Trust Digest 58 (July 22, 2014)


A Matter of Trust
Is it possible to erode that which isn’t there? Recent scandals at General Motors and the U.S. Department of Veterans Affairs are but the latest headlines that leave employees and the public wondering if American private and public enterprises have any conscience. Robert Hurley, professor at Fordham University in New York, knows better. He and the team at the Consortium for Trustworthy Organizations believe that ethical companies still exist and that they can help stem the tide of distrust. It's with this goal in mind that the Fordham-based organization held its "Forum on Building a Trustworthy Organization" in New York last month.
Key Words: CFTO, Trust Forum
Trust Issues: Communication, Capability


Your Rights, Buried in Paperwork
When shareholders receive takeover bids for their companies, they may feel like celebrating. But what if the buyout price doesn’t fully reflect a fair value for the company? That was the question asked by a group of more than 100 Dell shareholders last year as that computer giant was being taken private by its founder, Michael S. Dell, for nearly $25 billion. To get an answer, they sought an independent appraisal of the company, a process now being overseen by J. Travis Laster, a vice chancellor in the Delaware Chancery Court.
Key Words: Shareholders, Dell
Trust Issues: Transparency, Integrity


Whirlpool Wants Congress to Ban Class-Action Suits Tied to Energy Star Program
After government testing showed that scores of consumer products carrying the Energy Star label did not deserve the listing, a wave of class-action lawsuits was filed against the companies that manufacture the products. Now, at least one major manufacturer wants Congress to ban the lawsuits and is threatening to withdraw from Energy Star, an Environmental Protection Agency program, unless it gets its way. But consumer advocates say such lawsuits are a healthy form of enforcement.
Key Words: Whirlpool, Energy Star
Trust Issues: Integrity, Capability, Accountability


Barclays' 'Dark Pool' Volumes Drop in Wake of Lawsuit, Data Shows
Volume in Barclays Plc's private U.S. trading venue, or "dark pool," fell 79 percent in the week and a half after the New York attorney general accused the British bank of giving an unfair edge to high-speed traders, according to data released on Monday. The number of shares traded in Barclays' LX (BARC.L), an alternative trading system, dropped 66.3 percent in the week of June 30 to around 66.4 million shares from around 197 million shares the previous week, according to a report by the Financial Industry Regulatory Authority. The report from FINRA, Wall Street's self-funded regulator, included only the most widely traded securities.
Key Words: Barclays, Dark Pools
Trust Issues: Transparency, Accountability


After GM: Can In-House Lawyers Survive?
The allegations are prima facie awful. In-house lawyers defending wrongful death claims knew for eleven years that some GM vehicles had an ignition flaw that could cause accidents. They didn't report the flaw internally or to regulators because they didn't want to prejudice GM's position in ongoing or future litigation. The ignition flaw, GM has now acknowledged, eventually resulted in 13 people being killed in 54 accidents. The company was forced to recall about 30 million vehicles at a cost of more than $2.5 billion.
Key Words: GM, General Counsel
Trust Issues: Communication, Integrity, Benevolence


Five Instances Of US Diplomatic Dysfunction In The New Republic's Israel-Palestine Cover Story
The latest issue of The New Republic includes the definitive account of Secretary of State John Kerry's attempts at reaching an Israeli-Palestinian peace deal. No one comes off looking good. During the talks, which began last summer and ended in early April, Israeli Prime Minister Benjamin Netanyahu was never really able to convince his counterparts in the U.S. or Palestinian governments that he was serious about making peace and decided to hang on to his anti-peace process right-wing coalition partners at a crucial point in the talks.
Key Words: Israel, Palestine, Diplomacy
Trust Issues: Communication, Capability


Missed Targets: When Companies Fail to Keep Their Key Sustainability Promises
When the Walt Disney Company reached out to Rainforest Action Network for help in crafting a new sustainable paper sourcing policy in 2012, the nonprofit was all ears. As the world's largest publisher of children's books and magazines, with more than 700m products sold each year, Disney’s paper sourcing influences the operations of 25,000 factories in more than 100 countries.
Key Words: Environmental sustainability, Target, Walmart, Disney, 3M
Trust Issues: Integrity, Sustainability


Ignoring the Compliance Message
The shocking results noted above are even more disturbing when you consider that 54 percent of the respondents noted that the CCO in the company wears two hats, meaning they are not a dedicated CCO but are responsible for other functions. Most of these two-hatted CCOs are also the general counsel but we all know that the general counsel and the CCO have entirely separate responsibilities and need to be separated in functions and operation. These responses are incredible. How can a company operating today have no CCO or a non-dedicated CCO? Talk about a reckless business strategy.
Key Words: PWC Compliance Survey, CCOs
Trust Issues: Capability, Responsibility


How UK Business Enables Corruption in Poor Countries
UK professionals are acting as enablers for corrupt deals in developing countries. It happens in a number of ways and involves a range of industries, including law, banking and accountancy. For example, a corrupt state official from a developing country may seek out the services of a UK-based solicitor or accountant to process their spoils and, importantly, confer legitimacy to their actions.
Key Words: Globalization, Corruption
Trust Issues: Regulation, Responsibility, Integrity


SEC Petitioned for Tougher Whistleblower Protections
A coalition of whistleblower advocates has petitioned the Securities and Exchange Commission, urging it to do more to prevent retaliation against those who report malfeasance at public companies. The effort, intended to coincide with the fourth anniversary of the Dodd-Frank Act, is spearheaded by the law firm Labaton Sucharow, the Government Accountability Project, a whistleblower protection an advocacy organization, and 250 other organizations. Two petitions call upon the SEC to “clarify and strengthen certain aspects of the agency's Whistleblower Program.”
Key Words: SEC, Whistleblowers
Trust Issues: Responsibility, Accountability


Global Crackdown on Offshore Secret Tax Accounts Yields €37bn
Governments across the world have collected more than €37bn of tax from secret offshore accounts since 2009, it emerged on Monday as new details were unveiled of the next phase of the global crackdown on tax evasion. The Organisation for Economic Co-operation and Development published its global standard for automatic information exchange, aimed at removing the secrecy that provides evaders with safe havens for their cash.
Key Words: Tax Evasion
Trust Issues: Integrity, Regulation, Transparency


Creating Awareness with Internal Audit's Stakeholders: Sometimes It Takes "Marketing"
At The IIA’s recent International Conference in London, I heard a colleague mention that he absolutely hated explaining internal auditing to non-auditors. “When I have to ‘sell’ people on the internal audit function,” he said, “it feels too much like what a used-car salesman does. It just doesn’t feel professional to me.” His comments didn’t come as a surprise to me. I know there are many who don’t like the idea of having to “promote” their internal audit functions. But his words still concern me. Because my blog is intended primarily for internal auditors, I will skip past the issue of professionalism among those who routinely “sell” as part of their job and cut to the chase about our profession.
Key Words: Internal Audit
Trust Issues: Communication, Capability


Time Warner Takes Aim at Fox's Governance
Companies seeking to fend off hostile takeovers often trash their suitor's business model. Time Warner Inc., in rejecting an $80 billion bid from 21st Century Fox, is taking aim at its suitor's corporate governance. High on Time Warner's list of reasons for rejecting Fox's $85-a-share cash-and-stock bid is the tight grip of Fox's chairman and chief executive, Rupert Murdoch, who with his family controls 39% of the votes at the entertainment and television-news company.
Key Words: Fox, Time Warner Acquisition, Governance
Trust Issues: Capability, Integrity


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