I have pointed out a number of times some really solid reporting that comes our way from Gretchen Morgenson, who writes a regular column for Sunday business section of The New York Times. She weighs in today with a look at yet more corporate misbehavior in the executive and boardroom suites. This time the story involved a company called Sunrise Senior Living–a company run by a very closely-knit board of directors. By closely-knit, I’m not saying that they exude family values–though the chairman of the company and his wife are two of the seven directors. I mean “closely-knit” as in “we won’t ask any questions about ethical behavior.” 

    Morgenson tells us that:

Almost six months ago, Sunrise hired an outside law firm and tasked a “special independent committee” of the board to do two things: scrutinize questionable option grants and examine $32 million in insider stock sales that Mr. and Mrs. Klaassen (as well as three outside directors) made before Sunrise publicly disclosed an accounting change that trounced its shares. The company spokeswoman has said that the executives and directors could not have had knowledge of the accounting review when they sold their stock.

Sunrise decided to examine itself after an institutional shareholder, S.E.I.U. Master Trust, a pension fund that benefits members of the Service Employees International Union, pushed for the move.

Yes, it’s another example of a union trying to get corporate directors to behave themselves. The company already estimates that restating of its income from 1999 to 2005 will cut about $100 million off its earnings–not small change for a company of its size.

    Shareholders are trying to get some answers but, guess what? Because the company hasn’t filed its proxy statement because it doesn’t yet have an audited financial statement, it can’t hold a meeting.

Stephen Abrecht, executive director of benefits funds at the S.E.I.U. Master Trust, said that his organization has waited for the company to answer the questions that it submitted months ago. None have come, he said.

“But the list of problems keeps getting longer — accounting troubles, questionable insider trading, possible options backdating, material weaknesses in internal controls, S.E.C. inquiries, and now, the dismissal of the C.F.O.,” Mr. Abrecht said. “There is a leadership problem that needs to be fixed. The board should step up and appoint new, truly independent outside directors and implement governance reforms.”

Adding to the urgency of the matter, significant merger and acquisition activity has occurred in Sunrise’s industry, making it a possible takeover target, Mr. Abrecht said. “The board’s conflicts of interest make it virtually impossible for shareholders to have confidence that the current group of outside directors will place shareholders’ interests before all others in assessing opportunities to enhance value,” the letter said.

    We shall see what the sunlight eventually shows about what is up inside the Sunshine board room.