Forgiveness in an austere age

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In spite of the new spirit of puritanism sweeping through US boardrooms, some chief executives are still being forgiven an occasional lapse into dishonesty.

That was the stance taken this week by directors of Microsemi, a small Californian technology company, after it was revealed that the company’s chief executive had been less than forthright about his educational qualifications.

Rather than showing Jim Peterson the door – the fate that has often befallen other chief executives who have lied about their credentials – Microsemi’s directors have decided that he should stay on, although with financial penalties that could cost him $1m.

News of the board’s leniency drew a mixed reaction. “It’s one data point about a person, about their willingness to falsify a record in a tight spot,” said Wayne Norman, professor of ethics and philosophy at Duke University.

He added, though, that the company’s directors were right to take a broader view of Mr Peterson’s conduct over a number of years, and to consider the impact on shareholders of making a leadership change.

Justifying the decision not to jettison the chief executive after his nine years at the helm, Dennis Leibel, chairman, said: “The board’s mission is to protect shareholder interests by balancing the results of the independent inquiry against the great value and strategic vision that Jim Peterson has created at Microsemi.” He credited the chief executive with building a “highly successful and profitable enterprise”.

Complicating the case was the fact that the disclosure about Mr Peterson’s false credentials was made by Barry Minkow, a short-seller who has a track record of profiting by uncovering such irregularities.

The work of short-sellers in ferreting out discrepancies like this probably helped in the longer term to keep chief executives honest, said Mr Norman.

In a regulatory filing, Microsemi said that an investigation by law firm Munger Tolles & Olson had concluded that Mr Peterson did not have a bachelor’s degree and MBA from Brigham Young University, as he had claimed.

Instead, he had been awarded an associate’s degree by a college that later became part of Brigham Young, and had also earned “substantial credits” towards a bachelor’s degree at the university.

Microsemi said it would impose financial penalties on Mr Peterson, while also introducing a heightened level of scrutiny that would involve deeper background checks into its senior executives.

While adding that the company “takes this matter very seriously”, Mr Leibel stopped short of criticising the chief executive’s dishonesty directly and said the company’s directors “are not commenting on his beliefs, understandings or state of mind”.

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