Comments

Does a fine that will never get paid really deter someone? What about being in a prison and still being able to work and make millions of dollars? Most people, if given the choice between the opportunity to live like a king for a year and then go to an easy street prison, or to live as a normal person for all of their life and not go to white color prison, would probably choose to live like a king for a year. The only thing that can stop these guys is a case of morality and integrity, which you can't buy at the local store. Sad state of affairs we're in.

Posted by Phil Gerbyshak at August 4, 2005 6:13 PM

Tom - I know from your Washington, D.C. days that you [we, since I was at state] learned to have a plan A, B, and C going at all times.

Seems some "CEO's" are brilliant at bright collar crime - or end up there somehow - wonder if some of them do budget in detention time as a risk worth taking - a plan B or C if you will - a risk worth taking, considering the incredible "upside wealth" to sneak off with!?

Posted by Sean at August 4, 2005 6:53 PM

Funny, Sean, that you should mention Plan A, B, C. I was working part-time at State when Kissinger moved in from the NSC. He made one "little" change that I remember well. Previously all SECSTATE action docs had included 3 options. Needless to say the middle one was always crafted to be the choice, neither quite here nor there--pretty much like State itself. Kissinger dropped "B," and insisted on two options only. Not sure it actually made a difference, but amusing at least. My best experience at State, by the way, was the occasional chance to work with Dr K's #2, Larry Eagleburger.

Posted by tom peters at August 4, 2005 8:05 PM

The idea that "many of today's chieftains are treated like royalty, and increasingly are outta touch with the Rank & File" fits the sports industry, as well. Exchange "chieftans" for "athletes/owners/league administrators". My "predictable surprise": what we see in White Collar World will happen to our beloved sports...

Posted by Lee H. Igel at August 4, 2005 10:13 PM

Ah, here you are! I was looking for you over on the AOl Better Life Coach blog. I'm glad you're still blogging somewhere!

Posted by Marianne Powers at August 4, 2005 10:18 PM

So maybe it isn't the sexiest topic in the world. And yes, its implementation can be laborious, lengthy, and slow to show dividends. But good corporate governance is of paramount importance to any organization-not just in terms of compliance with rules and regulations, but also in terms of overall success.

The recent public company scandals in the US have certainly underscored the need for good corporate governance policies and practices to provide assurances to shareholders. But while no one would dispute the fact that good corporate governance is a good thing, not all public companies are embracing it willingly.

There is a nice quote that would help put thingz in perspective which i'd like to share.....

"The fraudster is like an unwelcome magician conjuring clever tricks. There is a certain mystery about fraud. Yet most fraudsters are not clever at all. Rather, the companies they defraud unwittingly play the part of magician's assistant." -David Davies, "Fraud Watch," Second Edition, 2000

Learning from recent events
------------------------------------

As the facts and circumstances underlying the recent financial disasters begin to emerge, it's clear that the following contributory factors were present:

Pressure:
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Pressure is often a major cause of fraud. What pressures are people under in your company? Business pressures, such as meeting financial reporting targets, incentive plans tied closely to financial results, and the desire for promotion. And there are often personal pressures-gambling habits, substance abuse problems, divorce settlements, debt, and extravagant lifestyles. If you fail to recognize and manage such pressures, don't be surprised when fraud is subsequently uncovered.

Escalation :
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Escalation usually results from a lack of attention to small-scale infractions. The majority of frauds begin with a small error, which is then concealed, or unauthorized risk-taking of a minor nature. Effective fraud risk management should seek to detect these minor incidents before they spiral out of control into a major fraud. Fraud awareness at all levels of the organization, clear reporting channels, and protection for those who report suspicions of fraud, will go a long way to ensuring detection at an early stage. Better still,
rigorous recruitment screening should ensure you don't hire "bad apples" in the first place.

A disaster waiting to happen:
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Abnormal levels of fraud risk are often created by a combination of factors related to risk management and internal controls, and the wider business environment (including personnel, culture and ethics, management and reporting structures, reward structures, and communications).

Feel free to share ur thoughts & views....

Posted by K.Sriram (India) at August 5, 2005 2:51 AM

Phil, you summed up my thoughts so concisely! Thanks!

I might just add that although set deterrents for crime might seem scary for many of us, those in the culture of crime are less affected. Thugs in our streets don't have conversations like we might about it. You won't hear a street criminals saying "I don't know man, we could really get in trouble for this." Likewise, with corporate criminals, they feel above it and have more than likely considered how they would evade prosecution in advance of thier actions; possibly even, as Sean suggests, crunching the numbers to measure the risk against the potential gains.

To really frighten corporate criminals, it would be more effective to throw them into the tank with Ima "Your My Bitch" Hardman and his friends ALONG with seizing all of their assets AND actually repossessing their property AND prohibiting them from engaging in any management or private business ventures in the future. Using a soccer analogy, how many yellow cards will they issue before they actually throw someone out of the game?

The Marth Stewart example makes a joke of the whole process! They really showed her didn't they? The poor thing, what will she do now?

Posted by Tom O'Leary at August 5, 2005 5:05 AM

>morality and integrity... sad state of affairs we're in.

Have to agree. Now, cue howls of outrage...

Truth is, commerce as it has been predominantly practiced is essentially ****ed.
As are all of us who've gone along with it. And still do.
We genuinely need something different.

My 'when I'm king of the world' solution is to change the default attitude toward any and all with 'real' responsibility for how an enterprise is governed... assume they're all guilty and simply lock 'em all up... have 'em sit a 'parole' hearing to get freed.

Certainly radical. Crazy too. As is allowing so many to get away with so much for so long.
Maybe we could lock up the politicians too?
Just thinking aloud. (And is thinking still allowed in our increasingly homogenized ever-so-same world?)

;-)

Posted by gulliver at August 5, 2005 5:52 AM

Positive reinforcement only works when the recipient views it as positive rather than as an entitlement. That's why guys like Kozlowski, Shelton and others who looted their companies are where they are: they view the perks and royal treatment as entitlements.

Posted by Patrick Lamb at August 5, 2005 6:42 AM

This is not really any different from what takes place in government-federal, state, county or local. As long as it's someone else's money they will do whatever they think they can get away with.

For that reason, and many more, I despise public corporations, Democrats and Republicans.

Find the remains of our Founding Fathers, clone them and start over.

Posted by Nick at August 5, 2005 8:26 AM

I don't understand (ok, really I do) how these high-ups can get away with manipulating numbers to such a large degree without anyone knowing at the time what's going on.

Presumably, it's the same grey area of integrity that consultants and companies use when invoicing billable hours for a project. There's often padding built in there. But the leap to billions of dollars and conscious fabrication that large company swindlers make is reprehensible. The part that's SO frustrating is we always hear "With great power comes great responsibility." But with these cases, it almost needs to be amended to add "except if you steal money on paper and wear a tie to work. Then, do whatever you want."

Posted by Dante at August 5, 2005 10:25 AM

In my humble opinion...there is no current issue more demanding towards corporate executives than ethics. Its a very very slippery slope. Everything starts with one little infraction...one little compromise. As a CEO myself...I know the pressure put on executives but in the long run its always better to face the music today on something your honest about then the alternative. It reminds me of a story where a father is taking his two kids to an amusement park and the ticket person asks the father how old the two kids are. He responds...this one is 6 and that one is 13. They ticketing person says why don't you just tell me that he is 12 and he can get in for half price...nobody will know the difference...the father says yes...but my son will. These are guiding principles indeed.

Posted by Stacy Gentile at August 5, 2005 10:50 AM

What about making corporate robbers work for Martha Stewart as entry level interns earning minimum wage for 10 years and simultaneously cap Martha's profit levels to a very modest level, donating the majority of it to provide ethics training to American businesses. That way, Martha would be pissed off, the others criminals cleaning her toilets would be the target of her wrath (supposedly she's not the most pleasant boss even when she IS making millions) and a preventative ethics programme would be funded.

Posted by Tom O'Leary at August 5, 2005 3:04 PM

buying viagra online to australia I've been privy to the 'inside track' (as covertly recorded by a group of corporate espionage experts) of the top management team at a major corporation for a couple of months now and I couldn't let this post pass without mentioning that while corporate corruption is widespread, the message that's being sent to management teams is to spend an inordinate amount of time covering their backsides so as to avoid even the appearance of wrongdoing. You might say this is a good thing but it's time taken away from the good running of the business.

Posted by Noel Guinane at August 5, 2005 3:27 PM

Oh Martha, Martha! Can't you get a grip? Those old habits are popping up once again. You know the one, the one where you know better than everyone else. And the other one, where you are better and more important and smarter than everyone else and are very good at outsmarting (in this case) the feds.

So, the old habits are keeping you closer to the four (plus plus) walls of your estate in Bedford for three more weeks.

I understand you went and called the Yoga Studio and chewed them out about telling the press you were there.

Let's understand this set of ethics ... your position is ... I'm mad at you for telling on me for being somewhere I shouldn't be.

Dare I say it?? That's not a good thing!

Posted by Brenda at August 7, 2005 3:27 PM