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Power Sheet – August 18, 2015

Is your organization corrupt?

No, of course not. But are you sure? Corruption is a strong theme in this morning’s news, and while it’s impossible to say whether corruption overall is increasing, it’s definitely a growing problem for leaders.

That’s because it is at least being uncovered more often. Yesterday an independent auditor proposed a new structure for Fifa, soccer’s global governing body, after it was revealed last spring to be so corrupt that it was practically managed on the basis of bribery. President Sepp Blatter insists he was shocked, shocked to learn about it, but if so, he was the only person on the planet who didn’t know, or at least suspect. The soccer savvy have complained about it for decades.

Massive protests over the weekend in Brazil demanded the resignation of president Dilma Rousseff as investigators continue to reveal deep corruption in the government-owned oil company, Petrobras. Dilma was president of the company when the alleged corruption took place. As with Fifa, corruption in the Brazilian government is not exactly breaking news. But now, after decades, it’s being exposed. And again, the leader insists unpersuasively she knew nothing about it.

In the wake of the disastrous warehouse explosions in Tianjin (death toll so far: 114), the Chinese government announced this morning it’s investigating a regulator who for years let companies operate without a license for dangerous chemicals. The reliability of Chinese “investigations” and media is always suspect, but would anyone be surprised if corruption were involved? People’s Daily, the Communist Party mouthpiece, is almost saying so already. “Some are even suspicious, with rumors circling,” it observed in an article about the blast; “a thorough investigation and severe punishment are beyond any doubt.” President Xi Jinping has kept himself above China’s endemic corruption, cracking down on it brutally.

The larger trend is that long-established corruption operating comfortably in the shadows is increasingly being exposed, spawning big problems not just for government leaders but also for business leaders. Bloomberg reported yesterday that the U.S. Justice Department has subpoenaed Citigroup for information on accounts tied to Mexican billionaire Carlos Hank Rhon, part of a growing investigation into the bank’s money-laundering controls. Citi has already disclosed that a security unit in Mexico committed fraud, and a loan fraud there cost it $235 million in 2013. CEO Michael Corbat has said Citi will have 30,000 employees in regulatory and compliance functions by year-end.

We’re in the age of radical transparency. That’s a good thing. Leaders must embrace it, not resist it. I’d bet lots of money that Blatter, Dilma, and Xi knew about plenty of corruption, but sometimes the leader really is the last to know. Especially in today’s environment of instant, universal communication, don’t let it happen to you.

What We’re Reading Today

Carly Fiorina’s CEO record comes under scrutiny

A few days after Fortune looked at the presidential candidate’s tenure as Hewlett-Packard’s CEO, The New York Times also delved into the rough six years. For instance, Fiorina touts the growth she brought to the company, but she’s using revenue numbers that include an ill-fated and damaging merger with Compaq.  NYT

American Apparel issues dire warning to investors

It does not know if it will have enough cash on hand or revenues to keep operating for the next 12 months. While the retailer has been near the brink of bankruptcy for years, this is its sternest warning to date.  Fortune

The NLRB rules on college athletes right to unionize

Well, kind of. The National Labor Relations Board dismissed a case in which Northwestern University football players asked for the right to unionize. A regional NLRB ruling had labeled the players employees. The dismissal is a big win for the NCAA and Northwestern but does not end the debate over athletes’ status.   ESPN

PetCo hopes the third time’s a charm

…as it files papers for an IPO. With $4 billion in revenues, it’ll be the third time in 11 years the pet retailer has done an IPO.  Los Angeles Times

Leaders fear the next recession

Not because one is imminent, but because policy makers don’t know if they have the tools, like interest rate cuts or money, to stimulate the economy in a slowdown.  Fortune

FIFA may drop its executive committee altogether

The radical idea comes from the official overseeing reform efforts at soccer’s governing body, which has faced numerous scandals and corruption under current President Sepp Blatter. Instead, FIFA would have a management committee, which will handle daily operations at the organization, and a governing council with far less oversight and control. Reuters

Building a Better Leader

Are you tracking your managers’ time?

More offerings track employees’ days, similar to the tools used at Amazon. It’s an effort to ensure work time truly means work time, but some also argue it’s a huge effort that leads to micromanagement and paranoia within the organization. NYT

Companies are showing the money to CFOs

Median pay for CFOs jumped 13.9% last year, compared to 6.9% boosts for CEOs.  WSJ

Some good news for McDonald’s

If you’re eating breakfast twice a day, it’s likely your favorite place to go. The survey, though, probably highlights more the breakfast food wars to come.  Reuters

Feds Weigh In

IRS amends hack numbers 

…by 220,000 people. In May, the agency reported that 114,000 taxpayers had personal information exposed to hackers. That number has risen to 334,000.  USA Today

Citigroup, Mexican billionaire part of money laundering investigation

The Justice Department has asked for information concerning companies linked to Mexican billionaire Carlos Hank Rohn over dealings with Citigroup’s Mexican banking unit, Banamex. It’s part of a broadening search over money laundering controls at the bank. MarketWatch

Shell permitted to drill in the Arctic Ocean

After obtaining final approval from the U.S. government, Shell will begin test drilling in the Arctic Ocean for the first time since 1991, much to the ire of environmental activists. ABC News

Up or Out

Target Corp. made two changes on Monday, promoting CFO John Mulligan to the newly created role of COO. Cathy Smith, formerly CFO of Express Scripts Holdings, will succeed Mulligan. Fortune

SeaWorld will replace interim CFO Marc Swanson with Peter Crage, who performed the same role at Extended Stay America Inc. Swanson will become chief accounting officer. The company also named Anthony Esparza its chief creative officer. MarketWatch

Robert Steven Kaplan, a Harvard professor and former Goldman Sachs vice chairman, will become president of the Federal Reserve Bank of Dallas. NYT

 

Fortune Reads and Videos

Facebook has a new look for Notes 

The tool, which has an appearance similar to the website Medium, will likely be used to encourage publishers to post directly on the social site. Fortune

The Feds get techie

President Barack Obama signed an executive order to streamline the federal government using 21st century tools.  Fortune

Walmart’s wage increases eat into bottom line

It appears customer service has improved, but the retailer revised its yearly profit goals this morning. Fortune

Ads on the moon?

A company in Japan wants to make it happen. They call it an advertisement; others may call it vandalism.  Fortune

Birthday Wishes

Timothy Geithner, Treasury Secretary during the 2008 financial crisis, turns 54.   Biography

Former first lady and wife of President Jimmy CarterRosalynn Carter turns 88.  Biography

Produced by Ryan Derousseau
@ryanderous
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