Reputation risk: the AWB experience
The Board of AWB Limited (formerly the Australian Wheat Board) has admitted in prominent newspaper ads that AWB's reputation has been seriously damaged as a result of the company's participation in the United Nations Oil-for-Food Program.
The Cole Inquiry ("the Inquiry into certain Australian companies in relation to the United Nations Oil-for-Food Programme") is currently determining whether any payments by AWB and 2 other Australian companies were made for services not provided or whether the price of UN approved contracts was inflated, and if so whether there was a breach of any Australian law.
Whether or not their conduct was "illicit" or involved "kickbacks" to agents of the Iraqi Government as suggested by the UN's own inquiry (including through payment of mandatory transport charges and "after sales service fees"), already the management and Board of AWB has been seriously embarrassed.
Whatever the ultimate findings, and regardless of AWB's claims of unfairness, at the very least issues relating to AWB's corporate ethics in international transactions and the role of the Board and CEO have been raised.
If Inquiry investigators have obtained 27 volumes of company documents which evidence transactions the Board and CEO may not have known about there is arguably either a lack of, or a flawed, compliance system.
Other embarrassing issues to date include the CEO's withdrawal of an unauthorised statement to the ASX.
It may well be that no breach of Australian law has occurred: the Inquiry's own legal advice is that United National Security Council Resolutions are not enforceable in Australia unless adopted by Australian law. Regulations which purported to do so were repealed in 2003.
However AWB's reputation (and its share price) has already been affected by the allegations that it has a "whatever it takes" corporate culture that tolerates breaches of the law.
Regard your good name as the richest jewel you can possibly be possessed of - for credit is like fire; when once you have kindled it you may easily preserve it, but if you once extinguish it, you will
find it an arduous task to rekindle it again. The way to gain a good reputation is to endeavor to be what you desire to appear.
Socrates Greek philosopher in Athens (469 BC - 399 BC)
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