Tag Archives | corporate governance

Investor Trust in Equity Markets may not be Saved by the Dodd-Frank Bill

By on January 24, 2011 in Leadership Books, Perspectives, Trust


At a pre-conference session of the Corporate Governance Conference held annually by the Corporate Director’s Forum in San Diego I attended a panel discussion on the regulatory landscape. Here, Lynn E. Turner, Senior Advisor to LECG, an international forensics and economic consulting firm, and former SEC Chief Accountant, shares an informative perspective of what American investors see. My observation is that regulators think they can fix this view with regulation.

If investors do not invest in equities — and they are not — it is not good for the country. They are not investing because we have a real problem with trust. According to Turner, “They are not going to read the Dodd- Frank bill, but they know what they see and they see a rigged system because offenders are not prosecuted.” Enforcement has been non-existent.

Why, you might ask, is that so? Because US District Court Judges are political appointees and it is not good for their political career to offend the politicians who appointed them, so they throw these cases out of court.

One that did make its way to court was the trial the SEC brought before Judge Rakoff to penalize Bank of America. Rakoff resonated with the sentiment of the public in his view of the SEC’s case — why bring the case against the bank and not the executives? Why should the buying public have to pay AGAIN for potentially scandalous behavior of individuals?

Judge Rakoff refused to approve a $33 million deal that would have settled a lawsuit filed by the Securities and Exchange Commission against the Bank of America. The lawsuit alleged that the bank failed to adequately disclose the bonuses that were paid by Merrill before the merger, which was completed in January at regulators’ behest as Merrill foundered. He accused the S.E.C. of failing in its role as Wall Street’s top cop by going too easy on one of the biggest banks it regulates. And he accused executives of the Bank of America of failing to take responsibility for actions that blindsided its shareholders and the taxpayers who bailed out the bank at the height of the crisis.

You can read more about Rakoff’s treatment of the Bank of America case, which was thrown out of court (New York Times).

Two last comments and a question before sharing the last video clip of Turner’s comments. Many people believe that the Dodd-Frank bill was created by the same men who caused the financial melt-down in the first place, and that the players in Washington DC haven’t changed, so we’re still commandeered as a nation by the same thinking that got us here in the first place. What do you think?

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Frank Partnoy’s Passion is Investor Greed, or Rather the Unveiling/Stopping of It

By on April 5, 2010 in Business, business planning, Leadership Books, Perspectives, strategic planning, strategy, Trust, Values

Larry and I had occasion recently to dine at the University of San Diego (my MBA Alma Mater) with Frank Partnoy and several others from the Corporate Director’s Forum.  Pictured here to Frank’s right is Cindy Richson, an expert in corporate governance and critical member of the organizing committee of the Corporate Governance Conference that Larry chairs each year since its inception five years ago.  The group was gathered to discuss next year’s January Corporate Governance Conference.  I was there as a spouse, so my view of the event was somewhat different.

My fascination was with Frank Partnoy, law professor at USD.  First of all, he’s a very approachable and funny human being.  Second, he is the most entrepreneurial lawyer/professor I’ve met in a long time.  But third, and most fascinating to me, is the list of books that he has written, all seemingly devoted to uncovering the dirt on Wall Street and the investment world.

These books are entitled, in the order they were written, F.I.A.S.C.O.: The Inside Story of Wall Street Trader, followed by “The Match King,” about Ivan Kreuger, the infamous “Match King.”  Kreuger was known as the “Match King” because he held monopolies on the sale of matches in many countries, but his financial empire extended to banking, construction, film, mining, paper, railways, and telephones. He was a statesman as well as a financier, and usurped Jack Morgan as the leading lender to Europe. He rescued France from bankruptcy, and nearly saved Germany. He charmed everyone, from President Hoover to Greta Garbo to the journalists who put his boyish face on the covers of Time and The Saturday Evening Post. Kreuger favored perception over reality. He believed financial statements were an art, not a science. When asked to name his three rules for success in business, Kreuger advised “silence, more silence, and still more silence.”  He was found dead with a bullet through his heart.  He was labeled by some pretty significant historians, among them John Kenneth Galbraith (a favorite of mine) and Arthur Schlesinger, Jr. as the greatest fraud in history.

Frank’s most recent book is called “Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.”  I can honestly say that I have not READ these books, cover to cover, but I have met Frank, and he’s a man with a mission and it’s a mission I heartily endorse.

Here’s what his website (www.frankpartnoy.com) say about Infectious Greed.  “Recent corporate scandals have brought our attention to the dangerously complex and unregulated financial practices of some of the world’s most successful companies. Frank Partnoy, author of the riveting business bestseller F.I.A.S.C.O.: The Inside Story of Wall Street Trader, brings his impressive understanding of complex financial transactions and legal expertise to a fascinating tour of the institutions, scandals, and business cultures that brought us to this moment. In tracing the evolution of increasingly complex derivatives’ use over the past fifteen years–and an appetite for risk and return that made it possible–Partnoy demonstrates that despite the media’s narrow focus on Enron, it was only the tip of the iceberg. The culmination of a steady erosion of personal and institutional control, today’s financial landscape is loaded with ticking time bombs with far greater potential for harm and loss than any other period in our history.”

Go Frank, go!  I hope this latest book sells as many or more than your previous books, and that the people who should learn their lessons do so.  The dinner was delicious, and thank you again for sharing your roasted garlic.


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Always go back to the mission (and vision).

By on December 1, 2009 in Business, business planning, Leadership Books, Perspectives, strategic planning, strategy, Trust, Uncategorized, Values

We have a new friend, Kim DeMotte, whom we met at a fabulous conference last month for people who want to build on their success to expand the good they can bring to the world. At a dinner, Larry and Kim struck up a conversation about corporate governance, and Kim said some things that resonated with Larry and myself.

First, you have to trust people to do a good job, and in this instance we were speaking of someone holding the job of CEO. When a CEO reports to a board, how do you govern that CEO such that they are responsible AND allow them to do their job, their way.

In this video with Kim, you can get it straight from “the horse’s mouth,” (sorry Kim, not a literal translation)… Kim is an advisor to the corporate world. He lives in St. Louis. What you should know about Kim, in addition to his comments here on corporate governance, is that he authored a book called “The Power of No” in which Kim (and contributors) illustrate just that! Get the book, it’s excellent!  I particularly appreciate Kim’s straight talk.  No muss, no fuss, just straight talk.  We could use more of that today, with a sagging low in trust of leaders in this country (and elsewhere, we don’t on the corner on that malady).

In the name of mission (and I would say some think mission is vision, so I’m including vision here also), do the right thing. Clear communication enables a whole host of positive effects. Too many wus’s won’t take a hard stand, set a clear boundary, say no. Amazingly enough, some of the most mature, noble looking men fall into the trap of being too nice, and mucking it up for everyone from the top of an organization down to the last person to feel the effects of poor leadership.

To that I say, “Cut it out!” Get Kim’s book, read Susan Scott’s “Fierce Conversations,” and go back to the mission. Whatever doesn’t fit the vision and the mission, do not tolerate.


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