Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success

Integrity versus Spin

It's fascinating to see just how many companies have had serious problems related to cultural issues and lack of honesty. We've touched on just a few—the tip of the iceberg. To get a sense of how pervasive these problems seem to be, we can look at news reports about three well-known companies from just one day late in 2009. And as you think about what happened at these companies, you'll want to also consider the public relations spin they tried to put on what had occurred.

General Electric

On this day came news of General Electric's $50 million settlement with the U.S. Securities and Exchange Commission over allegations of repeated accounting improprieties, with a corporate eye toward “making the numbers.”

The story refers to a priest who worked for GE years ago after obtaining a degree from the University of Pennsylvania's Wharton School. When informing a GE executive that results were coming in low due to overseas losses, the employee was told, “Just reverse a few journal entries,” because headquarters would be displeased if his unit missed its numbers. Further, his boss told the man that he “was taking those accounting courses too seriously” and directed him to “squirrel away excess earnings in fake accounts with made-up names,” to be used when earnings went down in later months.

Well, as often happens, history repeats itself. GE's accountants ultimately found “misstatements and secret side deals, and more senior executives telling [staffers] to sign off ...