Boardroom naivete, inaction and ignorance leads to corporate fraud
10 November 2014
CMI Ambassador urges business leaders at global convention "urged to adopt practical ways of preventing abuse"
The naivete, inaction and ignorance of some directors is landing companies with large bills for fraud, miss-selling and the theft of intellectual property (IP) according to Prof. Colin Coulson-Thomas speaking at the Institute of Directors of India's 14th London Global Convention on Governance and Sustainability. His investigations have found that “many boards fail to protect corporate IP and/or introduce structural and other changes that create new opportunities for abuse, while seemingly unaware of practical and cost-effective steps that can be quickly taken to prevent breaches of rules and policies and make if easier for people to excel and behave in desired ways”.
According to Coulson-Thomas: “Experienced directors sit and have sat on the boards of financial institutions . Yet, while statements of values are distributed, culture change programmes are initiated and governance codes are complied with, the costs of naivete, inaction and ignorance continue to mount. Too many directors are nice but naïve. They hope for the best rather than take precautions and make things happen. Companies manufacture at locations where the theft of IP is endemic and then express surprise when competitors introduce offerings similar to their own. Worthy and general pronouncements are made but practical steps to implement them are not taken.”
As delegates assembled for IOD India's 2014 London Global Convention the compensation bill for miss-selling payment protection insurance alone reached £20 Billion. An affordable approach such as providing customer-facing staff with knowledge-based performance support, as advocated in the professor's recent report Transforming Knowledge Management, can enable compliance, prevent many forms of miss-selling and deliver other benefits to people and organisations.
The CMI Ambassador believes that “calls for general and fundamental change of structure, culture or procedures should trigger alarm bells. Continuity can be as important as change, particularly continuity of relationships and consistency of experience that meets customer expectations and requirements. Too much change and change for changes sake can create new opportunities for fraud, theft, hacking and other abuses. Uncertainty during a period of transition or transformation, or while changes are bedding in, can create new loopholes and vulnerabilities.”
The professor finds: “Customers, employees, business partners, suppliers and investors often represent a diversity of cultures, religions, values and nationalities. A variety of perspectives can spur creativity. General culture change is often advocated where there are affordable ways of quickly changing behaviour and achieving other aims with existing people and cultures. Fraud and other abuses usually result from technical loopholes and vulnerabilities rather than deficiencies of general attitudes and values.”
In addition: “Too many directors are concerned with rhetoric rather than reality. They feel virtuous rather than deal with problems. They call for a culture of greater vigilance and honesty rather than adopt better monitoring systems, counter fraud measures and/or practical steps to quickly close loopholes and make it easier for people to respond in desired ways. Principles that set the tone are not enough. People in the front-line many need the performance support that makes it easy for them to behave and respond appropriately and difficult for them to ignore policies and break rules.”
The London Global Convention “Boards to Lead: Effective Corporate Governance and Sustainability” was organised by the Institute of Directors of India (IOD). The four-day programme of events included a two day conference that was held at the Millennium Hotel in Belgrave Square. Coulson-Thomas spoke during a plenary session dealing with corporate fraud, audit and the vigilance mechanisms required by contemporary organisations. He can be contacted via: http://www.coulson-thomas.com/
Prof. Colin Coulson-Thomas, CMI Ambassador and a member of the business school team at the University of Greenwich, holds a portfolio of board, public and academic appointments and has helped companies in over 40 countries to improve board and corporate performance. Author of over 50 books and reports he has held professorial appointments in Europe, North and South America, the Middle East, India and China. The report Transforming Knowledge Management on a more affordable route to high performance organisations and his other recent books and reports are available from Policy Publications: http://www.policypublications.com/