Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Integrity of game play: Institutional cheating

This is the fourth in a series of five posts on the topic of integrity of game play. The first post in the series was about various types of player misconduct and its implications for sportsmanship and game outcomes. The second post discussed the moral character of different types of strategic tanking and looked at various examples of tanking from a variety of different sports. Last week’s post was about referee bias in diverse sports and how it relates to overall decision-making and judgment.  Today’s post looks at examples of organizational cheating operations by teams.  The fifth and final in the series, on March 21, will analyze examples of unethical leadership by coaches.

Institutional cheating by sports teams has sparked repeated scandals in the media and inspired outrage from observers who perceive sustained operations by teams to cheat or gain unfair advantage as an assault on the competitive objective of game play. These cheating campaigns can have a dramatic, and disastrous, impact on both reputation of teams and their future competitive possibilities or the sustainability of their prior achievements that may have been reached dishonestly.


Integrity of game play: Referee bias

This is the third in a series of five posts on the topic of integrity of game play.  The first post discussed the impact of various types of player misconduct on sportsmanship and game outcomes.  Last week’s post debated whether tanking can be ethical and looked at numerous examples of tanking across different sports to compare how it happens and what its effect is. Today’s post is about referee bias and how it affects games, players, and teams.  The fourth post, on March 14, will be about organizational cheating operations by teams.  The fifth post and the last in the series, on March 21, will be about unethical leadership of coaches.

Teams and their fans often accuse referees of being biased or making unfair calls. Whenever players or spectators disagree with the call made or penalty assessed – which, for those on the wrong side of the outcome of the decision, is not all that rare – bias is often suspected or assumed.


Insights from behavioral economics for compliance officers

This is the third in a series of four posts on insights for compliance officers from different fields of study.  The first post in the series was about lessons from psychology regarding motivation and choice, from prominent figures such as Viktor Frankl and Barry Schwartz.  Last week’s post discussed insights from self-development and coaching, including the works of people like Brene Brown and Byron Katie.  Today’s will be about insights from behavioral economics.  The fourth and final post in this series, on March 13, will focus on the application of theories of business management theories to corporate compliance programs.

Behavioral economics is a multi-disciplinary field of academic study which integrates themes from psychology, sociology, and neurology, among others, to analyze and predict economic decisions and markets behavior of individuals.  Given that behavioral economics shares so much theoretical inspiration with other areas and covers such a wide array of human behavior, it is naturally quite insightful for compliance officers.  Like compliance, behavioral economics focuses heavily on factors to decision-making and conduct.  Behavioral economics also takes great interest in risk tolerance and assessment, the management of which is also important for compliance.


Integrity of game play: Ethics of tanking

Editor’s note: Check back in the coming days for additional content to this post which will feature a deep-dive discussion on the moral code of tanking and the practice’s themes and applications between me, from a compliance and ethics perspective, and my husband, Bill Afonso, from a sports management and strategy perspective.

This is the second in a series of five posts on the topic of integrity of game play.  Last week’s post discussed player misconduct, such as penalty embellishment, like diving and flopping, and equipment cheating.  Today’s post is about the ethics of tanking and will question the morality of the practice across various sports and situations.  Next week’s post, on March 7, will be about how instances of referee bias impact games, players, and teams.  The fourth post, on March 14, will be about institutional cheating by team organizations.  The fifth and final post, on March 21, will be about coaches who have demonstrated unethical leadership practices.

Tanking is loosely defined as relying upon poor performance in order to ensure future benefit or competitive advantage based upon bottom of the table results. Internal decisions within the team organization can be planned and intended for the purpose of gaining future advantage via sustained losses or refraining from employing the most competitive strategies.   This can include roster manipulations such as sitting key players or keeping others in the minor leagues or farm systems, as well as actually instructing players actively in the game to underperform or to pursue strategies they expect to be unsuccessful or unproductive in order to deliberately lose the game(s).


Integrity of game play: Player misconduct

This is the first in a series of five posts on the topic of integrity of game play.  Today’s post will be about player misconduct, such as penalty embellishment, individual cheating and misconduct, and time offenses.  Next week’s post, on February 28, will be about the ethics of tanking.  The third post, on March 7, will be about referee bias.  The fourth post, on March 14, will be about institutional cheating.  The fifth and final post, on March 21, will be about the unethical leadership of coaches.

Player misconduct is any instance of an act committed by a player which is unfair, contrary to the laws of the game, or interferes with other players or the active play of the game.  These acts can occur in a variety of circumstances, including during active game play, when the play is paused, during intermissions, or before and after the game.  Some types of misconduct – such as those that are eligible for disciplinary sanction, including cautioning or dismissal from the game – are subject to significant referee discretion or technical construction.  Other types of misconduct – such as those fraudulent acts by players that are the result of sustained conspiracies or pre-meditated efforts to cheat – can be more subtle, harder to detect, and challenging to prevent or punish effectively.

Players may be motivated into misconduct out of emotion, competitive ambition, game dynamics toward some outcome or interaction with another player, or, like many other fraudulent acts that threaten game integrity, desire for financial gain and future success.  No matter the varied reasons for why players engage in malfeasance, it remains true that these misconduct events happen across all sports, all national cultures, and all types of events.  Furthermore, manipulation of plays and games by player misconduct negatively impacts the integrity of sporting events and interferes in the unadulterated experience of sporting with real stakes that other participants and fans expect and deserve.

  • Penalty embellishment – Penalty embellishment generally describes anytime that a player seeks to gain unfair competitive advantage by exaggerating contact with another player in order to imply that a foul has been committed against him or her.  Assessments of whether players are embellishing penalties are highly subjective and can become notorious personality evaluations of various players who are accused of chronic or shameless embellishment.  These pretended injuries or simulated contacts with other players are a fundamental exercise in dishonesty and player misconduct which impugns the quality and veracity of game play.  In various sports penalty embellishment takes different typical forms, as described below.
    • Diving (football) – In football (referred to as soccer within the United States), penalty embellishment is also referred to as diving.  Players do it in pursuit of chances to score via free or penalty kicks or in order to cause the opposing player to be sanctioned by the referee and therefore unduly disadvantaging the other team.  Diving is actively studied as a powerful example of “non-verbal deception.”  Leagues have begun to give out punishments and fines more frequently for diving, as the practice of exaggerating contact and injury has the potential to endanger or slow response to other players who are in actual danger.  Footballers who become known for chronically diving further face the reputational damage of being labelled as perpetrators of this deceptive behavior.  Check out these examples of diving from 2017:

Diving is also practiced by players in hockey, where perpetrators are subject to 2-minute penalties for embellishment and can receive fines as supplemental discipline for repeat offenses.  Check out this compilation of diving in the NHL:

    • Flop – Similarly, in basketball, flopping is when players fall on purpose after minimal or no contact from another player in order to provoke referees into calling a personal foul.  This way the player who flops wishes to be awarded free throws and possession of the ball or possibly to cause the opposing player to be fouled out and dismissed from the game.  Flopping has been regulated against in the NBA since 2012 with the potential of fines and, like diving, subjects inveterate practitioners of it to public scorn.  Nevertheless, many players in the NBA do it and even see it as a form of strategy which they practice and perfect over the course of their careers, much to the derision of some of their peers but possibly to their own competitive benefit.  This archived Grantland post gives an interesting perspective on the long history of flopping:  Flopping in the NBA: A History of (Non)violence.  Check out this collection of floppers from the NBA:

  • Time offenses – Time offenses generally refer to the actions of a player or players on one team which use up the remaining time on the clock but don’t serve any other tactical or strategic purpose.  This is possible in any sport which is timed and therefore is a prevalent practice employed to prevent the other team from getting adequate opportunity to score before the period of the game or the game itself ends.  Players will often do this when their team is winning by a small margin, or tied, in sports where overtime play is possible and/or regulation ties or non-regulation losses are still awarded points.
    • Time-wasting – The term time-wasting typically applies to football.  Late in the game, such as during the extra minutes from injuries or other stoppage, substitute players are brought on and time can be wasted both by exiting and entering players who do so deliberately slowly.  These and other less obvious forms of time-wasting, such as putting the ball out of play from the corner or returning to the ball to play slowly, can subject players to punishment.  Check out these ridiculous and overt examples of time wasting by footballers:

    • Running out the clock – Running out the clock is a form of clock (mis)-management which is employed by American football players in the NFL.  Teams on the offense which are also leading on the scoreboard will plan their play strategy with minimal risk in order to run the time from the clock and avoid the potential of losing possession or having the ball go out of bounds.  Basic rushing plays down the middle of the field or multiple quarterback knees are often used as teams trade the chance of additional scoring for relative security as the remaining time in the game drains away.  Here’s an example from 2016 of players deliberately holding the other team’s defenders in bear-hugs in order to run out the clock (notice all the flags on the play):

  • Equipment cheating – Equipment cheating is a ubiquitous risk across many different sports, in any situation where the condition of accessories used by the players can be doctored or falsified.  In baseball or cricket, bats can be “corked” – filled with an artificial material to make them lighter and easier to hit a ball farther with them.  In tennis, rackets can be strung illegally.  In golf, players can use clubs which violate weight and size regulation.  In cycling, bikes can be altered so that they perform and operate unnaturally in comparison with normal equipment.  This can be referred to as “technological doping” – a threat to the integrity of the sport which comes not from illegal performance enhancing-drugs, but in fact from performance enhancing-equipment that has been fraudulently adjusted.  Check out this article on “technology doping” in cycling from 2016:  What’s Next for Sport After Cycling’s Technology Doping Shame?

Check back next week, Wednesday February 28, for the second post in this series of five, which will discuss the ethics of tanking, such as the Philadelphia 76ers and “trust the process” and the Astros tanking strategy for World Series contention.


Ben & Jerry’s CSR origins

Corporate culture is most effective when it Is part of the organization’s origins. Compliance by force can never be fully effective at risk control or influencing corporate values. While organizations can and should always be looking to improve their standards and frameworks for compliance risk management, the most successful compliance programs will be rooted in the native culture of the company. For this reason thinking of compliance fundamentals from the beginning (such as described in this post or this post about start-ups, this post about founder-led business, or this post about small businesses) wherever possible gives the greatest chance of imbedding an authentic and engaging culture of compliance.

The above is especially true from a corporate social responsibility (CSR) perspective. CSR values adopted purely and un-authentically, just for competitive advantage or public relations attention, will not be convincing to all consumers or stakeholders, and therefore will not be sustainable. Companies that have some relation to or interest in political issues or social justice should recognize this early and often and incorporate activism and engagement into their company mission statements and values.


Tony’s Chocolonely and a Roadmap for CSR principles

The chocolate business has long been plagued with associations with slavery and child labor. In the countries where manufacturers buy their cocoa beans, trading companies and farmers traditionally have engaged in exploitative and unfair business practices both between each other and in employing the work of slaves, many of them children. Chocolatiers have even claimed that producing chocolate without the use of slave labor at some point in the supply chain, however remote, is impossible to prove or accomplish. Instead, the industry has focused on shifting risk or responsibility for the use of slave labor or abusive trade partnerships by moving these decisions and relationships to third parties and offering ignorance or lack of control as a defense.

Tony’s Chocolonely, a Dutch confectionary company, offers an intriguing alternative to and challenge within this market. The eponymous Tony is actually Teun van de Keuken, a Dutch investigative reporter. In 2002, van de Keuken was working on a project about chocolate manufacturers. He determined that none of the manufacturers he studied that had signed the 2001 Harkin-Engel (aka Cocoa) Protocol, an international agreement intended to end child and forced labor in chocolate production, were in full compliance with the protocol’s requirements. Therefore, all the chocolate for sale by those candy companies (including Hershey’s, M&M Mars, Nestle, and Guittard) was, in van de Keuken’s view, an illegally-manufactured product.


Business compliance wish list for cryptocurrencies

One of the hottest topics of 2017 was cryptocurrencies.  The blockchain-derived digital currencies such as Bitcoin, Ethereum, and Ripple were the subject of seemingly endless interest and speculation, in both the media and the markets.  In an excitement reminiscent to many of the dot-com boom, cryptocurrency companies rushed to become issuers via initial coin offerings (ICOs).  Companies that were previously unrelated to blockchain or any product of the technology changed their names or indeed their entire operational purposes to attract market interest.  Investors searched for information and guidance, experimented with the digital currency as both a payment service and a securities holding, and filled social media and dinner table conversation with curiosity and enthusiasm for the disruptive potential cryptocurrencies hold for banking, technology, and the markets.


Inexperienced CEOs and immature compliance cultures

It is never too early, or too burdensome, to create a fundamental business compliance program.  Small businesses, new businesses, and experimental businesses can all benefit tremendously from the foundation and organizational structure that a basic risk control framework can bring.  A disruptive or innovative company does not have to eschew everything about traditional business in favor of transformative and novel ways of working.  It is fair that some strategies or philosophies may be seen as staid or unlikely to keep pace with the competitive and development pressures these businesses face.  However, the common sense responsibility (values-based) and implementation of legal and regulatory guidelines (rules-based) impact of a corporate compliance culture encourages and supports business sustainability.

All too often, however, start-up companies lack this structural backbone.  They do not have adequate policies and procedures in place, are unable to cope with the employee and supervisory demands that emerge in their workplaces and marketplaces, and grow into business practices without the controls framework and governance, risk management, and compliance structures that they find they need.  Most concerningly of all, with their attention span devoted to survival and then growth, these companies find themselves without genuine and integrity-supporting corporate cultures, and attempts to impose them over the top of the existing environment are artificial and difficult.

This challenge becomes only stronger when the company without a confident hold on compliance and ethics building blocks is dominated by a founder or CEO who is,  him or herself, on unproven ground.  Inexperienced CEOs may have amazing, ground-breaking ideas and new ways to develop and market them, but if they are not effective as either leaders or managers, then they may fall into leaning on personality ethic.  These are the leaders whose individual credibility and identities dominate every aspect of their business, to investors, colleagues, employees, customers, and the public in general.

Without a prevailing independent corporate culture that relies on a collective character ethic and mature organizational integrity, these situations do not make for long-term viable business strategies.  Instead, these companies all too often slip into misconduct, fraudulent practices, and an overall culture of non-compliance.   Risk from regulatory non-adherence, corner-cutting in basic business operational requirements, and other malfeasance is not controlled by the appropriate and thoughtful defense strategies that a compliance program could create, implement, and monitor.

There are a number of examples of companies which grew impressively and then suffered due to insufficient leadership or immature management.  In each case these businesses are known for a prominent figurehead whose personality attracted the press and the public and whose ideas were exciting to the markets and enticing to investors.  However, legal and regulatory inadequacies of these businesses and their cultures have hobbled these companies’ lasting ascent:

  • Apple – Steve Jobs – The ouster of Steve Jobs at the company he created, Apple, led by the mentor he brought on to guide him to the next level as CEO, John Sculley, is the stuff of Silicon Valley legend. While this often seen as an epic example of corporate disloyalty and executive board politics, the more powerful lesson here is for business values and sustainable practices.  At the time Jobs was fired from his own company, emotional intelligence, inner success, and business mission statements were not part of the popular parlance.  Perhaps if they had been, Sculley and Jobs wouldn’t have found themselves permanently estranged: Former Apple CEO John Sculley admits Steve Jobs never forgave him, and he never repaired their friendship, before Jobs died
  • Nasty Gal – Sophia Amoruso: The retail entrepreneur and self-proclaimed “girl boss” may beg to differ with her inclusion in this list, but Sophia Amoruso is a classic example of personality ethic over character ethic.  Amoruso developed a company in her own image, and then turned her image into a personal brand that both transcended and hindered Nasty Gal.  Amoruso is a polarizing personality, and the whimsical approach she embraced in her life may be great for a career as a motivational speaker and writer where people who need inspiration can take a few tips from her for self-development.  However, a business that succeeded due to Amoruso’s successes was also vulnerable to fail due to her failures, without its own corporate identity and developed business culture, and this led to the ultimate undoing of her brand (to be rescued by a larger corporate entity, away from Amoruso’s control), rather than its longevity:  What Comes After Scandal and Scathing Reviews? Sophia Amoruso Is Finding Out
  • Uber – Travis Kalanick – Travis Kalanick’s tenure at Uber started in idolatry around the industry, when everyone with an idea for app wanted to imitate and one-up his path to success. Starting in 2016, however, cracks in the pedestal Kalanick was up on began to show.  Once his public relations woes began, they never ended, even after he was ousted as CEO of Uber for countless issues with the company’s corporate culture for employees, regulatory adherence in critical markets, and legal risks.  All of these problems came out in a powerful confluence at least in part because Uber’s quick rise to the top was enabled by non-compliance via omission at its origins:  Uber Scandal Timeline: Why Did CEO Travis Kalanick Resign? 
  • Thinx – Miki Agrawal – Check out this post for a comprehensive take on the inappropriate conduct modelling of Miki Agrawal and the destructive impact it had on corporate culture at her innovative female hygiene apparel company, Thinx.
  • Theranos – Elizabeth Holmes – Check out this post for a look at the cult of personality created by Elizabeth Holmes at the blood-testing device company Theranos, and the fraudulent business practices and misrepresentations that were enabled by it.
  • Tinder – Sean Rad – Check out this post for a detailed discussion of the emotional un-intelligence that dominated the start-up culture of Tinder due to the influence of its CEO, Sean Rad, and the absence of a burgeoning compliance program to match the booming dating app business.

For an interesting counterpoint, check out the post on Eric Schmidt at Google:  Google is not without its corporate culture challenges, particularly as shown in 2017 by the loud public discussion over diversity and engagement in its ranks and the company’s clumsy and performative handling of this bad publicity.  However, Google has often portrayed Eric Schmidt at the grown-up in the room, not to prevent or obstruct innovation and success, but to steward and support these efforts while still taking care of the underlying business operations must-haves.  Check out this Wired article on how this management structure enabled Google’s development into one of the major digital companies in the world:  At Google, Eric Schmidt Wrote the Book on Adult Supervision

For similar discussions to this one, check out this post on essential compliance tips for small businesses, and this post on challenges faced by start-ups in Silicon Valley and other disruptive industries.