The surprising thing in the story is not only GM's incredible delay but, mainly, in the revelation that employees had known about the flaw for years. But there is another, and much more intriguing, surprise: the guy who wrote the report and released it, retired federal prosecutor Anton Valukas, did not follow the “manual” in this type of complaint and went on the field saying that there are no villains or Machiavellian plans behind GM's inertia. On the contrary, he said, the problem lies in the “silos” created by GM's deeply fragmented structure.

In fact, I don't like that thing about saying “I told you so”, but it's a bit irresistible to do it when, in recent weeks, I've had the good fortune to receive space on some websites, magazines, and newspapers for articles in which I insisted on the thesis that communication failures form “black holes” in corporate structures, and that these holes irresistibly suck up information and destroy it. Although I was referring to the use of these channels by corporate gangs to obtain information about their misdeeds, the point is that there is no possibility of compliance policies in business structures in which information as important as that pointed out by Anton Valukas could be lost for ten years.

Compliance is a very serious thing in gigantic buildings, often as large as those of national governments, which are mega-companies. A compliance policy, in a basic way, means having standards to follow to avoid errors and having people eavesdropping so that those standards are truly followed.

As seen in the GM affair, and in another dozen that are easily recalled in recent times, compliance policies are not being effective. Why will it be? I've been working on this and have consistent clues, but that's a topic for another conversation. In the present case, a disturbing fact is that its format is valid, on a smaller or larger scale, for other similar ones that are in people's mouths and minds. It is not difficult to observe that the same basic traits shown at GM are found in the line of argument of senior Petrobras executives when they talk about Pasadena and other stories that came to light: there was no intent to commit fraud, they say, but the initial calculations were poorly done (or done on a “baker's account”, although I think that bakers are more efficient in their business) and the information that should guide the decision was lost along the way.

Yes, the reader can accuse me at that moment of innocence. The truth, however, is that I do not remove from the situation the perhaps intentional intent on the part of whoever belongs to Petrobras and others. What I'm saying is that, until proven otherwise, the board of these companies did not want to cause harm or create businesses aimed at a loss. What the advice lacked was the crucial information, the one that differentiates bad from good business. That data was sucked into a “black hole” and maybe the bad guys used that circumstance.

The question that matters is: how can this occur in companies so full of controls and auditors and rules and everything else?

It's simple, as can be seen from the examples of GM and Petrobras: companies are so departmentalized and so large that there are spaces left without communication between their “silos”. The subject who knows about the problem is sometimes in another city, another country, another department among hundreds or thousands of departments, and the guy who should know about the problem has no idea about the existence of the former, just as the former has no idea of the latter. The information is trying to move, but overdepartmentalization is like a lego with irregular pieces. The space between them is enough to swallow information, randomly or not.

Can you solve it? Of course it is. The point is to know if companies really want to solve it, considering the degree of transparency in the business and the dilution of power in the “silos” that this requires.

*Postgraduate lawyer in Economic Law from Yale Law School and Master in International Law from Cambridge, Barry Wolfe is director of Wolfe Associates (www.wolfe.com.br), a consultancy in preventive compliance, risk assessment and corporate fraud investigation.

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