisition” of TimeWarner. Verizon is allegedly under the gun if this deal goes through. I think my favorite wireless carrier could be secretly banging the drum and smoking a victory cigar this morning.
I’m sure a bunch of smart people signed off on this one. However, when two large regulated companies merge, it’s often not immediately clear what will happen.
I think the government will approve this transaction. But not just because it is probably pro-competitive. And not because the Bush Administration allegedly always approves communications industry mergers.
Rather, it will be approved because it may prove to be irrelevant.
Think in terms of branding:
– Old AT&T was American Telephone & Telegraph. Think: Ma Bell.
– New AT&T faces cable, wireless and VOIP challenges. So perhaps think: Grandma Bell.
And the one brand that is raising the bar with growing appeal to consumer and business markets, Cingular, is to be discarded.
Updates: Kirkendall, Ribstein and the omnipresent WSJ Law Blog. 8 Mar 06: Holman Jenkins of the WSJ ($) playfully calls AT&T CEO Ed Whitacre “Mr. T. ” and suggests his forthcoming nightmare goes by the name of WiMax. 10 Mar 06 BusinessWeek has an interview suggesting that AT&T make be making a brand new mistake.
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