At home, a couple with 4 children eating dinner one ordinary evening.
Tentatively the husband says to the wife, “Bad news, yesterday I met with my attorney and someone from the justice department. You and the kids will need to vacate our home because it will be seized soon and you might want to hire an attorney. And (by the way) our accounts are all empty.”
Real Life Dramas
This is not a movie, but rather a dreadful experience our speaker, Andrea Ramsey (Merriman) shared at our most recent Speaker’s Program hosted by the National Association of Corporate Directors - Research Triangle Chapter (NACD-RTC).
Our other speaker, former US Attorney for the Eastern District of North Carolina, Thomas Walker, shared how critical it is to maintain consistent ethics and controls from the board room to the supply room. Attorney Walker shared how maintaining strict ethical standards could keep you from spending years away from your loved ones behind bars and/or with large financial penalties.
Ms. Ramsey shared that honesty is the only policy because a small error can grow into a large test of your integrity and become a personal calamity, as in the case of her former husband.
What is the True Cost of Fraud?
In many of the cases prosecuted by Attorney Walker it’s not just the financial costs or tarnished reputations that cause the most pain.
Some of the challenges experienced by Ms. Ramsey (due to her former husband, Shawn Merriman’s malfeasance – an error of $ 5,000 that eventually grew to a $ 20 million fraud case) triggered some former friends to harass and bully even her children to the point of loss of sleep and inability to live a normal life (due to no fault of their own).
A significant fraud occurrence therefore can attribute to broken families, shattered lives and dreams.
Board directors need to be concerned because whether it’s a private, public or non- profit enterprise you are held responsible for protecting the company and stakeholders’ interests (owners, shareholders, employees, environment, etc.)
What can Directors do?
According to Attorney Walker, there is no corporate resolution that will protect the individual board directors when there are “bad actors” who were not identified, due to a dereliction of duty by the board directors.
Directors must insist on implementing a compliance plan.
Inquiries and prompt follow up on internal control implementation and any issues is a must.
Maintain an open-line of communications insisting that if the Company determines that there is a problem, have immediately investigated, take action (i.e. fire the bad actors and press charges as needed at all levels) and report to the proper regulatory channels.
Remember that loyalty must be to the company, reinforce ethical behaviors and understand as a board director you might be subject to personal liability. Therefore a prudent practice is to implement monitoring mechanisms so you can trust but verify.
As board directors some of the most important duties include hiring a talented, ethical CEO to run the company, communicating with internal and external auditors to report on results and raise awareness of any material internal control weaknesses. If the goal is to protect and represent the shareholders’ short and long-term interests the more engaged and successful companies will have board members who assist with developing the overall strategic direction of the company while at the same time managing oversight of corporate governance.
How can NACD help?
NACD identifies, interprets, and delivers insights on critical issues that shape board agendas. Through actionable resources, NACD enhances directors’ ability to fulfill their roles to enhance the value of the enterprise.
The NACD Research Triangle Chapter has more than 250+ members (from private company to international publicly traded company directors). The goal of the chapter aligns to that of our national affiliated chapters of over 17,000 directors that seek to fulfil their duties with confidence in the boardroom. As the recognized authority on leading boardroom practices, NACD helps boards strengthen investor trust and public confidence by ensuring that today's directors are well-prepared for tomorrow's challenges.
Editor’s Note: Our guest blogger is Genevia Gee Fulbright, CPA, CGMA, and a recently appointed Trustee for the North Carolina School of Science & Math (NCSSM). She formerly served as a director for NACD-RTC, AICPA Foundation, Small Business & Technology Development Center (SBTDC), a bank and a 3-star early-stage mutual fund. Fulbright is the President& COO of Fulbright & Fulbright, CPA,PA and can be reached at email@example.com or (919) 544-0398.