A cursory review of major corporation ethical crises shows that Board members were as surprised as everyone else.
So, the reality is – don’t expect the Board to add much when it comes to establishing an ethical culture or heading off the existence of unethical conduct. The culture and conduct is typically just a function of organization leaders (formal and informal), not the Board. Yikes. Looking at some company leaders…. just yikes. But anyway…
That does not mean Board members are not ethical; they simply are not engaged. Maybe.
Board members are often in it for the prestige, perks, and paycheck… and lack the time, interest, independence, and competence to effectively add value when dealing with ethical issues. I’ll let you decide if their (lack of) behavior is unethical – I certainly have my own opinion.
Consider the recent apparent fraud of Elizabeth Holmes and Theranos (Healthcare Industry). The Theranos Board was made up at one time or another by Henry Kissinger (former U.S. Secretary of State), George Schultz (former U. S. Secretary of State), Jim Mattis (former U. S. Secretary of Defense). Few Theranos Board members had a science and medicine background and none took even basic steps to prevent the massive fraud.
Another case, recently uncovered by the Miami Herald newspaper, is about the compensation of the CEO of the Florida Coalition Against Domestic Violence. The Coalition Board approved $7.5 million in compensation and benefit payments to the CEO over a three year period. The money should have gone to assist victims of abuse across the state. Stayed tuned for my next blog on this specific case – it will be titled, sadly:
“The Victims Twice Abused”
When questioned later about the payments, the Coalition Board members acknowledged they did not know what they were approving. So much for board engagement and competency. Their ethics could be questionable too, if you ask me.
I also recently listened to the Congressional testimony of two former Wells Fargo board members who “served” the company during the massive bank branch fraud (opening phony accounts in customers’ names among other illegal and unethical things). As they clearly stated, they were in it to serve shareholder interests and not paying much attention to customers’ interests. Wells Fargo is clearly still struggling to get it right. See my last blog, titled:
“Déjà vu”
The truth in the boardroom? It’s also a lot of “lack of engagement, competence, independence, ethics… déjà vu.“
Aren’t board members supposed to oversee the organizations that they serve? Aren’t they supposed to raise the tough questions? Aren’t they supposed to ensure the existence of sound controls, processes, risk management, and governance?
Well, yes, but if they don’t know what they are doing, don’t care, or they are not told the truth, don’t expect any miracles from board members.
I have decided to officially trademark the term: Total Ethical Auditing™ – as this seems to be a complete, natural extension to my work around Total Quality Auditing®, which begins with a point of focus explaining to Internal Auditors the importance of auditing culture and ethics at our organizations.
The first thing you should know about Total Ethical Auditors?
They report the truth to the Board as well as senior executives. They are fully aware that the Board does not necessarily hear the unvarnished truth from executives (who were selected by the Board and can be fired by the Board) and others. They know that most (if not all) ethical failures occurred because someone did not speak up or ask the right questions in a timely manner.
Well, I am here to tell you…
Silence is not golden for Total Ethical Auditors under any circumstance. They speak the truth. And they hold the Board accountable for the truth.
Stayed tuned for more on Total Ethical Auditing™ in my next book….
