Directors' expenses: A ‘red flag’ issue

David Vine explains why changing expenses culture and eradicating fraud should start from the top of any organisation.

Mark Hurd the former CEO of Hewlett Packard is probably the most high profile head to roll because of alleged expense abuses and poor personal ethics. This senior corporate executive revered by Wall Street is renowned for his ruthless cost-cutting in all areas of business - except his own expenses claims, it seems.

Also accused of claiming for lavish expenses and joining Mr Hurd in the news headlines this month are officials at the Commonwealth Development Corporation (CDC), a government organisation set up to invest in private sector projects in the world’s poorest countries. The CDC spent £700 on a Michelin-starred dinner for non-executive directors in London and officials chose to stay at some of the dearest hotels in the world whilst travelling on business, such as the Four Seasons in Hong Kong.

‘Red flag’ expenses claims by executives at British electricity company, National Grid, mean that it is facing an investigation by United States regulators. The papers reported $35,700 for children’s school fees; $1,200 for shipping a wine collection from the UK to the US, and another $1,200 for shipping a cat.

Whether these expenses claims turn out to be fiddled and fraudulent or within the corporate expenses policy, they illustrate an important and overlooked expenses issue: quite apart from the financial loss to the employer, scandalous expenses claims are a sign of lack of ethics and poor judgement by a senior employee in a decision making position.

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