Due Diligence
CBS debacle exemplifies lack of prudent judgment

Due diligence is the process of researching, understanding and evaluating issues with the goal of avoiding unnecessary risks. “Due diligence” is not simply taking someone else’s word on a matter, but rather finding out for yourself or arranging validation by unbiased sources.

Members of governing boards of corporations, churches, charities and not-for-profit organizations, as well as political bodies, have a responsibility for due diligence. Many times, these individuals fail to speak up because of “peer fear.” It is more comfortable to go along with the prevailing opinion.

News reports graphically illustrate an appalling lack of due diligence of some who are “in charge.” Church leadership in different denominations is currently criticized for failures of due diligence, whether on fiduciary issues or issues of abuse.

The absence of due diligence by corporate board members and officials has played out in the news almost daily for such major corporations as Global Crossing and Enron. Charitable organizations where due diligence was not sufficiently exercised include the United Way and Red Cross. A severely tarnished reputation for United Way resulted from revelations of waste, fraud and profligate living on the part of its chief executive. Red Cross also came under sharp criticism for slow and ineffective delivery of aid for victims and families of the 9-11 terrorist attacks on America. Officers and board members of these important and essential organizations were apparently not exercising due diligence expected of prudent persons.

A most spectacular example where due diligence did not exist is the current scandal at CBS News. Seemingly fraudulent documents slandering the president of the United States were broadcast without due diligence in determining the authenticity of the documents or the allegations they contained. Even after numerous sources disputed and questioned the veracity of the documents involved, CBS continued defending its use of the material. Only after a serious plummeting of ratings, and rapidly mounting evidence of fraud probability, from non-CBS sources, did the network offer an anemic semi-apology and announce an internal investigation. But the damage is done on the trustworthiness and credibility of CBS News, damage that may be permanent.

Due diligence is absolutely necessary beginning with the nascent issue, not after the issue has developed and matured. The New York Times newspaper has its own scandals with “made up” news stories contrived by dishonest reporters.

Due diligence takes on a special urgency for elected school board, local, state and federal government officials. When decisions are made without sufficient research of the risks, and without adequate understanding of the consequences, it usually means due diligence was not applied.

Lexington’s local government council has voted to condemn the private property of Kentucky-American Water Company. A reading of the depositions of council members suggests an inadequate level of due diligence on the issue by some. The depositions of council members reveal very little knowledge of the company, infrastructure, and extent and geography of its holdings. Some members’ understanding of condemnation costs is sorely lacking, since costs incurred already exceed the government’s projected total costs for the next several years. It is wrong to take someone else’s word on such issues without researching and learning for oneself. Emotion and political servitude are not substitutes for clear and verifiable information.

It is hard work to be a conscientious member of a governing board. It is hard work to be a corporate official. It is hard work to do the job of an elected official. All require a serious level of due diligence.

Due diligence, due diligence, due diligence… media, government, churches, charities, all. It is a necessary component of accepting the responsibility of governing. Duty requires thorough examination.

Without due diligence, traducing our system of accountability becomes too easy.

Pat Freibert is a former Kentucky state representative from Lexington.
editorial@lanereport.com

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