News Archive: September - December 2006

BACK TO ARCHIVES

• 2/3 UK Companies Not In Compliance with Good Governance Code. Only a third of the UK's largest companies claim full compliance with the UK's Combined Code - introduced in 2003 after a string of corporate scandals and laying out standards on issues such as board composition, pay, and shareholder relations- according to a report published by the accountancy firm, Grant Thornton. Of the remaining two-thirds of the FTSE 350 not in compliance with the code, only 30 explain where and why they stray from it, as the code mandates (12/28/06).

• Daimler-Benz Hires Former FBI Chief: Daimler-Benz AG has hired former Federal Bureau of Investigation Director Louis Freeh as an independent monitor as the auto maker concludes a two-year internal investigation into suspected bribery by company representatives, The Wall Street Journal reported on December 28, 2006. The German car manufacturer said earlier this year that an internal investigation of bribery claims found evidence of "improper payments" in Africa, Asia and Eastern Europe. It is also engaged in a U.S. illicit payments investigation.

• Nokia Makes Grants on 2nd Anniversary of Asian Tsunami. Nokia in Finland announced plans on December 22, 2006, aimed at helping thousands of young people and their communities. Two years on from the Asian Tsunami that devastated many communities, Nokia said it is launching prjects in India, Sri Lanka and Indonesia. The EUR 2.5 million program aims to help young people find jobs or set up small businesses, building long-term livelihoods for themselves and their families.
  
  

• Poor Performance Richly Rewarded: Pfizer’s Board forced the resignation last July of former Chairman and Chief Executive Henry McKinnell, after shareholders registered repeated anger over the stock’s poor performance. Now, according to a US official company filing, the executive is to receive a total payout valued at almost $200 million, The Wall Street Journal reported on December 22, 2006.
  
  
• Five Top Thai Officials Fired as New Case Against Former Thai PM’s Family Emerges.The Bangkok Post reported on December 26, 2006 that five top Finance Ministry officials have been fired for failing to assess tax payable by Bannapot Damapong, the brother-in-law of former Prime Minister Thaksin Shinawatra. This is part of a large government inquiry that may see charges against the former PM. In this case the officials were sacked for their conduct relating to why 4.5 million shares of Shin Corp "gifted" to Mr Bannapot by Khunying Potjaman, wife of Mr Thaksin, through her maid, valued at 738 million baht, did not incur any personal tax liability.
  
  

• Blair Government Criticized On Ending Bribery Probe: Members of the British Parliament and NGOs are voicing rising criticism of the December 15, 2006 UK Government’s ending of a Serious Fraud Office investigation into alleged corruption in dealings between BAE Systems and Saudi Arabian authorities. Writing in the Financial Times on December 20, 2006, the leaders of the Africa All-Party Parliamentary Group say the decision runs counter to the "letter and spirit" of the Government's June declaration against corruption in Africa. Then, Transparency International UK chairman Laurence Cockcroft said in a press release:” The Government’s decision conveys a disturbing message: while other countries are expected to observe their obligations under international anti-corruption conventions, the UK reserves the right to ignore its obligations when this is politically expedient. It will be hard to dispel the perception that this constitutes a double standard.”

• New Earnings Record Set - Lloyd Blankfein, Chairman and Chief Executive Officer of Goldman Sachs Group Inc. won the battle of the Wall Street bonuses by a wide margin, getting a record $53.4 million for 2006, Reuters reported on December 20, 2006.
  
  

• Corruption Hits Sri Lanka’s Tsunami Recovery. Conflict and corruption are undermining post-tsunami recovery in Sri Lanka, reported AFP on December 18, 2006. The island lost an estimated 31,000 people while another million were left homeless in 2004. Some $3.2 billion in foreign aid pledges were made, but accusations of huge corruption are rampant. "God only knows if the money had been spent on tsunami victims or anybody else," said J. C. Weliamuna of global anti-corruption outfit Transparency International.

• Directors Also Manipulate Stock Option Grants. Corporate outside directors may have manipulated stock option grants, as well as corporate CEOs, reported The Washington Post on December 18, 2006. An extensive study by academics at Harvard and Cornell universities showed a "statistically impossible" coincidence of grants on days when the stock prices were at their monthly lows.
  
  UPDATE: December 22, 2006 - IBM announced that it is ending stock options for directors and in future they will receive an annual retainer of $200,000 according to Bloomberg News.
  
  
• Ethics Reform in US Congress: Citing the mandate from voters to clean up a culture of corruption, incoming US House of Representatives speaker Nancy Pelosi has promised a sweeping reform agenda, including a first-ever "outside enforcement mechanism" for congressional ethics, reported the Christian Science Monitor on December 15, 2006. "The ethics process over the last few years has lost the confidence of the American people," she said in a briefing with reporters, where she predicted the "most honest and open Congress in history."
  
  
• UK Abandons BAE Probe. Britain was accused last night of caving in to pressure from Saudi Arabia after Tony Blair's government stepped in to end a government office inquiry into bribery accusations against British company, BAE Systems, the world's fourth largest defence contractor. Over the past two years investigators have been examining allegations of slush funds and ethics violations in connection to the 20-year Al Yamamah oil-for-arms deal with Riyadh, the UK's biggest export deal (BBC, 12/15/06).
  
  
• Siemens' Slush-Fund Scandal Deepens, Executive Arrested. German company, Siemens, Europe’s largest engineering group, announced that it now believes as much as €420 million is missing from its accounts, more than doubling its previous estimate of  €200 million, in a fraud scandal that has rocked the company. Investigators are examining the missing funds, which may have been siphoned off into overseas funds as possible bribes for contracts. On Tuesdsay, Thomas Ganswindt, former chief executive of Siemens' information and communications unit, was arrested, bringing the scandal to the highest levels of the company (Deutsche Welle, 12/13/06)
  
  UPDATE: Deutsche Welle reported on December 22, 2006 that Munich State prosecutors have freed a group of men accused of running slush funds at the engineering giant Siemens, but they announced that the case was growing in strength (other media reports suggested the invesitagion is expandingt, that a focus is on just how high up in management there was complicity and that illicit payments continued in 2006).
  
  

• Taiwan's First Lady Pleads Not Guilty at Start of Corruption Trial (Xinhua, 12/15/06). Taiwan Prosecutors Have Enough Evidence to Indict President on Corruption. Reuters, reporting on 11/3/06, quoted prosecutors sayingt they have enough evidence to bring corruption charges against President Chen Shui-Bian after he leaves the immunity of office. The announcement came with the indictment of the President's wife on corruption charges of embezzling money from a secret diplomatic fund under Chen's control and faking documents in a case involving the misuse of more than $448,000. The charges are the latest blow in a scandal that has led to mass protests and calls for the president's removal.

• China Issues "Green Procurement" Policy. China's Ministry of Finance and the State Environmental Protection Administration have announced that starting in 2007, the nation’s central and provincial governments will be required to prioritize their purchasing of environmentally friendly products and services in a new "green procurement" policy that will be implemented at all levels of jurisdiction starting in 2008. The agencies released a “green purchasing list” that specifies a range of recommended products carrying the “China Environmental Label”, China’s only national eco-label for environmentally friendly goods and services (GreenBiz, 12/4/06).
  
  

• U.S. Imposes New Limits on White-Collar Prosecutors. The U.S. Justice Department imposed new limits on officials prosecuting corporations and individuals in white-collar investigations. Federal prosecutors must now receive formal approval from superiors in the local U.S. Attorney's offices and from senior Justice Department officials when seeking access to communication between company attorneys and employees being investigated for wrongdoing. They must also now make written requests for companies to share information obtained in internal corporate investigations. The changes revamp the so-called Thompson Memo guidelines issued in 2003 by former Deputy Attorney General Larry Thompson, which some have criticized as depriving accused companies and executives of their legal rights (The Wall Street Journal, 12/13/06)
  
  
• H.P. Board Cuts Its Ties With Lawyer. Hewlett-Packard’s board has ended a crucial advisory relationship with Larry W. Sonsini, the powerful Silicon Valley lawyer, reported The New York Times (12/14/06). The move is the latest repercussion from the U.S. tech company’s spying on directors and journalists, which has led to the criminal prosecution of its former chairwoman and a senior company lawyer by California authorities, several federal investigations, $14.5 million in civil fines as well as considerable embarrassment for a company that prided itself on ethical behavior (See Investigations and Prosecutions for More on the HP Scandal).
  
  
• One Third UK Shoppers to Buy Ethical Christmas Gifts. Over 15 million UK shoppers will buy ethical Christmas presents, according to a new survey by UK Financial Services Group, Friends Provident (12/5/06). According to the survey, 31% of shoppers will buy gifts, clothing and food that are ethically produced, organic or naturally sourced including fair trade coffee (22%), chocolate (35%), and environmentally conscious gifts (18%).
  
  

• Mexican Government Announces 6-Point Plan Against Corruption. Mexican President Felipe Calderon's top anti-corruption official, Secretary German Martinez, on Saturday announced a six-point plan to tackle the bribes, kickbacks and theft from government coffers that plague Mexico. Mr. Martinez said the plan will include anti-corruption education programs, better disclosure of government activities and a uniform system to revise spending in all government departments. Martinez said he signed a measure banning government officials from receiving official gifts worth more than US$50 (€35) in the run up to Christmas (AP, 12/9/06).

• Executive Compensation: Lehman CEO To Receive $186 Million in Stock Grants. Directors of Lehman Brothers, the investment bank, have agreed to a special $186 million payment in the form of stock options for the 2007-2016 period to chief executive Richard Fuld. This is an enormous payment even by Wall Street standards. The grant will come on top of basic pay and special bonuses. In 2005, Mr. Fuld took home $34.5 million, while rivals at other leading investment banks in New York earned similar amounts. The 2006 compensation levels, due to be agreed shortly, may be larger (The Wall Street Journal 12/6/06).
  
  
• Indian Supreme Court Rules to Make Corruption Prosecutions Easier. In a landmark ruling, the Indian Supreme court said prosecutors did not need prior permission to begin proceedings against politicians facing corruption charges. Until now, assent was needed from the parliament Speaker or a state governor to charge an MP or a state legislator. Corruption is rampant in India and several high-profile politicians have been accused in corruption cases (BBC, 12/6/06).
  
  
• OECD Provides Guidance for Assessment of Corporate Governance Rules and Practices. The Organization for Economic Cooperation and Development (OECD) has published Methodology for Assessing Implementation of the OECD Principles of Corporate Governance which issues guidance for users in assessing their implementation. The Principles, agreed by governments in 1999 and revised in 2004, are designed to maintain public trust in companies and stock markets and are used by a wide range of organizations and policy-makers.
  
  
• NIKE Breaks Ties With Major Supplier Over Labor Standards. U.S. sporting goods firm NIKE, Inc. has broken ties with its primary hand-stitched soccer ball supplier, the Pakistan-based Saga Sports (Pvt) Ltd for failing to maintain fair labor standards. According to The Guardian, a six-month probe by NIKE found that Saga outsourced some sewing to individual households. This practice reduces the transparency of supply chains and increases the risk of underage labor.
  
  
• Corporate Library's 2006 U.S.Governance Practices Report Says Governance "Never Been Healthier." The Corporate Library has released its 2006 Governance Practices Report, an extended compilation of the most important trends and challenges facing U.S. corporate governance. According to the Corporate Library, "Even as the headlines denounce one new scandal after another, the truth of the matter is that corporate governance policies and practices in this country have never been healthier."
  
  

• Australian Government Punishes AWB Over Iraq Bribes. John Howard, the Australian prime minister, on Tuesday dealt the first blow to the export monopoly of the Australian Wheat Board by temporarily removing its veto rights, under which AWB vets rival companies’ applications to export wheat, after a national inquiry which found AWB had paid A$290m in kickbacks to the former Iraqi regime of Saddam Hussein under the UN Oil-for-Food Program (FT, 12/6/06).
  
  

• IFC and IETA Partner to Reduce Corporate Carbon Emissions. The International Finance Corporation, the private sector arm of the World Bank, and the International Emissions Trading Association have agreed to join their efforts to support business-friendly and market-driven solutions that address climate change by exchanging information and supporting capacity building to facilitate participation in the carbon market by the private sector in developing and transition countries.

• Corruption to Blame for Ineffective Police Force in Afghanistan. Afghanistan's police, who are often paid less than the Taliban insurgents they are fighting, frequently force those in custody to buy their freedom, a "bribe and release" arrangement undermining the government's legitimacy, a new U.S. report by the State Department and Pentagon says. The report cites illiterate police recruits, a history of low pay, and pervasive corruption as major obstacles to the U.S.-funded $1.1 billion program to train and equip the Afghan police concluding that that the police force's readiness to carry out law enforcement duties is "far from adequate." (Washington Post, 12/5/06)
  
  
• Chinese Courts Rule Against Anti-Corruption Journalist, Human Rights Activist. Chinese courts ruled against a blind activist and a researcher for The New York Times in two cases that have attracted international attention as examples of government retribution against dissent. The courts rejected an appeal of Zhao Yan, the Times researcher who reported on official corruption and peasant rights before he joined the newspaper, and they upheld a four-year prison term of activist Chen Guangcheng, who documented cases of forced abortions (AP, 12/1/06)
  
  

• EU Streamlining Budget Rules for Greater Accountability. The European Commission said EU member states and the European Parliament have reached final agreement on new budget rules aimed at streamlining access to funding, preventing fraud and corruption and improving accountability. The new rules will require that the names of beneficiaries of agricultural and structural funds are made public. The commission will also set up a central database of organizations excluded from EU funding. (AFX11/30/06.
  
  
• Haiti Donors in Efficiency Pledge. Haiti and delegates at a donors conference in Madrid have agreed to operate with greater efficiency in the use of funds in the Caribbean nation. The commitment came after Haiti's prime minister said that 99% of the US $750m pledged in July had not reached their intended destinations in Haiti, possibly due to corruption. In Transparency International's 2006 Corruption Perceptions Index, which ranks perceived levels of corruption in countries, Haiti came in last (BBC, 12/1/06).
  
  

• Leading Phillipines NGO Banned From UN Conference. One of the most respected anti-corruption organisations in the Philippines, the Transparency and Accountability Network, has been banned from the forthcoming first session of the Conference of the Parties to the UN Convention Against Corruption (UNCAC) that will be held from 10-14 December in Jordan because one (unnamed) member state has used UN rules to object to its participation. Three global unions, including Public Services International, have condemned the banning as a direct attempt by the government of the Republic of the Philippines to gag anti-corruption voices. For more information on the the key UN Convention meeting please visit this link.

• NCRP Releases Guidelines On Philanthropic Accountability. On November 30, the National Committee for Responsive Philanthropy (NCRP) released its report, Building Solid Foundations: New Approaches to Substantive Philanthropic Accountability. The report introduces guidelines to regain public trust in and restrengthen the philanthropic sector as well as aims to answer two key questions: 1) What is the substantive value of philanthropy?, and 2) To whom are foundations substantially accountable?

• UK Carbon Initiative Launched for Businesses. A new UK-government funded initiative has been launched in to help businesses reduce their 'carbon footprint' and boost their appeal to an increasingly environmentally-aware public. The Carbon Trust (CT) outlines how businesses can track the carbon emitted by the products they sell at each stage of their lifecycle. The CT argues that businesses implementing its proposals could see positive returns, as research conducted by the trust found that two thirds of UK consumers said they would be more likely to buy a product with a low carbon footprint (IntheNews, 11/21/06).

• Taiwan's Ruling Party Suspends First Lady Over Corruption Charges. Taiwan's ruling party decided to suspend President Chen Shui-bian's wife, weeks after prosecutors indicted her on charges of embezzling money from a presidential fund. Wu Shu-chen will be suspended from the Democratic Progressive Party for 18 months (International Herald Tribune, 11/30/06).
  
  

• Top Firms Are Named in China Bribe Case. Three large multinational companies - International Business Machines, NCR and Hitachi - were named in a court verdict that sentenced the former head of China Construction Bank to 15 years in prison for accepting more than $500,000 in bribes, reported the New York Times on November 30, 2006. The companies were named as having worked through a Chinese contact in an effort to sell information technology services to the huge state-owned bank in 2003 and 2004. The court verdict said that the contact had collected large "service fees" from IBM and NCR and that he later passed valuable gifts on to the bank chairman. If American companies knowingly made gifts or large payments to Chinese officials to win or influence business, they could be prosecuted in the United States under the Foreign Corrupt Practices Act of 1977.
  
  
• Giving it Away. To qualify as one of the top 50 individual philanthropists in the United States you now have to have given away or pledged to give away more than $157 million over the last five years (up from $120 million a year ago), according to a November 27, 2006 special report in Business Week magazine. Topping the 2006 list with massive charitable contributions are Warren Buffet at $40,612 million, followed by Bill and Melinda Gates at $3,350 million, then George Soros at $ 2,066 million, and Gordon and Betty Moore at $2,049 million. Barron’s magazine on November 27, 2006 analyses personal philanthropy and finds that “Top donors often favor special causes where they can have an impact – and feel a connection.” See Philanthropy for More Coverage.
  
  

• Siemens Probed For Bribery in Italy Unit. Siemens AG, the target of a bribery probe that's spread to at least six countries, may have relied on illegitimate payments to succeed with an acquisition in 1994 and to win orders in Italy, an Italian prosecutor said (Bloomberg, 11/28/06). Siemens had offices and private residences of employees at 30 locations searched by police this month in an embezzlement probe prosecutors have estimated at 200 million euros. The investigation has spread from Germany to Austria, Italy, Switzerland, Hungary and Liechtenstein, prompting Chief Executive Officer Klaus Kleinfeld to say the case threatens to shake the company's foundations.

• Study Finds Strong Link Between Executive Pay and Company Performance. Executives at financially high-performing companies are realizing greater compensation than their counterparts at underperforming companies, suggesting that corporate America’s executive pay-for-performance model is working for most companies, according to a new study by Watson Wyatt Worldwide, a global consulting firm. In its study, Watson Wyatt found that CEOs at higher-performing companies have significantly greater “realizable” pay, especially from long-term incentive awards. According to the study, based on public data from 793 companies in the S&P Composite 1500, Between 2003 and 2005, the median realizable LTI for CEOs at higher-performing companies was $4.4 million, compared with just $1.5 million for CEOs at lower-performing companies.

• South Africa: IFC Launches Report on Access to Finance for Women. The International Finance Corporation launched the first research study on Access to Finance for women entrepreneurs in South Africa since apartheid in which it reveals that black women are the most entrepreneurial segment of the population, yet the least likely to have access to finance. It explains how and why most financial institutions are not doing enough to address the problem and how an abundance of resources in both the private and public sectors is not matched by an understanding of women's enterprises (IFC, 11/28/06)

• Australian Government Cleared in AWB Bribery Scandal. On November 27, 2006 the Cole Commission which was established by the Australian government 11 months ago to investigate charges from a UN report that Australian wheat exporter, AWB paid huge bribes to Saddam Hussein’s Iraqi government in exchange for contracts worth more than $2bn in the UN’s Oil-for-Food Program, cleared the Australian government of involvement in the alleged bribes. But it said that some officials from the monopoly body controlling wheat exports could be liable to prosecution (BBC, 11/28/06).

• Saudis Halt £10bn Jet Talks to End UK Graft Probe. Saudi Arabia has suspended commercial negotiations with the UK over the £10bn purchase of a new fleet of Eurofighter Typhoons, in an attempt to force the UK's Serious Fraud Office (SFO) to wind up a long-running corruption probe. For more than two years, the SFO has been investigating allegations of slush funds and other unethical practices surrounding the 20-year-old Al Yamamah oil-for-arms agreement with Riyadh, the UK's biggest export deal (Financial Times, 11/28/06).

• ABN Amro Pays $4.5 Million to Free Staff. Dutch bank ABN Amro has paid $4.5m to a Vietnamese-state run bank as part of a deal to secure the freedom of four of its employees, who have been in jail or under house arrest, for months in connection with disputed foreign exchange trading, and as compensation for "illegal profits" from the disputed foreign currency trades it executed on behalf of Incombank, a large state-owned bank, reported the Financial Times on November 28, 2006. Although the company has consistently denied any wrongdoing in the case, critics have raised questions about the transparency and fairness of the payment.
  
  
• UK Financial Association Launches Compliance and Anti-Money Laundering Standards. The UK-based International Compliance Association, which works to further best compliance and anti-money laundering practice in the financial services sector, announced its launch of a set of occupational standards in compliance and anti-money laundering. According to the press release, the value of these standards is that they provide independent and sector-wide benchmarks for competent performance in the range of jobs within firms and can used for many different purposes, including the recruitment and evaluation of staff and identifying training needs for individuals, teams and organisations. The standards are organised into groups that represent compliance and anti money laundering activities and apply across the financial services sector, reflecting the way those responsibilities are allocated and discharged.
  
  

• Charges of Stock Manipulations Likely to Cost Lone Star Major Deal in South Korea. On November 22, 2006 the Financial Times reported that Lone Star, a US buy-out fund, is close to terminating its $7.3bn contract to sell Korea Exchange Bank to Kookmin, because of Korean prosecutors investigations into the deal, including charges of stock manipulation filed yesterday, which have made the bank almost impossible to sell.
  
  
• China 'Unblocks' Wikipedia Site. China's year-long block on the US-based online encyclopedia, Wikipedia, has been lifted, reported the BBC on November 16, 2006. China has strict laws on internet use and blocks content it deems a threat, including references to the Tiananmen Square massacre and notable dissidents. The press freedom group Reporters without Borders praised the bosses of Wikipedia, who they said had "always refused to go in for self-censorship." Other internet giants such as Yahoo, Google and Microsoft have drawn criticism for censoring their services or complying with strict Chinese laws. Many of these firms justified their actions by saying they were the only way to gain access to China's fast-growing market, an argument which activists are claiming is disproven by Wikipedia's unblocking. For more on US tech companies and chinese censorship see Business & Politics.
  
  

• Peruvian Prosecutor Receives TI Integrity Award for Fighting Corruption. On November 15, 2006, Dr. Ana Cecilia Magallanes Cortez, one of the most respected prosecutors in Peru, was presented with Transparency International's Integrity Award, which honours individuals who fight corruption. Dr. Magallanes was the leading force in the prosecution of approximately 1,500 members of the criminal network headed by Vladimiro Montesinos under the corrupt regime of Peru's ex-president Alberto Fujimori. Dr Magallanes’s efforts led to the arrest of among others, the former President of the Republic -Alberto Fujimori- generals, Supreme Court justices, judges and media magnates and helped initiate the recovery of US $250 million.

• Passage of Companies Bill Brings Major Changes for U.K. Companies. Some of the most sweeping changes for U.K. companies since passage of the Companies Act of 1985 took effect when the 696-page Companies Bill, considered to be Britain's longest piece of legislation, became law on November 8. According to an analysis by Institutional Shareholder Services on November 15, 2006, the bill, which is intended to enhance shareholder engagement and promote a long-term investment culture, would implement several key changes such as requiring more detailed reports on environmental and social impacts, and calling for shareholders to ratify directors' acts. Other changes include requiring shareholder approval of director severance contracts that allow for awards of more than two-times a director's annual salary, as well as provisions allowing for auditor indemnification with shareholder approval.
  
  
• New Inter-Agency Alliance Will Boost Latin American Anti-Corruption Efforts. On November 15, 2006, the World Bank, the Inter-American Development Bank, the UK's Department for International Development and Transparency International signed a memorandum of understanding formalizing the Inter-Agency Anti-Corruption Learning Alliance, a partnership to facilitate the sharing of knowledge and best practices in key strategic areas of the anti-corruption effort. The alliance has identified three priority areas for cooperation, which will focus its support of reform efforts in Latin America: public contracting, political finance and local government.
  
  
• SustainAbility Releases Corporate Sustainability Reporting Rankings. SustainAbility, a CSR consultancy and think-tank, has released its latest biannual benchmarking survey of leading practice in corporate sustainability reporting, published in partnership with the United Nations Environment Programme (UNEP) and Standard and Poor’s. Entitled Tomorrow’s Value, the report ranks the world’s leaders in corporate sustainability reporting, transparency and disclosure. Strikingly, half of the Leading 50 companies in the new survey are complete newcomers, including 5 entrants from non-OECD countries. BT, Co-Operative Financial Services, and BP, all British firms, top the list (11/9/06).
  
  
• Kenya Corruption 'Threatening UK' Says British Minister. On an official visit to Kenya, British foreign office minister Kim Howells warned that endemic corruption in Kenya's "porous borders" is helping to drive the supply of illegal drugs into the UK and inviting terrorism (BBC, 11/10/06).
  
  
• UK Gender Pay Gap At Lowest Level Ever, No Difference for Workers in Twenties. The pay gap between men and women in the UK is at its lowest level, and has vanished entirely for those in their twenties. According to UK government statistics, since 1997, the gap has dropped from 18% to 12.6% – with men making an average £11.71 per hour, compared to £10.24 for woman. But in the 22-29 age group, women are now earning slightly more, with average hourly pay standing at £9.55 compared with £9.53 for men (Chartered Institute of Personnel and Development, 11/9/06).
  
  

• Auditing Firms Urge New Ways to Detect Fraud. In a policy letter to be released today, the heads of the world's six biggest accounting firms suggest considering whether companies should be subject to forensic audits specifically designed to root out fraud every three or five years, whether stock exchanges should require companies to randomly undergo these tests, or if investors should choose the intensity of the audit they want for a company. The firms have long contended that while standard audits are designed to detect errors that could lead to fraud, the checks can't pick up all corporate wrongdoing (The Wall Street Journal, 11/8/06).

• IBM Paid Agent Who Bribed China Bank Head, Court Says. International Business Machines Corp. (IBM), the world's biggest computer-services company, paid $225,000 to a sales agent who helped bribe the former chairman of the country's fourth-biggest bank, a Beijing court verdict said. Another company, Fidelity National Financial Inc., the biggest U.S. title insurer, already is the subject of a bribery inquiry by U.S. investigators involving the same banker (Bloomberg, 11/6/06).
  
  
• 2006 Corruption Perceptions Index Released. The 2006 Corruption Perceptions Index (CPI) published today Nov. 6, 2006 by Transparency International, shows that Haiti, Myanmar, and Iraq, and Guinea are perceived to have the highest levels of corruption, while Finland, Iceland, New Zealand and Denmark are seen as having the lowest. Among industrialized countries, the U.S. appears to have slipped the most in rankings. See CPI for the full rankings.
  
  

• Pension Funds Warn US Companies On Use of Pay Consultants. A coalition of US pension funds, which collectively control 850bn USD, sent a letter to America's 25 biggest companies expressing concern that hiring the same consultants to advise on compensation as well as on other management issues could create conflicts of interest that could inflate executive pay at the cost of shareholders as well as lead to Enron-style scandals. The letter puts pressure on companeis to reveal previously undisclosed relationships with pay consultants and on regulators to monitor the indepence of these influential companies (Financial Times, 11/2/06).

• WHO Launches Anti-Corruption Initiative for Medicines Procurement. Citing recent estimates that as much as 25% of procured medicines can be lost to fraud, bribery and other corrupt practices, the UN World Health Organization (WHO) launched a new initiative to help governments and regulators combat corruption in medicines procurement practices (10/30/06). The initiative includes plans to stimulate legislative reform within countries and promote standardized systems of checks and balances to prevent abuse by making publicly available criteria for selecting regulatory and procurement staff and medical products. The WHO will also encourage ethical practices through behaviour change activities and staff training.
  
  

• China Passes First Anti-Money Laundering Law. China's legislature has passed its first law targeting money-laundering, indicating the government’s increasing concern over the scope of financial crime, loopholes in its financial supervision system, and the sophistication of corruption cases. The law describes various types of money laundering, which will include bribe-taking and financial fraud (China Daily, 11/1/06).

• Berlusconi Ordered to Stand Trial. Former Italian Prime Minister Silvio Berlusconi and British corporate lawyer David Mills were ordered to stand trial on March 13 for allegedly perverting the course of justice in two corruption trials. A judge ruled that the two should be indicted after preliminary hearings in which prosecutors, accused Mills of accepting a $600,000 kickback from Berlusconi. Berlusconi and Mills already face trial next month in Milan on separate corruption charges (ANSA, 10/31/06).

• Red Cross Proposes Major Governance Overhaul. The American Red Cross, which has come under fire for its response to Hurricane Katrina, announced plans, many of which are pending on the approval of the U.S. Congress, to reduce size and management role of its board from 50 people to between 12 and 20. The Red Cross proposed removing the designation of its chairman as "principle officer," a role which has complicated the relationship between the board and CEO. Under the plans, the chief internal auditor would report directly to the board, and whistle-blowers would have improved means for reporting wrongdoing. Critics have blamed its governance structure for many of its slow response and mismanagement problems.

• Global Compact Network to Be Launched in Russia. On October 26, 2006, at an international conference on “Social Investments in the Economic Development of the Regions of Russia" in Rostov, the Global Compact, the UN created organization for socially responsible business, decided to launch a network in Russia, which will be established by the end of the year, in cooperation with the Russian Union of Industrialists and Entrepreneurs.

• Nigeria's Vow to Investigate Oil Deal Reveals Questionable Public Procurement System. On October 31, 2006 the Financial Times reported that Nigeria's most senior anti-corruption official, Nuhu Ribadu promised to investigate how a lucrative oil block was sold off to Starcrest, a little-known company with no proven track record in the oil industry but which industry sources say has strong political connections, without being declared by Nigeria's petroleum ministry, despite open bidding procedures designed to bring a measure of credibility to Nigerian oil licence awards. Africa's top oil producer last year introduced a -system of open oil block -auctions as a break from the discretionary awards prevalent under past military regimes. But, to date, no comprehensive list of the dozens of license winners in 2005 and this year has been published officially by the government.

• Study Says CEO Pay in U.S. Outpaces Company Performance. A new Financial Times (10/29/06) study of the S&P 500 for the past two years reports that U.S. CEO compensation is growing faster than earnings and shareholder returns suggesting that the gap between executive pay and company performance is widening. According to the study, which calls for more shareholder control, the median compensation packages of U.S. CEOs increased 20% to around $5 million over the last fiscal year. At the same time net profits the companies increased an average 15% and shareholder returns only 9%.

• Oxfam Accuses Starbucks of Opposing Ethiopian Plan to Bring Coffee Farmers Extra Revenue. On October 26, 2006, Oxfam accused Starbucks coffee company of opposing the Ethiopian government’s application to the US Patent and Trademark Office to trademark the country's most famous coffee names, Sidamo, Harar and Yirgacheff, part of a plan to enable Ethiopian farmers to earn, according to Oxfam, an estimated $88 million (USD) extra per year. In a press release, Starbucks responded by saying that it had never filed an opposition to the trademark application but that it believed geopraphic certification programs were a better way to protect geographically descriptive terms. Oxfam responded the next day by saying that Starbucks had prompted the U.S. National Coffee Association to oppose the applications, which was denied for the names Sidamo and Harar.

• $5 Million (US) Prize to Least Corrupt African Leader. Mo Ibrahim, a Sudanese multi-millionaire, will announce today the launch of a US $5 million prize aimed at fostering good governance in Africa, reported the Financial Times (10/26/06). The prize will be awarded to African leaders who leave office and deliver security, health, education, and economic development to their countries. According to Ibrahim, while departing Western leaders are welcomed into boardrooms and speaking circuits, "our guys have no life after office. Suddenly all the mansions, cars, food, wine is withdrawn...That incites corruption; it incites people to cling to power.

• Study Shows Most U.S. and Canadian Business Students Are Ethically Minded. A study of 2,100 MBA students in 87 programs in the US and Canada by Net Impact, a CSR organization of professionals, MBAs, and other graduate students, reports that most business school students believe corporate profits and social responsibility could co-exist. About 81% of the students said companies should try to work "toward the betterment of society", while 18% thought most companies were already doing so. 90% said business leaders should factor social and environmental effects into their business decisions, an approach which 60% said could be profitable

• Thailand Coup Leader Says Little Proof of Thaksin Corruption. Investigators have failed to uncover solid evidence to support corruption charges against Thailand's ousted Prime Minister Thaksin Shinawatra, the nation's coup leader, General Sondhi Boonyaratklin, said in an interview. In the past, Sondhi has justified the bloodless coup on September 19 by saying that widespread corruption during Thaksin's five years in office had undermined democracy. He quickly revived the nation's dormant corruption watchdogs and set up his own high-powered team of investigators to look into allegations of graft by Thaksin and members of his government (Hindustan Times, 10/26/06).

• Taking A Cut Is Acceptable, Says African Minister. In an unusually frank admission about the mechanics of business in oil-rich West Africa, a top Equatorial-Guinean official, Teodorin Nguema Obiang, the 37-year-old son and likely successor of President Teodoro Obiang Nguema Mbasogo, has said that companies owned by ministers often bid for -government contracts with foreign groups and, if successful, receive "a percentage of the total contract the company gets," reported the Financial Times (10/26/06). The statement was made in a made in a South African court where he is opposing the government's seizure of two of his luxury houses.

• AACA Holds First Annual Meeting. The International Association of Anti-Corruption Authorities (IAACA), which was founded by 40 experts in April 2006 at the UN Office in Vienna, is holding its first annual meeting in Beijing this week. Among the objectives of the Association is the promotion of the effective implementation of the UN Convention against Corruption, as well as the assistance of anti-corruption authorities internationally in the fight against corruption. The IAACA will seek consultative status with the United Nations.

• ISS Launches Governance Leadership Interview Series. Institutional Shareholder Services (ISS), a leading provider of corporate governance and proxy voting services, announced a new program, the Governance Leadership Interview Series, designed to leverage the expertise of its own corporate governance experts as well as others in the industry to share knowledge and exchange viewpoints about key corporate governance issues facing investors, corporations and their directors. For the Fall 2006 schedule of interviews see www.issproxy.com.
  
  
• Wolfowitz Slams China's Banks on Africa Lending. Paul Wolfowitz, president of the World Bank, sharply criticised Chinese banks in their lending to African countries accusing them ignoring the "Equator Principles," a voluntary code of conduct adopted by almost 80% of the world's banks pledging that projects financed by private bank lending meet certain social, human rights, and environmental standards (Financial Times,10/24/06). China's activities in Africa have begun to concern many development agencies and NGOs who say Chinese companies are bypassing safeguards and guidelines designed to improve corporate governance, protect human rights, and guard against corruption.
  
  
• Judge Sentences Skilling to 24 Years in Prison. Jeffrey K. Skilling, former CEO of the collapsed energy giant, Enron, and according to The New York Times, the most vilified figure from the most notorious U.S. financial scandal of the decade, was sentenced to 24 years, four months in the harshest sentence yet in the case that came to symbolize corporate fraud in America.
  
  
• Corporate Library Identifies Director Relationships As Key Cause of Backdating. A new study by The Corporate Library of the 120 companies now implicated in the options backdating scandal finds new evidence that the practice of backdating stock options may have been spread by word of mouth through the network of directors sitting on the boards of more than one company. According to the report, director interlocking relationships now appear to be the most important governance characteristic and indicator of backdating problems.
  
  
• Judge Orders Grasso to Return Tens of Millions in Compensation. A New York state judge ordered former New York Stock Exchange (NYSE) Chairman Dick Grasso to return tens of millions of dollars in retirement pay criticizing Mr. Grasso for failing to adequately disclose the size of his U.S. $187.5 million compensation package to the exchange's board of directors and the board for failing to do its homework at a time when the NYSE was still a non-profit entity. U.S. Courts rarely criticize a top executive's pay package so forcefully, much less rebuke board members for their ignorance of such rewards (The Wall Street Journal, 10/20/06)
  
  
• The Conference Board Reports U.S. CEO and Directors' Pay Both Up Again. On October 19, 2006 The Conference Board published its two annual reports on CEO and Director Compensation. It found that median total compensation for outside (non-employee) directors of U.S. boards is higher than last year's median in all three of the major industry sectors it covers in its 402-company survey. According to its CEO compensation report, which based on data on the top five executives of 3,075 U.S. companies in 14 major industries, median executive pay is higher in all industries.
  
  
• Cuban Newspaper Uncovers Widespread Corruption. A rare investigation by one of Cuba's communist newspapers, the Union of Young Communists newspaper, Rebel Youth, has found that most state-run services are corrupt and preying on the population. Its undercover reporters found that at most of the cafeterias, beauty salons, repair shops and other outlets they visited, employees are skimming profits by overcharing and cutting portions. Such open criticism of the state sector was once discouraged but in the past year Fidel and Raul Castro have led the way by complaining that corruption was undermining their 47-year-old communist revolution (Guardian, 10/17/06).
  
  
• CorporateRegister.com Launches Two New Sustainability Reporting Registers with GRI, AccountAbility. On October 17, 2006 CorporateRegister.com, an international online directory of non-financial corporate reports, announced that it has partnered with two corporate citizenship initiatives, the Global Reporting Initiative and AccountAbility, to provide two, free and separate online registers, which allow users to search for companies reporting according to GRI and AccountAbility guidelines and standards (CSRWire, 10/17/06).
  
  
• U.S. SEC Sanctions Statoil for Violating Foreign Corrupt Practices Act. The U.S. Securities and Exchange Commission announced a settled enforcement action against Statoil, ASA, a Norway-based and New York Stock Exchange listed multinational oil company, for violations of the Foreign Corrupt Practices Act, which prohibits bribery of foreign government officials. The SEC found that Statoil paid bribes to an Iranian government official in return for his influence to assist Statoil in obtaining a contract to develop a significant oil and gas field in Iran and to open doors to additional projects.
  
  
• Former China Southern Airlines Executives Face Trial in Corruption Scandal. According to the Associated Press (10/18/06), local media reported that four former top executives at China Southern Airlines, one of the country's biggest carriers, have begun their trials almost a year after they were arrested on charges of bribery and embezzlement involving over 1.2 billion yuan (US$151 million; €121 million).
  
  
• U.S. Auditing Watchdog Issues Guidance on Stock Options Reporting. On October 17, the Public Company Accounting Oversight Board (PCAOB), the U.S. accounting-firm overseer, a little more than a year after requiring companies to treat stock options as an expense and in the midst of a wave of scandals over stock options backdating, issued long-awaited guidance for auditing the value of employee stock options. In its guidance, the PCAOB warns auditors that because companies must estimate the value of employee stock options, they should be aware of possible pitfalls, such as how changes in assumptions can affect the fair value of the options (The Wall Street Journal, 10/18/06).
  
  

• UK Carbon Initiative Launched for Businesses. A new UK-government funded initiative has been launched in to help businesses reduce their 'carbon footprint' and boost their appeal to an increasingly environmentally-aware public. The Carbon Trust (CT) outlines how businesses can track the carbon emitted by the products they sell at each stage of their lifecycle. The CT argues that businesses implementing its proposals could see positive returns, as research conducted by the trust found that two thirds of UK consumers said they would be more likely to buy a product with a low carbon footprint (IntheNews, 11/21/06).

• Taiwan's Ruling Party Suspends First Lady Over Corruption Charges. Taiwan's ruling party decided to suspend President Chen Shui-bian's wife, weeks after prosecutors indicted her on charges of embezzling money from a presidential fund. Wu Shu-chen will be suspended from the Democratic Progressive Party for 18 months (International Herald Tribune, 11/30/06).
  
  

• Top Firms Are Named in China Bribe Case. Three large multinational companies - International Business Machines, NCR and Hitachi - were named in a court verdict that sentenced the former head of China Construction Bank to 15 years in prison for accepting more than $500,000 in bribes, reported the New York Times on November 30, 2006. The companies were named as having worked through a Chinese contact in an effort to sell information technology services to the huge state-owned bank in 2003 and 2004. The court verdict said that the contact had collected large "service fees" from IBM and NCR and that he later passed valuable gifts on to the bank chairman. If American companies knowingly made gifts or large payments to Chinese officials to win or influence business, they could be prosecuted in the United States under the Foreign Corrupt Practices Act of 1977.
  
  
• Giving it Away. To qualify as one of the top 50 individual philanthropists in the United States you now have to have given away or pledged to give away more than $157 million over the last five years (up from $120 million a year ago), according to a November 27, 2006 special report in Business Week magazine. Topping the 2006 list with massive charitable contributions are Warren Buffet at $40,612 million, followed by Bill and Melinda Gates at $3,350 million, then George Soros at $ 2,066 million, and Gordon and Betty Moore at $2,049 million. Barron’s magazine on November 27, 2006 analyses personal philanthropy and finds that “Top donors often favor special causes where they can have an impact – and feel a connection.” See Philanthropy for More Coverage.
  
  

• Siemens Probed For Bribery in Italy Unit. Siemens AG, the target of a bribery probe that's spread to at least six countries, may have relied on illegitimate payments to succeed with an acquisition in 1994 and to win orders in Italy, an Italian prosecutor said (Bloomberg, 11/28/06). Siemens had offices and private residences of employees at 30 locations searched by police this month in an embezzlement probe prosecutors have estimated at 200 million euros. The investigation has spread from Germany to Austria, Italy, Switzerland, Hungary and Liechtenstein, prompting Chief Executive Officer Klaus Kleinfeld to say the case threatens to shake the company's foundations.

• Study Finds Strong Link Between Executive Pay and Company Performance. Executives at financially high-performing companies are realizing greater compensation than their counterparts at underperforming companies, suggesting that corporate America’s executive pay-for-performance model is working for most companies, according to a new study by Watson Wyatt Worldwide, a global consulting firm. In its study, Watson Wyatt found that CEOs at higher-performing companies have significantly greater “realizable” pay, especially from long-term incentive awards. According to the study, based on public data from 793 companies in the S&P Composite 1500, Between 2003 and 2005, the median realizable LTI for CEOs at higher-performing companies was $4.4 million, compared with just $1.5 million for CEOs at lower-performing companies.

• South Africa: IFC Launches Report on Access to Finance for Women. The International Finance Corporation launched the first research study on Access to Finance for women entrepreneurs in South Africa since apartheid in which it reveals that black women are the most entrepreneurial segment of the population, yet the least likely to have access to finance. It explains how and why most financial institutions are not doing enough to address the problem and how an abundance of resources in both the private and public sectors is not matched by an understanding of women's enterprises (IFC, 11/28/06).

• Australian Government Cleared in AWB Bribery Scandal. On November 27, 2006 the Cole Commission which was established by the Australian government 11 months ago to investigate charges from a UN report that Australian wheat exporter, AWB paid huge bribes to Saddam Hussein’s Iraqi government in exchange for contracts worth more than $2bn in the UN’s Oil-for-Food Program, cleared the Australian government of involvement in the alleged bribes. But it said that some officials from the monopoly body controlling wheat exports could be liable to prosecution (BBC, 11/28/06).

• Saudis Halt £10bn Jet Talks to End UK Graft Probe. Saudi Arabia has suspended commercial negotiations with the UK over the £10bn purchase of a new fleet of Eurofighter Typhoons, in an attempt to force the UK's Serious Fraud Office (SFO) to wind up a long-running corruption probe. For more than two years, the SFO has been investigating allegations of slush funds and other unethical practices surrounding the 20-year-old Al Yamamah oil-for-arms agreement with Riyadh, the UK's biggest export deal (Financial Times, 11/28/06).

• ABN Amro Pays $4.5 Million to Free Staff. Dutch bank ABN Amro has paid $4.5m to a Vietnamese-state run bank as part of a deal to secure the freedom of four of its employees, who have been in jail or under house arrest, for months in connection with disputed foreign exchange trading, and as compensation for "illegal profits" from the disputed foreign currency trades it executed on behalf of Incombank, a large state-owned bank, reported the Financial Times on November 28, 2006. Although the company has consistently denied any wrongdoing in the case, critics have raised questions about the transparency and fairness of the payment.
  
  
• UK Financial Association Launches Compliance and Anti-Money Laundering Standards. The UK-based International Compliance Association, which works to further best compliance and anti-money laundering practice in the financial services sector, announced its launch of a set of occupational standards in compliance and anti-money laundering. According to the press release, the value of these standards is that they provide independent and sector-wide benchmarks for competent performance in the range of jobs within firms and can used for many different purposes, including the recruitment and evaluation of staff and identifying training needs for individuals, teams and organisations. The standards are organised into groups that represent compliance and anti money laundering activities and apply across the financial services sector, reflecting the way those responsibilities are allocated and discharged.
  
  

• 15% of Foreign Aid to Iraq Missing. On October 16, 2006 Reuters reported that, according to the Iraqi government, of the US $65 billion pledged to Iraq for aid and redevelopment since March 2003, only $20.5 billion has been spent on that purpose as some $35 billion has still not been disbursed to Iraq by donors while billions have been lost to corruption and billions redirected to security.  "About 15 percent of the total money invested in the country by the US government and other donors for reconstruction projects is missing without explanation. Each day the international debt of Iraq will increase because of corruption," said Judge Radhi al-Radhi, head of the Commission on Public Integrity, which is tackling corruption.
  
  
• Boardroom Brain Drain: Do Fewer CEO Directors Mean Weaker Boards? In an October 16 article in Forbes, writer Jim Drury argues that the dramatic drop in CEOs serving on the boards of other companies has "robbed corporate boards of arguably the most experienced, talented and sought-after candidates" resulting in a "boardroom brain drain" of "real world" experience.
  
  
• In CSR Women Get Lower Pay. Women working in the U.S. field of corporate social responsibility (CSR) earn about 30 percent less than their male counterparts, according to a survey conducted by Boston College Corporate Citizenship Center. The October survey showed that women earn between $80,000 and $90,000, compared to $110,000 and $120,000 for men. The survey gathered information from 254 U.S. "corporate citizenship professionals."
  
  
• S. African Corruption Anger. South Africa’s Institute of Justice and Reconciliation (IJR) new report, “Money & Morality,” on October 13, 2006 concludes that South Africans are angry about growing corruption, and that the politically well-connected seem to be the main beneficiaries of democracy. The Mail&Guardian reported that one of the lead authors, IJR’s Susan Brown said there was huge anger among citizens over a perceived lack of delivery and lack of access to a closed elite. ""The head of the executive [President Thabo Mbeki] is not holding the executive [the ministers] accountable… Ministers who year after year have dirty departments should lose their jobs. That's accountability," she said.
  
  
• Silicon Valley Chiefs Quit in Options Scandal. The chief executives of McAfee, an antivirus software maker, and CNET, an online publisher, on Wednesday were the first chief executives of major U.S. companies to quit over the stock options backdating scandals that are sweeping Silicon Valley (FT, 10/12/06). For commentary and backround see Boardroom Reform.
  
  
• China's Auditing Watchdog Opens Itself Up to Corruption Investigations. China's National Audit Office (NAO)-- which has achieved popular acclaim for its exposure of corruption, malpractice and misspent public funds -- is opening itself to corruption inspections by a team of officials from other government departments, reported Xinhua, 10/1//2006. Thus far, the NAO, which has published a storm of reports over the past three years on government departments, has received no outside scrutiny despite having received 440 complaints on "discipline violation" of audit offices and officials from January 2005 to August 2006.
  
  
• Pakistani Quake Victims Rally Against Corruption. A day before the anniversary of last year's earthquake in Pakistan, hundreds of survivors of the quake demonstrated in Islamabad accusing reconstruction officials of corruption. Despite billions of relief dollars pledged by international donors in the months following the quake, which killed more than 73,000 people and left about 3.5 million homeless, protestors say that they are not receiving enough assistance and that corruption is rampant among officials. This week Oxfam released a report citing patchy recovery in the reconstruction effort (Reuters, 10/8/06).
  
  
• Study Calls for Limiting Auditors Post-Scandal Liability. A study released for the European Commission by London Economics, an economic consultancy, makes the case for limiting the liability of auditing firms in the face of accounting scandals, arguing that the collapse of another major accounting firm, such as that of Arthur Andersen following the Enron's fall, could threaten the financial stability of the wider European economy, creating “serious problems for companies whose financial statements need to be audited." The study says that, “one of the major Big Four [accounting] networks could possibly fail” and that “a limitation on auditor liability would reduce risk caused by potential catastrophic claims.”
  
  

• GRI Launches New G3 Sustainability Reporting Guidelines. On October 5, 2006, at its Amsterdam conference, the Global Reporting Iniative launched its revised G3 Sustainability Reporting Guidelines which are used by countries around the world to report on their environmental, social and ethical practices. To view the updated guidelines click here.
  
  
• Whistleblowing in the US: Major Setback for First Sarbanes-Oxley Whistleblowing Case. The first worker to win protection as a whistle-blower under the Sarbanes-Oxley Act suffered a setback in his drawn-out case when a U.S. district judge decided not to enforce a Department of Labor ruling ordering a Virginia bank to reinstate him, reported CFO.com, 10/10/06. David Welch, the former chief financial officer of Cardinal Bankshares claims he was fired from the company after he raised questions about the bank's accounting policies and internal controls, and subsequently refused to certify its financial results.
  
  
• Buffett Calls for Crackdown on Unethical Acts in Berkshire Memo. Berkshire Hathaway Chairman Warren Buffet sent a memo to 45 top managers in the company in which he addresses the recent scandals involving stock-options backdating and Hewlett-Packard Co.'s leak probe by warning, "The five most dangerous words in business may be 'Everybody else is doing it," reported The Wall Street Journal, 10/10/06. In the memo, Buffet also urged lieutenants to be extra viligant in monitoring and wrote in regard to backdating, "My guess is that a great many of the people involved would not have behaved in the manner they did except for the fact that they felt others were doing so as well...So, at Berkshire, let's start with what is legal, but always go on to what we would feel comfortable about being printed on the front page of our local paper, and never proceed forward simply on the basis of the fact that other people are doing it."
  
  
• Global Compact and GRI Form Alliance. Two major international corporate citizenship initiatives, the United Nations Global Compact and the Global Reporting Initiative announced that they have formed a strategic alliance aimed at synergizing their platforms. . While the UN Global Compact covers citizenship “implementation” through its 10 universal principles in the areas of human rights, labour standards, the environment and anti-corruption, the GRI’s new “G3” Sustainability Reporting Guidelines provide guidance on transparency and how to report on performance results. 
  
  
• Cambodian Rights Groups Petition for Anti-Corruption Law. Representatives from more than 20 Cambodian human rights groups and non-governmental organizations delivered a petition containing 100,000 signatures to the nation's parliament demanding action against corruption (DPA, 10/4/06). The Cambodian government has been under international pressure to pass an anti-corruption law, but it has so far not been tabled in parliament.
  
  
• IFC Announces Winners of Sustainable Finance Competition. The International Finance Corporation announced that it has awarded a $500,000 grant to CRISIL, Standard & Poor’s, and KLD; and to Trucost and CLSA, the winners of its research competition “Capturing Value,” which aims to provide investors in emerging market equities with better research on companies’ environmental, social, and corporate governance performance, and facilitate high-quality, long-term investment in emerging markets from pension funds and other investors worldwide.
  
  

• Global Witness Accuses Mittal Steel of Exploiting Liberia in Controversial Iron Ore Deal. In a report entitled 'Heavy Mittal,' the advocacy group Global Witness alleges that Mittal Steel’s acquisition of Liberia’s iron ore reserves has created an unaccountable, “state within a state” and is a "case study in which multinational corporations seek to maximise profit by using an international regulatory void to gain concessions and contracts which strongly favour the corporation over the host nation." The deal was made last August amid public controversy between Mittal, the world's largest steelmaker and the outgoing, unelected transitional government (Guardian, 10/3/06). Reports by Global Witness were instrumental in establishment of the global Extractive Industries Transparency Initiative.
  
  
• HP UPDATE: Patricia Dunn, 4 Others Charged With Crimes Over Spying Scandal. (The Wall Street Journal, 10/4/06).
  
  
• Global Compact Delists 335 Companies In Quality Drive. On October 2, 2006 the UN Global Compact announced that it has removed 335 companies from its global list of over 3,000 participants as a part of its drive to ensure accountability and integrity in the iniative. The companies were delisted in compliance with the Global Compact's Integrity Measures, which state that any company that has missed two consecutive annual deadlines to submit a Communication on Progress (COP) will be regarded "inactive" and marked accordingly on the Global Compact website. Said one Global Compact official, "While the Global Compact is a purely voluntary initiative, it is important to protect the investment that seriously committed companies and other stakeholders have made."
  
  
• UPDATE: Three More Officials Sacked in Shanghai Pension Scandal (AFX, 10/3/06).
  
  Another Senior Official Questioned in Shanghai Scandal. On September 28, 2006 Reuters reported that Sun Luyi, deputy secretary of the Communist Party's Shanghai Municipal Committee is being questioned regarding a widening corruption scandal involving officials handling of funds from the city's $1.2 billion pension system. On September 26, Chen Lianyu, Shanghai's top Communist Party Leader was dismissed amidst corruption allegations (see News for past coverage).
  
  
• HealthSouth Reaches 445 Million USD Settlement of Class Action Lawsuits. HealthSouth Corp. has agreed to pay $445 million to settle several lawsuits against the health-care provider and some of its former directors and officers stemming from its accounting scandal, reported CFO.com (9/28/06). Under the deal, HealthSouth will shell out $215 million in common stock and warrants, and its insurance carriers will pay $230 million in cash.
  
  
• HP UPDATE: US Congress Holds Congressional Hearing on Spying Scandal (CNET, 9/28/06). See News for Past Coverage.
  
  

• U.S. Corporate Fraud Cases - Convictions and Sentences:
  
  Fastow Sentenced, Accuses Major Banks of Complicity. Andrew Fastow, the former chief financial officer of Enron, has filed a 24-page legal declaration in support of a class action lawsuit against several banks brought on behalf of Enron’s shareholders in which he accuses 10 leading investment banks of helping the now-bankrupt U.S. energy group falsify its books in return for big advisory fees. Mr. Fastow was sentenced on September 26, 2006 to six years in prison, a far lesser sentence than the 10 years he agreed to in his 2004 plea bargain (Financial Times, 9/27/06).
  
  
• Lawyers Discuss Scrushy Retrial. A U.S. federal judge ordered defense attorneys and prosecutors to discuss HealthSouth Corp. founder and former Chief Executive Richard M. Scrushy's request for a new trial on political-corruption in light of improper jury member communication outside the courtroom. (The Wall Street Journal, 9/26/06)
  
  
• Former WorldCom CEO, Bernard Ebbers, Begins 25-Year Jail Sentence for Fraud Conviction (Reuters, 9/26/06).
  
  

• Corruption and Scandals Shows 'Weakness of Chinese Politics,' Pose Major Threat to Economy. An opinion piece and editorial in the September 27, 2006 Financial Times suggest two different perspectives on the implications of the ballooning Shanghai pension scandal, which recently resulted in the firing of Communist Party leader Chen Liangyu (see below for past coverage). In an editorial, the FT says, "this [Mr. Liangyu's dismissal] is less a corruption scandal than a political assasination" and shows "how far he [President Hu Jintao] has consolidated his power." A column in that same issue by Minxin Pei, a senior associate at the Carnegie Endowment for International Peace, argues that the scandal "has exposed the twin faultlines in China's political economy: fragile unity among the ruling elites and pervasive official corruption." Pei writes, "Uncontrolled, corruption will inevitably sap China's economic dynamism."
  
  
• EU Gives Bulgaria and Romania Final Warning on Corruption. The European Commission (EC) has dropped its threat to Romania and Bulgaria to postpone their entry into the European Union (EU) for a year, but has warned them that, unless they do much more to fight corruption, Brussels will freeze up to a quarter of all EU funds due to them, reported The Times (9/26/06). Last May, the EC gave the two countries a long list of reforms needed for entry into the EU, which many say the countries are taking too long to implement.
  
  
• U.S. Judge Gives 'Light' Cigarette Suits Against Tobacco Companies Class Action Status. In a legal blow to the tobacco industry, a U.S. federal judge ruled on September 25, 2006 that people who smoked light cigarettes that were often promoted as a safer alternative to regular cigarettes can press their fraud claim as a class-action suit, exposing cigarette companies to tens of millions of claimants and possibly upwards of $200 million in damages (The New York Times, 9/26/06). The judge said that there was “substantial evidence” that the manufacturers knew that light cigarettes were at least as dangerous as regular cigarettes.
  
  

• Thai Military Begins Corruption Probe of Ousted Government. Thailand's military, which last week overthrew the government of former Prime Minister Thaksin Shinawatra (see News), announced that it has established a panel to investigate corruption in the former government. The inquiry, which commenced today with a one-year time frame, has the power to freeze the assets of politicians and their family members (Thai News Agency, 9/25/06).
  
  
• Study Shows U.S. Business Students Cheat More Than Other Graduate Students. A new study by the Center for Academic Integrity at Duke University shows that MBA students cheat more often than other U.S. graduate students, reported Bloomberg (9/25/06). The study found 56% of MBA students acknowledged cheating, compared with 54% in engineering, 48% in education and 45% in law school. According to Bloomberg, the study gave several explanations for the findings: the pressure-cooker atmosphere of business schools, the distorting effect corporate scandals have had on business students' standards, and the negligence of faculty in correcting the problem.
  
  

• UPDATE: Shanghai's Top Communist Party leader, Chen Liangyu, Sacked Over Pension Corruption Scandal. (Asia Times, 9/26/06)
  
  Shanghai Pension Scandal Reveals "Recipes for Corruption" in China's Economy. While much attention has been paid to its impact on national politics, an article in the Financial Times (9/14/06) describes how the recent scandal involving official abuse of Shanghai's public pension funds (see below) has raised doubts about the transparency of China's new commerical paper market and has highlighted serious weaknesses in China's economic regulations that are "recipes for corruption."
  
  Probe Widens Into Possible Abuse of Shanghai's Retirement System. Following the detainment of several high level municipal officials, more than 100 Chinese government investigators have arrived in Shanghai to probe possible bribery and misappropriation of funds in the Chinese commercial capital's $1.2 billion pension system, in a widening financial scandal that Chinese media is describing as Shanghai's biggest in years, reported The Wall Street Journal (8/29/2006). According to the article, the Chinese government, which has struggled to control the official corruption that has accompanied the country's rapid economic growth, would particularly suffer from a social security scandal given the need to rapidly expand the system ahead of a coming surge in the number of retired people.

• UPDATE: Dunn Resigns From HP Board. (PC Magazine, 9/25/06)
  
  UPDATE: Patricia Dunn Steps Down as Chairman Amidst Spying Scandal. New York Times (9/13/06)
  
  UPDATE: HP Admits Hired Investigators Accessed Journalists' Phone Records Without Permission.
  
  HP - Spying on Board Directors: Unethical; Maybe Illegal; Certainly “Colossally Stupid.” Leading technology companyHewlett-Packard Co. is being investigated by US authorities for possible illegal actions related to an order by its Board Chairwoman, Patricia Dunn, to trace telephone calls to the media by members of the Board of Directors. The media leaks relating to the ouster former chief executive Carly Fiorina may have been unethical and infuriated HP’s leadership. Dunn, however, may have acted illegally in ordering an investigation that may have involved obtaining directors' phone records and eavesdropping on conversations. Details were released by the US Securities & Exchange Commission and its filing prompted California’s Attorney General Bill Lockyer to announce an investigation. According to The San Francisco Chronicle (9/6/06) Lockyer said, "I don't know if it's illegal, but I'm sure it's colossally stupid." For more on the implications of the HP scandal see Corporate Reputation.

• Zuma Corruption Case Thrown Out. A South African judge threw the corruption case against former South African deputy president Jacob Zuma, one of the country’s most popular politicians and a possible contender for president, saying the prosecution did not follow correct procedure, reported Reuters (9/20/06). The judge stopped short of completely dismissing graft charges against Zuma, leaving the door open for the prosecution to reframe the charges. Zuma was accused of having a corrupt relationship with his former financial advisor and taking bribes from a French arms company in exchange for helping to clinch multimillion-dollar government contracts.
  
  

• Report Shows Corporate Governance Worse in Emerging Markets. According to a survey of 3,8000 publicly traded companies released this week by GovernanceMetrics International (GMI), companies in emerging markets are more likely to have poor governance than their counterparts in industrialized markets, reported Reuters. According to GMI, the average governance rating of the 321 companies from 25 countries in emerging markets was 4.3 compared to an overall average of 6-7; only 35% of emerging market companies have a majority of independent directors (compared to 75% in industrialized markets); 27% of do not disclose an audit committee, and only 50% have a compensation committee.

• U.S. State of California Sues Automakers for Global Warming. On September 21, 2006, the Washington Post reported that the U.S. state of California filed a lawsuit against the six largest automakers operating in the United States, General Motors, Ford Motor, the Chrysler division of DaimlerChrysler, Toyota Motor, Honda Motor and Nissan Motor, contending that, under state and federal common law, their car and truck emissions are creating a public nuisance by causing global warming, injuring the state's environment, economy and endangering public health

• UPDATE: Exxon Responds By Ordering Review of Its Funding. Following a letter from Britain’s Royal Society (see below), ExxonMobil announced that its decisions about which outside groups to fund for the rest of 2006 and for 2007 "are under review." (The Wall Street Journal, 9/21/06)
  
  
• UK Science Society Tells ExxonMobil: Stop Funding Climate Change Denial. The Royal Society, Britain's leading scientific academy, criticized the US oil company ExxonMobil's "inaccurate and misleading" global warming statements and called on it to stop what they said was its U.S. $2.9m funding to 39 groups that attempt to undermine the scientific consensus on climate change, reported the Guardian (9/20/06). For more on ExxonMobil and climate change see Corporate CSR Reports.
  
  
• Former Executives At General Re, AIG Indicted for Fraud. Four former senior executives of Berkshire Hathaway Inc.'s General Re Corp. unit and a former senior executive of American International Group Inc. were indicted on charges that they participated in a scheme to manipulate AIG's financial statements in order to create the appearance of an increase in loss reserves, a key financial indicator, reported The Wall Street Journal (9/21/06).
  
  
• Deadline for AWB Oil-for-Food Inquiry Extended. Australia's Attorney General extended by two months (from Sept. 29 - Nov. 24, 2006) the deadline for a government inquiry into kickbacks paid by Australia's monopoly wheat exporter, AWB Ltd., to Saddam Hussein's Iraqi regime under a United Nations oil-for-food program. According to the Associated Press (9/21/06), the Attorney General said in a statement that the inquiry's work has been "seriously affected" by exporter AWB's bid in Federal Court to withhold 900 documents from the inquiry.
  
  

• Military Seizes Control of Thailand's Government Citing PM's Corruption. On September 19, 2006, the Thai military seized control of Bangkok, in a coup aimed at deposing Thailand’s prime minister Thaksin Shinawatra, who was in New York to address the UN, reported the Bangkok Post (9/20/06). The coup leaders pledged to remain in power for no more than two weeks and said they had been forced to seize control in order to end corruption and to restore the independence of government agencies. Over the past year Thaksin has been embroiled in a string of corruption allegations which led to massive protests and a snap election in April. While Thaksin’s Thai Rak Thai party claimed a victory, allegations of election fraud prevented the hoped-for unification.
  

• U.S. SEC Issues Guidelines on Options Accounting. The U.S. Securities and Exchange Commission's chief accountant, Conrad Hewitt, released a letter guiding companies on how they should account for employee stock options after a string of regulators’ probes into the “backdating” of options at companies. “Backdating” involves changing the date of options granted in order to maximize their compensation. Mr. Hewitt's letter described situations which have raised questions over whether a company should account for options, concluding that the “spring-loading” of options, where companies award options ahead of good news, doesn’t constitute an accounting concern.

• World Bank Ministers Approve Anti-Corruption Strategy But Insist on Oversight. On September 17, at the World Bank’s annual meeting in Singapore and after a lengthy negotiation and revision process, finance ministers approved the World Bank's controversial new anti-corruption strategy but said their representatives on the Bank's 24-member executive board would oversee its implementation. The ministers also asked the Bank's president, Paul Wolfowitz, who has put anti-corruption at the forefront of the Bank's agenda, to make a progress report next April. Wolfowitz has been criticized by Britain and several African nations for blocking more than US$1 billion in aid to allegedly corrupt countries and projects. Britain’s foreign development secretary, Hilary Benn, who last week threatened to withhold 50m pounds of UK funding from the bank, said he was pleased with the outcome and the oversight decision. (Reuters, 9/18/06).

• First Benchmark of Gulf Region's Corporate Governance Practices Released. On September 15, 2006 Hawkamah, the Institute for Corporate Governance, and the Institute of International Finance released their report, “Corporate Governance in the GCC – An Investor Perspective,” the first study to benchmark corporate governance standards in the region, which indicated improvements in the corporate governance policies of Gulf corporations. The report found that the opening of stock markets in the Gulf Cooperation Council (GCC) to foreign investors, international growth by companies in the region, and the role of banking and capital market regulators have been driving the improvements. However, stressing that further reforms are needed, it recommended harmonizing financial reporting regulations, establishing specialized securities law enforcement courts, strengthening political commitment to reform, the establishment of a “registrar of companies,” and increased cooperation between the GCC and regulators.

• UAE Stock Market Director Reveals New Corporate Governance Code. On September 17, 2006 Rashed Al Baloushi, Acting Director of the Abu Dhabi Securities Market (ADSM) called for internationally recognized corporate governance codes to be implemented throughout the entire GCC region and, for the first time, announced details of ADSM's proposed corporate governance code for the United Arab Emirates, aimed at increasing disclosure, transparency, and shareholder rights (AME, 9/17/06)

• UK Development Secretary Criticizes World Bank Anti-Corruption Strategy, Witholds 50 Million Pounds. On September 14, 2006 The Guardian reported that Hilary Benn, Britain’s international development secretary, criticized World Bank President Paul Wolfowitz’s long anticipated plan for reforming the way poor countries are governed, which is expected to be presented at the Bank’s Annual Meeting in Singapore next week. According to the article, Mr. Benn believes taht Mr Wolfowitz is too focused on corruption rather than the broader issue of governance; that his plan does not sufficiently address how to continue to help poor people in countries where corruption is a problem; and that there should be better coordination between donors to prevent duplication. Earlier this week Britain announced that it will  withhold £50m of funding for the World Bank unless it stops forcing poor countries to liberalise markets and sell off public services, reported the Guardian. 

• Calpers Increases Corporate Governance Investments to U.S. $5 Billion. The California Public Employees' Retirement System,  or CalPERS, the largest U.S. public pension fund which invests over $210 Billion, announced that it will increase the amount it invests with firms specializing in corporate governance from $4.4 billion to as much as $5 billion (a 14% increase) (9/13/06). According to CalPERS, its decision follows reports that the 10 corporate governance firms it has been using posted annual returns of 17.7 percent from 1999 to 2006, nearly three times the industry benchmark.  "By improving poor financial performers, our corporate governance investments show that we can do very well by doing good in the market place," said CalPERS president Rob Feckner.

• Russian Anti-Corruption Official Murdered. The first deputy chairman of Russia's Central Bank, Andrei Kozlov, the official in charge of cleaning up Russia's crime-ridden banking was killed by two gunmen, in an apparent contract killing reported the Guardian (9/14/06). According to the article, Mr. Kozlov had shut down dozens of banks accused of money laundering and other crimes. Though not as common as in the turbulent 90s, contract killings of prominent figures still occur frequently in Russia and officials said they had little doubt Mr Kozlov's murder was connected with his work.
  
  
• First Foreign Sarbanes-Oxley Suit Settled. On September 14, 2006 billionaire Ricardo Salinas Pliego and the U.S. Securities and Exchange Commission reached a settlement in the first lawsuit against a foreign company under the corporate governance rules of the Sarbanes-Oxley Act, reported The New York Times (9/15/06). Mr. Salinas Pliego, who owns Mexico’s second-largest broadcaster, TV Azteca, agreed to pay $7.5 million in penalties and compensation to settle accusations of fraud involving a scheme to conceal a deal between a TV Azteca subsidiary and a company secretly owned by Mr. Salinas.
  
  
• Daimler, U.S. Discuss Bribery Case Settlement. German-American auto maker DaimlerChrysler AG is in talks with the U.S. Securities and Exchange Commission and Justice Department to settle a two-year investigation over allegations of foreign bribery spanning three continents, reported The Wall Street Journal (9/14/06).  According to the article, the pact is expected to require the company to pay a financial penalty and install an independent monitor of its compliance and internal controls.  In March, DaimlerChrysler, the world's fifth-largest auto maker by unit sales, disclosed in a regulatory filing that it had dismissed or suspended several employees after an internal bribery probe found the company made "improper payments" in Africa, Asia and Eastern Europe.
  
  
• Australia Rejects Soloman Island's Envoy Dismissal Over Corruption Claims. Prime Minister John Howard has announced that Australia refuses to accept the the Soloman Islands' expulsion of its high commissioner, Patrick Cole, for alleged 'meddling in local politics'. According to Mr. Howard, Mr. Cole, who has expressed worries that a Soloman Islands government commission of inquiry into the riots which trashed the island’s capital earlier this year would compromise existing criminal trials, was improperly expelled for expressing concerns about corruption in the Islands (The Herald Sun, 9/14/06). According to the article, the dispute could put at risk an international mission of mostly police charged with helping to maintain law and order on the island.
  
  
• Githongo Says Anglo-Leasing Investigation Moving Too Slowly. In a September 12 interview with the BBC, Kenya's former Governance and Ethics Permanent Secretary, John Githongo, whose now famous dossier implicated top government officials in a massive public procurement corruption scandal known as the 'Anglo-leasing affair', accused Kenya's Anti-Corruption Commission's (KACC) of inaction in its investigation of the scandal. Mr. Githongo, who is currently in exile, told the BBC that was also troubled by the seemingly unexplained sacking of the lead KACC investigator on the case and indicated his intention to return to Kenya in the near future (AllAfrica.com, 9/13/2006).
  
  
• Study Ties Merck's Vioxx To New Health Threat. On September 13, 2006, The Wall Street Journal reported that a study published by the Journal of the American Medical Association identified kidney-related risks for drugmaker Merck & Co.'s withdrawn Vioxx painkiller, while another study said the drug's cardiovascular risks began soon after treatment, contradicting the company's claim that the risk increased only after long-term use. Merck faces more than 14,200 lawsuits alleging that Vioxx caused heart attacks and strokes. See More News for earlier coverage.UPDATE: Nigeria VP Sues Federal Government, Links President to Controversial Account. (AllAfrica.com 8/13/2006, AllAfrica.com, 8/12/2006).
  
  

• Nigerian President Accuses Vice President of Corruption.According to AllAfrica.com (8/8/06), Nigerian President Olusegun Obasanjo sent the country's Senate an anti-corruption agency report allegating that Vice President Atiku Abubakar appropriated millions of dollars from the public Petroleum Technology Development Fund to fund private business matters. Mr. Atiku responded by threatening to submit to lawmakers evidence implicating Mr. Obansanjo in 127 instances of malpractices including corruption said media sources.

• Stanford Medical to Ban Drugmaker's Gifts to Doctors, Even Pens. Stanford University Medical Center will prohibit its physicians from accepting even small gifts like pens and mugs from pharmaceutical or medical device maker sales representatives under a new policy, now spreading among academic medical institutions, intended to address rising concerns over companies' influence on patient care and doctor education, reported The New York Times (9/12/2006). According to the article, the new policy, which is expected to cost Stanford millions of dollars a year in industry support, also contains disclosure requirements for doctors and prohibits them from accepting free drug samples and from publishing articles in medical journals that are ghost-written by industry contractors.

• Green Investment Firm Announces Largest Private Sector Carbon Fund. Climate Change Capital, a London-based investment firm which invests in companies seeking to lower their carbon dioxide (CO2) emissions, announced that it has raised almost U.S. $1billion for fund that will be used to invest in companies in developing nations enabling them to use Western technology in order to enhance their manufacturing procedures and reduce carbon dioxide emissions. These carbon "credits" will then be sold to European companies that are straining to meet their own CO2 reduction goals. According to the company, the fund is the largest of its kind.

• 90,000 Protest Corruption in Campaign to Force Taiwan's President's Resignation. On Sept. 9, 2006 around 90,000 people rallied in Tapei beginning a series of protests aimed at pressuring Taiwan's President, Chen Shui-bian, whose term ends in May 2008, to resign over a string of corruption allegations and acussations that his relatives and aides have exploited their connections to him for illegal financial gain (AP, 9/11/2006). According to the AP, the crowds dwindled in the following days to approximately 20,000 protesters on Sunday and 3,000 on Monday.

• UPDATE: Report Says Merck Management "Acted With Integrity" on Vioxx. On Sept. 6, 2006 Merck's board announced that a report by an investigation it commissioned into how the company developed and sold Vioxx concluded that management "acted with integrity" and did not mislead the public.

• Merck Wins Fifth Vioxx Case. A California jury cleared U.S. Merck & Co. of responsibility for the heart attack of a 71-year-old man who took the painkiller Vioxx for about two years, reported The Wall Street Journal on August 3, 2006. The jury said Vioxx did have risks that were knowable but that the risks didn't present a substantial danger to users. Merck, which faces some 14,200 suits over Vioxx, which it withdrew from the market in September 2004 after a study linked the drug to an increased risk of heart attacks and strokes in patients taking the drug for 18 months or longer, has thus far won five Vioxx-related trials and lost three.

• BP Hires Sporkin to Probe Workers' Concerns. Oil giant BP, which was recently forced to close an Alaskan oilfield due to corrosion and disrepair, has hired Stanley Sporkin, a retired US district judge to act as the company's ombudsman amidst criticism that it fails to listens to worker concerns over safety and environmental problems, reported the Financial Times (9/6/2006). Judge Sporkin, a former General Counsel of the CIA, was the head of enforcement of the U.S. Securities and Exchange Commission in the 1970s who led the charge against U.S. corporate corruption.

• Study Estimates Shareholder Costs of Backdating Scandals. A new study by three researchers at the University of Michigan suggests that the stock options backdating scandals that are currently plaguing over 100 companies in the U.S. may cost shareholders of those companies an average of $500 million per company as stock market values fall. At the same time they said compensation of executives at these companies rose by an average of $600,000 due to the backdating of options, reported The New York Times (9/6/2006)

• U.S. Ambassador Attacks Norway's Pension Fund's Ethics Policy. Benson K. Whitney, the U.S. ambassador to Norway, blasted the country's $240 billion pension fund, the world’s largest, saying its decision to sell shares of U.S. companies including Wal-Mart Stores Inc. for alleged ethical violations, was unfair and decided by an “arbitrary” process with “no set standards on how and why it picks a certain company for ethical screening,” reported Dow Jones (8/5/2006).  In June, the fund said it sold a stake in Wal-Mart worth $415 million, citing alleged "serious and systematic" abuses of human and labor rights. In the past, the fund has ejected U.S. defense companies for producing anti-personnel land mines, cluster bombs and nuclear weapons. Because U.S. companies like Wal-Mart face more scrutiny from the media and their government, they "are more likely to be blacklisted than companies in parts of Asia or the Middle East, where repressive societies predominate," Whitney said noting that two-thirds of all companies currently blacklisted by Norway's Finance Ministry are American.

• Securities Law and Governance in Japan:

  • Bank of Japan Panel Urges a Ban on Officials' Trading. An advisory panel to the Bank of Japan said that bank officials should be barred from most types of financial trading reported The Wall Street Journal (9/5/2006). The panel was set up to revise the central bank's internal rules after the bank’s governor, Toshihiko Fukui, was criticized in mid-June for his investment in a fund led by the financier Yoshiaki Murakami, now indicted for insider trading. The panel also said that bank officials should be require to disclose all assets in their portfolios.

  • Japanese Internet Chief on Trial. Former Livedoor Co. President Takafumi Horie former chief executive of Livedoor Co., one of Japan’s biggest internet groups, pleaded not guilty to charges of securities law violations in the first hearing of his trial at Tokyo’s District Court, reported Yomiuri Daily (9/5/2006). Mr. Horie faces a string of allegations including collaborating with former executives to falsify corporate accounts and inflate the company’s share price.
    
    
• Zuma Corruption Trial Begins in South Africa. The corruption trial of former South African Deputy President, Jacob Zuma, one of South Africa’s most popular politicians, has begun, reported the Independent Online(9/5/2006). Mr Zuma was removed from the government more than a year ago when his financial adviser Schabir Shaik was found guilty of corruption in a case that developed from a 1990s  government procurement contract with France's largest arms firm, Thales. The judge in that case concluded that there had been a corrupt relationship between Mr Shaik and Mr Zuma leading the National Prosecuting Authority to launch and investigation of Mr Zuma.

Back To Top