To all of you in the path of Hurricane Florence, I wish you the best in your battle against the winds and rain. If you need something to read, these are some of the compliance-related stories that recently caught my attention
Why Compliance Programs Fail—and How to Fix Them by Hui Chen and Eugene Soltes in the Harvard Business Review
The ubiquity of corporate misconduct is especially surprising given the staggering amount firms spend on compliance efforts—the training programs, hotlines, and other systems designed to prevent and detect violations of laws, regulations, and company policies. The average multinational spends several million dollars a year on compliance, while in highly regulated industries—like financial services and defense—the costs can be in the tens or even hundreds of millions. Still, all these assessments deeply underestimate the true costs of compliance, because training and other compliance activities consume thousands of valuable employee hours every year. [More…]
When You Anonymously Report on Trump by Matt Kelly in Radical Compliance
Like millions of other Americans, I read that anonymous opinion column in the New York Timeslast week, apparently written by some senior official in the Trump Administration quietly aghast at the nuttiness of President Trump — and I thought, “Wow, that guy is a cowardly jackass.”
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How would a compliance officer handle an anonymous report like that?
After all, that’s the closest approximation to what this missive is. An employee is raising alarms about executive misconduct, and doing so anonymously. Compliance officers field reports like that all the time. So what layers could we peel back and examine here, to appreciate how our own whistleblower reporting systems might work better? [More…]
A Retrospective on the Demise of Long-Term Capital Management by Paul L. Lee
LTCM was the largest hedge fund operating in the United States and its brush with death provided a preview of some of the forces that would contribute to the near collapse of the U.S. financial system in September 2008. In August and September 1998, as in September 2008, market fears were all consuming. Secretary of the Treasury Robert Rubin was quoted at the time as saying that “the world is now experiencing its worst financial crisis in 50 years,” and Chairman of the Federal Reserve Board Alan Greenspan said that “he had never seen anything in his lifetime that compared to the terror of August 1998.” Ironically, the success of the U.S. authorities in minimizing the effects of the near collapse of LTCM and the effects of other market disruptions in the 1990s may have lulled the markets and the authorities themselves into a false sense of confidence in their ability to manage future crises.[More…]
How CEOs Reinvented the Dating Game Scandal in Stock Options by Edmund L. Andrews
In Dating Game 2.0, however, many top executives appear to be reaping the same kinds of windfalls with a new variant on the original scam. Instead of manipulating the dates of option grants to match a dip in the stock price, companies appear to be manipulating the stock price itself so that it’s low on the predetermined option date and higher right afterward. [More…]