MF Global: The buck stops where?

President Harry Truman is known for the plaque on his desk:

The Buck Stops Here.

Ultimately, everything is the responsibility of the person at the top.  Contrast this with the Iran-Contra Scandal, a fiasco blamed in its entirety on Colonel Oliver North and his secretary Fawn Hall.

So to, with the modern corporation.  The rhetoric we read about the recent scandals tends to blame the mortgage meltdown on “the 1%” or on “big banks” and “Wall Street.”  These scapegoats are too vague.  There is always someplace that the buck stops.  Organizations always have a chief executive who is ultimately responsible for everything.  (Yes, I really mean everything.)

That’s why I have so much trouble understanding the question over whether Jon Corzine knew that private moneys were used to cover MF Global’s overdraft.  It doesn’t matter if he knew or gave explicit approval for the transfer.  He was in charge when it happened.  Therefore, he is responsible.  If he actually approved the transfers, then he instigated them.  If he knew about them, then he should have stopped them.  And if he didn’t know about them, then he was grossly negligent.

Now consider William Weldon’s surprising step-down as CEO of Johnson & Johnson.  After one too many recalls, J&J decided it was time to change management.  Did Weldon know about the poor controls in J&J plants?  It doesn’t matter.  That’s where the buck stopped.

[Image: Wikipedia]

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About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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