Gavin Patterson, CEO of British telecom giant BT, had heard reports of problems with the company’s Italian business. Rumors of wrongdoing included false invoices and shady loans.
In May 2016, he released BT’s annual report that included a reference to the situation. “We have continued to monitor our operations in Italy and progress has been made to improve the control environment,” it read.
But soon after, a whistleblower revealed accounting irregularities in the Italian operation. It turned out to be far more serious than initially believed.
Despite long-standing rumblings of something amiss, Patterson had traveled to BT’s Italian office in Milan only twice over a three-year period. Had he delved more deeply into the issue—and visited Milan more frequently—he could have met face-to-face with Italy-based employees at all levels and sought additional input from local customers and suppliers.
Over the last year, BT’s stock price has tumbled and Patterson has tangled with regulators. While there’s no guarantee he would have uncovered the extent of the accounting fraud if he had spent more time in Italy, his lack of involvement didn’t help.
If you run a sprawling business, make regular visits to outposts, and listen to a range of employees and other stakeholders rather than remaining behind closed doors with a few senior lieutenants.
— Adapted from “BT and Pearson mistakes show CEOs need to get out more,” Michael Skapinker, www.ft.com.