Companies in Crisis: Walmart & CRT

Two stories concerning federal investigations hit the news this week. The New York Times outlined in detail Walmart’s alleged actions after being notified by a former executive at Walmart’s largest foreign subsidiary, Wal-Mart de Mexico, of rampant and widespread bribery with payments totaling more than $24 million. The allegations state that the then CEO, now board member, H. Lee Scott, Jr effectively shut down the investigation in 2005 and Wal-Mart de Mexico CEO, Eduardo Castro-Wright, who is alleged to be central to the bribery, was promoted.
http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry-silenced.html?_r=1&hp
In a very different situation, a Hartford-based non-profit, CRT, with $100 million in revenue from a variety of government grants, was raided by 55 agents representing four federal agencies: Health & Human Services, VA, Energy, and HUD. The Hartford Courant had questioned in Feb why the former CEO has been receiving $85,000+ since 1985 for unspecified work from his Florida home, where he is a resident. The CRT Chief Operating Officer, a former Army Major, was fired in 2012 and she wrote to the board claiming she was fired in retaliation for cooperating with state auditors, who started an investigation in 2011. The board chair has denied those allegations in a letter to the Hartford Courant stating, “nothing more than the views of a disgruntled former employee who resigned after confirming she had taken inappropriate action…” Other whistleblower complaints allege that federal funds were improperly diverted. After a year long state investigation, being raided by 55 government agents suggests major criminal wrongdoing.
http://www.courant.com/news/politics/hc-day2-crt-raid-0421-20120420,0,4562027.story
What do these two have in common? In both cases the people at the top did not take seriously the “whistleblower” information they were given. They chose not to act on information given them by high-ranking executives and we’re seeing the results.
I co-authored the award-winning, Board Leadership for the Company in Crisis (www.hopgoodgroup.com). The very first step is to determine if the CEO and or Chair are part of the problem or part of the solution. In both of these cases, it might be a very good place to start. Another good reminder is when someone says, “You have the right to remain silent. Anything you say can and will be held against you.” it’s a really good time to listen and call a criminal defense lawyer. They really mean it.  The board should now be asking for all information the CEO/Chair received and should be asking what other employee complaints have been made.  A serious issue for both companies is what has happened to the culture in the company as employees have witnessed wrongdoing a the top.  The Tone at the Top ripples throughout the organization.  All employees will be watching the next steps in both organizations.  Those actions will define the culture for many years to come.

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About hopsuz

Experienced leader, both as CEO and as board Chair. Founder of the 25 year old The Hopgood Group, LLC. Co-author of the award winning "Board Leadership for the Company in Crisis". Consultant to companies large and small. Expertise in board evaluations and leadership challenges.
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