Tuesday, October 18, 2011

It's easy to get too cozy to clients.

See Floyd Norris's report in today's New York Times (here).  Seems as though some Deloitte folks were taking the word of the execs of the companies they were auditing, rather than doing some digging on their own.  So much for learning from Enron (see yesterday's Wall Street Journal report on Enron 10 years later, here).

Why don't we learn from our mistakes? Well, I have some theories.  I think that we combine a failure to pay attention to history with some common cognitive mistakes that even the smartest among us make, and we get the same-old, same-old.

Stop me if you've heard these phrases:

"I know these guys.  They wouldn't lie."
"If there were really a problem, someone would have told us by now."
"I am not getting too close to my clients."
"Everybody does it."

So I'm not particularly surprised by this Deloitte issue, or by Andrew Ross Sorkin's report on what may be massive overvaluing of Groupon by Goldman Sachs.

It's enough to make one an avowed pessimist.

Monday, October 10, 2011

A few thoughts on the composition of boards.

Last week, I read about Chelsea Clinton's appointment to a corporate board (here).  (I have to admit that I felt seriously jealous of Ms. Clinton after I read this.  The good news about her appointment is that she's exceptionally smart and well-connected.  But she's also ... 31 years old.  These days, 31-year-olds feel like kids to me.)

This morning, I read Lucy Kellaway's column on how important it is to have someone on a board who's unafraid to speak up (here).

Let's combine the two stories.  I've never met Chelsea Clinton, but I have a feeling that she's tough enough to be able to speak up if she sees something hinky happening.  I hope so.  It's important to have people who can fight groupthink in organizations, and boards are especially susceptible to groupthink. 

For more of my thoughts on why boards (and other organizations) need naysayers to slow them down, see this PowerPoint I did (here).