Compliance and social media influencers

Influencer marketing has become a major trend in the advertising industry with the increasing dominance of social media and blog networks in the media landscape. With influencer marketing, brands and their advertising agencies identify the individuals to whom certain demographic groups look to for suggestions on trends or products and services to purchase. These individuals, referred to as “influencers,” then share or produce editorial content for their followers (the people who like or connect to them on social media networks) or engage in the brand’s marketing activities.

Through these sorts of campaigns, both the brands and the influencers hope to gain a non-traditional advantage in appealing to a wider audience. From the brand perspective, they get creative and incredibly targeted content that is produced on a bespoke basis for very specific consumers who are already engaged and interested in the channel through which the content is shared. Through the detailed metrics that are abundantly available via social media and blogs, advertisers can determine which campaigns were successful in spurring either interest or actual sales. From the influencer perspective, they get opportunities to generate paid content and engage with their followers and fans in a novel way. Relationships with brands can be very lucrative for influencers, especially if they become long-term, and can drive significant, much-desired traffic for blogs and social media posts that brings attention to other content the influencer has to offer.

From the above, it is evident that along with all the opportunity comes a complex set of interests which may end up in conflict or give rise to concerns about business practices and accuracy of representations and disclosures. For influencers in particular, blurring the line between the position a follower or a fan, which is even on some networks referred to colloquially as a “friend,” and the position of a customer or a referral, complicates an informal relationship where few duties are owed. Instead, these interactions can occasionally be viewed as a commercial relationship where much more responsibility exists and can be potentially breached.

  • In the United States, the Federal Trade Commission (FTC) is one of those regulators who is contemplating stronger restraints in the practices of influencer marketing. The main area of the FTC’s concern centers on disclosure of the relationships between brands and blogger influencers. Without full, clear disclosures, consumers cannot make reliable, informed choices about purchases they may be influenced to make due to influencer marketing content. The FTC hopes to protect customers from being misled or ripped off entirely by influencer marketing that is targeted to them without providing them with the necessary disclosures for them to make ethical and financially-wise decisions. The FTC has already informed influencers and advertisers that disclosure of relationships between them must be “clear and conspicuous,” with posts that paid promotions clearly indicated as such so that they are not lost within the influencer’s unpaid content that engaging with would not lead to a directly-linked commercial interaction. These regulations have been around for some time, but the extra enthusiasm for enforcing them protectively will have a much bigger impact on the market going forward: Regulating influencers: What retailers need to know about the regulatory crackdown
  • The SEC also has influencer marketing on its regulatory enforcement docket. This is an interesting clash of social media advertising etiquette and investor protection priorities. Companies offering trading of cryptocurrencies have begun to rely on celebrities for endorsements. Much of influencer marketing is done in “testimonial” style, so this medium lends well to a celebrity sharing his or her preferences with thousands or millions of followers. When that preference is for a cryptocurrency investment, however, the endorsement may run afoul of proper disclosure expectations. These regulatory expectations for cryptocurrencies are still evolving, as the market for initial coin offerings (ICOs) is in its infancy still and nearly everything that happens with cryptocurrencies is new, with its impact on banking, the markets, and investors unproven as of yet. Central banks and regulators have taken wildly different approaches in different countries to handling demand for and developments in cryptocurrencies. In the US, this approach has been cautious and restrained, but one area in which the supervisors have not been quiet has been to protect potential investors from advertisements without appropriate disclosures: SEC warns celebrities over endorsing ICOs without proper disclosure
  • Brands and influencers aren’t the only ones who may need to meet a higher disclosure standard when it comes to advertisements that aren’t immediately identifiable as such. Hidden marketing on social media sites as just as insidious as the political advertising that has received so much attention in the press recently. As Congress pushes social media platforms like Facebook to make clearer disclosures about and take more monitoring and control responsibility for the advertisements that appear on their sites, the need to build in protections against deceptive actions by marketers and their partners is urgent as well: It’s not just Facebook’s Russian ads: Hidden advertising is pervasive and growing
  • Social media compliance enforcement will be a major priority for the FTC in this regulatory environment. It should be expected that even within regulatory rollbacks in other areas, the FTC will continue to pay attention to possible non-compliant social media posts and advertisers and their related influencers could be subject to formal enforcement actions. Compared to some other industries like banking or pharmaceuticals, advertising agencies are subject to a relatively sparse supervisory agenda. This light regulatory touch may change dramatically if the FTC chooses to extend and entrench investigation and enforcement efforts on influencer marketing. This is worrying for the influencers as well, who are even less likely than advertising agencies or marketing divisions of brands to have fully-formed compliance programs and to be ready to have the record-keeping and other regulatory controls they may need in place and up to speed: How to Comply with FTC Social Media ‘Influencer’ Rules
  • For more on influencer marketing and the way that brands, advertisers, and influencers may use it to spread content in the future, check out this 2018 forecast for possible trends in the practice, which will in turn dictate the ensuing regulatory priorities, from Forbes: The Influencer Marketing Trends That Will Dominate 2018

Given these potential developments and risks, it is definitely not premature to direct appropriate and pro-active compliance attention to the cultivation and use of influencer marketing networks. Regulatory and supervisory entities are already starting to consider cracking down on various marketing activities in this sphere, and enforcement of disclosure and reporting standards will become robust and should be aided by proper control frameworks.

 

Compliance and MLMs

Although multi-level marketing companies (MLMs) have been selling products and services via “distributor” networks for years, they have shot to prominence in the aftermath of the 2008 global financial crisis. In reaction to long-term unemployment or under-employment and systemic, structural changes to the labor market in many communities, non-traditional workforces such as the non-employee, commission-only participants in MLMs have become more common than ever before in the United States.

MLMs all determine their own compensation scheme and marketing and recruitment strategies, but they do share some similarities with the way they brand themselves and communicate. They operate in diverse industries, from nutrition and fitness/wellness to fashion apparel to jewelry to housewares, but they all are organized around a pyramid-shape commission system, where participants at the top recruit and make residual income from the participants below them on a sliding scale. These business also all rely heavily on worth of mouth marketing, both to sell the products or services on offer as well as to recruit new participants to fill out the levels of the pyramid.

Because of this operation style, MLM participants are expected to promote the products and the company itself very eagerly, often expressing the financial freedom and flexibility that the non-traditional working arrangement has granted them in unstable times and portraying the MLM company as a self-employment or entrepreneurship opportunity. These portrayals are particularly effective with the aid of social media and are prevalent in communities where social connection and employment consistency may be hard to achieve and sustain, such as stay-at-home parents, military spouses, or people who need to work from home for medical or personal reasons.

While some MLMs certainly do offer popular products and present an opportunity for participants to earn at least some income, studies have shown that most participants make no money from their involvement or even lose money due to sunken costs of inventory and personal products they buy and do not or cannot sell. Questions are rampant as to whether many MLMs are pyramid schemes, scams that purport to sell products or services but really just recruit members in order for them to recruit other members.   These schemes are often illegal and seen by many as immoral due to the misleading or even fraudulent representations made to participants to get them to spend money, join, and continue making investments.

  • As noted above, one root cause of the popularity of MLMs in the current economy is the struggle of many communities for economic opportunity post-financial crisis. Rural communities, for example, were especially hard-hit by the crisis and have not experienced a fully-realized economic recovery in the following years. To these individuals, joining an MLM appeals because it promises freedom for family time, quick income, and an “American dream” lifestyle that is otherwise far out of reach. This version of the MLM business model is laser-targeted to women in these rural areas who did not work before the financial crisis or don’t work now and seek economic freedom and community, as well as the allure of fun products such as nail decals or whimsically patterned leggings. These companies hawk a message of women’s empowerment and female entrepreneurialism matched with a do-it-yourself dream of financial success. Unfortunately, many of these people enter into these businesses by getting into debt and are never able to recoup their initial investment let alone make money for it that could justify the effort and hours spent. Most disconcertingly, many of the participants enter without any risk disclosure from the MLM company:  Multilevel-marketing companies like LuLaRoe are forcing people into debt and psychological crisis
  • This New Yorker piece goes into greater detail about the ways that MLMs play up the aspirational nature of their branding to recruit participants who join unaware of the attendant possible risks. In this case, companies such as DoTerra market aromatic oils to which all kinds of medicinal properties are ascribed without any regulatory or legal legitimacy to reinforce this. Participants in these MLMs often claim that their suffering from psychology, physical, and other medical problems have been almost miraculously addressed by using the products they are selling. The companies operate in a gray area of not giving medical advice but nonetheless suggesting that the products can help with health or lifestyle problems, creating an echo chamber where customers and participants assure themselves that they are both sick and able to be cured by buying expensive essential oils and other homeopathic, non-regulated products: How Essential Oils Became the Cure for Our Age of Anxiety 
  • Here’s yet another perspective on how female participants have been manipulated through MLM company marketing and social media to stake their financial well-being on unattainable goals of personal enfranchisement and economic success. In their efforts to reach toward these goals, participants often find themselves instead in over their heads, without proper training or sufficient expertise selling products that are not regulated, effective, or sometimes even safe:  How Women Making Men Rich Has Been Misbranded As Feminism
  • MLM participants aren’t only at danger of fraud, misrepresentation, and other risks from the companies for which they are sellers. In a commercial market run by independent sellers and conducted via person to person sales, often online and even on social media, sellers are vulnerable to disputes with customers. Buyers can be fraudulent or even predatory and sellers often find themselves out on both the product and their money. MLMs such as LuLaRoe often do not step in to intervene on behalf of their representatives, who have a consultancy relationship with the company and therefore are not afforded the same protections as employees might be. The style of selling is overwhelmingly casual, social marketing conducted via comments on pictures on social media or at parties, making direct salespeople especially susceptible to scammers:  Do MLMs Protect Their Online Sellers From Fraud?
  • Since 2012, hedge fund manager Bill Ackman has been embroiled in an ongoing dispute with Herbalife. Ackman has spent years shorting Herbalife in hopes that its stock price will be driven to zero by public and regulatory identification of the company of a pyramid scheme. Due at least in part to the publicity generated by Ackman and likeminded individuals, in 2016 Herbalife settled with the Federal Trade Commission to resolve their charges that the company had made deceptive disclosures to distributors who lost money. As part of the FTC settlement, Herbalife agreed to provide evidence that its products are being sold to actual customers and not just participants within the pyramid who are funding their own involvement and keeping the façade going to recruit new people underneath them. The standard this settlement sets for the MLM industry, should the FTC keep pace with investigation and enforcement priorities in this, could greatly complicate the way these companies operate: Herbalife Deal Poses Challenges For The Industry

To find out more about MLMs, how they have become so ubiquitous in today’s employment market, and the risks they pose to participants and the economy in general, check out the great piece from a 2016 episode of Last Week Tonight with John Oliver.

Profiles of ethical leadership in sports coaching: Gregg Popovich

This is the fifth and final post in a month-long series profiling acclaimed sports coaches for their ethical leadership abilities. John Wooden, famed UCLA basketball coach, and his Pyramid of Success were the subject of the first post. The second post was about Johan Cruyff, world-famous Dutch footballer and international club manager, and the ethical leadership lessons of his 14 Rules. The third profile discussed Jim Valvano and his views about leadership and success as expressed in lines from his famous 1993 ESPY Awards speech. Last week’s post focused on Vince Lombardi, the NFL Hall of Fame coach, and values for ethical leaders from his famous motivational speeches.

Finally, today’s post will be about Gregg Popovich, an NBA coach who heads up the San Antonio Spurs and is well-known for his progressive and pro-active values, which often manifest in very public and political statements.

Before becoming an NBA coach, Gregg Popovich attended the United States Air Force Academy where he played basketball and majored in Soviet Studies. He served in the Air Force for five years before returning to the Academy to coach basketball there, followed by a stint as head coach at Division III Pomona-Pitzer and then assistant coach jobs in the NBA for the San Antonio Spurs and Golden State Warriors, before returning to take a general manager job with the Spurs in 1994.

Popovich is widely considered one of the most accomplished coaches in NBA history. He has been the coach of the San Antonio Spurs since 1996, making him the longest tenured active coach in not only the NBA but in all US major sports leagues. The competitive successes of the San Antonio Spurs under his stewardship are many – 20 consecutive winning seasons, five NBA championships, and more than 1,000 games won.

However, Popovich’s legacy as a winning basketball coach may be matched by his legacy as an outspoken and consistent leader on social justice issues – both in society as a whole and on the direct scale among his players. Popovich consistently uses his very visible platform to speak about inclusion, engagement, and accountability.

  • This 2007 profile of Popovich from Canada’s National Post hints at the values Popovich brings to his overall coaching vision. The profile notes that Popovich’s media profile was, at that time, lower than some other great coaches because he was not interested in self-promotion, nor did he have a singular “vision” for the team that was well-suited for branding and publicity purposes. Instead, he focused on building “strong, complicated” relationships with his players and emphasizing worldly knowledge and overall excellence alongside basketball fundamentals. This profile is especially interesting for the quote at its end, which at that time was posted in the hallway by the Spurs locker room, translated into the various languages the players on the team spoke: “When nothing seems to help, I go look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred-andfirst blow it will split in two and I know it was not that blow that did it but all that had gone before.” This view of success can only be espoused by a leader who sees the values and efforts of the organization as inseparable from those of the individual. This is a powerful and indeed empowering perspective on management as an activity and skill which serves the collective of the organization as well as each individual within it:  Popovich is a man of mystery
  • This 2013 round-up on Popovich centers on his interesting and complex personality and background, intended to fascinate basketball and sports fans. In most cases, these traits and experiences translate directly to his ethical leadership qualities as well, and the root is in Popovich’s personalized and compassionate approach to coaching individuals rather than just constructing offenses, defences, and plays in a vacuum. When he was general manager of the Spurs and the head coach wasn’t getting the job done, Popovich stepped up and put himself on the line, eventually hiring himself as head coach. He took tough decisions and made himself responsible for them, a behavior that embodies ethical leadership: An Ode to Gregg Popovich, the Most Interesting Man in the NBA
  • In 2014, Fortune included Popovich in its “The World’s 50 Greatest Leaders” feature. In this view, Popovich, portrayed as curmudgeonly and stoic, distinguishes his leadership by enabling his whole team, from the bench players to the superstars, to excel and achieve. His no-nonsense style focuses on character ethic, not personality ethic, which is the central value for promoting and sustaining individual integrity to then scale across the organization. Popovich’s leadership is special in this view because it is so relationship-focused, giving his players incentive to seek individual inner success, not just to please a coach or beat an opponent in a one-off, unsustainable fashion: Another victory for ‘Pop.’ Another show of leadership
  • Business Insider ran a 2016 piece on Popovich which again centered on his relationship-focused, individual-valuing coaching philosophy. His perspectives on rebounding from failure, organizational governance, and player development all fit within the broad strokes of ethical leadership. In particular, Popovich emphasizes that motivating players and resolving conflict is best accomplished through honesty and personal accountability. These is fundamental perspective for encouraging organizational and individual (employee, player, or otherwise) integrity. Again, character ethic is the most important, and this enables open communication and feed-forward development and problem-solving:  Gregg Popovich has a brilliant philosophy on handling players, and it exemplifies the Spurs’ unprecedented run of success
  • From 2017, this ESPN piece focuses on Popovich’s political engagement and public opposition to what he sees as immoral political behavior. However, the rationale for why Popovich feels so strongly about this and indeed why he feels that he has an ethical imperative to speak out loudly about it is very illustrative of his leadership views. The article shares an anecdote about a time that Popovich began a high-stakes film session by sharing his knowledge on a historical topic of personal importance to one of his players. Popovich creates an environment of inclusion on his team by making what is different between them, important and meaningful to all of them, by translating these lessons into leadership messages for all. This empathetic approach to leadership is an ultimate expression of integrity and engagement, two imperative ethical qualities in management. For the Spurs, recruiting based on diversity and then using that diversity as motivation leads to both market competition as well as organizational cohesion:  Why President Trump ignites Gregg Popovich

Hopefully this series of posts about sports coaches as ethical leaders has been entertaining and informative, lending a new perspective to management values in a different venue than the traditional corporate compliance environment. The concepts of inner success, character ethic, personal accountability, and purpose-driven life and work are all commonly endorsed by these ethical leaders as they guide their teams, which are major organizations in and of themselves, to competitive achievements with meaningful, sustainable motivations behind them.

Profiles of ethical leadership in sports coaching: Vince Lombardi

This is the fourth post in a month-long series of five that profile well-known sports coaches as examples of ethical leadership. The first post was about John Wooden and the Pyramid of Success he created while coaching basketball at UCLA. Johan Cruyff, legendary Dutch football player and manager, and the 14 Rules that are displayed at the fields that bear his name worldwide was the subject of the second post. Last Wednesday’s profile was of Jim Valvano, featuring an analysis on his views about leadership and success as featured in lines from his famous 1993 ESPY Awards speech. Today’s post focuses on Vince Lombardi, the NFL Hall of Fame coach, and his views on ethical leadership as expressed by his motivational speeches to his players and the public.

Vince Lombardi was a football player and coach who achieved great success over his 15 years working in the NFL before his death from cancer in 1970. Many critics consider Lombardi to have been one of the greatest coaches in the history of football, and this opinion was borne out in the records of the teams he coached and the accolades he received during his career. His tenure at the Green Bay Packers produced five NFL championships in the seven years from 1961-1967. He was elevated to the Pro Football Hall of Fame in 1971 and the NFL Super Bowl trophy was named in his honor. He has been admired and revered by many professional coaches, including the subject of last week’s ethical leadership profile, Jim Valvano. Therefore the effect of his powerful leadership style which will be explored below has been a legacy which has far outlived his own career.

Lombardi is known to have been a powerful, inspiring, and complex individual as a coach. He was known for his fiery, loud temper and authoritarian ways as much as he was for his insistence upon fairness and unconditional respect for the members of his football organizations. He demanded much from his players and in return was passionately devoted to them both as teams and as individuals. He would punish or call out players who did not meet his standards for effort or commitment, but also sought to actively recognize dedication and perseverance, which he upheld as critical values for success and achievement. He was devoutly religious yet open-eyed to prejudice and discrimination, which he strove to oppose with zero tolerance, and he was notable for his largely liberal beliefs.

Following the premature end of his life in 1970, Lombardi has been revered by football’s institutions, fans of the teams he coached, and people in the communities he impacted, especially in Wisconsin, New Jersey, and New York. Plays, movies, and books have been written about his influence as a coach and leader. Lombardi’s enduring legacy has been inspiring statements from speeches he made to players and other motivational comments attributed to him. Collections of these have been published and studied both by people working in sports and by others in all walks of life.

Of course, many of these statements are relevant not just to a football team preparing for a game or a coach seeking to motivate his players, but to life in general, and to a compliance professional interested with inspiring leadership ethics in specific. In this theme, here are five famous quotes by Lombardi, annotated with tips for how to apply these sentiments in defining compliance values for individuals and organizations:

  1. “Morally, the life of the organization must be of exemplary nature. This is one phase where the organization must not have criticism.”– Moral compromise cannot be a consequence of desire for success. Core values of an organization should be sacrosanct and not up for debate or critique which is focused toward diminishing or subjugating them to commercial or external pressures.
  2. “Success demands singleness of purpose.” – As discussed in last week’s profile of Valvano, individuals who drive toward goals with a defined and committed purpose, rather than a base desire for external recognition, are best prepared for true internal achievement that is sustainable and meaningful. Ethical decision-making requires this purpose-driven approach; commitment to values is certainly deserving of that singleness.
  3. “To be successful, a man must exert an effective influence upon his brothers and upon his associates, and the degree in which he accomplished this depends on the personality of the man.” – It is not just coaches who can inspire and elevate others with their examples. All individuals must have personal accountability for their moral codes and must strive to make ethical and compliant decisions. People must recognize the huge impact that their behavior has on those around them and commit to using this influence for the collective good. No person is an island in a culture of compliance. All levels must be engaged – tone at the top, mood in the middle, buzz at the bottom – and individuals must view their own reputations and relationships with others as important extensions of the values of the organization’s compliance program.
  4. “Watch your thoughts, they become your beliefs. Watch your beliefs, they become your words. Watch your words, they become your actions. Watch your actions, they become your habits. Watch your habits, they become your character.” – In a context where the organizational heuristics lean toward values-based and purpose-driven, individual ethics have a huge impact toward defining broad frameworks for making choices and defining strategy. Unethical decisions and misconduct often originate from environments where employees are isolated from the impact of their actions or where personal consequences are remote and not relatable.
  5. “A leader must identify himself within the group, must back up the group, even at the risk of displeasing superiors. He must believe that the group wants from him a sense of approval. If this feeling prevails, production, discipline, morale will be high, and in return, you can demand the cooperation to promote the goals of the community.” – Awareness and acceptance of personal accountability and consistent articulation of values and rules are critical for imbedding a culture of compliance. For that culture to succeed, leadership must speak up and out, and encourage others to safely and productively do the same. If individuals feel that their leaders espouse values, expect them to embrace those values, and provide a prevailing environment where both really matter, then the culture of compliance will be authentic and enduring.

For more powerful quotes from Lombardi on leadership and inner success, many of which are inspiring from an ethical perspective, check out the official website maintained in his name.

Also, don’t miss the final post in this series, next Wednesday, which will profile Gregg Popovich, who is the current coach of the San Antonio Spurs and is widely admired for his views on inclusion, political engagement, and personal accountability.

Profiles of ethical leadership in sports coaching: Jim Valvano

This is the third in a month-long series of five posts that analyze the ethical leadership of famous sports coaches. The first post was about John Wooden, the beloved UCLA basketball coach and creator of the Pyramid of Success. Last Wednesday’s post focused on Johan Cruyff, the acclaimed Dutch footballer and manager of Ajax, Barcelona, and Catalonia football clubs, and his 14 Rules. Today’s profile will be about Jim Valvano’s perspective on leadership and success as expressed in the famous speech he gave at the ESPY Awards in 1993.

Jim Valvano was a NCAA basketball coach for 19 years, ten of those seasons at North Carolina State. He coached his teams at NC State to many winning seasons, including two tournament championships and two regular season championships, and for several years also served as athletic director there. He was also no stranger to controversy during this time, due to accusations of rules violations involving his players’ academic qualifications and financial activities, which led to substantial administrative pressure, scrutiny, and a variety of investigations. Though these numerous investigations revealed no outright major violations in recruiting or financial practices, Valvano ultimately resigned as athletic director in 1989 and in 1990, negotiated a settlement and resigned as basketball coach as well.

Following this somewhat ignoble end to his coaching career, Valvano worked as a broadcaster and became a motivational speaker. His speeches sometimes covered his version of the controversy at NC State or offered commentary to his audiences on how to handle and get over these unfortunate events and the character and reputational damage they present. This is not an unusual path for high-profile people to take after finding themselves in crises of confidence. Practical ethics are complex and transgressions in these professional dilemmas can lead a person to a moral reckoning and awakening of the true values that matter in life and how to embrace them authentically.

Valvano’s enduring legacy is a speech he made in this exact spirit at the first ESPY Awards in 1993. He was accepting the Arthur Ashe Courage and Humanitarian Award and at this time was in the throes of the glandular cancer which would take his life less than two months later. After announcing his intention to create an charitable foundation dedicated to finding the cure for cancer, he went on to speak emotionally and eloquently about individual success and his views on what made life worthwhile. This powerful perspective on purpose-driven living relied heavily on a definition of true success as inner and personal, not dictated by accolades from others or black-and-white “wins,” but rather a personal sense of accomplishment and completion that required no external justification.

This concept of internal success is important in an understanding of applied ethics and translates powerfully to a vision for individual accountability in a culture of compliance. In this theme, here are five significant statements from Valvano’s legendary speech, with suggestions for how to interpret these powerful insights for individual and organizational values to promote ethics and compliance:

  1. “To me there are three things we should all do every day. We should do this every day of our lives. Number one is laugh… Number two is think… And number three is, you should have your emotions moved to tears, could be happiness or joy… You do that seven days a week, you’re going to have something special.” – A balanced life is a sustainable one. This way, the pleasure of the highs will be memorable, the pain of the lows will fade, and the middle will be where the lessons from both come together for a lasting effect. As Johan Cruyff’s “Total Football” showed in last week’s profile, the only practical approach to life or business is a holistic one, with all factors and outcomes taken into fair contemplation. An even keel is a long-lasting perspective.
  2. “I always have to think about what’s important in life to me… Where you started; where you are; and where you’re going to be. Those are the three things that I try and do every day.” – This expresses a perspective on success that is grounded, measured, and reasonable. Success may be a line, or an arc, or a constellation of peaks and valleys, but the present must always maintain an attachment to the origin as well as to the ambition. This perspective can both humble and motivate individuals and organizations to consider, and be true to, their values.
  3. “It’s so important to know where you are. And I know where I am right now. How do you go from where you are to where you want to be? … I think you have to have an enthusiasm for life. You have to have a dream, a goal. And you have to be willing to work for it.” – Success is equal parts planning and effort. In life as well as in business, if you don’t work for it, it’s not worth having and might not be possible to keep. Professionals should be passionate about and engaged the work that they do and the reasons for which they do it – not a paycheck or external recognition, but as Valvano says, enthusiasm, vision, and commitment. Ethical decision-making is only possible if individuals are purpose-driven and accordingly, so long as they hold themselves accountable to that purpose.
  4. “I urge all of you… to be enthusiastic every day… to keep your dreams alive in spite of problems whatever you have. The ability to be able to work hard for your dreams to come true, to become a reality.” – Adversity is always a great challenge to character ethic. Be it accusations of wrongdoing, confrontation with personal moral failures, opposition and criticism, doubt and uncertainty, or even physical illness and disease, resilience and perseverance are the only remedy. Continuing commitment to core values, even when feeding forward input or external changes and making adjustments is necessary, as is appreciation of the work and effort required to reach goals. With this in mind, genuine inner success is achievable.
  5. “Cancer can take away all my physical ability. It cannot touch my mind; it cannot touch my heart; and it cannot touch my soul. And those three things are going to carry on forever.” – The closing and perhaps most famous and poignant lines of Valvano’s speech, the lesson from Valvano’s conviction to endure despite his illness and physical diminishment is universal to all human endeavors. Dignity, legacy, and respect are not circumstantial and cannot be taken from a person unless freely compromised. This goes to the heart of personal ethics and morality – a person’s own register of right and wrong, internal governor and code should be untouchable and can be relied upon in even the darkest and most uncertain times.

For Valvano’s powerful 1993 ESPY speech, watch it here:

Don’t forget to check back for next Wednesday’s post, which will be about Vince Lombardi, the NFL Hall of Fame coach (and the role model of Jim Valvano, as it happens), and clues about how he saw ethical leadership based on famous statements from his statements to players and motivational speeches. The final post in this series, on November 29, will profile Gregg Popovich, the current coach of the San Antonio Spurs with a progressive view toward people management of his players and political engagement as an expression of leadership.

Profiles of ethical leadership in sports coaching: Johan Cruyff

This is the second in a month-long series of five posts that discuss successful sports coaches in terms of their ethical leadership qualities. Last Wednesday’s post was about John Wooden, the visionary UCLA basketball coach. Today’s post will focus on Johan Cruyff, the acclaimed Dutch footballer and manager of Ajax, Barcelona, and Catalonia football clubs. Next week, the profile will be about Jim Valvano’s leadership ethic as expressed in the famous speech he gave at the ESPY Awards in 1993, two mere months before he died of cancer. On November 22, the post will be about Vince Lombardi, the NFL Hall of Fame coach, and clues about how he saw ethical leadership based on some of his most famous public statements. The fifth post in this series, on November 29, will study Gregg Popovich, a current NBA coach with a progressive view toward developing his team as both players and people.

Johan Cruyff is widely thought of as one of the greatest football players of all time, having won the Ballon d’Or three times and playing many extremely successful seasons for Ajax (1964-1973) and Barcelona (1973-1978) in club play and the Netherlands (1966-1977) in international play. Cruyff is equally regarded for his impressive achievements as a club manager. His innovations while at the helm of Ajax and Barcelona football clubs laid the generational foundations of coaching philosophy that continue to shape the directions of those teams and their youth academies, as well as those of many others.

To learn more about Cruyff’s life and accomplishments as a player, read this profile from The Guardian published after his death in March 2016.

Cruyff, regarded by many as a technically perfect football player, was able to devote his energy to creative organizational strategies to make the game more cooperative and dynamic. From his perspective, technique went far beyond fundamentals of football that could be learned from rote practice of drills. Rather, real playing ability came from having a fluency and versatility with the game that allowed players to connect to one another and work in an instinctive and flexible system together on the pitch.

Cruyff also receives special mention for his approach to the game that emphasized morality via simplicity of play. While regarding football as a beautiful game, this was not merely based on entertainment value or competitive stakes that might be exciting, but also on efficiency and mental strategy, where the mind’s plan facilitates the body’s actions. This is a powerful consciousness that elevates a deeper existential, internal success over the fleeting external recognition of a win-lose result that was not achieved by a personal commitment to greatness via integrity and discipline.

Cruyff’s strong values toward the game and life are most poignantly embodied in his “14 rules,” which are displayed in each of 200 Cruyff Courts set up in countries all over the world for children to use freely to play football together.   These 14 basic rules are fundamental for all players in football match to follow, but they also provide a guiding philosophy for a values-based approach to life. Applying these as both personal and business management principles allows an individual to seek inner satisfaction and success via connections to and cooperation with others, personal accountability, authenticity, and informed ambition.

Cruyff’s 14 rules, annotated with suggestions for their application to corporate cultural principles in interests of promoting organizational and employee integrity, are as follows:

  1. Team player – To accomplish things, you have to do them together. – True success is achieved by focusing on collaboration and cooperation, not making isolated decisions in disconnected processes.
  2. Responsibility Take care of things as if they were your own. – Individual ownership of risks and recognition of each person’s role in their management is fundamental to any defense strategy as well as necessary for a genuine culture of compliance at all organizational levels.
  3. Respect – Respect one another. – Businesses must have zero tolerance for non-inclusive or abusive behavior; incidences of it must be addressed seriously and mitigated or prevented from reoccurring when possible.
  4. Integration – Involve others when possible. – Work together to share responsibility – invoking praise when duly earned, and liability when risks are not managed.
  5. Initiative Dare to try something new. – Foster and contribute to a culture of speaking up and out. Challenge heuristics and routines which can drive unethical decision making and narrow cognitive frameworks.
  6. Coaching Always help each other within a team. – Regard the organization as an interdependent unit to support an integrated style of decision-making and working.
  7. Personality Be yourself. – People should maintain their personal code of ethics and sense of right and wrong that they have in life, at work. Good people should not be afraid or unable to do good things.
  8. Social involvement – Interaction is crucial, both in sport and in life. – Be active champions for ethical processes and work together to promote them. Isolation is toxic to collective integrity.
  9. Technique – Know the basics. – Have or get the information needed to remain in constructive compliance with rules, regulations, and laws. Stay up to date or in front of them.
  10. Tactics – Know what to do. – Have a strategy that is flexible but driven by defined values and a thoughtful understanding of risks. Prepare work based on a plan and in agreed terms.
  11. Development – Sport strengthens body and soul. – Stay up to date or in front of the guidelines that form the controls framework. Feed-forward ideas, letting future productivity benefit from past performance.
  12. Learning – Try to learn something new every day. – Be open to and informed about different perspectives and opportunities. Seek knowledge and evaluate strategy based on it, not based on what is easy or fast.
  13. Play together – An essential part of any game. – Share values and manage risks by working together. Don’t be solicited for advice or seek an opinion; have an evolving and ongoing relationship.
  14. Creativity – Bring beauty to the sport. – Be passionate and on the lookout for novel approaches that will provide elegant solutions to dilemmas.

Cruyff’s 14 rules are about so much more than football or sport. These rules are succinct, relatable suggestions for how to live a moral life in harmony with others and in pursuit of self-sustaining accomplishments. This emphasis on values drives intellectual curiosity, physical effort, mental development, and individual accountability. These powerful principles promote integrity in all areas of life and work.

To learn more about Johan Cruyff and his undeniable legacy in football and leadership, check out this Football’s Greatest feature on him:

Also, make sure to read next Wednesday’s post, when this series continues on to look at Jim Valvano, a famed NCAA basketball coach and, later, broadcaster and motivational speaker, and his legendary speech at the first ESPY Awards in 1993 which makes a powerful, simple statement on integrity and internal success.

Profiles of ethical leadership in sports coaching: John Wooden

This is the first in a month-long series of five posts about historically significant sports coaches as exemplary models for ethical leadership values. Today’s post will focus on John Wooden, the legendary UCLA basketball coach. November 8th’s post will analyze the famous “14 rules” of Johan Cruyff as business values to promote organizational and employee integrity. On November 15, the profile will be about Jim Valvano and the inspiring speech he gave at the ESPY Awards only two months before his untimely death in 1993. Vince Lombardi, the NFL Hall of Fame coach, and his insights on the ethics of leadership and performance will be the focus on November 22. Finally, on November 29, a contemporary coach will be the final profile along with the previous leaders from sports history, with the focus on NBA coach Gregg Popovich.

These coaches are all beloved, legendary figures whose importance in society extends far beyond their teams, and for good reason.   Beyond inspiring players and other coaches who develop with them or work alongside them, the ideas coaches share about motivation, personal growth, attitude, and performance can easily translate from the court, pitch, or field to all areas of life.

No discussion of legendary coaches in sports history is complete without mentioning John Wooden, so it is logical to start this inquiry with him. John Wooden was the head basketball coach at the University of California Los Angeles from 1948 until 1975. During that time, he coached the team to ten NCAA national championships in 12 years, seven of those in a row. For his many storied accomplishments at UCLA, Wooden was named coach of the year six times.

Apart from his winning record, Wooden is renowned for his popularity among his former players, many of whom recognized him as having shaped their lives positively. He is well-known for his organizational leadership and insights which have been translated as tips for success in life in general, often relying on simple and straightforward inspirations for positive behavior and attitude. Wooden defined many leadership and performance principles to inspire his players to achieve their best in basketball and life. These were embodied by, for example, his Seven Point Creed, which included being true to yourself, helping others, building relationships, seeking advice, and being thankful, and the Pyramid of Success.

The Pyramid of Success describes 15 blocks which, when considered in performance and strategy, support competitive achievements which can be reached through a values-based approach. These 15 qualities are: (1) industriousness, friendship, loyalty, cooperation, and enthusiasm; (2) self-control, alertness, intitiative, and intentness; (3) condition, skill, and team spirit; (4) poise and confidence; and, culminating in, (5) competitive greatness. These are supported by, on one hand, from bottom to top: ambition, adaptability, resourcefulness, fight, and faith; and on the other hand also from bottom to top: by sincerity, honesty, reliability, integrity, and patience.

This balanced approach demands that any individual hoping to reach competitive greatness must take into consideration the personal qualities and resilience that are required to get there. In this model, quick wins or external satisfaction are not emphasized; instead, building character ethic and cultivating a measured path to the desired achievement.   These values are not special to basketball or sport. They are also not mere business principles. They are a life philosophy and paradigm which an individual can consistently carry though all of his or hers endeavors. The hard work a person devotes to the dual goals of sustaining faith and patience provide the momentum for the culmination in success.

For an interactive look at this, check out the website memoralizing him, which has a section devoted to the Pyramid of Success.

The key takeaway from the Pyramid of Success, and many of Wooden’s finer management and development insights, is that success and winning are not synonyms. A person can reach competitive greatness, the ultimate stage of the Pyramid of Success, but that does not mean the result will be winning every time thereafter. By the same token, an individual game or effort can result in a win, but that does not mean intrinsic success has been achieved in a sustainable, credible way.

In Wooden’s words in his 2001 TED talk (linked below), success is defined as “peace of mind attained only through self-satisfaction in knowing you made the effort to do the best of which you’re capable.” This is not something others can judge or define and does not come from an external performance or perception. This sense of self-accomplishment, win or lose, prevail or fail, can only be reached through hard work, the commitment to which is supported by equal doses of patience and faith.

Watch and read Wooden’s TED talk, “The difference between winning and succeeding,” here.

Having a commitment to this internally-motivated model of success is powerful for determining that the results of one’s effort will be about the integrity with which it was made. Individuals and organizations can inspire a values-based approach to work from this management mechanism. Getting there is the most important part of the process of “being” there. If the emphasis is on winning, competition, profit, attention, and external accolades, then the internal values will be missing to sustain the accomplishment. But, if the emphasis is on growth, hard work, relationships, learning, preparing, and internal satisfaction, then the greatness achieved will last long enough to get the win and keep much more after that.

For a great study of the enduring legacy of John Wooden, check out this Sports Illustrated article by Seth Davis from March 2017.

Also, don’t forget to check back next Wednesday when this series continues on to look at Johan Cruyff, legendary Dutch footballer and manager whose coaching philosophy is credited with revolutionizing the game of football.

Compliance considerations in an active era of mergers and acquisitions

The term “mergers and acquisitions” describes transactions in which the ownership of organizations or business operations within organizations are combined or transferred between companies. Merger describes the combination of at least two organizational units, whereas acquisition describes the transfer of interests or assets from one organization to another.

So far 2017 has been a banner year for high-profile mergers and acquisitions across all industries. Businesses are generating attention, press, and perhaps even revenue for themselves by ambitiously entering into deals with one another. Some prominent competitors have decided to join forces, while other companies hope to make inroads into new markets or gain access to new technologies through mergers and acquisitions activity.

  • The Amazon/Whole Foods merger has been one of the hottest topics of late summer 2017. Already the deal has had a seismic effect on the market, causing competitors from European grocery retailers to ready-to-eat meal delivery companies to major retailers such as Wal-Mart to recalibrate their own corporate strategies and expansion plans. One of the focal points of the lively conversation around this transaction has been the speed with which the US Federal Trade Commission (FTC) gave its blessing. While some professional skepticism from lawmakers on this subject is certainly welcome, the proof will be the pudding as to whether the deal encourages innovation in the sector by challenging competitors to respond creatively to the merger. If this does indeed pan out, perhaps consumers will stand to benefit, not to be harmed, by this type of deal:  Consumers the big winners of Amazon-Whole Foods merger
  • In the UK, a different regulator is not in such a rush to approve the merger between 21st Century Fox, owned by Rupert Murdoch, and broadcaster Sky. The Competition and Markets Authority (CMA) will perform a six month review of that one on the referral of the Culture Minister Karen Bradley. The stated reasons for the review were concerns about media plurality, stemming from the material influence Rupert Murdoch would gain over news providers in the UK key market plaforms, and an inadequate compliance program at Fox, which already owns a 39 percent stake in Sky:  UK competition commission to review Fox-Sky merger
  • Mergers can complicate outstanding or future legal claims, as the union between chemical industry giants Dow Chemical and DuPont is indicating. The issue dates back to a major industrial accident in 1984 in India at a factory owned by Union Carbide India. The majority owner of this company was Union Carbide Corporation, which in turn was acquired by Dow in 2001. Victims of the gas leak accident, which killed as many as 22,000 people and left more than 500,000 others injured, have struggled in the last three decades to reach justice through the complicated system of corporate liability. This is a labyrinthine system of liability and procedural quagmires already for victims to make it through, and the acquisition of Union Carbide by Dow made defining liability, both in a legal sense and in a concrete moral sense to attach to an existing corporate entity, very complicated. Already complex enough when dealing with just Dow, now that DuPont will be in the mix, the corporate structures will become even more difficult to navigate legally:  Bhopal disaster victims may never get compensation following Dow-DuPont merger, fears UN official
  • Bayer AG and Monsanto Company are set to face a regulatory review by the EU over at least the next four months in the planned merger by the major agrochemical companies. In that same sector this year, Dow and DuPont as well as China National Chemical and Syngenta AG have faced similar regulatory hurdles and had to make serious sacrifices in order to settle with the EU For their consolidations to go ahead. As companies in one industry seek to merge with each other, the industry comes out reshaped entirely, and the regulator in charge of oversight must step up to ensure the consumers are protected and that innovation continues unchecked despite fewer competitors in the market:  Bayer-Monsanto merger faces in-depth EU probe
  • Similarly, EU regulators have also expressed concern about the merger between Italian eyewear-maker Luxxotica and French lens-maker Essilor. Together the two companies will form a $55.12 billion global eyewear retailer. The EU is concerned because the combined company will be so large, likely crowding out other, smaller retailers that cannot operate on the slim margins workable for major organizations. The regulator is particularly concerned about impact this merger could have on the supply chain, as Essilor will gain access to previously untapped markets in the Americas and Asia:  EU regulators have concerns over Luxottica-Essilor merger

One conclusion that may be drawn already so far from a survey of this year’s mergers and acquisitions activity is for some, that expediency is the name of the game. Companies entering into these agreements want to come together quickly to get on with business, before the advancements in technology outpace their own participation. In some markets, regulators seem basically happy to oblige them. This apparent trend stands somewhat in contrast with standard regulatory agenda for existing companies, and the current preference in other markets, which is to identify and investigate possible anti-trust business practices for possible enforcement action or remedial measures before allowing the deal to go through.

If the US regulators continue to take the point of view that combined and strengthened competition from one market player drives the rest to be better and innovate, such as with Amazon, this will be a justification of relaxed regulatory scrutiny. It will be interesting then to observe whether regulators in the EU or other regions trend in the other direction, increasing the scope and standard of their oversight in order to reinforce their opposite protection that in these times of combination innovation may actually be more at risk than ever.

Only time will tell in this case which side has predicted the outcome correctly; one may find commerce stifled in name of caution, while the other may discover that imposing supervision after the union is more difficult than taking a measured approach from the beginning.

Deep dive on what happened at Enron

Almost 16 years after Enron declared bankruptcy in December 2001, questions about the root causes of the financial fraud and ensuing publicity of the corrupt business practices there persist. Despite the subsequent years where other major bankruptcies and the global financial crisis may have somewhat desensitized the public to these scandals from the greater business world, the many answers to the “why” of Enron’s fraudulent business practices are still fascinating to contemplate.

  • Enron: The Smartest Guys in the Room: This 2005 documentary, based on the 2003 book of the same name written by Fortune magazine reporters Bethany McLean and Peter Elkind, and directed by noted filmmaker Alex Gibney, is the seminal work on the Enron scandal. The film goes back deep into Enron’s history to unpack why its success of the 1980s and 1990s and its desire for sustained growth and competitive edge in new business areas, drove its fraudulent practices ever deeper into the corporate culture. Great attention is paid to those “smartest guys” – Kenneth Lay, Jeffrey Skilling, Andrew Fastow – and their sometimes philosophical, occasionally political, and always profit-motivated, views of management that contributed to the fraud.

 

  • The Crooked E: The Unshredded Truth About Enron: This television movie from 2003 is based on the book Anatomy of Greed by Brian Cruver.   Cruver was an ex-Enron employee and detailed his personal experiences there in addition to those of several anonymous colleagues, some very senior members of the organization. The movie shows how the lack of organizational integrity made an impression on Cruver, a good person who found himself doing bad things because of the unethical environment and processes in which he was working. The excesses of the corporate culture are shown in great detail and in contrast to the suffering of shareholders, including many employees who had their retirement funds entirely invested in the company, that followed the company’s collapse in 2001.

 

  • Enron Explained: An Insider’s Account: On a similar, but non-dramatized note, this 2006 C-SPAN American Perspectives program provides a deeper look at the workings of the accounting practices and corporate culture at Enron. This time it is from Robert Bradley, who was the Director of Public Policy Analysis at Enron. Bradley provides detail into the technical aspects of the accounting fraud as well as his personal perspective on Kenneth Lay. From Bradley’s point of view, Lay’s actions should be viewed in light of the narrow framework in which he had worked, achieving great success in his years at Enron by focusing on profit-driven business strategies that promoted driving for financial gains and did not emphasize strategic ethical decision-making. While certainly not an excuse for lack of personal accountability, or a legal defense, this is a powerful lesson for how strong organizational contexts and heuristics can impact employee integrity.

 

  • Bigger than Enron: The PBS documentary series Frontline took on the Enron story in 2002. This program suggests presciently that the bankruptcy of Enron, which immediately became one of the largest scandals in the history of American business, could actually have the harbinger of the deeper systemic weaknesses. From the current standpoint, of course, this points directly to the subsequent economic and regulatory crisis in the global financial markets that began to unfold in public in 2007-2008. From this perspective, the root causes of that crisis go much deeper than the fiscally unsustainable growth of the sub-prime mortgage market and subsequent securitizations. Instead, epic failures in the oversight system – from management, from government, and from outside business partners such as auditors – exposed investors to huge losses and enabled corporate fraud such as occurred at Enron and other major companies before and, indeed, after its 2001 collapse.

 

  • Sherron Watkins at UNC Kenan-Flagler Business School: Sherron Watkins was Vice President of Corporate Development at Enron and is known to history as the author of the August 2001 memo to CEO Kenneth Lay detailing the questionable accounting practices she noticed in the company’s financial reports. Five months later her memo was made public, and she is therefore thought of as the Enron whistleblower. Watkins was criticized in the aftermath of Enron’s bankruptcy for not going public sooner and not immediately escalating her suspicions of the fraud to Enron’s regulators or law enforcement. The speeches Watkins has given in the years since Enron’s bankruptcy, such as this one, focus on how complicated acting as a whistleblower is in reality – not what you would do better than someone else in a hypothetical situation, but what you would or could actually do if it happened to you. This is a challenging ethical dilemma and one that organizations must consider in order to create a reporting system in which whistleblowers are encouraged and protected.

 

The Enron business case remains one of the most famous examples of modern corporate fraud and corruption. Studying the root causes behind the fraudulent accounting and business practices provides insight for why an effective controls and reporting framework is so important for investor protection and markets integrity.

Instagram and the internet’s code of ethics

Instagram is a very popular social media app based on sharing photos and videos, publicly and to selected users as well as via direct, private message. It was launched in 2010 and since April 2012 has been owned by Facebook, another giant in the social media industry. In less than the decade of its existence, Instagram has grown a very large and active community, where users can interact with their friends and “followers” as well as other communities who maintain a presence there, public figures, media sources, and corporate brands.

All of these wildly different groups, from all over the world, sharing content and commentary on one platform, is exciting and promises many opportunities for collaboration. Along with these positive connections, though, of course come negative surprises and possibilities for challenges and abuses. With all the influence Instagram has through its popularity comes also responsibility for defining the standards and limitations of the community as well as what it will put out into the internet and the world.

Instagram has faced its share of criticism for its efforts to implement and maintain effective controls and reporting mechanisms.   Instagram relies heavily on user reporting of inappropriate content, such as posts depicting illegal activity or the use of “coded” hashtags and emojis to conceal but continue on with such practices. Understandably, even the most aggressive attempts to keep up with the pace of this behavior on social media will fall behind quickly, leading to criticism the community is unsafe. When Instagram is too proactive or reaches in deleting comments, posts, or users, however, then controversy about overreaching into privacy and expression begins in response.

Kevin Systrom, one of the original creators of Instagram and its current CEO, wants to work this balance between protection from abuse and freedom of expression. Under his leadership, Instagram is dedicated to ensuring that the content and tone on the platform is compliant with its community guidelines. Changes to the comments sections on photos – including allowing users to filter out comments that had certain words, or to post photos without comment sections available – are intended to encourage safer self-expression by the posters who might otherwise fear harassment or offensive content in response below their photos.

Platforms such as Instagram, of course, can never be neutral – any technology’s relationship with its user is one that is fraught with moral concerns, starting right at the ethics of its design, which is made only more complex by algorithms, robot users, and the real users who make their own decisions about the content to share and promote that run the gamut from universally appropriate to offensive, harassing, or even illegal. In such a context, applying a code of ethics is a very hard task, but perhaps it is the inherent difficulty of doing this that makes it so important to try.

Creating filters and tools to hide and promote, prevent and engage, either when deployed by the community management behind the scenes or when elected by users, is just the beginning of the design choices engineers have made at Instagram to implement technical responses to problematic tone in some corners of the platform. Instagram tries to deploy artificial intelligence to help also, to sort real posts from fake and to learn from the data to understand why innocent comments or content may be abusive to the context, a concept called word embeddings. AI has its limitations, of course, but in any rules-based approach to governance it’s necessary to start with something good and then make continual efforts to make it better, rather than leave risks un-addressed while in hopeful pursuit of the best.

Time will tell how effective Instagram’s efforts to make the platform a safer place for expression really are, and what they really accomplish – a place which is open for creative sharing and communication creation, but not to toxicity and abuse, or a censored, sanitized, disingenuous photo collection where self-expression is restricted and speech censored? Perhaps Instagram will succeed in going against the tide on the internet and in much of life, where the level of social discourse seems to have gone low, tinged by anger and dark with people’s worst impulses, and make a place where the conversation can be a bit more civil, even if it has to be filtered first to get there.

For more detail on Kevin Systrom’s ambition of making Instagram a safe haven and role model platform on the internet, and the challenges that both motivate and complicate this mission, see Nicholas Thompson’s story on Wired.