Imagine one of the following scenarios: (1) details about ABC Company’s latest strategic development plan has ended up on a popular Internet Web Site, to which ABC Company is now forced to scrap the plans that could have gained them substantial leverage in the marketplace; or (2) corporate financial data was inadvertently sent to a few shareholders within the organization, outlining the fact that XYZ’s financial situation was dramatically weaker than what its corporate executives were attesting to publicly. These are not "what if" scenarios, but rather, scenarios that actually occured (only the names have been removed).
The problem is that most CEO-level executives fail to communicate effectively to mid-level managers the importance of data governance within the organization. The consequence of that miscommunication in a post-Enron business environment could spell personal liability to the corporate executive team. It is no longer an acceptable defense for executives to use the "Ken Lay Defense" ("I didn’t know. I’m just the CEO."). The corporate fiduciaries of an organization (i.e. general counsel, outside counsel, etc.) need to do a better job of protecting the intellectual/information assets of the organization, specifically by developing a data governance program that will provide the C-level executive with some sort of assurance that any statement he/she makes on a filing (10K Securities filing, etc.) is true and accurate to the best of their knowledge.
As reported in today’s The New York Times, jury selection began in a shareholder lawsuit that was brought against 2 senior executives of the French conglomerate Vivendi for making false and misleading statements about the company’s financial position. Prior to the three-way merger between Canal Plus and Seagram (parent company of Unviersal Studios), Vivendi reported strong earnings and revenue that showed it would be in a position to satisfy the debt that was to go along with the merger even though other media and communication companies in the U.S. and Europe were suffering. By analogy, if a selling company approaches a purchasing company asking to be bought at a certain price, and the data governance is overlooked by the purchasing company, those executives (from the purchasing company) could be potentially setting themselves up for litigation.
Have a data governance plan in place from the outset, and the negative risks to your organization will be limited.
To read more about the Vivendi litigation, please click here: Shareholder Suite Against Vivendi Starts