Cindy A. Schipani Welcomed by JCU Institute for Entrepreneurship

On March 8, the JCU Institute for Entrepreneurship, in collaboration with Professor Silvia Pulino‘s MGT 498 Strategic Management class, welcomed corporate governance expert Professor Cindy A. Schipani from the University of Michigan’s Ross School of Business for a lecture on the role of corporate governance in avoiding corporate crime.

Cindy A. Schipani

Cindy A. Schipani

With an audience of future business people and entrepreneurs in front of her, Cindy Schipani had the goal of teaching students how corporate crime occurs and what they can do to prevent it.

“What do you think about when you think of fraud?” she asked. Schipani explained that mistakes do happen in financial statements and projections. However, the difference between fraud and a mistake is the intention. Mistakes can be corrected, but fraud occurs when companies intentionally produce misleading information.

Schipani used Martha Stewart as an example. The investigation into Martha Stewart began on allegations of insider trading. It was said that when Stewart discovered a drug her company was producing would not be approved for the market, she began selling shares. Stewart, however, was never convicted of insider trading. After investigators found that she had erased tapes of conversations with others, Stewart was convicted for the destruction of evidence.

“If you find yourself in a situation where investigators are coming after you, it is always better to cooperate,” said Schipani. She explained that once an investigation begins, every employee from the highest in charge down will be looked into, and everyone who could have come in contact with the fraud is liable. “It does not matter if your boss directly ordered you to adjust a statement. If you participated, you are liable.”

Student Nicholas C. Kessler asked, “Is there any leniency for young entrepreneurs who cannot afford a legal advisor?” Schipani’s answer was no. It is becoming more common that people are willing to work for startups for shares of the company, even lawyers. “You should always have a lawyer.”

Her take-home message for students was the following: the best thing one can do is commit to lawful conduct, know one’s specific role and duty in a company, and pay attention to the situation at all times. Whether fraud occurs because someone is trying to get rich quick or trying to keep a company afloat, it is always better to conduct business honestly because the consequences for not doing so are severe.