As consumers we are constantly barraged with accepting or signing contract of which we nary take a look, figuring that "What are the chances...." of something going awry. But it is for that very reason that items are noted in contracts, board and securities filings -- for that day when things do go off the tracks.
Recently there has been a lot of media attention on the woes of the former executive of Hollinger International. For those of you who have not been keeping up with the trial, it is basically a question of whether non-competes negotiated by/for the leadership are fraudulent or whether they had been exposed to the required scrutiny and been passed by the board's audit committee, through SEC filings and rulings obtained by lawyers.
It seems the more the trial progresses that it seems to be the latter. Maybe not in the absolute best interests of shareholders, but not fraud and thereby not criminal (note -- as I am not sitting in the courtroom and just reading sanitized versions of the proceedings in the newspaper I am giving an opinion and not passing judgement).
During the trial what truly was amazing however was the fact that the Board members who sat on the very important audit committee, signed their names to documents that had these very "non-compete" payments for all to see. Granted it was buried in dozens of pages of other corporate meanderings, but nevertheless do not seem to have been hidden.
This brought to mind the question of how many in corporations sign legal documents without reading what is put in front of them. Most likely it happens thousands of times a day, trust in those that are providing the documents have not put a blank cheque in sheep's clothing for signing.
It is important for all those who are officers of companies and have the legal status to commit the organization to do their due diligence and read that which they sign. If the contracts are more or less the same, then an exception report can be attached for discussion purposes.
Do you initial every page of the document you are signing? You should, because it is not outside the realm of possibilities that these could be switched.
I understand that it is difficult to keep up with much of the paperwork that comes one's way, but as seen in the Hollinger trial, it is imperative not to just skim and/or scan, but to exercise more due diligence and focus. After all, think of how you would look on the witness stand if you haven't!
Recently there has been a lot of media attention on the woes of the former executive of Hollinger International. For those of you who have not been keeping up with the trial, it is basically a question of whether non-competes negotiated by/for the leadership are fraudulent or whether they had been exposed to the required scrutiny and been passed by the board's audit committee, through SEC filings and rulings obtained by lawyers.
It seems the more the trial progresses that it seems to be the latter. Maybe not in the absolute best interests of shareholders, but not fraud and thereby not criminal (note -- as I am not sitting in the courtroom and just reading sanitized versions of the proceedings in the newspaper I am giving an opinion and not passing judgement).
During the trial what truly was amazing however was the fact that the Board members who sat on the very important audit committee, signed their names to documents that had these very "non-compete" payments for all to see. Granted it was buried in dozens of pages of other corporate meanderings, but nevertheless do not seem to have been hidden.
This brought to mind the question of how many in corporations sign legal documents without reading what is put in front of them. Most likely it happens thousands of times a day, trust in those that are providing the documents have not put a blank cheque in sheep's clothing for signing.
It is important for all those who are officers of companies and have the legal status to commit the organization to do their due diligence and read that which they sign. If the contracts are more or less the same, then an exception report can be attached for discussion purposes.
Do you initial every page of the document you are signing? You should, because it is not outside the realm of possibilities that these could be switched.
I understand that it is difficult to keep up with much of the paperwork that comes one's way, but as seen in the Hollinger trial, it is imperative not to just skim and/or scan, but to exercise more due diligence and focus. After all, think of how you would look on the witness stand if you haven't!
1 comment:
Anyone who depends on auditors, audit committees or accountancy firms for accurate and germane information in relation to any large organization is sadly unwise. Of course things are different in different companies but as a rule, you need to know to whom the auditors report and who chooses the audit committee members from the Board.
I wouldn't be surprised if Conrad, one way or another, didn't choose the Board members, the audit committee and the firm of accountants required to review the company's annual activities.
From my observations, Board members chosen in this fashion have little interest in the company and only think about due diligence when there's a possibility of being sued personally. They are a rubber stamp, just as the audit committee is a rubber stamp. They don't read things because there's no point in reading things.
The outside auditors are being paid millions every year to "audit" the company and they're worth every penny because once purchased, they seem to find only what senior management wants them to find and they don't intend to risks those millions every year for something as stupid and infinitely variable as the truth. They have the GAAP (Generally Accepted Accounting Principles) to hide behind and that's effective because they actually invented and wrote the GAAP.
You're fighting a losing battle, Ms. Moser-Stern. Still, I hope you keep it up because it's kind of refreshing for some of us old cranks anyway.
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