A colleague sent me a link to an article last week about an insider trading scandal involving both a CPO and his/her spouse. The CPO will go unnamed in this context because it’s not relevant to the general issue at hand. Still, the issue of ethics and integrity in procurement, finances, outsourcing and shared services very much is. Especially in the context of the insider trading scandals that rocked McKinsey and IBM last year, I think that procurement organizations must consider not only ethical risk elements in their supply base, but also in their own executive and management ranks. This will be even more important in the context of an M&A environment heating up throughout 2010 and 2011, a trend many analysts are predicting.
The situation that I learned about involved a CPO who told his/her spouse about news related to an impending acquisition, according to SEC allegations. The spouse then traded on this information and the CPO allegedly provided details about the deal which contributed to, in the SEC’s words, “an illegal profit” based on material non-public information. The defendant, the spouse, ended up settling the charge for a penalty with the SEC without “admitting or denying the allegations in the complaint.” The CPO kept his/her job after this, despite ethical questions from those close to the situation.
I won’t pass judgment on this case because it’s not my place. But I can assure you that there’s no way this is an isolated situation. There are thousands of procurement executives around the world privy to insider information from both a quarterly reporting perspective as well as an M&A one…
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