Among the 25 Best-Kept Secrets of the World’s Best Companies discussed by Business 2.0 is Colgate-Palmolive’s “bad news folders.”  More specifically, they have been described as an early-warning system designed to identify problems before the mushroom into a “company-wrecking crises.”

 According to the report, each day red plastic folders hit the desk of top-ranking Colgate executives, including CEO Reuben Mark’s desk, containing reports prepared by lower ranking managers about potential problems that are brewing.  For example,

When a report alerted Mark that officials in Baddi, India had questions about how a plant treated wastewater, Colgate quickly involved an engineering team to avoid potential embarrassment.

     The report goes on to say that one of the benefits of the folder system is that it is self-policing.  One executive said, “No one is going to report a problem and then not do anything about it.”  That maybe, but a well deserved tip of the hat goes to senior management who obviously have the correct incentive structure and corporate culture in place to allow employees to raise the red flags without fear of repercussion.

     This is a business practice success story that corporate compliance lawyers will want to share with their clients.  Not only did Colgate neutralized a potential smoking gun situation, they turned a potential legal problem into a business opportunity — the chance to protect their reputation and avoid an embarassing legal entanglement. 

This entry was posted on Thursday, March 23rd, 2006 at 8:34 pm and is filed under Compliance, Corporate Governance, Decision Making, International, Knowledge Management, Lawyers, Leadership, Smoking Guns. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.