VideoDoes locating the headquarters of a large company in a small town increase the likelihood of fraud? Richard Breeden, the court-appointed watchdog of WorldCom-cum-MCI, thinks so. The former chairman of the Securities and Exchange Commission says that WorldCom's headquarters location in Clinton, Miss. (population: 25,000), placed added pressure on its finance staff to comply with dicey executive orders, since the nearest job alternative was "800 miles away."
"If you're in New York City and someone asks you to do something you don't feel comfortable with, you can do a dozen interviews in a 12-block radius. That gives you some bargaining power," says Breeden. "That's not going to happen if you're out in the boonies somewhere."
Perhaps none of the companies that experienced large-scale fraud was based in a more remote location than Adelphia Communications Corp. The cable-television provider, which has been in Chapter 11 bankruptcy for the past two years, had been headquartered in Coudersport, Pa., a town of 5,390 on the border between Pennsylvania and New York. It was in "Coudy" that many of the alleged wrongdoings of founder and former CEO John Rigas and his sons, Timothy (CFO) and Michael (executive vice president), took place.
Adelphia CFO Vanessa Wittman, who has been following the trial of her executive predecessors, agrees with Breeden that location was a factor in the fraud. She notes that Chris Thurner, a former accountant at Adelphia, testified that he was threatened with being fired when he questioned transactions. "In that situation, you feel that if you say no to your boss, you're out of a job with no chance to find a new one," says Wittman.
Certainly employees at Tyco International Ltd., which is incorporated in Bermuda but until recently handled U.S. operations from Portsmouth, N.H. (pop.: 21,000), didn't have a lot of options if they decided to walk. (Like Adelphia, which relocated to Denver after the scandal, Tyco's new management moved the company to an urban setting: Morristown, N.J.)
What does that mean for companies like Wal-Mart Stores Inc., based in Bentonville, Ark. (pop.: 19,730), or Maytag Corp., in Newton, Iowa (pop.: 16,000)? Experts contend that a remote location is only one contributing risk factor. Executive recruiter Peter McLean of Spencer Stuart admits that recruiting is tougher for small-town companies, but he dismisses the small-town theory. "At WorldCom, it had nothing to do with people trying to protect their jobs," he says. "It wasn't the underlings who were responsible, it was the leaders." —Ilan Mochari
Time Out
Think twice before you organize that softball game at the company picnic. Injuries sustained at work-sponsored recreational outings could result in workers' compensation claims.
A March 10 ruling by the New Jersey Supreme Court found that an employee could collect workers' compensation benefits for injuries sustained while driving a go-cart, at his employer's insistence, during a company outing. When an employer compels an employee to participate in an activity that ordinarily would be considered recreational or social, the employer renders that activity work-related, wrote Justice James Zazzali in the court's decision.
The definition of "work related injury" is a gray area subject to judicial interpretation, but the recent ruling will broaden that definition in New Jersey and could influence other state courts.
One factor used to determine whether or not a company outing can be considered work is how much official business occurs there. A pregame speech from the CEO or the inclusion of clients at a golf tourney can tilt the balance. If participation is mandatory, even implicitly, it might be considered work-related for workers' comp purposes. So don't lean too hard on the company ringer to play third base. —Joseph McCafferty
Make Room for Daddy
Now here's a different kind of bond issue. In a controversial vote in 2002, the California legislature passed SB 1661, better known as the Paid Family Leave Act. Under the legislation, both male and female employees in California can take up to six weeks of paid leave to spend time with newborn or newly adopted children or foster children. The law, which kicks in July 1, is funded by employee contributions.
Business groups, which lobbied against SB 1661, say it's a productivity killer. But researchers claim paid paternity leave could save the state's employers $89 million in employee-retention costs. And family advocates say the bill is simply an acknowledgement of the realities of child-rearing in the 21st century. "The involvement of the father is crucial to the well-being of children," asserts Roland C. Warren, president of the National Fatherhood Initiative.
Apparently some employers agree. A recent survey found that about 14 percent of U.S. companies grant paid paternity leave — well up from a decade ago. Most programs offer two weeks paid leave, and some offer four or more. Microsoft, IBM, Merrill Lynch, Eli Lilly, and Ikea all offer the benefit. Big Four accounting firm KPMG LLP launched a paternity-leave program in 2002, as part of the firm's ongoing work/life initiative. Joe Maiorano, KPMG executive director of human resources, says the take-up rate has been near 80 percent.
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