By Beth Kowitt, writer
FORTUNE – In times like these, companies might need a scorecard to keep track of the alleged misdeeds and missteps of those at the top. Take, for example, an especially problematic seat on the Goldman Sachs (GS) board. On March 19, 2010, Goldman put out a press release announcing the nomination of a new board member -- former Wal-Mart CEO Lee Scott. Goldman was still feeling the heat in the aftermath of the financial crisis, and Scott had the right résumé and experience. After all, he had led Wal-Mart through its own public relations troubles.
Two months later Goldman CEO Lloyd Blankfein announced that he was launching a business standards committee; Scott would be one of four board members on it. But Scott stayed on the board for just a year. When he left, in 2011, he said it was because of time constraints.
Then, in late April of this year, the New York Times reported claims of bribery by Wal-Mart (WMT) officials in Mexico, along with a problematic internal investigation into the bribes. The paper alleged that Scott, then Wal-Mart CEO, had known about the investigation. (Scott was CEO from 2000 to 2009.) Though the trouble in Mexico occurred before Scott joined the Goldman board and he had left by the time allegations were made public, Scott's short directorship could undermine the time he spent at Goldman. After all, he was on the company's business standards committee. Even worse, he joined the board just as a notorious member was on his way out.
The same day that Goldman announced Scott's nomination -- March 19, 2010 -- it filed an 8-K stating that current board member Rajat Gupta would not stand for reelection. A month later news broke that Gupta was being investigated for allegedly passing along inside information gleaned from his position as a director at the company. Both Goldman and Scott declined to comment.
Heavy-hitters like Gupta and Scott bring visibility to a company's board -- generally a desirable attribute, until it isn't. "You don't want those things cropping up and have people start second-guessing what you're doing," says David Larcker, director of the corporate governance research program at Stanford Graduate School of Business. Maybe a scorecard really is in order.
Gupta's online support
Rajat Gupta began his trial for securities fraud armed with the same secret weapon deployed by Martha Stewart and Raj Rajaratnam: a website with messages from the defendant's supporters. A sampler from friendsofrajat.com:
"He always quoted the Bhagavad Gita ... 'You are only entitled to do your duty, not to the fruits of that duty,' and he lived by that credo." --Mukesh Ambani, chairman, Reliance Industries Limited
"I first got to know of Rajat as a distant iconic inspiration, not merely to me, but to the entire Indian community in the U.S." --Rohini Dey, founder, Vermilion restaurant
"I have seen him ... help everyone who reaches out to him ... He personally reached out to his colleague to put us in touch for a business deal." --Sabeer Bhatia, co-founder, Hotmail
"As a person, he was very affectionate and considerate." --Sujatha Rao, former Secretary of the Ministry of Health, India
This story is from the June 11, 2012 issue of Fortune.
Insider trading charges against the former Goldman Sachs board member and McKinsey managing director will put the spotlight on the reputations of the two storied firms. But McKinsey -- and its clients -- have already moved on.
FORTUNE -- The perp walks continue. This morning, 62-year old Rajat Gupta, the former managing director of consulting powerhouse McKinsey & Company, turned himself into the FBI to face insider trading charges. Specifically, the MOREDuff McDonald, Contributing Editor - Oct 26, 2011 11:27 AM ET
When testimony gets confusing, lawyers risk losing the jury. Raj Rajaratnam's legal team may use an expert network of its own to interpret the whirl of complicated information.
When Goldman Sachs chief executive Lloyd Blankfein testified as part of the insider trading case against the hedge fund manager Raj Rajaratnam, the banker provided glimpses into the world of the Wall Street power house that were at times riveting, and at times MOREKatie Benner - Mar 24, 2011 11:19 AM ET
19 people have already pled guilty in the vast, ongoing insider trading bust. Can Raj Rajaratnam's lawyers make a strong enough case for the hedge fund manager at its center?
Opening statements are expected to begin Wednesday in the insider trading trial of hedge fund manager Raj Rajaratnam, kicking off a courtroom drama expected to last more than two months. Jury selection began on Tuesday.
No insider trading case has attracted this MOREKatie Benner - Mar 9, 2011 9:49 AM ET
The Galleon insider trading ring has enveloped a big fish on Wall Street with the SEC's charges against Rajat Gupta, a former member of the board of Goldman Sachs and a former managing director of McKinsey & Co.
Dammit, Rajat. We gave you the benefit of the doubt. We said that we wished it were not so. That it might all be all series of coincidences—that a former managing director of MOREDuff McDonald, Contributing Editor - Mar 1, 2011 1:13 PM ET
The SEC just announced that it is charging Rajat Gupta with insider trading, as part of the larger investigation that centers around hedge fund Galleon Management. In its press release, Gupta is referred to as "a Westport, Conn.-based business consultant who has served on the boards of directors at Goldman Sachs (GS) and Procter & Gamble (PG)."
All true, but Gupta is much more than that.
Gupta also serves as chairman and co-founder of MOREDan Primack - Mar 1, 2011 12:17 PM ET
How would YOU defend yourself from insider trading charges? You can go the Raj Rajaratnam route or the Steve Cohen one. I'd take the latter.
If a man is known by the company he keeps (or has kept), then these are tough times, reputationally speaking, for hedge fund kingpins Raj Rajaratnam and Steve Cohen. While neither has been convicted of a crime, hardly a day goes by in which we MOREDuff McDonald, Contributing Editor - Feb 2, 2011 11:10 AM ET
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