HOT TOPIC

INTEGRITY INFRASTRUCTURE


» Context

A fundamental requirement for good governance is to have a strategic context related to integrity. This chain, from:
(1) establishing a system of common values and priorities, to
(2) providing some standards or guidelines to
(3) feedback loops for effective accountability, is becoming know as an “integrity infrastructure”. This last step is only recently being inclusive of employees, to provide an opportunity to raise concerns about misfeasance or malfeasance without fear of recrimination.

» In the News [please contact us for further archival references]
28Jan08 CFO Magazine “[N]early six years after Arthur Andersen went out of
business in the wake of the Enron collapse, the SEC has finally settled charges against four former partners of the accounting firm [for] violating antifraud provisions of federal securities laws, engaging in improper professional conduct in connection with their Enron work, and recklessness for not knowing that unqualified audit reports… were materially false and misleading [ SEC also critical of “highly aggressive” and “form over substance” accounting practices [see also NYT 29Jan08 @ C6].
10Dec07 PCAOB Issues Disciplinary Orders against Deloitte&Touche LLP and a Former Partner
“Our enforcement program is vital for assuring that public confidence is not undermined by firms of individual audit professionals who fail to meet the profession’s high standards of quality and competence” M.Olson, PCAOB Chair. The firm itself was censured as its management was aware of facts and questions about a partner’s competency for public audits.
07Jul07 Chief Executive (p24, TKrause) Cognitive Bias in the Boardroom
‘Cognitive biases cause a board to overlook pertinent information because… it is assumed that everyone knows the context in which a remark or proposal is intended…” practice points include committee assignments and procedures, communications, and “assumptions of agreement without taking a vote or engaging in a discussion”.
» Briefing Notes - © The Governance Counsel™ (2007)

Principles behind the practice include the values of employee self-respect, increased productivity, decreased risks and positive loss management from more consistent decisions and feedback, through integrity infrastructure practices of statements of values and principles, standards and guidelines, feedback loops and, reviews and updates.

[Governance Literacy: An unfortunate pop tag of choice associated with integrity infrastructures is “whistleblowing”. Just as pop tags of calling executives street terms of art are not generally accepted as in good taste in the boardroom or on the front page (or healthy for those using such terms), ask a group of executives or employees how many would like to be known as a whistleblower? Is an auditor a whistleblower? a general counsel advising on legal risks? It’s just a good governance practice of accountability and feedback for more informed decisions.
At the risk of really tilting at windmills, or goring sacred cows, or something, what about moving off “Code of Ethics” as evoking preconceptions that are too prescriptive and western for our pluralistic, dynamic, global corporate communities. Statements of Principles and Standards, or even Who We Are, with important obligations of director development, and periodic review and refinement of the documents, are recommended.]