Earlier this year, just a day after Politico reported that Dr. Brenda Fitzgerald purchased shares in a tobacco company, she resigned from her position as Director of the US Centers for Disease Control and Prevention. While she has repeatedly been recused from testifying before congress due to other conflicts, apparently investing in tobacco companies while acting as top dog at the agency who’s slogan is "24/7:Saving Lives, Protecting People" is a step over the line. Who would have thought...
While we don’t look to get political at Spurstone, there are a few big lessons for executives to learn here. The first of which is that optics matter. While you may not be restricted from investing in particular companies or competitors, at some point as you advance up the corporate ladder it might be worth thinking about eliminating specific investments from your portfolio. There's a double bonus here if those investments are highly correlated to your employer stock.
A second big lesson is to consider using Investment Policy Statements and restricting specific investments in your portfolios. In Politico’s report, they cite a Health and Human Services Department spokesman saying "...During the divestiture process, her financial account manager purchased some potentially conflicting stock holdings...". An Investment Policy Statement could have addressed these issues and concerns preemptively.
And third, information moves FAST. In today’s world of technology, social media and advanced reporting, potentially bad actors are being exposed faster and with greater detail. Anyone trying to skirt rules or who even just takes a laissez-faire approach to their compliance practices is flirting with disaster.
Today’s executives need to be sure they are thinking about and planning for these issues. Your team of advisors must be versed in your unique needs and have the capabilities to bring forward solutions to proactively address these situations.
Be smart. Plan ahead and review often.
-Tim Golas Partner Spurstone Executive Wealth Solutions