Factors Influencing Corporate Culture – Chart From The IIA – Plus, Let’s Agree Upon Sample Culture And Governance Audit Programs

Passing this along, a chart from the Institute of Internal Auditors, identifying factors that influence corporate culture. I’m not sure about some of the ranking – particularly training and enforcement through disciplinary measures – it seems to me that those two categories would be ranked higher, and at about the same level as the establishment of a code of conduct (i.e., immediately below the first two ranked factors). Just comments for thought.

This chart came from a discussion about how to audit culture, and that it can be audited. As noted, for years auditors have tended to stay away from auditing culture, and I’ll also add governance as an audit area that auditors, internal and external, tend to stay away from, which is really perplexing since for years it has been known that culture is an important indicator of the possibility of fraud and unlawful acts. But, if I’m not mistaken, from my years of audit, when designing or planning the audit, doesn’t the external auditor already to some extent do an evaluation of and take into consideration the estimated reliability of the financial recordkeeping processes and internal controls – and wouldn’t that, or doesn’t that, or shouldn’t that, already to some extent take into consideration aspects of culture and governance?

Now both the COSO 2013 internal control framework and the new 2017 COSO enterprise risk management (ERM) framework list culture and governance as important framework criteria. Culture and governance are the first, underlying criteria in the new COSO ERM framework. And many other organizations are now promoting culture, including the National Association of Corporate Directors. Risk management and enterprise risk management should not be viewed as separate or standalone processes occurring on an occasional or periodic basis – instead, they should be integrated into the ongoing and constant decision making processes for achieving identified objectives.


And, I say a “public discussion” because public and private businesses, nonprofits and governmental entities, and their auditors, will then have criteria to try to meet or exceed. Note, however, that I am not advocating that the criteria and steps create a legal standard. Internal controls and risk management design are highly discretionary – any effort to create a broad legal standard, other than, for example, the business judgment rule, will be met with extreme resistance, and very most likely failure and an inability to move these topics forward.

So . . . if you are an internal auditor, or an external auditor, how would you, or how do you, describe to management and the audit committee, and perhaps the board, the steps that you would take to audit the entity’s culture and the entity’s governance?


See also my blogs at http://californiaestatetrust.com and at http://lawriskgov.com/


Audit Committee 5 Lines of Defense 10222017 David W. Tate, Esq. jpg



Claim for violation of nondisclosure agreement must establish that the information disclosed was true

Nondisclosure agreements are in the news. Here’s an interesting aspect of making a claim that a nondisclosure agreement was violated – plaintiff’s claim for violation of a nondisclosure agreement must establish that the alleged wrongful disclosure was of confidential but true information, which was covered by the nondisclosure agreement. Of course, there are also other important issues relating to whether or not a nondisclosure agreement was breached – such as, for example, whether the holder of the privilege (e.g., the plaintiff employer) can actually prevent the disclosure, or reporting of the information to all sources or just some sources (such as, for example, to the police or to a regulatory entity or to the board of directors, compared to the press or the public), or whether, regardless of the existence of the nondisclosure agreement, the person disclosing the information has standing and a right to bring a legal action relative to the event or occurrence from which the information arose (such as, for example, in a situation of alleged unlawful discrimination or harassment).

See, e.g., Glassdoor, Inc. v. Superior Court (2017) 9 cal. App. 5th 623, which held:

“An employer cannot establish a claim for breach of a nondisclosure agreement unless it is prepared to prove, and does prove, that the defendant disclosed actual confidential information, i.e., that his or her statements were, in some relevant degree, true. Nothing in this record would sustain a finding that the CEO’s statements—reported by Doe inaccurately, according to MZ—had this effect.

MZ’s hesitation on this point may be understandable, because Doe’s supposed disclosures do not cast MZ in a favorable light. But MZ cannot be excused from the requisite showing merely because proving a prima facie case might be embarrassing to it. If Doe accurately disclosed company policy, or the CEO’s statements regarding that policy, it was incumbent upon MZ to present evidence to that effect. Instead it denied the accuracy of Doe’s report without identifying any real confidential information it might be understood to have disclosed. MZ therefore failed to establish a prima facie case predicated on Doe’s account of the CEO’s statements.”

As an additional requirement, in trade secret cases the holder of the secret (e.g., the plaintiff employer) is required to describe the trade secret so that the court and the defendant are sufficiently apprised of the confidential information that is alleged to have been wrongfully disclosed – thus, since the disclosure of that confidential information by the holder of the secret would mean that the trade secret information is no longer secret and would therefore invalidate the holder’s entire case of trade secret secrecy, keeping that information confidential, while also sufficiently disclosing that information to the court and to the defendant is a requirement that must be carefully accomplished. Thus, for example, for California state court nondisclosure and trade secret cases, see also Cal. Civ. Code §3426.5, which states in part that the Uniform Trade Secrets Act, requires the trial court to “preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”

That’s all for now. Of course, each situation is different.

David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com


NLRB Advice Memorandum in the Damore/Google situation – part (i.e., mostly) protected speech, and part unprotected speech, and Google acted appropriately (based on the current facts and evidence)

Below, at the bottom of this post, I have provided a link to the National Labor Relations Board Office of General Counsel internal Advice Memorandum in the Damore/Google situation. You may recall, and very broadly or generally speaking, over a short period of time (i.e., a few months) Mr. Damore, who was an employee at Google, posted comments about Google’s diversity initiatives and about diversity or women and men in general, whereupon after the period of time and development of the situation Google fired Mr. Damore.

The internal Advice Memorandum is extremely interesting for its discussion about employee comments that are or might be protected, and comments that are not protected, and about the situation at Google that the Advice Memorandum concludes involved primarily protected speech which eventually was also in combination with unprotected speech.

The Memorandum also is interesting for the additional facts that it provides about the timing, the factual situation, and how Google handled the situation as it developed; however, keep in mind that the Memorandum is provided without full knowledge about who did what and who communicated what and at what time, as discovery including document requests and production, and depositions are missing or have not yet occurred. The Memorandum advice might be different if discovery could prove the facts otherwise, such as if discovery established that Mr. Damore was not fired due to the comments that he made that the Memorandum concludes were unprotected (see the two bullet point comments near the bottom of page two of the Memorandum).

The Memorandum also is interesting because it appears to conclude that most of Mr. Damore’s comments were protected speech, apparently except specifically for the two comments that are indicated at the bottom of page two of the Memorandum, wherein the Memorandum indicates that Mr. Damore commented that there are or might be IQ differences between women and men, and neuroticism and stress level differences between women and men which might in part account for there being fewer women in high stress or tech company jobs.

Frankly, given the facts and evidence that the NLRB was working with at this time, I am surprised that it took so many pages for the Advice Memorandum to reach its conclusion that Google acted appropriately. I also find the Memorandum lacking in detail and support on several of the factual evidence and timing matters.

I am also surprised that the Memorandum included some of its general or broad-based comments which probably are not necessary in this situation, such as “Where an employee’s conduct significantly disrupts work processes, creates a hostile work environment, or constitutes racial or sexual discrimination or harassment, the Board has found it unprotected even if it involves concerted activities regarding working conditions” (see page four of the Memorandum), and “In furtherance of these legitimate interests, employers must be permitted to ‘nip in the bud’ the kinds of employee conduct that could lead to a ‘hostile workplace,’ rather than waiting until an actionable hostile workplace has been created before taking action” (see page four of the Memorandum).

It is important for employers and employees to realize and understand that the Memorandum concluded, based on the currently available evidence, that much or most of Mr. Damore’s comments about Google’s diversity program and initiatives were protected speech, but that the situation at Google and comments being made were developing and changing over a period of months (apparently from June through perhaps August, 2017 or even later in 2017), and, thus, the Advice Memorandum also concluded that at some point the comments by Mr. Damore exceeded the scope of protected speech for the reasons stated (i.e., comments about possible biological differences between the sexes, “Thus, while much of the Charging Party’s memorandum was likely protected, the statements regarding biological differences between the sexes were so harmful, discriminatory, and disruptive as to be unprotected” (see page five of the Memorandum)).

Thus, these are or can be complicated situations when employees are expressing comments, assertions and protected speech, or mixed protected and unprotected speech, about the work environment, or about diversity programs or initiatives, or about political views, or other protected speech, and when an employee’s comments, assertions and speech exceed, or eventually in part exceed, the scope of protection or the protected area, or are entirely about unprotected topics and issues, or otherwise are unprotected in nature.

Here is the link to the NLRB Advice Memorandum (unfortunately with redactions), https://www.nlrb.gov/case/32-CA-205351

Help With Workplace Investigations

The following are some comments in guidance about workplace investigations. We are currently seeing a lot in the news about situations where investigations did not occur, and also apparently where possible situations of unlawful activity occurred but were not reported (although in some situations knowledge of possible unlawful activity might had been widely known). And these issues don’t simply reflect on the victim and the accused, but clearly also reflect on the business, nonprofit or governmental entity at issue, and, variously depending on the situation, elected representatives, executive officers, boards of directors and the board committees, general counsel, compliance and ethics professionals, HR, perhaps internal audit and even the external auditor, etc., and throughout the entire organization. In recent prior posts you can also see discussions about the new COSO ERM framework which lists culture and governance as the first category of enterprise risk management.

An employer has a duty to take reasonable steps to prevent harassment, discrimination, and unlawful employment practices, and to correct inappropriate workplace behavior. See, i.e., Cal. Gov. Code §12940(k); and 29 CFR 1604.11(d). An employer can be liable for the failure to investigate, at least if there was underlying unlawful activity. And failure to investigate can be considered ratification of the unlawful activity.

In appropriate circumstances on a claim of wrongful termination by the alleged wrongdoer, when the terminated, wrongdoer employee did engage in unlawful behavior, the question can become whether the employer acted appropriately and in good faith after conducting a reasonable investigation, and based on a reasonable belief in that investigation – in other words, the reasonableness of the employer’s investigation can become the standard by which the employer is judged for alleged wrongful termination liability purposes.

So . . . the following are some of the issues and steps to consider or follow when determining whether the employer’s investigation of the conduct and situation was reasonable, and whether the employer had a reasonable belief in that investigation – did the employer:

  • Take the complaint of wrongdoing seriously;
  • Maintain confidentiality of the situation to the extent reasonably possible;
  • Conduct a timely investigation, promptly after receiving the complaint of wrongdoing;
  • Have the investigation performed by an investigator who is competent and knowledgeable about the relevant issues, and also how to conduct investigations, investigation techniques, evidence, writing reports and opinions, and oral communications and testimony (also, note issues that might be present if the investigation is performed by an attorney for whom attorney client or work product privileges might be claimed – in short, don’t use an investigator in which these issues might be present);
  • Follow appropriate complaint investigation procedures;
  • Listen to and treat both sides fairly and equally;
  • Obtain and understand the claims that are being made;
  • Give the alleged wrongdoer fair notice of the claims being made;
  • Provide the alleged wrongdoer with ample opportunity to offer evidence in his or her defense, including what occurred or not, documents that might be relevant, and the names of and information about witnesses who he or she believes can provide relevant comments about the alleged occurrence(s);
  • Have the investigator conduct a thorough investigation, under the circumstances (note that in some circumstances courts have held that the investigation need not necessarily be perfect, but it should be sufficient, reasonable and thorough under the exigencies and circumstances at hand without the benefit of full discovery or a trial);
  • Implement progressive discipline if appropriate; and
  • Have the investigator prepare a well-reasoned report and conclusion, supported by and based on objective evidence.

That’s all for now. Of course, each situation is different, and on many of the above points courts and regulatory agencies have provided additional guidance.

David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com  

Royse Law Firm – Practice Area Overview – San Francisco Bay Area and Los Angeles Basin

  • Corporate and Securities, Financing and Formation
  • Corporate Governance, D&O, Boards and Committees, Audit Committees, Etc.
  • Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  • International
  • Immigration
  • Mergers & Acquisitions
  • Labor and Employment
  • Litigation (I broke out the litigation because this is my primary area of practice)
  •             Business
  •             Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  •             Trade Secrets, NDA, Accounting Issues, Fraud, Lost Income, Royalties, Etc.
  •             Privacy, Internet, Hacking, Speech, Etc.
  •             Labor and Employment
  •             Mergers & Acquisitions
  •             Real Estate
  •             Owner, Founder, Investor, Board & Committee, Shareholder, D&O, Etc.
  •             Insurance Coverage and Bad Faith
  •             Lender/Debtor
  •             Investigations
  •             Trust, Estate, Conservatorship, Elder Abuse, and Contentious Administrations
  • Real Estate
  • Tax (US and International) and Tax Litigation
  • Technology Companies and Transactions Including AgTech, HealthTech, Etc.
  • Wealth and Estate Planning, Trust and Estate Administration, and Disputes and Litigation


Two New EEOC Disability Discrimination Cases – Reasonable Accommodation, and Disability Screening

I have pasted below clips from two new disability cases posted on the EEOC website. One case involves the reasonable accommodation issue, and the other case involves disability screening. Note, and this is important, EEOC website clips present only one side of the story. There is always more than one side. But I have attached these clips because they present the EEOC viewpoint, and they do highlight that there are a lot of business issues and situations involving and relating to disability discrimination.

David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.

This first clip is from a case involving American Airlines, dealing with reasonable accommodation. Again, I note that this is the EEOC viewpoint – I believe that the EEOC overstates the employer’s obligations.

This second clip is from a case involving Amsted Rail, dealing with alleged disability screening. Again, this presents only the EEOC’s viewpoint.


And below I have pasted additional materials, on different topics, that you might find useful:

Audit Committee 5 Lines of Defense 10222017 David W. Tate, Esq. jpg


Help with employment termination investigations – new case Jameson v. PG&E

See, Jameson v. Pacific Gas and Electric Company, California Court of Appeal, First Appellate District, October 5, 2017, Case A147515

In relevant part, plaintiff employee claimed that PG&E fired him in breach of the implied covenant of good faith and fair dealing, that he would not be fired for other than good cause, and in retaliation. PG&E countered that it was an at-will employment, and that in the alternative that PG&E had good cause and that its investigation established good case. Plaintiff employee further claimed that PG&E’s investigation was inadequate and that the investigator, who was an attorney, failed to interview all of the identified witnesses or sufficiently consider plaintiff employee’s arguments and evidence. See below clip from the court’s opinion.

Of course, whether or not the investigation was sufficient and appropriately performed by a competent and qualified person will vary and depend on the facts and circumstances of each case and investigation.

David Tate, Esq.

With respect to the sufficiency of the investigation, in relevant part, the court held:

Jameson v. PG&E - employment termination investigation case 11042017-1