Freeh Report on Penn State Scandal Holds Corporate Governance Lessons

The Freeh Report is, of course, specific to the Penn State situation, but it does reveal some important basic points about proper corporate governance.

2013-01-26

January 26, 2013 (Press-News.org) Freeh Report on Penn State Scandal Holds Corporate Governance Lessons

The recent indictment of former Penn State University President Graham Spanier alleges that Spanier engaged in a "conspiracy of silence" with other administrators to cover up the crimes of former football coach Jerry Sandusky. Although the media is likely to focus on the more salacious details of the Spanier indictment, it also holds important lessons for corporate boards.

One of the key points arising from the indictment of Spanier is the importance of the report of Judge Louis Freeh on the Sandusky scandal. Much of the Freeh Report focuses on the fiduciary conduct of Penn State executive leadership: how much did the Penn State board know about Sandusky's crimes, when did they learn of them, and what was the role of Spanier and other administrators in notifying the board?

General Lessons in Corporate Governance

The Freeh Report is, of course, specific to the Penn State situation, but it does reveal some important basic points about proper corporate governance:
-Awareness of risk: one of the most important roles of executive leadership is ensuring that the corporate board gets the information it needs to properly respond to a given situation. It is not enough, however, for leadership simply to alert the board of a given risk. Rather, they have an ongoing obligation to provide the board with the information they need to make decisions on how best to address particular risks.
-Creating the right culture: corporate boards have an obligation to create a culture of compliance with both legal and ethical obligations in their organizations. This means not only creating effective compliance policies, but also ensuring that whistleblowers can bring issues to light without fear of reprisal.
-Understanding roles: the corporate board should create a clear understanding with executive leadership about what issues require increased communication or oversight. Furthermore, the board should be careful to avoid deferring to executive leadership in situations where skepticism would be helpful.
-Preserving reputation is important: for any organization, reputation is an asset that a board must take steps to protect. This means that the board must consider the repercussions of their decision whether to act in a given situation.

A Business Law Attorney Can Help

If you are a shareholder considering action against a corporation regarding a dispute over business strategy, operations, or other matters, contact an experienced business litigation attorney. A knowledgeable business litigation lawyer can assess your case and advise you of your options. For more information, contact a business law attorney today.

Article provided by The Adanas Law Firm
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Freeh Report on Penn State Scandal Holds Corporate Governance Lessons

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