Money matters

Corporate governance has moved forward from earlier carte blanche control structures. Different management structures have been examined, and changes will be inevitable through regulation or internal pressures for reform. Mandating the money immediately without control or lien is a bad idea and one that has fallen out of favour in fund management. Control by a more proactive group of trustees, an elected board of non-executive directors and more effective risk-burden sharing is on the cards. Tie everyone in and knot tightly to secure corporate loyalty and performance.
Governance capability levels show some ways in which we can exercise more control over the CEO and investment manager. ‘. . . the Sarbanes-Oxley Act is a call to get back to the basics that we have been discussing. Simply stated, the current status quo for corporate governance is unacceptable and must change. . . . The message for chief executive and chief financial officers and senior management is: Uphold your responsibility to maintain effective financial reporting and disclosure controls and adhere to high ethical standards. This requires meaningful certifications, code of ethics, and conduct for insiders that, if violated, will result in fines and criminal penalties, including imprisonment.’ We have shown some of the models for reforming and monitoring the fiduciary duty of the board of directors and investment managers. Organic risk management plays a valuable role here by asking what is the value of leadership – i.e. stripping away performance from perceived reputation. These models have the potential to move us into the light rather than signing your money away and being left in the dark.

Operational risk involves the actions of many business groups, so mapping out the investors and stakeholders is an organic process and a complex one. PRINCE 2 and RAMP are examples of two methodologies that place stakeholders and expected returns on paper. We can deploy risk analytical tools. We can consider poor company performance or financial loss as a hazard requiring detailed risk analysis. The causal element or risk catalyst stems from unsuitable leaders or inadequate investment managers leading to a fall in earnings and damage to business reputation. The dreaded result is the risk event, such as the adverse effect of a start-up investment loss or disastrous M&A decision. Analyse the subjective worth of the company heads – determine the value-added (positive or negative) that can be ascribed to the top management. One effective method is to interview then face to face to find the truth.2 Already, regulators are expanding and are on the war path gearing up for getting tough on criminal activity by corporate management.
The UK’s chief financial regulator is lobbying the government for the same powers as its US counterpart to stamp out accounting abuses by companies and guard against Enron-style business scandals. . . . . It would amount to the biggest shake-up of corporate accounts policing since scandals such as Maxwell and Polly Peck. Under the plan, the FSA would resemble the Securities and Exchange Commission . . .
The widening definition of crime, e.g. to include false accounts and money-laundering, mean that command-control must be established within an organisation. Some of these can be monitored automatically using computer software with AI logic. Companies that provide a rosy interpretation of balance sheets for the public need a more thorough grilling by the auditors, who are now more alert to their duty. The investors and auditors are on the offensive against fraud. The corporate barriers against truthful information for investors are being attacked, led by funds, shareholder advocacy groups and regulatory authorities.