Voices Amplified: Overstock CEO Jonathan Johnson Talks Building a Culture of Compliance

Jonathan Johnson is the CEO of Overstock, one of the top four U.S. online retailers specializing in home furnishings. Since assuming this role in 2019, Johnson has focused the e-commerce home furnishings retailer on sustainable, profitable market-share growth. The company was recognized as one of the top employers of 2021.

From 2016 to 2021, Johnson also served as president of former Overstock subsidiary, Medici Ventures. Medici focuses on using blockchain technology to democratize capital, eliminate frictional middlemen, and re-humanize commerce. Under Johnson's leadership, Medici made investments in and grew many cutting-edge blockchain technology and fintech businesses, including tZERO, Bitt, Medici Land Governance, GrainChain, PeerNova, and Voatz.

Johnson was one of the leaders who spoke at the 2021 Amplify conference, a worldwide virtual conference that challenged attendees to dare to simplify. Here's what he had to say about building compliance into workplace culture. 

Key Takeaways: 

• Taking risks with new technology can make you a leader in change
• Transparency is critical for the company’s success, and can empower teams to do their jobs more effectively when they are proactively included
• Leaders need to set an example by getting involved in work that matters such as 10-K or 10-Q reviews, especially when it involves a large team across departments
• Decisions must be driven by the desire to build the business, not by accounting findings

Q: Overstock broke ground when it became the first major retailer to accept Bitcoin. Will you explain to us the decision to work with cryptocurrencies and blockchain technology?

A: Early in December of 2013, someone at one of our executive meetings said, "Have we ever thought of accepting Bitcoin as a form of payment?" Thankfully, I knew what it was then. After a discussion, we decided as an executive team that's something that we would do in the future. Our CEO made an offhand comment to a reporter, and it was reported in the press that Overstock would accept Bitcoin sometime in the second half of the next year. Our developers heard this and—being the technologists that they were and loving cutting-edge technology—said, "Why are we going to wait till next year?" They locked themselves in a conference room that week between Christmas and New Year's Eve 2013, and on January 7, we became the first major retailer to accept Bitcoin. 

Q: That’s one example of your company’s founder, Patrick Byrne, talking to analysts, reporters, and others in an unscripted way. Byrne’s transparency is well known. Was that a challenge to work through at times? 

A: We're no less committed to telling the truth and being transparent. In many ways, what he set up when he founded this company over two decades ago was the driver of compliance rather than challenge. He never came to accounting and said, "Do this, do that." He always said, "We're going to run the business this way. You tell us how to account for it. You tell us how to report it. We'll do what you say.” I think that really empowered our reporting teams, our internal audit teams to do whatever they needed to do their jobs. That's a culture we try to maintain today. 

Q: Can you describe the divisions in your culture of business decisions and accounting compliance? 

A: I hope people are running their businesses to maximize shareholder value and grow their businesses, not doing deals that are driven by accounting or tax. Those are kind of consequences. Yeah, sometimes a slight tweak to a deal that becomes immaterial to get a different accounting or tax treatment is a good idea, and that is maximizing shareholder value. But it should not be the primary deal of doing what's right for the business. ... We always make decisions based on the business, never letting the accounting drive decisions. Then we let the accounting chips fall where they may, and then correctly and accurately own and disclose the accounting. We let our accounting and other professionals do that as they know how to do it better than anyone else.

Q: Could you give us your perspective on how you get comfortable when it comes to your Ks and Qs?

A: We have a pretty big group review. Our Ks and Qs are part of what we internally call our disclosure committee. It includes all of our senior executives, every single one of them. We ask each of them to read the 10-Q and the 10-K cover to cover. We provide a red line from past ones that make it easier to know where the changes are, because we want them to see those, and give them an extra look. And we have some certifications that different people in our company signed.

The disclosure committee consists of quite a number members of our legal team, quite a large group of our finance team, and all of our senior executives. One of the reasons I love reading those documents is I always want to know what's going on with our business and, very rarely, does something in there surprise me, but sometimes I'll learn things. For me, it's like a chance to read the newspaper. I may have heard the news on the radio already, but now I see it in black and white and I know it's done and we can move forward. So getting sub-certs, trying to set a tone at the top that this is not checklist work, that this is real work that matters, is something I've always tried to do.

Q: What advice would you give to SOX managers or internal audit teams to help bolster transparency?

A: Some companies have a culture where auditors may be seen as the enemy of the business because they find mistakes. At Overstock, we've established a culture of having open, honest, active discussions with our auditors throughout the year and getting them involved in significant transactions. I view it like this: our first line of defense against propagating mistakes is our internal control environment. Those controls are supported by an accounting group and by the accounting group policies and procedures. Those are followed by an internal audit team that tests those procedures. And then, of course, we have external independent auditors, too. 

If we're doing something incorrectly, I want to know about it, not after it's become something big but when it's still something small. I view auditors, whether they're internal or external, as a friend of the business, not as a "gotcha" department.

For more insights from finance and accounting leaders, check out these other conversations from our Voices Amplified series:

• Junko Swain, CAO of Upwork, on Automation in Accounting
• Mike Whitmire, CEO of FloQast, on Preparing for the IPO

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