Google Chairman and CEO Eric Schmidt, in a commencement address in 2009 at the University of Pennsylvania, told graduates: “Trust matters. In the network world, trust is the most important currency.” I was reminded of this as we began mapping the feature stories that appear in this issue on whistleblowing, the Boardroom Guide for the Digital Director and a special report on IT risk.
A year ago, when fraud investigator Harry Markopolos spoke at the Directorship 100 Forum, he told our audience that he was working on “billion-dollar-and-up” cases that involve the C-suite. These cases, he said, are “big. They’re unbelievable, but that’s what I do for a living.” Markopolos, best known for his relentless efforts to blow the whistle on Bernard Madoff’s Ponzi scheme, is true to his word. He is now part of a group whose work is reported to have led to separate civil lawsuits by the Justice Department and the New York and Massachusetts state attorneys general alleging that two leading financial services firms systematically over-charged investors on billions of dollars of currency trades. The whistleblower group can seek a share of as much as 25 percent of any recovery the states obtain in many of the cases.
Our cover story, “The Whistleblowing Business,” explores the serious implications to corporate boards and officers of the new whistleblowing regime. It features interviews with the Securities and Exchange Commission’s first chief operating officer, Jeff Heslop, and Wachtell Lipton partner David M. Murphy, who has defended corporations in whistleblowing cases. The centerpiece of our coverage is an excerpt from a recently issued report by the RAND Institute for Civil Justice and its Center for Corporate Ethics and Governance. In addition to offering bounties, the report concludes, the most contentious aspect of the new rules is that they do not require a corporate insider to first make use of his or her company’s internal reporting channels as a prerequisite for access to the SEC and any potential award under Dodd-Frank.
The underlying theme of each of these important stories is trust. The SEC’s new bounty program for whistleblowers shows that trust is key to effective employee programs. In his comments on information technology, NACD President and CEO Ken Daly focuses on the “i” in IT, which must be trustworthy above all. I think everyone in the boardroom would agree, Schmidt was right.