Warren Buffett’s Grand Illusion

To improve transparency, accountability and risk oversight of publicly traded and investment companies, zEthics has gone to great lengths to introduce a standard metric for benchmarking corporate culture.
 
 
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Tags:
Sec
Cftc
Warren Buffett
Investors
Risk Assessments
Berkshire Hathaway
Corporate Culture
Organizational Behavior

Industrys:
Business
Finance
Accounting

Location:
Phoenix - Arizona - US

March 22, 2011 - PRLog -- Warren Buffett makes a bold statement in the Berkshire Hathaway Inc. 2010 Annual Report, “Corporate Culture, not rules, determines organizational behavior.”

If true, why isn’t there a standard metric to help investors distinguish between corporations that maintain an ethical and productive corporate culture from those that don’t?

In the interest of shareholders and for the protection of investors, federal regulators such as the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) are chartered to implement and enforce the “rules,” subject to adequate funding from Congress.

But how well have these rules worked to protect investors after a second financial crisis in what some investors are calling “the lost decade.”

If Mr. Buffett is correct, perhaps federal regulators such as the SEC and CFTC should focus their attention on corporate culture and do a better job giving investors and the public greater transparency into the “organizational behavior” of publicly traded and investment companies.

Effective regulatory oversight of publicly traded and investment companies requires that skilled and qualified professionals have access to timely, accurate, and complete information, produced from highly credible data, and have the systems and tools to turn this data into useful information.

Today, in all too many instances, SEC staff do not have, and are prevented by Congress from purchasing basic technology tools that are requisite for monitoring and overseeing capital markets.

In the interest of shareholders and for the protection of investors, publicly traded and investment companies should be assessed routinely to ensure they have the strategies, policies, processes (including risk management), organizational and skills capabilities, information for decision making, and systems and data to meet and match investor’s needs on an ongoing basis.

To improve transparency, accountability and risk oversight of publicly traded and investment companies, zEthics has gone to great lengths to introduce a standard metric for benchmarking corporate culture.

The value to federal regulators such as the SEC and CFTC is in identifying material weaknesses in internal controls, compliance and reporting systems at publicly traded and investment companies that can import risk and lead to capital market disruptions.

The value to publicly traded and investment companies is demonstrating the effectiveness of their internal control, compliance and reporting systems using a common metric that allows investors to benchmark their corporate culture with industry peers.

In addition, publicly traded companies can utilize these metrics to identify risks within their supply chain and customer base.  As procurement networks become more complex and supply lines grow longer, the difficulty and expense of seeing deeper into the supply chain increases. Major corporations have constant communications and deep knowledge of primary suppliers.  However, it’s in the secondary layers of suppliers where the greater risk is.

Similarly, customer demand variability requires a growing knowledge of risk intelligence throughout the marketplace.  Corporations are best suited to gain increased access to risk intelligence for their customer base to avoid importing risks that can lead to higher legal fees, possible fines and sanctions, loss of revenue, and reputational damage.

After a second financial crisis in a decade, and a lost decade for investors, the public and investors alike need greater transparency into publicly traded and investment companies.  This will be served best by providing investors insight into corporate culture.

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zEthics is a start up based in Phoenix, Arizona that takes a holistic view of risk, integrating External Risk Assessments with Enterprise Risk Management (ERM) systems. zEthics introduces the first cloud computing application for Enterprise and External Risk Management (EERM), providing publicly traded corporations, investment companies as well as federal and State agencies a holistic view of risk. zEthics provides the diagnostic tools to align risk and performance to create a risk intelligent organization.
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Source:Mark Rome
Email:***@zethics.com Email Verified
Phone:888-668-0080
Zip:85042-6951
Tags:Sec, Cftc, Warren Buffett, Investors, Risk Assessments, Berkshire Hathaway, Corporate Culture, Organizational Behavior
Industry:Business, Finance, Accounting
Location:Phoenix - Arizona - United States
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