Close GC Supervision
October 24, 2006 | Filed Under On The Dock, Compliance
Intrepid law.com reporter Sue Reisinger at Corporate Counsel has a sobering account of Prudential Financial’s experience in settling claims with US DOJ of alleged wrongoing at a brokerage subsidiary.
Other companies have had requirements of outside oversight over post-settlement compliance programs. The new twist for Prudential Financial is that some of these terms focus on its GC; indeed, the settlement:
“…requires GC Susan Blount to personally design, install, and oversee a complex compliance program. Moreover, Blount must report on the program to federal prosecutors twice a year for the next five years.”
What is unclear as to how this will work in practice. Twice-yearly reports to a US Attorney. What if there is a disagreement in the scope or substance of the compliance program? Ms. Reisinger’s article also raises the specter of GC Blount’s own liability for the effectiveness of the program. That would be a potential expansion of a job description.
This oversight will undoubtedly give ample fodder for increased substance to compliance training programs at Prudential Financial in the future. That and the $600 million in fines and penalties.
Here’s the obligatory DOJ press release. Some good news, though: BusinessWeek still rates Prudential Financial a buy, the settlement notwithstanding.
Wired GC — Unplugged Show #6
September 14, 2006 | Filed Under Unplugged - Audio, Compliance
“Legal Literacy for Business”
It seems like an almost daily occurence: you pick up a newspaper and read about a company that has a CEO, a board member, or even a GC under some ethical cloud. Once a matter has come to the attention of the public (and the regulators), a company is in damage control mode.
One way to guard against this is for corporate counsel to practice preventative law and educate managers in the business case for ethical conduct.
In today’s audiocast, we address this timely issue with Hanna Hasl-Kelchner, a corporate counsel and author of “The Business Guide to Legal Literacy.”
Today’s show is here (just click on the “mp3″ link):
mp3 (9:12 min; 2.1 mb)
Show Notes:
– Ms. Hasl-Kelchner’s website is found here.
– Her bio is here.
– The Legal Literacy weblog.
– A link to Ms. Hasl-Kelchner’s book on Amazon. Buy it! It’s cheaper than litigation…
Listen to the Whistle Blow
May 1, 2006 | Filed Under Regulation, Compliance, In the News
Can you hear it?
The news media is tracking the issue of what companies are doing to balance the orderly administration of compliance programs with federal laws such as Sarbanes-Oxley.
And the take is somewhat anti-business; consider this treatment of arbitration provisions:
Another tactic firms are using is to require employees to sign contracts that compel any who exhaust the Labor Department’s process to submit allegations of Sarbanes-Oxley violations to binding arbitration rather than filing suit in federal court.
A year after the law was passed, Salomon Smith Barney, the brokerage arm of Citigroup, won its bid to force into arbitration a former research analyst who claimed he was fired for refusing to alter a research report. The allegation clearly is covered by Sarbanes-Oxley, the court held, but that doesn’t override the contract the worker signed agreeing to arbitration.
There’s a fine line between encouraging employees to bring forward concerns and having some reasonable chance to hear about it and correct any issues before the Feds come knocking on the door.
Corporate Governance and The Big Picture
April 12, 2006 | Filed Under Compliance, Governance
It’s like the wayward uncle who just won’t stay away.
Alan Murray of the Wall Street Journal has a perceptive take ($) (temp link) on emerging standards of corporate governance. Memo to company executives: this is one trend that isn’t going away.
Mr. Murray notes a recent study by Institutional Shareholder Services that found that stakeholders like pension and mutual funds have increasing expectations for corporate governance performance at companies in which they invest.
Here’s one example:
Is all this attention to corporate governance good for business? Many corporate executives I talk with worry about the creation of a culture of compliance in their companies. Too much executive time and attention, they fear, is spent on defensive matters like governance, accounting and complying with regulations, leaving too little time and attention on the company’s growth.
But big investors clearly believe attention to governance increases the value of their investments. Fifty-nine percent said monitoring corporate governance of companies they invest in enhances investor returns.
As more institutional investors look globally for attractive returns, corporate governance will take on an increasingly international tone. Metrics will be developed to allow sophisticated investors to keep score of best practices.
And U.S. executives who remain too focused on legislation like Sarbanes-Oxley may be looking through the wrong end of the governance telescope.
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.
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