Corporate Structure and Governance

Reflecting on recent corporate failures, Banking and other industry, the charges of accounting fraud make me think of the current environment and how improvements in management structure could help mitigate some occurrences. Considering the enormity of the impact that finance has on the economy within all industries, there appears to be more tolerance for ethical lapses and sole autonomous leaders. Current incentives have encouraged immediate results at almost any cost. The end result in these cases has been the enrichment of the executive class in the short-term, growing societal inequality, and corporate failures endured by the rest of the employees in the longer-term.

Some failures that come to mind include Enron, WorldCom, Lehman, and AIG. While the causes of failure are quite different among various industries, banking has a greater economic impact in terms of asset losses. Moreover, the reasons for failure among the other industries differ dramatically and in a 2004 paper, McKinsey and Company suggested changes that would improve corporate governance. The report is entitled “Investor perspectives on corporate governance – a rapidly evolving story” and lists 6 themes of importance:

1. Rapid extension of worldwide governance codes;

2. Increased focus on board professionalism;

3. Selective redesign of corporate leadership roles;

4. Re-assessment of corporate reporting needs;

5. More intensive external scrutiny of governance; and

6. Increased attention to corporations’ impact on society.

An addendum to the McKinsey list, or even within, I propose a greater check/separation of the CEO-CFO relationship. The CFO would also report to the Board of Directors through the Audit Committee to minimize the possible influence to alter the appropriate reporting of performance results and financial/strategic risks. This organizational structure is no different than the Matrix Management structure used by most large corporations usually at mid- to low-level management and can be applied at the Executive level. The BOD’s Audit Committee would serve as a steering council to ensure effective financial reporting recognition of activity and risks in addition to improved strategic decision making. However, no corporate hierarchical, structural change will matter if no one knows the true value or risk of the assets on the books (mortgage backed securities).

Current State of the Union?

Here are a few excerpts from American Theocracy by Kevin Phillips, a former Republican Strategist, published in 2006. I find his assessments compelling and insightful into the current political protesting and outcries.

In Fundamentalisms Observed, Marty and Appleby had explained the “family resemblances” between the different strong religions around the world. To begin with, “Fundamentalisms arise in times of crisis, real or perceived. The sense of change may be keyed to oppressive and threatening social, economic or political conditions, but the ensuing crisis is perceived as a crisis of identity by those who fear extinction as a people.”

Ch 6, The United States in a Dixie Cup. P205.

Bruce Lawrence emphasized five symptoms of fundamentalism. Among them were a predilection to impose God’s will – the one true faith – on other peoples, an intolerance of dissent, and a central reliance on errant scripture for ideology and authority. These, too, seemed characteristic of the post-September 11 White House.

Charles Kimball identified five principal perverse fundamentalist tendencies: (1) claiming absolute truth (when “people presume to know God, abuse sacred texts and propagate their particular versions”); (2) seizing upon an “ideal time,” as in claims for imminent cataclysms or fast-approaching end times; (3) fostering blind obedience; (4) using ends to justify means (as deaths or acceptance of collateral damage); and (5) pursuing “holy war” as in Crusades (and to some extent the 1991 Gulf War).

Ch 6, The United States in a Dixie Cup. P205.

The Southern Baptist Convention, as we have seen, is regarded by some as more or less the unofficial state church in Dixie… Moreover, since the 1990s the SBC’s moderate-liberal opposition faction has criticized the dominant conservatives for getting too close to Washington and soft-pedaling the church’s historic commitment to separation of church and state.

Ch 6, The United States in a Dixie Cup. P213.

The SBC, Mormon, and Lutheran churches are the three Protestant denominations in the United States with the sort of strong regional preeminence that in itself breeds a powerful clerical closeness to everyday community governance and political authority. It is in their core strongholds … that U.S. churches have their highest ratios of adherence. Community pressure and conformity would be substantial.

Ch 6, The United States in a Dixie Cup. P214.

A cultural adjunct to these ambitions, end-times theory and literature, with its audience of fifty to one hundred million Americans, emerged as a big business in the United States during the 1990s, turning dozens of fundamentalist and charismatic preachers into multimillionaires, thanks to their best selling books, video, televised sermons and Bible hours, TV stations, and broadcast networks. Not surprisingly, most are ardent supporters of tax cuts and reduced economic regulation, as their faithful flocks concentrate on morality, salvation, biblical guidance, a possible rapture, and the countdown to Christ’s return. These believing constituencies, in turn, want more of their “government” – over whatever time may be left – to come from religious institutions…

Ch 6, The United States in a Dixie Cup. P217.

Judgments and Character

What was your first impression upon seeing the photo?


Are you uncomfortable seeing this?


Is it considered art or an expression of a taboo worthy of an art museum?


A threat to cultural heritage?


Would it matter if the ethnicities were opposite?


How about two women? Two men?


What do you think about me for posting this?


Would this photo make you more or less inclined to purchase the music?


The photo is of Joss Stone from her CD Introducing Joss Stone.

Many are probably already familiar with her and her work, but for those that are not, do you know who the executive producers on the album are? The world renowned songwriter of one of my favorite songs on the CD? The guitarist on many of the songs?


The answers to any of these questions provide insight into how we see and understand the world around us. The CD was released in 2007 and I am upset that I only just recently purchasing it because, in my opinion, it is her best release yet.

Pictures create powerful images in the brain and can promote powerful symbols. The fact that we now have a bi-racial President of the U.S. strongly identified by the African-American community has impact. Would it have made a difference if the president was not married to another African-American? Much of the perspective on this momentous American occasion is built upon the struggle for inclusion as is the history of the country. It is evidenced in the social and religious structures of the society. Most of all the social organizations of which people spend a big portion of their lives affiliated, particularly Fraternities and Sororities, are based upon ethnicity and self-identification.

Within the African-American community, the election of a Black President has been profoundly inspiring and encouraging for unlimited aspirations. It has also been the rallying point to strengthen the black family to improve the poverty conditions experienced by many. This means the acceptance of responsibility by the black man as the precursor for community improvement. This, however, does not recognize other condition variables impacting outcome nor that adjusting for such other factors, outcomes can be explained across many communities in the U.S.

In the book Before the Mayflower, Lerone Bennett, Jr. states that during slavery in the South, the plantation owners would not allow “poor whites” to be seen by the slaves. They were relocated out of the site of the plantation allowing the psychological indoctrination of the dominance and supremacy of the class of plantation owners. Given this beginning, it is not inconceivable that this structure of separation and exclusion is reinforced through the use of the evolved social organizations. These types of organizational structures also make communication very efficient and secretive. With today’s GPS satellite and telecommunication technologies, messages can be sent to the entire group and supporters with lightning speed identifying those not keeping with the group norms. There is historical evidence of how far some in power will go to reinforce or confirm a belief (The Tuskegee Experiment).

I have no intention to belittle the social and racial progress that has been made in this country. In fact, I intend to promote its continuation in the face of  to contradict those who will use this historical achievement as political fodder to end policies beneficial to the excluded and underrepresented. Some may use the historical event as confirmation of the separate group structure and as a basis for career success. However, until we can see the photo and think of it as history and it reflects images of representative government, corporate structure, and a global society, we are not there yet.