A series of developments threaten to blur the important distinction between the corporation’s legal and compliance functions. These developments arise from federal regulatory action, media and public discourse, policy statements from compliance industry leaders, and new surveys reflecting the increasing prominence of the general counsel. If left unaddressed, they could lead to significant organizational risk, e.g., leadership disharmony, misallocation of executive resources, ineffective risk management, and the loss of the attorney-client privilege in certain circumstances. The governing board is obligated to address this risk by working with executive leadership to assure clarity between the roles of general counsel and chief compliance officer.
Posts Tagged ‘Michael Peregrine’
The current public controversy notwithstanding, valuable governance lessons arise from JPMorgan Chase’s internal analysis of the highly public 2012 losses in its synthetic credit portfolio; the saga of the so-called “London Whale”. The internal JPMorgan analysis should not be confused with the March 15 report on the “Whale Trades” issued by the Senate Permanent Subcommittee on Investigations.  Neither should its credibility be undermined by the Subcommittee’s critical report.
JPMorgan’s primary findings were contained in an exhaustive report of the trading strategies and management activities that led to these losses, prepared by a management task force.  Additional findings and recommendations were included within a much shorter companion report prepared by the board’s Review Committee. This companion report concentrated on the board’s risk oversight practices.  To a certain extent, the “sizzle” was contained in the lengthier management task force report, with its focus on what happened, why it happened, and who was to blame for it happening. But from a governance perspective, the lessons for corporate America are in the companion report, with its focus on improving the process by which risk information is reported to the board. These governance recommendations are highly relevant today, because the broader fiduciary landscape has been dominated of late by concerns about the quality of board oversight of risk.
A series of broad based developments over the last year combine to encourage governing boards to apply closer attention to conflicts of interest issues. These developments include several prominent judicial decisions; a series of focused articles in The New York Times; a highly public state attorney general investigation; the SEC internal investigation of its general counsel — and the subsequent investigation of its own Inspector General. Collectively, they draw new attention to the proper identification, disclosure and resolution of potential conflicts of interest. This new attention is consistent with an increasing lack of public, judicial and regulatory tolerance for perceived ethical lapses by corporate fiduciaries, their advisors, and others in a position of trust and confidence.