• Learning from corporate mistakes
• Asset allocation back in vogue
• A glass half full

In February Toyota was in the firing line for safety problems related to sudden acceleration in its motor vehicles and an alleged failure to report them in a timely manner. Then in April it was investment firm Goldman Sachs before Congress related to conflicts of interests to do with the structuring and marketing of the Abacus synthetic CDOs. And this week, BP testified before Congress after being accused of taking dangerous short cuts in its operations in the Gulf. The lesson in each of these cases is that mud sticks and tardy or sub standard responses will be costly and long lasting.

To recap at Toyota (NYSE:TM) the crisis was a clear-cut example of the company failing to own up to quality problems and manage them with the same quality and reputation it had become known for. In Goldman Sachs’ (NYSE:GX) case the Securities and Exchange Commission (SEC) the SEC alleges Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO. In both cases millions are being spent on legal fees and corporate communications, not to mention countless hours of management time. And the BP (NYSE:BP) disaster is on another scale.

Since the April 20 explosion at its Gulf of Mexico oil well, BP has spent $US1.6 billion trying to stop the spill. Its share price has collapsed, its dividend has been cut by 75% and BP has been strongarmed into setting up US$20B escrow account for damage claims related to the spill. And that might not be the extent of the cost with the company receiving no liability waiver as part of the agreement. The disaster has made a mockery of BP’s efforts in recent years to establish a “green” pedigree and its reputation has hit an all-time low. Our own market bellwether BHP also had its own problems in the past with a tailings spill at its Ok Tedi copper and gold mine in Papua New Guinea in the 1990s.  

Elizabeth Tilley - Finance News Network