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Elisa Turullols Ambassador of Assurance http://elisaturullols.com Integrity Professionalism Humanity Fri, 12 Jul 2019 22:19:34 +0000 en-GB hourly 1 https://wordpress.org/?v=4.9.3 108889684 A Compliance Director pleads guilty to cover up corruption. Is this what shareholders and CEOs want? http://elisaturullols.com/compliance-director-pleads-guilty-cover-corruption-shareholders-ceos-want/ http://elisaturullols.com/compliance-director-pleads-guilty-cover-corruption-shareholders-ceos-want/#respond Fri, 12 Jul 2019 22:19:34 +0000 http://elisaturullols.com/?p=554 A Compliance Director pleads guilty to cover up corruption. Is this what shareholders and CEOs want? pharmacy compliance director pleads guilty to cover up former ceo convicted of defrauding FDA and distributing adulterated drugs to infants To clarify, this is not limited to the pharma industry, as recent scandals in other industries show lack of […]

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A Compliance Director pleads guilty to cover up corruption. Is this what shareholders and CEOs want?

pharmacy compliance director pleads guilty to cover up

former ceo convicted of defrauding FDA and distributing adulterated drugs to infants

To clarify, this is not limited to the pharma industry, as recent scandals in other industries show lack of compliance, despite having large and wellstaffed compliance and internal audit departments.

I was in a similar role some years ago when my manager asked me to cover up a false statement. I declined the invitation, only to suffer the most outrageous witch-hunt ever. Even today there is an image of myself as a problematic person, i.e. a whistleblower, a term that has been devalued to now mean troublemaker.

March 2014 Maria Elisa Turullols brought HMRC to First Tier Tax Tribunal, won and established legal precedent in UK

As I explain in this article above, I simply followed the agreed internal escalation procedure, as per my internal audit responsibilities, to raise genuine concerns to senior management on issues that I had identified that could seriously damage the company’s reputation and cause serious risks to the company operations and the customers. I also gave recommendations on how to rectify them. However, I ended up defending myself in tribunals on my own.

If the first lines of defence against corruption and fraud in corporations (i.e.: Internal Audit and Compliance departments) can end up in tribunals either because they did not cover the wrongdoings or because they did (albeit this is uncommon), are we really serious when we say we want to tackle corruption?

My question to all shareholders, investors, CEOs, business owners, recruiters, HR departments, society overall:

Do you prefer a Compliance Director that bends to the fraud and corruption and covers it up, or do you prefer a naïve? brave, (I still believe one has to have b….to stand up in front of fraud- for the avoidance of doubt I always spell b for bravo,….feel free to use your own spell), honest and high-minded professional? By the way, we end up calling this professional whistleblower or troublemaker.

So my question again is: what do we want? The first lines of defence lining up with the corrupt and fraudsters, or the brave “troublemakers”?

If so, what are we really supporting with our actions?

Elisa Turullols

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In March 2014 I, Maria Elisa Turullols, brought HMRC to a First Tier Tax Tribunal (FTT), won and established legal precedent in this country in relation to the taxation of interim relief. I managed to achieve this despite not being a lawyer or a certified tax advisor. http://elisaturullols.com/march-2014-i-maria-elisa-turullols-brought-hmrc-first-tier-tax-tribunal-ftt-won-established-legal-precedent-country-relation-taxation-interim-relief-i-managed/ http://elisaturullols.com/march-2014-i-maria-elisa-turullols-brought-hmrc-first-tier-tax-tribunal-ftt-won-established-legal-precedent-country-relation-taxation-interim-relief-i-managed/#respond Fri, 12 Jul 2019 19:33:58 +0000 http://elisaturullols.com/?p=550 It all started when I was an internal auditor and my employment was terminated by email with effect from the following day. As part of my every-day role and responsibility, I had raised protected disclosures to my employer at the time following the agreed internal escalation policy. However, purely as a result of doing my […]

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It all started when I was an internal auditor and my employment was terminated by email with effect from the following day. As part of my every-day role and responsibility, I had raised protected disclosures to my employer at the time following the agreed internal escalation policy. However, purely as a result of doing my job, I ended up defending myself in tribunals

hmrc at a tax tribunal

Some would label me a whistleblower or a troublemaker. However, this is not the case. I simply followed the agreed internal escalation procedure to raise genuine concerns to senior management on issues that I had identified that could seriously damage the company’s reputation and cause serious risks to the operations. I also gave recommendations on how to rectify them.

 

After over one and a half years, in January 2011 I won unfair and wrongful dismissal, albeit not for having raised protected disclosures. Instead, the Tribunal said in the last hearing that it found that my style of writing might have been the cause of the termination of my employment. Nevertheless, the Tribunal did recognise that I had raised protected disclosures.

In 2009, prior to the Employment Tribunal I had been awarded interim relief. The legal point that I successfully challenged at the FTT against HMRC was the taxation of interim relief payments.

Interim relief is a legal protection under PIDA (Public Interest Disclosure Act) to protect those who raise protected disclosures, but also to protect other people when they are dismissed whilst they carry out activities such as:

  • a trade union member;
  • a health and safety representative;
  • an employee representative for the purposes of TUPE consultations; or
  • a trustee of an occupational pension fund.

An Employment Tribunal awards these payments, but up to the point where I successfully challenged them they were taxed in the same way as a standard payroll payment. I challenged this on the grounds that they are not standard earnings as a result of employment. Rather, they are a compensation payment that employers need to pay where unfair termination of employment is most likely due to having raised protected disclosures. So the legal precedent that I established benefits many people.

I would like to highlight some key facts on my tax case against HMRC:

  • I was a lay individual, that was, I had no legal or tax advisor helping me,
  • I had fought against HMRC for three years and had brought them to a First Tier Tax Tribunal all on my own,
  • I established court law in UK with my case despite not being a lawyer

Challenging this narrow legal point was done in my spare time, without overly interfering with my private or professional life. However, my abilities to manage my time and remain focused were tested. As you can imagine, resilience was mandatory and I clearly strengthened mine during three years of receiving HMRC letters rejecting my legal argument. Despite many of their letters being repetitive, my responses were always polite, objective and never discredited the sender or HMRC.

Some would say I am now a famous person as my landmark case was mentioned in several tax magazines and websites. I do not feel famous. Fame was not the point. I feel that I did what I had to do because I have the capabilities to do so. This narrow and legal point made a lot of sense to me and it felt fair and reasonable. That is what I fought for, on my own, without any support.

Elisa Turullols.

 

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One in four chance of beating HMRC at tribunal http://elisaturullols.com/one-four-chance-beating-hmrc-tribunal/ http://elisaturullols.com/one-four-chance-beating-hmrc-tribunal/#respond Tue, 26 Dec 2017 18:03:19 +0000 http://elisaturullols.com/?p=539 I beat HMRC at a Tax Tribunal. So, I was within the one in four chance of beating HMRC at tribunal. I did win HMRC at a Tribunal. Further, I also established legal precedent in UK. I did all on my own. One in four chance of beating HMRC at Tribunal ‘image: www.freeimages.co.uk’ Some would […]

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I beat HMRC at a Tax Tribunal. So, I was within the one in four chance of beating HMRC at tribunal. I did win HMRC at a Tribunal. Further, I also established legal precedent in UK. I did all on my own.

One in four chance of beating HMRC at Tribunal

‘image: www.freeimages.co.uk’

Some would say I was lucky. I prefer to think that I did a good job. It was not easy, I recognise. I wanted to give up many times. So, how did I make it? Let me tell you. Hope my story can help.

First, it all started with one question: why did the interim relief payments have the same taxation as a standard payroll?

The answer, I was told at the time, was because the interim relief payments were linked to a contract of employment.

Well, yes but, this link is under special circumstances only. All I had as answer was that these special circumstances were so unique that there was no much legislation about. So, basically, it sounded as if one could do nothing else.

So I decided to explore by myself.

First tip: always ask the question you have in your mind and when you hear an answer like “this is what it is”, “ there is no much legislation about it”, …or similar, do your own research. This is what I did and it was really worth it. It is fair to recognise that I am not a conformer.

Then my research time started. I had to dig into what the full meaning of interim relief payments was. I found out two Appeal Employment Tribunal judgments that provided a very clear explanation. They also explained what the legal link with the employment contract was. This was key to support my argument against HMRC. So, this research, of my own, gave me the legal basis to defend the special circumstances.

Second tip: open your research to sources and areas outside tax. You may find useful information that you can use to support your tax case, as I have just explained above.

Once I was clear on the meaning of the interim relief payments and the legal link with the contract of employment, I submitted my tax claim to HMRC.

HMRC answered me with reasons and grounds to reject my claim. I had some weeks to answer back.

Third tip: do your own research on the reasons and grounds HMRC gives you to reject your claim. Look for what tax/legal advisors review is on those reasons or grounds. Usually, HMRC will refer to tax cases. Look for what tax/legal advisors say about those tax cases. You will understand the point of law of that case, so you will be able to compare it with your own one and conclude whether it applies to your particular case or not. If it does not, then, answer back, explaining your argument to HMRC. As I explained above, keep your research open to other areas outside tax. You can get valuable information that will help support your case.

This is what I did. For three years.

Fourth tip: you may have guessed it….be patient and keep going.

Each correspondence with HMRC could take up to six weeks to get back to you and you, then, have another some six weeks or so, to answer back. The number of weeks is not fixed, but it gives you a guidance. As I said above, each HMRC answer to you is a precious source of information to help you argue your case. So keep going. Keep researching the grounds and reasons HMRC gives you to reject your claim. Keep answering back.

Don’t feel put off by the length of time or by the work. I did it on my spare time and was able to enjoy my private life as well. Doing effective and efficient google searches help a lot.

In my case, my abilities to manage my time and remain focused were tested. As you can imagine, resilience was mandatory and I clearly strengthened mine during three years of receiving HMRC letters rejecting my legal argument. Despite many of their letters being repetitive, my responses were always polite, objective and never discredited the sender or HMRC.

After a while, HMRC will tell you that you have reached the end of their process and that the only and final step is a First Tier Tax Tribunal.

By this time, you will have nailed down the argument on your case together with supporting documentation. You only need to write a summary highlighting the key points of your argument and referring to your supporting documentation.

Fifth tip: be very well organised and diligent with the documentation you get from your research. It will support your argument in front of a Tax Tribunal. Further, the bundle to present to a Tax Tribunal includes as well all the correspondence you have exchanged with HMRC. So it pays off being well organised as it will save you time later.

At the end of the HMRC’s claim process you can have much more clarity on the strength of your case. It will be difficult for somebody else that has not carried out the research you have and that has not either gone through the argument of your case in every correspondence with HMRC as you have, to assess the merits of it.

Sixth tip: sleep on your case. Don’t look at it for a while, (e.g.: a week or more). Then, go back to it. Read it. You will be able to say whether you are ready for a First Tier Tax Tribunal (FTT) or not.

So you have decided to take your case to a FTT. Go for it! For the avoidance of doubt, I do not mean that anyone willing to pay less tax should go to a Tax Tribunal and take a chance.

Get familiar with the Tribunal protocol. You can ask the Tribunal service about it and where you can find more information. There are also some legal books that explain the process of a tax hearing. You may be familiar with other tribunals with a similar protocol that you can follow (e.g.: Employment Tribunal, Civil Tribunals- in case of a divorce, for example).

Tax Tribunals, and Tribunals overall, are not the Boogey Man. So, after all your work, and with all your documentation on your case, feel very confident that you are fully entitled to be heard. The Tribunal will listen to both sides, so be ready to explain the key points of your argument by yourself.

Seventh tip: rehearse in front of the mirror. I am not kidding! Practice how you will explain the Tribunal the argument of your case. The mirror will help you to, a) be in front of someone as if this person was the Tax Tribunal, and b) show you how the Tribunal will see you. Take into account that body language is very important as it sends messages too. Ensure your body language messages are aligned with your words. Have fun in front of the mirror. You will end up feeling confident. This is key when you are explaining your argument in front of the Tax Tribunal.

The Tribunal will also take a copy of your bundle and of the HMRC one. As I said above, it pays off being well organised with all the documentation of your case. This way the Tribunal can also navigate through it easily. After this point, that’s it. Relax. Give yourself a treat after all your work and wait for the Tribunal to issue the judgment.

What if HMRC wants to settle just before going inside the Tribunal? Well, it did not happen to me. All I can say is that you know, by then, your case and how strong it is vs. HMRC’s one. I’m confident you will be able to take the right decision.

Elisa Turullols

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A never ending shame, another corporate scandal http://elisaturullols.com/never-ending-shame-corporate-scandal/ http://elisaturullols.com/never-ending-shame-corporate-scandal/#respond Mon, 10 Apr 2017 19:35:33 +0000 http://elisaturullols.com/?p=401 The post A never ending shame, another corporate scandal appeared first on Elisa Turullols Ambassador of Assurance.

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A never ending shame that Jes Staley -Barclays CEO, attempted to ascertain the identity of an anonymous whistleblower.

Barclays Investigation

Jes Staley Barclays Rogue CEO

The real implications of this issue

Culture starts at the very top of the company and it cascades down. What is the message being sent by Jes Staley on culture then? Further, culture is one of the key pillars of corporate governance. Taking into account this, it is not surprising that Barclays has had so many wrongdoings and irregularities.

The conclusion from the board is unacceptable. As I say above, culture is one of the key pillars of corporate governance and it starts at the top. Jes Staley had to know that it is not permissible to identify a whistleblower. Believing differently is not a mistake. Labeling this a mistake is a political way of helping him to get away with it.

The excuse from Jes Staley is also unacceptable. He intended to protect a colleague from an unfair attack,….by fairly unprotecting a whistleblower…? I would expect a more smarter answer from someone at his level and with his experience.

This example shows how many serious difficulties whistleblowers have to cope with. These difficulties stem from senior management, and usually from the senior management involved in the wrongdoings or the irregularities.

The legal protection is not enough. Senior management is now more savvy and know how to bypass the legislation. They just need to start raising doubts about the work and performance of the whistleblower. The employment law will do the rest, as if there is any small doubt, the tribunal will conclude that is the poor or wrong performance that caused the termination of the whistleblower employee.

We, however, will not see any performance process with Jes Staley, neither with any senior management. Nor will there be any doubt on his wrong or poor performance. There is still too much unfairness in the coporate world and the law supports this unfairness.

Public Interest Disclosure Act (PIDA) is unable to protect a whistleblower from indirect attacks (i.e.: raising doubts about his/her performance). PIDA only works when there is a black and white situatio whereby the company terminates the whistleblower immediately after he/she raised the protected disclosure and without questioning his/her performance.

Senior management and companies overall are more savvy now. Their immediate reaction is not to fire the whistleblower, but to raise doubts about his/her performance. This way the employment law supports companies and rogue senior management to attack whistleblowers and PIDA protection disappears.

The fact that the US law enforcement agency was willing to assist him on his personal hunt on the whistleblower further reinforces my claim that there is very little protection for whistleblowers. I understand that the UK’s banking regulators are now investigating the bank adn Mr. Staley,…but, is there anyone investigating the US law enforcement agency?

Elisa Turullols – AmbassadorOfAssurance

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Compliance in the Trump era: what are the changes lying ahead? http://elisaturullols.com/compliance-trump-era-changes-lying-ahead/ http://elisaturullols.com/compliance-trump-era-changes-lying-ahead/#respond Tue, 14 Feb 2017 17:58:45 +0000 http://elisaturullols.com/?p=391 The post Compliance in the Trump era: what are the changes lying ahead? appeared first on Elisa Turullols Ambassador of Assurance.

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The Trump administration and compliance:

Compliance changes

Compliance and regulations

Challenging times lie ahead for compliance, clearly.

Trump administration more changes in corporate governance

It was already in Trump’s electoral campaign speech. There are too many rules that have created an administrative burden to companies. It is true that there are too many rules. This does not necessarily mean risks have been much reduced or controls are now stronger. If the right rules and controls are not the ones in place, then, risks and weaknesses are still high. Add in the additional administrative burden.

I find positive that the Trump administration uses a carrot way to enforce FCPA compliance programs. Positive motivation is more compelling and more efficient than threats and punishment.

After the financial crisis, we have seen a myriad of compliance activities developing. Consultancy firms, special trainings, Big4 projects, on top of the additional rules and regulations….but we still have corporate scandals.

it seems to me that we are seeing the pendulum swinging back. This is part of any pendulum effect though. It goes back and forth until it, eventually, reaches a middle point. Where will this middle point be? I do not think there is an answer yet.

We have to bear in mind where this burden of rules comes from.  A financial crisis due to high risks consciously overlooked and significant known control weaknesses. The aim is still to reduce high risks and strengthen controls. So the middle point will achieve this goal in the most efficient manner. We are not yet there.

For those who think compliance rules will become looser and non enforceable, I point out to Matt Kelly’s article (link above). He concludes rightly that investors and shareholders will have a say on that. This is what we have already seen in the Volkswagen test emissions scandal. Shareholders sued the company and senior management for wrongdoing. Recently in January 2017 the FBI arrested a Compliance Officer for conspiracy to defraud the United States, amongst other claims.

Conclusion

It is in the benefit of shareholders and investors to have a strong and robust FCPA Compliance program. This could be a way to enforce it.

Elisa Turullols.

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And another corporate scandal hits the news http://elisaturullols.com/another-corporate-scandal/ http://elisaturullols.com/another-corporate-scandal/#respond Wed, 25 Jan 2017 16:19:10 +0000 http://elisaturullols.com/?p=378 Where was internal audit?

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scandal

Another corporate scandal in the news

Another corporate scandal hits the news

And another corporate scandal hits the news. This time BT. For many years, top executives in the Italian subsidiary engaged in false accounting and embezzlement. The reasons? Still unknown, but their seven figures bonuses may have been one of them.

Where was the internal audit department? And the compliance one?

http://elisaturullols.com/where-were-the-internal-audit-and-compliance-teams/

What about the external auditors? How come that for many years nobody saw anything? Now the scandal and numbers are so huge that they wiped £8bn off in market value for the great joy of the shareholders and investors*. Is it the only scandal? Or is it just the peak of the iceberg that shows loose controls and a weak internal control framework? This will bring us back to the questions above.

I cannot understand that nobody saw anything for such a long time, unless there is gross incompetence or silence (either through threats or financially motivated).

Surely BT has a speak-up policy. Most likely too it has a speak-up line managed by a third party. This way it guarantees anonymity so people can raise issues easily. Clearly this time none of this worked. It is also worth reviewing whether this speak-up policy is just a window dressing solution to comply with legislation or good practices but without any intention of ensuring effectiveness. How do BT employees perceive this policy? Do they feel they can raise any issues without being penalised? There are surveys that have revealed the lack of reliability employees place in the speak-up policies and processes. The perception is that nothing will be done and the one blowing the whistle will be penalised. It clearly shows lack of trust in the hierarchy. This lack of trust has proven to be very real at BT.

My experience with scandal

As internal auditor, compliance and external auditor, I have always spotted the wrongdoings and bad practices before they hit publicly the news. People have always felt, and still feel, they can speak up to me and raise any issue. They know they will be safe. Sometimes it was me who suffered the aired reaction of some top executives that were not happy with my findings, but this is what shows the competence and maturity of an internal auditor (or compliance or external auditor) professional.

This way the company can easily address any problem, avoiding scandals and, very importantly, avoiding significant financial costs.

This is peace of mind for shareholders and investors.

Conclusion

Those top executives involved in wrongdoings and bad practices should be punished. They should not work at their level until they prove they have changed their behaviour. So many years lying and hiding the truth is not a punctual situation or problem. It is an attitude, one that no company can afford to. A robust corporate governance and professionalism could have avoided this scandal.

Elisa Turullols (www.elisaturullols.com)

*For the avoidance of doubt the tone of this sentence is ironic.

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It is easier to benefit shareholders by doing good and right http://elisaturullols.com/easier-benefit-shareholders-good-right/ http://elisaturullols.com/easier-benefit-shareholders-good-right/#respond Wed, 07 Sep 2016 17:14:29 +0000 http://elisaturullols.com/?p=359 The top ten customers totalling some 40% of the revenue did not have a contract, neither any basic terms and conditions and the prices in the system were input based on what the SVP sales said....troubled waters, fisherman's gain.
Some people believe that shareholders do not care what happens internally in the company provided they get benefits. Volkswagen shareholders are not thinking the same. The share price fell 46% at the onset of the scandal and nearly a year later has only recovered a 20%
Once the contracts were in place.....Prices were updated in the system so invoices were accurate and there were no delays in their payment. This boosted the cash flow and ultimately benefited shareholders. Operations could plan in advance the service and quality levels required for these customers, so they were able to respond efficiently. This meant no more extra hours, no more bottlenecks or emergencies in operations. This ultimately benefited shareholders.

There are still some people that believe there is nothing wrong with no having any contracts in place. Maybe because they are the only fishermen?

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The top ten customers totalling some 40% of the revenue did not have a contract, neither any basic terms and conditions and the prices in the system were input based on what the SVP sales said….troubled waters, fisherman’s gain. That was the SVP Sales benefitting from what was really going on in the sales area with the top ten customers. Were the shareholders able to get some gains as well?

elisa turullols good and right

I do not mean that contracts should be in place for legal reasons or just to avoid an auditor’s finding. Contracts should be in place for all parties to have full clarity on what has been agreed so the customers can be provided/served as per the agreement. Further, contracts should be made available to the main internal stakeholders so all departments serving the customers know what the agreement is. In my example, there was no evidence of senior management approving high discounts. If this was what had been agreed with the customer, and it had been appropriately approved, how do we ensure the invoices include the high discount? Further, how do we know that Finance knows about these discounts so they can be included in the budget and forecasts? There are sales targets and profits targets as well. These latter will be significantly impacted by high discounts.

In my example, only the SVP Sales knew about the service level agreements agreed with the customer. The customers were requesting different services and products to Operations team, who was unaware of what the agreements with the customers were. The SVP Sales was agreeing to all the customers were requesting. How could Operations team prepare to serve the customers? How could Finance budget and forecast all the purchases required to serve the customers?

Some people believe that shareholders do not care what happens internally in the company provided they get benefits. Volkswagen shareholders are not thinking the same. The share price fell 46% at the onset of the scandal and nearly a year later has only recovered a 20%, as it is still trading 26% below the price prior to the scandal. I think that in troubled waters, the shareholders are the ones who lose most.

In my example, when I highlighted all the troubles stemming eventually from the lack of contracts with customers, it was easy and straightforward to establish a plan to address the root cause. Once the contracts were in place and full clarity of what had been agreed with the customers was available to the different departments involved in serving the customers, everything started to flow smoothly.

Further, having full visibility of the sales and discounts per top customer helped building a more accurate budget and forecast, so senior management could take better decisions on the direction of the company. This ultimately benefited shareholders.

There are still some people that believe there is nothing wrong with not having any contracts in place. Maybe because they are the only fishermen?

Elisa Turullols

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Breakfast with Angeline http://elisaturullols.com/breakfast-with-angeline/ http://elisaturullols.com/breakfast-with-angeline/#respond Wed, 10 Aug 2016 13:46:43 +0000 http://elisaturullols.com/?p=353 they are going to send all the money to one of the PA’s personal bank account, for her to take the money in cash from her bank account and bring it to the office to put it in the red envelopes.
We are giving one employee an additional full bonus, and then we expect that this person will take all that money in cash to do what? I do not think this is something so small, it sounds so dodgy that it can be perceived as something illegal, even if this money is fully used on the red envelopes, Caesar's wife principle should apply.an email should be sent by the CEO, informing all employees, that they will get a red envelope the following day.
With all this, we have evidence of the payment approved by the CEO, the money been retrieved from the company bank by a person with legal powers to do so in presence of HR and another email informing the employees about the red envelope
The lesson from this real example is that, even a good gesture can be completely undermined and bring a company into trouble, if the way of doing it looks suspicious and dodgy. Since the recent bribery and corruption scandals (e.g.: GSK China, FIFA, etc) companies should pay more attention to cash payments. Doing the right thing in the right way it may take some effort. In this real experience this involved drafting official emails, the Finance Director appointment with the company bank, etc. This effort should be compared to the effort deployed explaining cash payments without much evidence on top of any reputational impact (regardless of whether the cash payment was for valid reasons or not).
how it would look like if it was to appear in a global newspaper and you had to provide an explanation to the media. I am still trying to find ways to explain the sizeable payment to the PA’s personal bank account for her to retrieve the money in cash….

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breakfast with angeline elisa turullols

– Good morning boss!

– Good afternoon Angeline! How was your day today? What happened in Singapore?

– Buff! I wanted to talk to you Elisa, I am not sure whether this looks ok, let me tell you.

– Go ahead girl

– The CEO in Singapore wants to offer a hong bao

– A what?

– Hong bao, red envelope, do you know about it?

– No, never heard

– It is Chinese culture to offer the employees with a red envelope containing some money for New Year

– Ok,

– It shows appreciation, and it sends a message of good luck. I think this is fine

– So do I

– The problem is that to do this, they are going to send all the money to one of the PA’s personal bank account, for her to take the money in cash from her bank account and bring it to the office to put it in the red envelopes

– What?!

– Yes, it does not look good, right?

– No, it does not, have not we learned from China? Why do we need to do it this way and complicate it so much?

– I do not know but I approached the Finance Director and he is not very happy with this way either. However, the CEO does not want to change it

– Why not?

– I do not know

– Well, there has to be a reason, and it better be a good one, have you talked to Alex?

– Yes, but he is fine

– How come is he fine with this? It does not look very compliant. In fact, it looks dodgy

– I know, and he knows that as well, but here we do not oppose the CEO, and least of all for small amount of money

– Excellent! Carpe diem then! Now I better understand China! How small is that money?

– Well, it seems they are planning to give some 10 Singapore dollars to each employee and we are some 1,500 employees

– Ok, so that makes a total of 15,000 Singapore dollars that will be sent to the PA’s personal bank account

– Yes

– How much could the standard full bonus of this PA be?

– Some 15,000 Singapore dollars, I estimate,

– You see girl? We are giving one employee an additional full bonus, and then we expect that this person will take all that money in cash to do what? I do not think this is something so small, it sounds so dodgy that it can be perceived as something illegal, even if this money is fully used on the red envelopes, Caesar’s wife principle should apply

– Caesar’s wife?

– Yes, Caesar’s wife had to be above suspicion, meaning that one has not only to comply with the law, but also to look like one is complying with the law. After China, we should be much more careful.

– So, what do we do? I feel really uncomfortable

– Me too, can you talk to the Finance Director? Maybe he can also join forces with the HR Director

– Yes, I can do that, but what do I tell him? How could this be done?

– Well, the most logical way is for the Finance Director to go to the company bank and retrieve the money, as he has powers on the company bank account. Further, this should be done in the presence of someone from HR. I am assuming that the bank will check thoroughly their credentials before handing the money.

– What about approval for that?

– You are right girl, prior to that, there should be an email, at least, from the CEO to the Finance Director and HR Director approving this payment and describing the way to do it.

– Yes, I feel more comfortable this way

– I am also thinking loudly here, the red envelope should be handed to all employees, so HR has to print an updated list and ensure that each employee gets the red envelope

– And what about an email informing the employees?

– Very good girl. Yes, an email should be sent by the CEO, informing all employees, that they will get a red envelope the following day. With all this, we have evidence of the payment approved by the CEO, the money been retrieved from the company bank by a person with legal powers to do so in presence of HR and another email informing the employees about the red envelope. Any other ideas you can think of?

– The timing

– What about the timing?

– The retrieval of the money from the bank has to be 1-2 days before giving the envelopes.

– Excellent thought! You are right, add it too to the discussion with the Finance Director

– What if the CEO still says no?

– Ask him what he is going to tell the external auditors and the internal auditors when all he is going to have, as evidence, is an amount of money being sent to the PA’s personal bank account.

– Elisa, you know the internal auditors will accept whatever the CEO tells them

– True girl, let me see…look at this link:  https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjwy7_O8LbOAhWCIMAKHfYcBXIQFggiMAE&url=http%3A%2F%2Fhb.betterregulation.com%2Fexternal%2FGlobal%2520Legal%2520Insights%2520-%2520Bribery%2520and%2520Corruption%25201st%2520Edition%2C%2520Irish%2520chapter.pdf&usg=AFQjCNFB7vgTpB6e72X5jReo6W_dwX1kYg&bvm=bv.129389765,d.d24

– What is it?

– Legal advice on bribery and corruption and how a red envelope payment, or any cash, can be easily perceived to be linked to corruption. Clearly, after China, he does not want to appeal any similar attention

– That’s great Elisa

– Also, check with Legal in Singapore, so they can provide more support

– Well Elisa, you know that Legal approved the suspicious distributor’s structure that was behind the sanctions and exports breach in Myanmar

– You are right girl, forget it, and let’s proceed as just discussed with the Finance Director, if you need me to talk to him, let me know

– I will Elisa, I feel much better after talking to you about this

– Good, I am glad that this has been helpful

The lesson from this real example is that, even a good gesture can be completely undermined and bring a company into trouble, if the way of doing it looks suspicious and dodgy. Since the recent bribery and corruption scandals (e.g.: GSK China, FIFA, etc) companies should pay more attention to cash payments. Doing the right thing in the right way it may take some effort. In this real experience this involved drafting official emails, the Finance Director appointment with the company bank, etc. This effort should be compared to the effort deployed explaining cash payments without much evidence on top of any reputational impact (regardless of whether the cash payment was for valid reasons or not).

Further, the Prevention of Corruption Act in Singapore (PCA) expressly disallows admission of evidence to show that any alleged gratification is customary in any profession or trade. An example of this is the giving of red envelopes. This is not a valid defence per se in a corruption trial.

The last comment is that, to get a final decision on whether the way of doing may look suspicious, just consider how it would look like if it was to appear in a global newspaper and you had to provide an explanation to the media. I am still trying to find ways to explain the sizeable payment to the PA’s personal bank account for her to retrieve the money in cash….

Elisa Turullols.

 

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Strategy execution problems http://elisaturullols.com/strategy-execution-problems-compatibility/ http://elisaturullols.com/strategy-execution-problems-compatibility/#comments Fri, 29 Jul 2016 18:20:56 +0000 http://elisaturullols.com/?p=349 It is critical that the set of activities decided to execute the strategy take the company in a consistent direction.I agree that when the senior executives have stretched profit targets compatibility problems appear in areas involving costs (e.g.: maintenance). If the company is one whose assets are key to deliver the activity (e.g.: airlines, car rental, lifts rental…) there will clearly be a compatibility problem between the senior executives targets on profits and the company’s activity via its assets. By establishing short-term performance measures that are not linked to value creation (increasing profits does not necessarily means creating value) the ground for compatibility problems is set.senior executives focus on short-term measures to get their bonuses. Complacency and lack of ethics are at the very bottom of many scandals and compatibility problems. I hope that Mrs May words (“get tough on irresponsible behaviour in big business" do end up in clear actions.

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Strategy execution problems: C for compatibility….really?

I recently read an article about the critical aspects of strategy execution. One critical aspect is “compatibility”. It is critical that the set of activities decided to execute the strategy take the company in a consistent direction. Easy! So it seems…., but when the Credit and Collections department has to do all their processes manually as the IT department has a cutting cost target (and this is a real experience), compatibility is clearly not so easy.

This article went on saying that, “many corporate scandals are catastrophic strategy execution failures that reflect compatibility problems”. I agree that when the senior executives have stretched profit targets compatibility problems appear in areas involving costs (e.g.: maintenance). If the company is one whose assets are key to deliver the activity (e.g.: airlines, car rental, lifts rental…) there will clearly be a compatibility problem between the senior executives targets on profits and the company’s activity via its assets. Fine with this, but…there is something else here, something that is missing. As a senior executive, as soon as I realise about any compatibility problem I highlight it immediately to start agreeing compatible ways of working. So, if I am smart enough to spot compatibility problems and look for ways to address them, how come that we have so many compatibility problems at the bottom of many corporate scandals? Are senior executives not smart enough? I already have addressed this point in a previous article:

http://elisaturullols.com/corporate-world-ignorance/

So, considering that senior executives cannot be so stupid or ignorant and keep their high salaries and bonuses for being stupid or ignorant…it seems there is something else that keeps compatibility problems on going.

Let me give you a clue. What are the key measures for senior executive performance? Profit targets? I have never seen a performance measure that focuses on keeping the assets of the company accordingly maintained. So But…..(and I know it is grammatically incorrect to start a sentence with “but”,….but I dare to do so), is that all? Again, as a senior executive, it is within my competence and role to see the “bigger picture” and understand that value creation is key to keep the company growing and doing well, not just a short-term measure. I would immediately raise this as an issue. So, back to square one. Why senior executives keep on focusing on the short-term measures?

Only by understanding the final root cause of a problem can we resolve it. We are not far from it. Let’s continue with the clues. What are the short-term performance measures for? Apart from assessing performance…what else for? Remunerating the senior executive. Now we are talking. So, senior executives focus on short-term measures to get their bonuses. Hence, no focus on addressing compatibility problems, as addressing them will not revert in higher bonuses. It seems that the final root cause originating so many compatibility problems is the compensation system for senior executives. I agree it is flawed, as this article also reflects:

 

http://www.nytimes.com/2016/07/08/business/dealbook/how-to-fix-wall-streets-flawed-system-of-compensation.html

 

As a smart senior executive, when I see a flawed compensation system that rewards me in a way that may easily cause value reduction in the company, I just get on with it, right? Or is it something else still missing? What about the ethics of the senior executive? Is the senior executive only motivated by money?

 

If we go through the many corporate scandals: Olympus, WorldCom, international gold and silver markets prices manipulation, GSK ABAC issues in China, UBS AG,  Astra Zeneca, USIS, HSBC, Ward Diesel Filter Systems, VW emissions scandal….and many more. What was the senior executive ultimate motivation?

 

Despite all these scandals, I do not see the learnings. Every time I have raised compatibility problems I have been told to shut up, in short. I was told that I was not strategic. I was told that my style of writing was the problem instead and a smear campaign was initiated to get me out of the company, as I was perceived as an enemy. The senior executives were not alone on this campaign; rather, they supported each other and were supported by HR and my so-called colleagues that might have seen an opportunity for them to take my position or get some benefits.

 

Complacency and lack of ethics are at the very bottom of many scandals and compatibility problems. What is shocking me most is that society does nothing to stop all this. Eventually, complacency and lack of ethics in the private sector impact us all, as we have seen in BHS and Sports Direct demise. I hope that Mrs May words (“get tough on irresponsible behaviour in big business” do end up in clear actions.

Elisa Turullols.

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Senior executives incompetence http://elisaturullols.com/senior-executives-incompetence/ http://elisaturullols.com/senior-executives-incompetence/#respond Wed, 29 Jun 2016 17:56:37 +0000 http://elisaturullols.com/?p=346 Despite their incompetence, their six-seven figures salaries keep on growing.

I do no think an incompetent senior executive is kept on the role in a simplistic way. The senior executive is kept in his/her role because he/she is of some interest to the company. His/her incompetence may not be the reason why....so? what is it? I have seen cases where the senior executive was covering up a company's wrongdoing.
Many corporate scandals have been unveiled by whistleblowers
Many of them suffered retaliation. Few of them were properly rewarded.....a smear campaign against the whistleblower starts as soon as the whistleblower uncovers any wrongdoing

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senior executives incompetence

Is it so difficult to assess and address? Senior executive recruiters have also confirmed that there is a significant level of incompetence amongst senior executives. Despite their incompetence, their six-seven figures salaries keep on growing. These recruiters explain that senior executives cover their incompetence asking for a higher salary.Clearly, it is not so illogical, as the message sent to the market is that the executive is very competent, hence, his/her high pay-check. And what happens internally? How can a senior executive cover up his or her incompetence? Well, “Human” Resources (HR) may have something to do. All a senior executive needs to say is that someone in his or her team is underperforming. HR will do the rest. And believe it or not, HR does.

Let’s be clear. I do no think an incompetent senior executive is kept on the role in a simplistic way. The senior executive is kept in his/her role because he/she is of some interest to the company. His/her incompetence may not be the reason why….so? what is it? I have seen cases where the senior executive was covering up a company’s wrongdoing.

And the brave, (or crazy!) people that raised the flag when they saw all this, were ostracised (with “Human” Resources doing their bit too, supporting the senior executive) and not only internally, but externally as well.

Nobody likes a whistleblower,…..yet I hear many voices (e.g : anti-corruption summit in London) asking for anti-corruption measures and other solutions to tackle corruption and create an environment of good governance…..but nobody includes or considers the whistleblowers. Until a safe and encouraging environment  is created, that supports whistleblowers and whistleblowing, good governance will be difficult.

Many corporate scandals have been unveiled by whistleblowers: Olympus by Michael Woodford (he had to defend himself against the charges brought against him by Olympus), Worldcom by Cynthia Cooper, international gold and silver markets prices manipulation by Andrew Maguire, GSK by Cheryl D. Eckard (awarded $96m), UBS AG by Bradley Birkenfeld (awarded $104m),  Astra Zeneca by Jim Wetta, USIS by Blake Percival, HSBC by Everett Stern, Ward Diesel Filter Systems by Ted Siska (received $94,200 in a settlement), PwC by Antoine Deltour (subjected to criminal charges when his revelation prompted discussions on how corporations reduce their tax check), SEC by David Weber (terminated by supposedly unrelated reasons).

This is just a short list.

If interested, see a link below.

https://en.m.wikipedia.org/wiki/List_of_whistleblowers

From 2010 onwards, the number of whistleblowers has been much reduced, upon this link. Does this mean that corporations, companies, government agencies, behave? I do not think so. They have learned how to better cover up their wrongdoings and how to tackle the whistleblowers. They know that if, instead of reacting immediately against the whistleblowers, they wait some time, to avoid linking the retaliation to the disclosure of information the whistleblower did, it will be difficult for the whistleblower to allege retaliation. Further, if in the meantime, they focus on finding mistakes or poor skills on the whistleblower, then it will be even more difficult for the whistleblower to be trusted in his/her disclosures. If the corporation creates doubts on the whistleblower skills and competence, anything that the whistleblower says will have less weight, as people will not trust someone that has poor skills or is incompetent.

Then, the strategy is clear, a smear campaign against the whistleblower starts as soon as the whistleblower uncovers any wrongdoing (with “Human” Resources full collaboration, against the whistleblower!). This creates a huge stress on the whistleblower, plus it is a threat to him or her on his/her employment. So, the whistleblower faces an internal smear campaign, plus the real threat of losing his/her job, the impact on his/her career and on the chances to find another job (as he/she, will be referred as incompetent or poor performer). Clearly, a whistleblower that is able to cope with all that and still be credible in the wrongdoing he or she is disclosing, is a super hero. How many super heros are there? How many whistleblowers are there? Do we see then a reduction on whistleblowers? Is it any surprising?

Corporations are more savvy now. They are guided by “Human” Resources and legal advisors, who tell them what to do and what not to do.

A whistleblower facing a wrongdoing has never “Human” Resources support, neither a legal advisor.

“Human” Resources role is to secure the company. So they join forces with the senior executive. Besides, in a hierarchical organisation, who is right? The senior executive or the subordinate? It seems positions of power carry out the competency to be always right.

Do not get me wrong. Many positions of power, mainly public positions, are thoroughly scrutinised and any single mistake (nor even a wrongdoing!) is highlighted as if a crime had been committed.

In corporations, internal positions of power are not so scrutinised, rather the opposite. As the senior executive is in a position of power, it is assumed that he/she is always right and doing the right thing. The subordinate, however, is someone to watch carefully in case he/she commits fraud against the company…..for the significant* value of £20 taxi ride.

Once, I was assigned an investigation of an employee that had allegedly claimed undue expenses. This investigation was given the appropriate attention by senior management, HR and all the departments related. Eventually the allegations were true and the employee had claimed undue expenses for an amount equivalent to an average annual salary. The employee had already been terminated.

As a contrast, I was also assigned an investigation on a senior executive that allegedly had colluded with HR and Legal to fabricate documentation to speed up the visa for the spouse of this executive. Eventually, I was told not to do anything on the investigation. The senior executive got promoted. The allegation and investigation vanished from the earth despite the evidence…..

So it seems that having a position of power does help to be considered a honest professional.

How to stop smear campaigns at work? How to ensure that people, irrespective of their position, are protected for raising or flagging wrongdoings? (Be it fraud, corruption, lack of controls…). There are ways. These ways to protect the honest and professional employees indirectly help to highlight the incompetence of others, regardless of the hierarchical level. Watch this space for more information.

Elisa Turullols.

*For the avoidance of doubt, significance in this sentence has an ironic meaning.

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