Critical Thinking Is So Important – It Needs To Be Taught And Discussed

Do you get a feeling sometimes or even overall generally that you really aren’t sure whether you can trust what someone is telling you? I’m actually past that point – except for good friends that I have known for some time and who I trust and respect, I either don’t believe what I am hearing or I certainly question its basis. This makes decision making more difficult and time intensive.

Some people simply without any discomfort lie as a matter of course – these people are missing a personality gene or trait – you may have seen survey results that seek to quantify how many times a person on average is lied to each day. The numbers are stunning. But I’m not even talking about that. At a different lower level you have things like the speaker’s spin, overstatement or exaggeration, intent to persuade, the speakers omission to state other important information, alternative or contrary information, preconceived belief or prejudice, lack of reliable factual support, and false, contrived or erroneously limited possible choices or explanations, et al. Defending on the severity these might be considered intentional fraud, constructive fraud, deceit, negligent or innocent misstatement or misrepresentation, or some other form of dishonesty.

Your only option or defense is to critically think about, consider, and evaluate what you are hearing. Alternatively, you might say that you need to actively question what you are hearing or being told. But it takes time, effort and interest – it isn’t the easy approach.

Can you critically think about something if you have little background or personal experience with that issue or topic? Sometimes I hear people say that you cannot comment about something because you haven’t experienced it. I specifically disagree, although the point has some relevance. Lack of information or personal experience makes critical thinking and evaluation more difficult. But you certainly can still use your own good judgment, consider possible alternatives to what you are being told, gather additional information including alternative or contrary information, and question the speaker about his or her position, alternatives, and basis for statement or opinion.

Frankly, I have to say that listening to the news, or salespeople, or politicians, just as examples, tends to drive me crazy sometimes as their information and statements can almost always be rebutted or at least questioned. Who has the time for that? And maybe that’s their point – you don’t have the time.

From my audit committee guide, the following is a summary of the business judgement rule for board directors – you will note that it’s significantly based on informed, critical thinking:

In summary, as a general principle the business judgment rule provides that a director should undertake his or her duties:

-In good faith, with honesty and without self-dealing, conflict or improper personal benefit;

-In a manner that the committee member believes to be in the best interests of the corporation and its shareholders; and

-With the care, including reasonable inquiry, that an ordinarily prudent person in a like position would use under similar circumstances.

Reliance Upon Other People Under the Business Judgment Rule

In the course and scope of performing his or her duties, a director must necessarily obtain information from and rely upon other people. The director is not involved in the day-to-day operations of the business. The director provides an oversight function. Pursuant to the business judgment rule, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by any of the following:

-Officers or employees of the corporation whom the director believes to be reliable and competent in the relevant matters;

-Legal counsel, independent accountants or other persons as to matters that the director believes are within the person’s professional or expert competence; or

-A committee of the board on which the director does not serve, as to matters within that committee’s designated authority, so long as the director acts in good faith, after reasonable inquiry as warranted by the circumstances, and without knowledge that would cause reliance to be unwarranted.

You can find more information including Tate’s Excellent Audit Committee Guide on my blog at http://directorofficernews.com, and also on my trust, estate, conservatorship and elder abuse litigation blog at http://californiaestatetrust.com.

 

Advertisements

Click on my updated Audit Committee Guide – 172 pages – includes SSARS 21 discussion – Free PDF – dtd Oct. 24, 2015

Below I have provided a link to a pdf of my updated Audit Committee Guide, 172 pages, includes a SSARS 21 discussion, dated Oct. 24, 2015. Please do pass the guide to anyone who would be interested. And I will continue to update and add to the guide in the future. Here is the link to the Guide, Tate’s Excellent Audit Committee Guide 10242015

Dave Tate, Esq., San Francisco and throughout California, civil and trust, estate, conservatorship and elder abuse litigation; contentious administrations; business, D&O, real estate and audit committees, http://californiaestatetrust.com and http://directorofficernews.com

Risk Management – Is Anyone Doing It, Yes Some Are – Is There An Agreement On How It Should Be Done, No Definitely Not


Here is a link to a discussion by Matt Kelly of Compliance Week about risk management, suggesting or perhaps stating that risk management is being done by financial institutions and some other public corporations, but it is a mixed bag, and, in my words, risk management and how to do it really have not caught on. And then below the link to Matt’s discussion, I have pasted in this post my response to Matt. Here is the link to Matt’s very interesting discussion – please read it, CLICK HERE.

And here’s my response to Matt’s post. Good discussion Matt. I’m not sure everything in the discussion correlates, but I believe the underlying points are true. Your discussion caused me to think about all of the many, many emails that I receive about new risk management discussions and posts, and some of them are by me. But have they done much good? I question whether they have. I’m not being critical, just truthful. Hordes of risk management, and internal control, and governance discussions and posts are created monthly, and for many, many years. But I have come to believe that people most often take action only if they are presented with a specific situation that they know demands that they take action, or they are required to by law, statute, or regulation, or they are required to by rule, sometimes (such as stock exchange rules), or it becomes an expected practice, sometimes (such as an expected practice in the community or perhaps by a professional organization such as the NACD, etc.). Otherwise, the requirement that the organization, or the board, or the audit committee, or the risk committee is responsible for risk management is simply too vague and indefinite. And that’s the way it is.

Dave Tate, Esq., San Francisco and throughout California, http://directorofficernews.com

 

Ethical imperatives for every board | Listed Magazine

I recently moderated an address by Andrew Fastow, the former CFO of Enron, and followed up by delivering a keynote on the role of the board in ethics, tying in aspects of Mr. Fastow’s speech. What f

Click on the following link for the article: listedmag.com

Dave Tate, Esq. comments. I usually don’t find lists useful – there are just too many of them that lack detail. For unknown reason, nevertheless, I decided to real this article by Richard Leblanc. I recommend that you also read the article, at least for the purpose of stimulating serious thought. You might also consider providing the article to your executive officers, board, audit committee, internal audit and legal counsel.

“Ethics” is kind of one of those vague areas that lacks specifics. It is easier to focus on prudent business judgment (including the business judgment rule) and legal and regulatory mandatory requirements. Factually, Richard’s 10 points actually do that, but under the heading of “ethics.” Also consider the comments at various of the 10 areas about the need for independent evaluation and representation, the ability to obtain independent outside assistance, and the use, oversight and hiring of the internal audit function – these comments are all very worthwhile for consideration.

Thank you for reading. Dave Tate, Esq., San Francisco and throughout California, civil, trust, estate, conservatorship and elder abuse litigation, and contentious administrations, blogs: http://directorofficernews.com and http://californiaestatetrust.com

Guest Post: Access to Internal Investigation Records by Shareholders | The D&O Diary

Mary Gill Courtney Quirós In many instances when allegations of wrongdoing surface at a company, the appropriate course for the company’s board will be to

Click on the following link for the article: www.dandodiary.com

Dave Tate, Esq. comment: A good discussion. Additionally, in any internal investigation, officers, directors, audit committee members and others need to keep in mind that the investigation might be ordered produced or there might be a decision to voluntarily produce the results (which most likely would also put at issue the background information). The fact that there was an investigation, if properly performed, tends to show diligence and business judgment, both of which are required by directors.

Dave Tate, Esq., San Francisco and California, business, real estate, D&O, trust/estate, elder abuse, injury, and professional liability litigation, http://directorofficernews.com and http://californiaestatetrust.com

Tate’s Excellent Audit Committee Guide – 122 Pages – Updated August 7, 2015

Please click on the following link for the August 7, 2015, edition of Tate’s Excellent Audit Committee Guide (122 pages), Tate’s Excellent Audit Committee Guide 08072015.

Enjoy. Dave Tate, Esq. (San Francisco/California)

Tate’s Excellent Audit Committee Guide (July 31, 2015, a work in progress)

For audit committee members and directors, I have attached three links below, the first for my 2007 audit committee chapter for the California Continuing Education of the Bar, the second for the new audit committee guide that is a work in progress but already contains substantial materials, and the third to the cover and table of contents to Accounting and Its Legal Implications.

Using my blog posts, the 2007 audit committee chapter (which is now unpublished, CEB subsequently cancelled the entire Director and Officer binder), and the new audit committee guide you should get a good feel for new developments and guidance about audit committee member functions and responsibilities.

I also ask that you tell other people about this blog and the new audit committee guide.

1. Here is a link to my 2007 audit committee chapter for the California Continuing Education of the Bar (the chapter and the entire D&O publication has been cancelled for some time), CLICK HERE

2. The following is a link to the new audit committee guide which contains substantial materials although it is a work in progress, Tate’s Excellent Audit Committee Guide (July 31, 2015 version), Tate’s Excellent Audit Committee Guide 07312015 CLICK HERE

3. Cover and Table of Contents from Accounting and Its Legal Implications – I expect to scan and post this entire material shortly – although some is outdated, it is still a good read – originally published by Business One/Irwin Publishing, CLICK HERE

Thank you. Dave Tate, Esq. (San Francisco / California).