CIG – What is That?
The U.S. government has 73 Inspectors General, one for each major governmental department. These IGs verify that a department is not engaging in waste, fraud, abuse or mismanagement. Companies that deal in publicly traded securities are required to have a compliance officer – to prevent legal or ethical breaches. Why have an IG, or a compliance Officer?
Quite simply, human nature is fairly well known and understood. While the majority of people are honest and trustworthy there is no way to escape a small minority that will cheat, take the easy way, or lie when it is to their advantage. It is said that all of us have at least a “little larceny” in us.
While the government and securities companies have this layer of ethics protection, most private and non-governmental companies rely on the basic honesty of their people to conduct business.
That reliance is based on a flawed assumption about human nature. People want to look good at their job. They want their work output to be right. If it isn’t, the urge to “make it right” by modifying the truth can be overwhelming – especially if millions or hundreds of millions of dollars are at stake. The results are often flawed products or services. The U.S. Gov’t has recorded 112,500 product recalls in the past 15 years, resulting in billions of dollars in expenses that could have been avoided. Some of the companies hit with a major product recall do not survive the event. At the least, it can damage even the most honored reputation.
VW is currently undergoing the pains of fraudulent activity by presumably a very small number of workers. It could take a decade to repair their reputation, not considering the vast amount of money that will be expended fixing the short term problem.
Toyota had to recall about 10 million cars, AND pay a $1.2 Billion fine due to sticky accelerator problems. General Motors? A faulty starter switch has humiliated a renowned American company.
For the U.S., the list of these incidents goes on almost forever – roughly 112,500 times in the past 15 years according to the government.
Not all Recalls are of the magnitude of Toyota, GM or VW. Too many U.S. food producers have had to recall products; probably enough to feed a small country for a decade.
The founder of IntelCap has dealt with numerous cases that could have resulted in recall situations. As Ben Franklyn wisely said, “an ounce of prevention is worth a pound of cure.” Converting that saying into modern business, George Jerome has instituted a program he dubs the “Civilian Inspector General” program or CIG. In it, Intel acts as an independent review group, evaluating what engineering departments represent as product specifications, how marketing interprets those specs, and how it meets governmental rules and laws. The object, quite simply is to catch and fix problems and issues BEFORE they get into the hands of the public, the government or any regulatory agencies.