FCPAméricas Blog
No “Tone From the Top”? What’s Compliance to Do?
11.17.2011
The job of a general counsel or anti-corruption compliance officer in managing a company’s compliance efforts is hard enough. It gets even harder when he or she lacks the “tone from the top” support from senior management. In these situations, what is an officer to do? What lessons on ethical leadership can he or she bring to bear?
This question is not just academic. Recent news reports reveal how Koch Industries Inc. hired a compliance officer and ethics manager in 2008 and soon thereafter sent her to investigate the management of a subsidiary in southern France. After her investigation uncovered bribes, management then removed her from the inquiry. They fired her less than a year after that, claiming that she was incompetent, even though her findings were substantiated by a second round of investigations.
Though Koch Industries is an extreme example, lack of top-down commitment is more common than one might think. According to a recent survey by Corporate Board Member / FTI, only 36% of general counsel thinks that their board and management have done a good job with U.S. Foreign Corrupt Practices Act (FCPA) training and compliance and 63% believe there is room for improvement.
In his August 18, 2011 article “Don’t Fold ‘Em: Making the Case for Ethical Leadership,” Tom Fox shows how compliance director James Nortz provides some helpful answers to this difficult question of what to do. Among other things, Nortz suggests using three questions from Machiavelli’s The Prince. First, officers should seek to secure positions of power, strength, and influence over others in their companies. Second, officers should think creatively and imaginatively about their organization’s role in society and its relationship to stakeholders. Third, they should be fluid and seize opportunity, sometimes with the strength of a lion and other times with the cleverness of a fox.
I offer another take on the philosophy behind ethical leadership, a perspective from Noah Bopp, the Founder and Director of The School for Ethics and Global Leadership (SEGL) in Washington, DC. Noah and I co-founded SEGL together in 2009 to educate future leaders to be ethically strong and internationally aware. SEGL is now in its third year of educating high school juniors from across the country with exceptional leadership and scholastic potential.
I asked Bopp how he would instruct his students at SEGL to handle the situation where they were tasked with performing a compliance job while their superiors were not fully committed to a strong ethical business culture. Bopp provided the below comments.
“Let me start with an example. Suppose too many drivers are running red lights at a particular intersection in your city. This causes several accidents a week and a few deaths every year. Most drivers never see these accidents, and if they do, they think they are caused by drivers with less skill. The accidents themselves are not enough to deter bad behavior.
If we station an extra police car at that intersection, we will probably reduce the number of accidents at that particular location, but other intersections will likely retain or develop problems. Accidents and deaths will continue. Why? Because we haven’t taught the drivers anything. They don’t really understand that running red lights is bad for them and for the city. They just understand that getting caught by the police is a hassle.
Compliance rules are like extra police cars at dangerous intersections. At these intersections, self-interested companies led by self-interested management are constantly running red lights. And too often, compliance officers function as back-seat drivers who yell, ‘There’s a cop–watch out!’
Compliance officers and general counsel should not simply look for cops. They should educate so that the company car understands why stopping for red lights is always right. In short, they should work to uncover and sharpen the company’s ethical compass. And this means starting at the top, with management.
What is the best way to do this? Well, at SEGL we start with a basic Socratic premise. In Book VII of Plato’s Republic, Plato has Socrates discuss the purpose of an education. It is not to ‘put sight into blind eyes.’ Instead, the effective educator assumes that the power to learn is already present in the learner. A good educator, therefore, gives a student questions to ask and places to look. This should form the basis of a compliance officer’s work.
As SEGL we also value what Aristotle says about excellence: it is a habit. A company, like an individual, becomes what it repeatedly does. Once a company establishes its values, its character traits, it ought to practice those values and traits relentlessly, at every step of the way, in every cubicle.
I am surprised to learn that compliance officers might suggest that their peers play the Machiavellian ‘lion’ and ‘fox.’ Maybe they have not read Chapter XVIII of The Prince, where those analogies are drawn? Does it sound like ethical leadership to say – as Machiavelli does – that sometimes princes need ‘to act contrary to faith, friendship, humanity, and religion’? To state that princes must ‘have a mind ready to turn itself accordingly as the winds and variations of fortune force it’? To note that ‘it is unnecessary for a prince to have all the good qualities I have enumerated, but it is very necessary to appear to have them’? These are not things I teach my students, and I find it hard to believe that leading practitioners are either so ignorant of Machiavelli or so duplicitous of conscience that they would teach them to their colleagues.
Whenever I hear about compliance work, I feel both discouraged and heartened. I feel discouraged because ‘doing the right thing’ ought never to be about ‘not getting caught.’ Heightened enforcement by itself should not be a reason that companies act ethically. I feel heartened because at the heart of compliance is a commitment to ethics and to a better world. Effective compliance officers and general counsel have an opportunity to instill this commitment at their companies.”
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© 2011 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments
February 11th, 2013 at 9:36 pm
Dear Mr. Ellis,
Thank you for this article. I am a Compliance Manager and I was preparing for our second Compliance Seminar, one of our topic is the Tone from the Top and how to insure it. The information you provided is a great resource for the presentation, I am referencing you and your article in my presentation. Thank you.