Internal communication issues are rarely top priorities for CFOs — that is, until they create potential liabilities. Witness e-mail messages and the policies (or lack thereof) surrounding them. Often, an e-mail flub is nothing more than embarrassing. At worst, though, the message could be entered as evidence in a lawsuit, as has happened to Enron, Boeing, J.P. Morgan, and Countrywide Financial.
Fortunately, relatively few CFOs will ever have to sweat out answering Department of Justice questions about subpoenaed e-mails. More typically the CEO, board, or audit committee will call on them to clarify the thinking and motives behind an e-mail they wrote or a response to an e-mail they received. “The tumult is a reminder to senior executives that they are operating in a fishbowl, and that all e-mails and actions are subject to intense review with the benefit of hindsight,” says Michael Mann, a partner in the law firm Richards, Kibbe & Orbe.
Mann counsels executives to treat every e-mail, incoming or outgoing, as a formal correspondence and to implement documentation and review policies around e-mails and other internal and external communications. In that way, companies can ensure that offhand remarks and “company speak” are not misunderstood and characterized as improprieties.
Another communications-related danger is not responding to a potentially explosive e-mail. For example, CFOs of even midsize companies may receive hundreds of e-mails a day but review only some of them. Some e-mails may never be read because they seem unimportant, are overlooked, or are left in limbo in a spam filter. If a whistle-blower’s e-mail to the CFO is tagged as spam, when it eventually surfaces it could send up a red flag to the audit committee as to why the CFO never responded.
In that case, an e-mail tracking system that records and files what goes into the spam folder, or a policy that states the CFO’s assistant must regularly read through the spam folder, would go a long way to putting the missed e-mail into the proper context and thereby reduce suspicion.
Executives also may come under board scrutiny when investigations rely on evidence that is a matter of recollection and reconstruction, notes Mann. Consider a situation in which a CFO receives an e-mail from a staffer who proposes a flawed and questionable accounting strategy that the finance chief considers ridiculous. The CFO simply replies to the e-mail with “call me,” figuring the issue better lends itself to a face-to-face discussion of why the idea is a problem.
A few months pass, and the CFO is now tangled up in a board investigation into questionable accounting practices. The “call me” e-mail is being held up as suspect, as if the CFO wanted to meet privately with the staffer to hide something. “Why take the discussion offline?” says Mann. Then there would be no record of the CFO’s motives or thought process, but merely recollections of the conversation between the CFO and the employee. “The world has changed with e-mail, and everything is recorded ‘forever,’” he warns.