Opinion

Directors need to change the culture below decks

Roy C. Smith
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Boards of big business companies need to wake up and recognise that they can lower the probability of such events in the future by reshaping the cultures and middle management cadres that have enabled them.
By Roy C. Smith
Volkswagen is facing an existential moment, one like BP’s after the Deepwater Horizon oil spill that cost its shareholders $70 billion in market value. Surely someone on VW’s supervisory board must be asking: “What could we have done to prevent this?”

The same question should have been asked by the boards of directors of the dozen or so major banks that between them have paid out approximately $200 billion to settle lawsuits brought by the US Department of Justice, the Federal Housing Authority, the Securities and Exchange Commission, the Commodity Futures Trading Commission and US state banking regulators, to say nothing of the authorities in Europe, since 2008.

These various and numerous regulatory offences leave the impression that today’s big businesses ignore or deliberately flout regulations intended to contain their power and influence. Observers must wonder whether any board members of these large corporates have ever asked how these kinds of abuses of power and influence could be prevented.

Read the full article as published on Financial News.

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Roy C. Smith is the Kenneth G. Langone Professor of Entrepreneurship and Finance and a professor of Management Practice.