In the first installment in this series, Julie Anne Preng, managing partner, Korn/Ferry International used a recent story – that of General Motors’ mishandling of a fatal ignition switch issue – as an example of how leadership failures can be sins of omission. While Preng pointed out that we certainly don’t know what executives at GM were aware of, or if there was any specific wrongdoing at the top, the incident can be seen as a hypothetical cautionary tale. Because, while every executive knows that there will inevitably be problems that must be addressed, not everyone in the C-Suite knows how best to address them.
“A big part of corporate governance is ethical culture,” Preng says, “but you have to substantiate it with behaviors.” There is a regulatory component, of course, be it Sarbanes-Oxley or Dodd-Frank, but what it often boils down to is enterprise risk management (ERM) and the risk tolerance level in an organization’s leadership. This dictates whether bad behavior or situations -- such as corporate officers who fail to act in accordance with their duties-- result in investigations.