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Compliance and ethics business case studies

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.

Categories
Compliance in current and historical events

Must-read ICIJ investigative project reports

The International Consortium of Investigative Journalists (ICIJ) is an independent, international network of over 200 investigative journalists in more than 70 countries worldwide. Their reporting focuses on international crime, corruption, and transparency of political and financial power held by governments and corporations. ICIJ works worldwide with local media partners to publish complex investigative reports often focusing on organizational corruption at the highest levels of power and the impact their activities have on people and communities in their home countries as well as in the developing world.

Like this blog’s earlier feature on the work of the Organized Crime and Corruption Reporting Project (OCCRP), reporters associated with ICIJ often follow highly complicated financial trails at major banking institutions and supporting organizations in the financial services industry, in order to uncover tax evasion, theft of national assets, bribery, and other financial crimes.

  • Luxembourg Leaks (2014): This blog has previously discussed the Luxembourg Leaks in the feature post on whistleblowers in the financial services industry. This investigative report was based on documents provided to ICIJ by, among others, a French employee of the Big 4 accounting firm PricewaterhouseCoopers. The ensuing investigation showed that Big 4 firms were facilitating registration of multinational companies in Luxembourg in order to evade local taxes and take advantage of banking secrecy laws that would prevent disclosure of even the existence of their offshore accounts to their home countries. Companies named in these papers included IKEA’s Australian operations, Pepsi, Disney, and the Koch Brothers’ business empire. 
  • Swiss Leaks (2015): Continuing in the vein of uncovering undisclosed accounts and financial arrangements maintained under the protection of a banking secrecy regime, this investigation revealed HSBC Private Bank (Suisse) maintained banking relationships with clients connected to arms trafficking, blood diamonds, and bribery. Many of the clients serviced by HSBC were connected to discredited political regimes in countries such as Egypt, Tunisia, and Syria. These were clients who due to their illegal or sanctioned activity would not be accepted for banking services in other countries. The documents showed that HSBC not only accepted them but repeatedly assured them that their wealth would be shielded from tax authorities or other inquiring government entities. 
  1. Evicted and Abandoned (2016): This investigation ran an external audit on projects supported by the World Bank. The International Finance Corporation, which provides private sector loans on behalf of the World Bank, has given financing to governments and corporations accused of egregious human rights violations. In some cases these financing activities continued after evidence of the violations was made public. Funds from World Bank projects were subsequently misappropriated and diverted by local governments to fund violent and harmful campaigns against the people who were supposed to be helped, and social and environmental impact was disregarded. 
  • The Panama Papers (2016): Receiving widespread media attention and igniting local investigations in many countries and by many financial institutions, the Panama Papers project was one of the biggest stories in money laundering investigation of recent years. ICIJ worked on this project in collaboration with OCCRP and Suddeutsche Zeitung, the German media organization which originally received the cache of documents from Mossack Fonseca, a trust company in Panama that facilitated legal incorporation of offshore shell entities for many of the world’s wealthiest people and powerful political figures. Many of these shell entities were later involved in illegal activities including tax evasion, fraud, and money laundering. 
  • The Paradise Papers (2017): The most recent of ICIJ’s reports, like the Paradise Papers, this details the facilitation of secret financial arrangements by offshore service providers, this time including one of the world’s most high-profile law firms working in this industry. This time the focus was on legal incorporations in Bermuda, Singapore, and Mauritius. The Paradise Papers differ somewhat from the Panama Papers in that they do not purport to uncover widespread illegal activity, but rather legal activity that is secret or inconsistent with representations otherwise made to the public. Political figures in the US, the UK and Canada, and their donors or other financial supporters, were included this time with information exposing their previously undisclosed offshore arrangements and ownership stakes. The Paradise Papers also provided great detail on the “tax engineering” of many major companies, including Apple, Nike, Allergan, and commodities giant Glencore.   While currently legal, it is expected that the public controversy over these increasingly “creative” tax arrangements may lead to deeper regulatory inquiry as to whether they should remain legitimate practices going forward. 

Like OCCRP, ICIJ has become a highly-regarded media organization in the twenty years since its formation. The work that the journalists of ICIJ do to investigate and expose corruption and crime is critical for the effort to enforce expectations that those in positions of power be held accountable for their actions, which even if legal, can be ethically unacceptable and abusive of the people they purport to serve. These investigations serve a crucial public service in exposing both criminal activity and legal arrangements which nonetheless may not meet society’s standards for transparency or lead later to the facilitation of illegal activity.

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Best Practices

Hero’s journey of the compliance professional

The hero’s journey is a myth narrative popularized by the American writer Joseph Campbell. Campbell studied hero myth patterns in contrast with psychology, ritual, and analysis and used his view of the hero’s journey to describe the generic narrative archetype of various heroic stories as follows: “A hero ventures forth from the world of common day into a region of supernatural wonder: fabulous forces are there encountered and a decisive victory is won: the hero comes back from this mysterious adventure with the power to bestow boons on his fellow man.”

This pattern will be familiar to any fan of a wide variety of adventure and fantasy stories such as Star Wars, Indiana Jones, Harry Potter, and much more. However, this narrative construct can be applied not just to literature and Hollywood movies but also to the work of the compliance professional attempting to imbed an authentic and effective organizational culture of compliance. In this view, the hero is the organization – and it is the objective of the compliance officer, as a guide or expert figure of sorts, to guide it through the stages of the journey to successful completion.

The hero’s journey is divided into three principal “acts” – departure, initiation, and return. Within each of these acts the hero undergoes a variety of tasks, ordeals, and lessons which compromise the stages, seventeen of them in total, of the journey.  The themes of persuasion, doubt, adversity, seeking guidance and expertise, challenge, success, and transformation which recur in the journey all translate provocatively to the ambitions of a corporate compliance program.

The three acts of the hero’s journey, as applied to corporate compliance and organizational ethics, are as follows:

  1. Departure – In which the hero is still living in the ordinary world and receives a call to action for an adventure which is daunting and requires a mentor’s guidance before embarking on it, this act depicts the organization which is without a compliance program or an organization where the compliance function is immature and inadequately implemented, without genuine engagement. The call to action in this case could be an internal, positive one – a decision to focus proactively on integrity and ethics, for example, or the company could be a new one which wishes to have a compliance risk framework from the beginning. It could also be an external, possibly negative one – such as new regulations or laws, a company or industry public scandal, or supervisory enforcement. The mentor offering guidance in the compliance professional, the person with the subject matter expertise and balance of rules and values knowledge who can support the organization in answering the call to action.
  2. Initiation – This is the stage in which the hero leaves the ordinary world and goes out into the unknown, extraordinary world to face a variety of challenges, some with guidance or support and others without but against great obstacles or resistance. The hero encounters crisis in the attempts to reach his goal. Once the goal is achieved, the hero has to go back to the ordinary world of before, again amidst challenges. In this stage, the unknown world represents the as-yet unformed environment of drivers for and obstacles against organizational and employee integrity and ethical decision-making. In confronting this, the organization accepts the need to implement or improve a controls framework and struggles with the appropriate approach and tone. A wide variety of interests diverge and compete in this process, with the priorities of different business lines, other support functions, stakeholders, external partners, supervisors, and even customers or followers diverging from and competing with each other. Some of these parties will be helpful allies and willing advocates for compliance initiatives, acting as evangelists with each other and the public to sell the comparative value of a compliance program. Others will be doubters who present tests to the maturity and necessity of the program’s design and goals, or even enemies who wish to defeat the effort in favor of commercial or other concerns. It is from here that the compliance professional must carefully craft communications and branding strategies for the compliance program to be convincing and overcome these trials. Once overcoming the crisis – be it incomplete implementation of a program leading to risk and loss, or reputational damage due to insufficient organizational integrity, or negative action by a regulator – the compliance professional can re-emphasize the fundamental values of the program to an organization with a new appreciation for their importance.
  3. Return – In the final act of the journey, the hero returns to the ordinary world, newly endowed with the central goal achieved and the ability to use this hard-won enlightenment for the common good. This process has been transformative and the hero has ascended to a higher level of being due to the triumph of the journey. At the culmination of its journey, the organization has successfully implemented a robust and pro-active compliance program which will be both functional and aspirational. The corporate compliance framework enables the organization and its employees to follow an ambitious yet responsible strategy guided by a flexible yet foundational balance of values and rules.

For a detailed description of the classical stages of the Hero’s Journey, check out this outline by Christopher Vogler.   And for a vivid explanation and illustration of the Hero’s Journey and its various applications in literature, watch this entertaining TED-Ed lesson by Matthew Winkler:

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This week preview

This week on Compliance Culture

Be sure to visit Compliance Culture this week for posts on these topics.

  • Monday: Hero’s journey and corporate compliance
  • Tuesday: Round-up on ICIJ reporting highlights
  • Wednesday: Vince Lombardi’s ethical leadership
  • Thursday: Happy Thanksgiving!
  • Friday: Taylor Swift and reputational risk

Don’t miss it!

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Last week round-up

Last week on Compliance Culture

Check out last week’s posts on Compliance Culture, in case you missed or want to revisit them.

Many thanks for reading!

Categories
Compliance in popular culture

Selected TED/TEDx talks on practical ethics

Practical ethics is an important and relatable branch of the philosophical study of ethics. As a discipline, it connects academic theory with real-life practice. Practical ethics is most commonly encountered in typical scenarios which are referred to as ethical dilemmas. Ethical dilemmas, which have been discussed at length here on this blog before, often present seemingly simple facts which in reality involve maddeningly complex and fraught moral and personal considerations. When faced with such dilemmas, individuals need to reconcile ethical principles which may be in opposition, as much as they need to rely on those same principles to inform their internal register of right and wrong.

Moral character – this individual internal register – and moral perception – the individual’s capacity to understand that an ethical issue exists and may need to be addressed or accepted – are both rooted in the ongoing observation of practical ethics. Identifying and resolving conflicts between personal ideas of ethics and integrity, and the situations and roles that person may find in a working situation, is a crucial application of practical ethics and a fluency which is necessary for corporate cultures to establish a successful compliance program.

Practical ethics goes to the root of so many dilemmas which are germane to the working experience. What are the limits of professional responsibility? What are the obligations of and restrictions within authority and control? How do interpersonal or relationship-based ethics play out into institutional structures and corporate policies or organizational decision-making? How do individuals work within institutions that may have implemented moral decisions which differ from the person’s own or present the individual with the need to dissent from policy or practice? To what extent should organizations address the public good and how can they do this if they choose to do so?

These questions can go on and on; practical ethics represents the attempt to navigate the broad social context of the workplace by reconciling professional rules with moral expectations and norms. This, again, is highly pertinent to a corporate compliance program, which seeks to encourage an business culture that respects legality, approaches business competitively yet thoughtfully, and also sets standards for employee and organizational integrity. It is imperative for compliance professionals to understand practical ethics and use dilemma sessions or open discussions with the businesses they advise in order to encourage a common comfort level with this sort of thinking throughout their organization.

The below TED/TEDx talks offer a survey of how people approach these conflicts between individual and societal morality on one side and professional ethics within organizations on the other side.

  • Legal vs. Ethical Liability: A Crisis of Leadership and Culture (Mel Fugate) – Very frequently, there are stories in the news that outrage and offend people due to perceived moral trespasses. For example, tax avoidance which is positioned as optimization rather than evasion is not against the law; in fact, corporate structures and arrangements that allow companies to take advantage of this are often sanctioned by national governments and facilitated by law firms. However, whenever information detailing these arrangements is made public, people are always stunned to find they are legal and feel let down by the justice system. So too is this true in any situation where individual or organizational accountability is not strictly required by law and therefore is not implicitly considered in decision-making. The distinction between legal liability and ethical liability reaches to the core of the true character ethic and leadership qualities. An organization which considers ethical liability will have a more transparent and sustainable culture, leading to increased transparency and accountability.

 

 

  • The Significance of Ethics and Ethics Education in Daily Life (Michael D. Burroughs) – The concept of individuals as “everyday ethicists” is powerful and useful. People must first take individual responsibility for approaching and addressing ethical issues. Individual ethical awareness is an unavoidable first step on the journey to a culture of compliance within an organization, or for that matter, increased integrity and honesty within society. It is important to consider an ethics education as foundational for both children and adults, and to establish the role of ethics in everyone’s lives and above all else, encourage discussion and information-sharing.

 

 

  • Ethics for People on the Move (Catharyn Baird) – On the subject of translating individual ethics into a group or collective moral code, individual perceptions of morality can have powerful impact on the ethical identity of a community. Both alongside and beyond business ethics, how is an ethical life defined and how does this contribute to the character of the communities in which we all live? Here the interpersonal aspect of ethical relations, including decision-making, has an especially strong influence.   For that to be successful however, individuals still have to form and commit to an ethical life that is each of their own.

 

 

  • Is your work aligned with your values? (Geoff DiMasi) – As discussed above, one of the challenges of practical ethics is to reconcile the individual sense of morality with ethical decisions implicit in corporate policies and required due to organizational processes. It can be powerful for individuals to consider their purpose, both in life and professionally, and then to question whether the work they do allows them to contribute to this, or asks them to labor in opposition to it. As many organizations turn to social impact and political engagement to establish their corporate identities in a crowded marketplace, individuals would do well to compare their ethical leanings with their professions and the companies with which they are associated.

 

 

  • Why “scout mindset” is crucial to good judgement (Julia Galef) – Scout mindset is an interesting proposition, valuing curiosity, openness, and practicality over defensiveness, heuristics, and routines. Approaching decision-making with this disposition can help to overcome narrow frameworks, habits, and other strong organizational contexts. This can also help people to determine individual integrity and morality, which can contribute to and position them within broader and sometimes challenging societal and corporate structures for ethics and compliance.

 

 

Check back in the coming weeks for further posts on the theory of practical ethics and its application in the corporate context, including discussion on the distinction between ethics and business ethics, as well as that between compliance and corporate compliance.

Categories
Trends in business compliance

Compliance issues with marijuana legalization

Marijuana has a complex legal and regulatory history in the United States. Originally widely deployed in a variety of medical and commercial uses, the regulation and eventual restriction of commonly-accepted preparations of hemp and cannabis began at the turn of 20th century with labelling requirements and a push to include cannabis in the definition of a “poison” for which a prescription would be required. By the 1930s a patchwork of state and national policies in law were in place and the criminalization of marijuana was underway in earnest. For the next 40 years any attempt at decriminalization or reclassification was unsuccessful. In the 1970s and 1980s, however, California began to slowly reduce penalties for possession under state law and work toward legalization for compassionate use in chronically-ill individuals, which became legal in the state in 1996.

Since then, the legalization of marijuana has been a matter of legislative interest in many states. This move toward decriminalization at first was limited to the medical use first legitimized in California state law, either for chronically-ill patients or for those suffering from a variety of illnesses for which marijuana has proven to be a desirable treatment in terms of effectiveness and cost. Advocacy in this area has eventually extended to non-medical use; in 2012, Colorado was the first state to legalize recreational use of marijuana for adults.

As of the writing of this post, medical marijuana is legal (to at least some extent) in 23 states plus the District of Columbia; in 8 states medical and non-medical marijuana is legal to sell and possess. As the below selection will show, momentum for decriminalization and handling of emerging legal markets invokes a wide variety of compliance issues which will need to be addresses for business and consumer protections and obligations.

  • Given that medical marijuana was the initial purpose behind modern legalization and that it continues to be the most widely-accepted rationale for it, it follows quite logically that medical marijuana research would need to be recognized and facilitated by the law as well. Senator Orrin Hatch, a perhaps unexpected ally for legalization, introduced the Marijuana Effective Drug Study Act of 2017 to improve the research approval process and increase the national marijuana quota to provide supply for medical and scientific research into its potential health benefits. Because marijuana is still completely illegal at the federal level, it is subject to the most restrictive classification and therefore getting approval to study it or supply of it to study is very difficult. In order for the full efficacy of marijuana as medical and therapeutic treatment to be understood, these administrative burdens must be overcome: Senator introduces bill to make it easier to do medical marijuana research
  • Due to the fact that, as stated above, marijuana is still totally criminalized at the federal level, and state efforts toward legalization vary widely, regulatory expectations are widespread across a cumbersome patchwork. Businesses hoping to join or exploit the marijuana market in states where it is legalized to some extent will confront a huge regulatory burden of rules, reporting and disclosure obligations, and licensure requirements. It will be crucial for existing or new owners of marijuana-based businesses to consider implementing compliance programs early and thoroughly so that they are not caught unaware by government expectations in their jurisdictions. Otherwise, a culture of operational non-compliance will reign, which could have devastating effect on business success rates amid supervisory enforcement actions for deficiencies: Marijuana Businesses, Particularly In California, Struggle To Navigate A Thicket Of Regulations
  • Public sentiment is certainly trending toward legalization. Sixty-four percent of Americans now say that its use should be made legal, which is the highest level of public support that the pollster Gallup has found in the fifty years it has been recording this measure. Certainly high-profile ballot initiatives in a variety of states and increased media attention have come through to the average American and liberalized views on the matter. How will this impact regulatory outlooks? If the federal government comes around to legalization then some universal standard for controls framework and supervisory requirements may be in the future. If not, states will continue to be left to their own devices to create independent markets and risk controls within them:  Record-High Support for Legalizing Marijuana Use in U.S.
  • As the market for legal weed emerges, powerful people wanting to work within are starting to act like they would in any other industry – looking to garner competitive advantage and turn their companies into giants of the marijuana business. Marijuana is a valuable industry and can be seen as a crop, which means it has an agricultural supply chain like wheat or corn that can be exploited. Utility patents, intellectual property protection for crops, can be used by powerful organizations to corner the market on breeding of new varieties, conducting research, and even producing seeds to be licensed: The Great Pot Monopoly Mystery
  • With governments addressing legalization of marijuana all across the United States, organizations are beginning to weigh in too on what their policies of use by their members and employees may be. One visible example of this is with the National Basketball League (NBA) where both the former commissioner David Stern and the current commissioner Adam Silver have expressed at least awareness that the league policies may eventually have to change. While marijuana is still a prohibited substance in the NBA irrespective of the purpose of use, Silver has said he wants to study it and Stern has opined that he feels players should be allowed to do what is legal in their states with respect to marijuana use:  David Stern calls for NBA changes of marijuana rules

As states continue to move toward decriminalizing or outright legalization for marijuana for a variety of purposes, and other organizations contend with their own policies within that system, mechanisms for regulated markets will begin to emerge, presenting interesting regulatory compliance issues with no clear and easy precedent. Governments and businesses alike will need to contend with both the opportunities and the challenges this will present.

Categories
Compliance and ethics business case studies

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.

Categories
Compliance in current and historical events

Whistleblowers in major US corporate organizations

This is the third of a three-part series profiling whistleblowers in different industries. The first of these posts was on October 24 and focused on the financial services industry, including Julius Baer and PricewaterhouseCoopers. Last Tuesday’s post covered whistleblowers in the pharmaceutical industry, with stories of exposing corporate fraud in the manufacturing and marketing processes at companies like Eli Lilly and GlaxoSmithKline.

Today’s post, the final in this set, will look at whistleblowers from prominent historic cases of business fraud or miconduct in major US corporate organizations. The actions of these individuals in speaking up to expose unethical or illegal business practices led to major media attention, legislative and regulatory scrutiny, legal actions, and deep review of corporate cultures of the organizations. In some of these cases, deep societal debate about or change of previously accepted practices and standards was kicked off by the information exposed by whistleblowers.

  • Sherron Watkins, Enron Corporation: One of the most famous whistleblowers in modern business history, Sherron Watkins was Vice President of Corporate Development at Enron Corporation, the disgraced energy company which is often referred to as one of the biggest corporate scandals in modern history. In August 2001, Watkins reported suspicious accounting practices she observed in the company’s financial statements to Enron’s CEO, Kenneth Lay, who famously did not take action on the memo Watkins wrote on the issue. Enron, of course, filed for bankruptcy in December 2001, after the public disclosure of the fraudulent accounting practices that led to gross overstatement of the company’s financial condition. Watkins has spent the years since the Enron scandal writing and speaking about the problems within the corporate culture of the organization that allowed the fraud to occur and continue. For information on how Watkins sees her role in the Enron scandal more than fifteen years on, check out this Texas Monthly article from 2016.
  • Cynthia Cooper, WorldCom: Cynthia Cooper was the Vice President of Internal Audit at WorldCom, which at one time was one of the largest telecommunications companies in the US. Amid declining profits in the telecommunications industry and a thwarted merger with Sprint, starting in 2000 the company used fraudulent accounting practices to maintain the price of WorldCom stock in a decreasing market. In 2002, Cooper led a team of internal auditors which investigated and exposed this $3.8 billion accounting fraud. Cooper never intended for her internal audit memo to be publicized, and did not want public attention from it, as her feelings about exposing this fraud at a company where she had loved working were complicated. However, investigations by the Department of Justice and the Securities and Exchange Commission followed, which by the end of 2003 determined that the company’s assets had been inflated by an estimated $11 billion due to the fraudulent accounting. Have a look at this Q&A with Cooper from 2008.
  • Courtland Kelley, General Motors: For 30 years, Courtland Kelley worked at General Motors, ultimately as the national head of GM’s vehicle inspection program. For years, Kelley warned GM about design flaws in its cars and trucks that had gone unaddressed. To Kelley, the company seemed more interested in avoiding costly recalls and saving face in public than in making a relatively simple safety fix to the ignition switch system. In 2003, he sued GM under Michigan state whistleblower laws, hoping to expose this company inaction that led to manufacturing unsafe vehicles that were involved in crashes, some resulting in deaths. Kelley’s case was dismissed on procedural grounds, and in the aftermath, Kelley found that he was silenced and marginalized by GM in retaliation for speaking up. The company waited almost ten years before issuing a recall in February 2014. For an in-depth look at what happened at General Motors and to Kelley after he blew the whistle, read this Bloomberg Businessweek piece.
  • Mark Whitacre, Archer Daniels Midland: Mark Whitacre was president of the Bioproducts division at Archer Daniels Midland, a food and commodities trading corporation specializing in processing of grain and oilseed crops. For three years from 1992-1995, Whitacre was an FBI informant aiding in the agency’s investigation of ADM for price fixing (conspiracy arrangement between buyers or sellers to buy or sell a product at a fixed price only, irrespective of market conditions). The price fixing at ADM involved lysine, a chemical additive to animal feed. ADM was part of a cartel with four other companies that inflated prices on lysine because of their concerted market manipulation. Due to Whitacre’s initial reporting and subsequent acting as an undercover informant, the FBI collected a tremendous trove of information about the cartel’s activities and ultimately fined ADM $100 million, with many more hundreds of millions of dollars going from ADM to harmed plaintiffs and customers. Price fixing, once an overlooked practice in the industry which controlled prices without recourse, became a global investigation and enforcement priority. Whitacre himself was a complicated figure, as it turns out he was exposing one fraud while participating in others. In the course of the investigation, he confessed that he had been involved with arranging corporate kickbacks and money laundering schemes, and later pled guilty to tax evasion and fraud in connection with the embezzlement of $9 million, serving 8.5 years of a 10.5 year sentence. Whitacre’s story was dramatized in the movie The Informant!, which starred Matt Damon. For a profile on Whitacre from the time the movie was released in 2009, check out this CNN story.
  • Gregory Minor, Richard Hubbard, and Dale Bridenbaugh, General Electric:   Gregory Minor, Richard Hubbard, and Dale Bridenbaugh are known as the “GE Three.” They were a group of nuclear engineers at General Electric who turned whistleblowers in 1976 to alert the public of ongoing safety issues at US nuclear power plants. Their disclosures about the dangers of nuclear power received significant media coverage and Congressional attention. Minor, Hubbard, and Bridenbaugh timed their disclosures with resigning in protest from their positions in the GE nuclear reactor division. Nuclear power was at that time in wide use in the US; the GE Three raised huge concerns about insufficient controls within the industry due to vulnerabilities from human error and an engineering process that isolated individuals from the overall decision-making process. Their protest resignations and subsequent testimonies had a huge impact on society’s view of the safety of nuclear power and inspired activist campaigns against nuclear power and in favour of environmental safety and protection. Check out this 1976 report from the New York Times archive for the contemporary reaction to the GE Three.

Whistleblowers have been the impetus behind some of the most explosive and powerful disclosures of corporate fraud and malfeasance in recent history. Companies once admired and viewed as financial stalwarts have been shown to have deeply unethical business practices and a concerning lack of organizational and employee integrity below the surface. In an economy and culture which is increasingly dominated by large corporate interests, trust in and credibility of these major institutions is critical for the public. When this is violated by inaccurate disclosures, dishonest accounting practices, or fraudulent business arrangements, consumer and markets confidence is greatly impaired. Whistleblowers therefore perform an invaluable function in making the often personally difficult and professionally costly decision to stand up for the protection of these values when observing misconduct from within their organizations.

 

Categories
Best Practices

Tips for improving employee accountability in compliance programs

The most ambitious culture of compliance paired with the most robust controls framework still cannot succeed without employee adherence. Employees who don’t know the correct thing to do, or those who make an unethical or non-compliant decision despite knowing, can be addressed with awareness communication in the first case or remedial action in the second case.

However, the more frequent and challenging scenario is that employees have received information about compliance risk management priorities and ethical culture at their organization. They understand this information well enough and maybe even admire the aims of the compliance program, but there’s a problem – they don’t see themselves as having an active role in it.

The best efforts of compliance programs will always be overcome by apathetic or unengaged employees who don’t see themselves as having personal compliance responsibilities. In cybersecurity, for example, the best IT systems with the most up-to-date risk controls structure will still be defeated by an employee who falls for a phishing scheme or leaves behind an unsecured laptop in a public place. Some mistakes are unavoidable, of course, just like some risks can only be mitigated or accepted. However, many other errors, acts of misconduct, or risk factors can be prevented with the appropriate individual vigilance and diligence.

So how can a corporate compliance program emphasize to employees that individual responsibility is the fundamental defense in any risk and control framework? Too many solutions from management or consultancy rely heavily on data solutions and systems approaches to addressing compliance risk. The logic goes: failures of existing compliance programs to prevent ever-evolving fraud and misconduct are unfortunately not unusual, so why not simply blame human misjudgment or incompetence for inadequate controls and therefore just automate processes whenever possible?

The above is a cynical and defeatist attitude toward corporate compliance; if management or its advisors decides that corporate compliance will fail, then it certainly will do so. However, removing the obstacles to individual responsibility is an important step to empowering organizational integrity. Outsourcing or digitalizing analysis and advisory work is an artificial, external solution. It may expedite or simplify some aspects of working with compliance risk management, but it cannot ever be as effective as a values-based approach that creates a corporate culture where good judgment and ethical decision-making are incentivized and supported.

Indeed the first, and probably best, solution for raising the standard of compliance programs and their controls is to promote employee engagement in these across all levels of the organization. This starts with individual accountability, which compliance professionals and senior management can nudge employees toward embracing these ways:

  • Walk the walk: Senior management should weave a thread of the corporate cultural values throughout all matters that touch an employee’s working life. This needs to be consistent and visible. Communication should be simple and straightforward, practical and not preachy, but it should express and reinforce the cultural values. In HR matters, for example, transparency should be communicated and modeled. Employees must see the corporate cultural values explicitly expressed as they experience corporate administration across the organization. This brings the values from mere words to a living system in which they are participants.
  • Nudge with timely reminders: Regulatory, legal, and policy requirements change rapidly. Employees that are trained regularly should be respected for what they already know; heavy-handed instruction can be seen as condescending. However, reminders upon key messaging events (anniversaries, completion of investigations, or announcements of strategies) or updates when there are new guidelines or expectations are critical. These reminders can act as nudges toward appropriate behavior for individuals whose attention may have moved on or whose understanding was out of date.
  • Work against culture of fear: People often think about speaking up in the workplace in terms of following an internal escalation process or being a whistleblower. To some people, speaking up by challenging an established procedure or an experienced colleague may seem unprofessional or presumptuous. The possibility of being opposed or facing retribution can be very scary for employees who might want to express uncertainty or ask questions. Corporate compliance programs have a responsibility to create a culture where speaking up routinely is safe and supported. A relationship-based approach to business compliance advisory is a great first step toward combating the fear factor and helping employees to speak up to check understanding or challenge practices. Involved employees are more likely to be accountable ones.
  • Actively address accountability gaps: When it is evident that an employee or group of employees do not embrace accountability in compliance risk management, address it, but not punitively. Open discussion can be mutually beneficial. Take the opportunity to express that individual responsibility is expected, and also to listen to the limitations or uncertainties that may provide an explanation for why it’s missing.
  • Insist on consequences: Disciplinary action is never the intended outcome for any employee-management relationship. Ideally everyone would want to and be able to do the right things all the time, but clearly mistakes and misconduct happen. Good people/bad people dichotomies are classic but not necessarily helpful. In reality, it’s most important to establish from the beginning that consequences for doing the wrong thing exist and will be enforced fairly and meaningfully.

There will always be people in organizations who either are in need of training or resourcing attention (wanting to do the right thing but not being properly equipped) or people who are not cultural fits (wanting to do the wrong thing despite organizational priorities). Engaging these people where possible is critical, just as holding all others accountable for their actions and responsibilities is the frontline defense most important to compliance risk management.