NYT Reporting on Lehman MAKES Ombuds Case
The Friday, March 12th New York Times article entitled Lehman Hid Borrowing , Examiner Says, reads:
By May and June of 2008, a Lehman senior vice president, Matthew Lee, wrote to senior management and the firm’s auditors at Ernest & Young flagging “accounting improprieties.” Neither Lehman executives nor Ernest & Youg alerted the firm’s board about Mr. Lee’s allegations, according to the report.
So, a Senior Vice President attempted to draw attention to issues exposing Lehman to signficant risk, but the formal channels blocked that information from moving to the board?
“Employees need to be able to let the board of directors know when they see something that threatens performance or exposes the company to risk.“ Jon McBride and Jim Hostetler make this germane point in their article “Board Champions for the Ombudsman,”
McBride and Hostetler continue later in their article,
Herb Allison, former chief executive of financial services company TIAA-CREF (Blog Author’s note: Allison currently serves as Assistant Secretary of the Treasury for Financial Stability and oversees the Troubled Asset Relief Program) notes that an ombudsman can tie together a company’s directors and employees and help assure that when problems do arise, directors can know about them and take steps to address them. “An ombudsman provides another avenue for a company to surface and address concerns so they reach the board sooner rather than later.”
Sooner rather than later indeed. Think for one moment about an alternative scenario. Mr. Lee approaches the Lehman Organizational Ombudsman, a skilled professional, operating a properly structured program, with appropriate reporting lines to the Chairman of the Board and the Audit Committee. The issues are safely raised. Lehman’s board leads a responsible set of counter measures. The Investment Bank does not collapse. The rest of the financial system is concerned, but not at risk. The Bailout is not required, or only at a fraction of the amount actually spent in our reality.
How different would the economy, our political situation, our future be, had this alternative scenario occurred?
By managing a problem early, more options exist, and less total cost is needed to resolve it. An Ombudsman for Lehman would have cost less than a million dollars per year, and would have likely returned many millions of dollars in value to the organization BESIDES managing this event.
Interestingly, this article starts on the Times front page and continues on B2. Facing the article on B3? A discussion about the Financial Reform Bill and the travails is faces on Capital Hill.
Mr. Allison, Senator Dodd, please include this elegant, effective, and valuable mechanism for managing issues – the Organizational Ombudsman – and require it for the financial sector.
