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

Corporate takedowns: American Apparel

This is the first post in a series of four posts about corporate takedowns.  Today’s post is about American Apparel.  Next Tuesday’s post is about Theranos.  The third post on March 17 is about Facebook, focused on the recent Cambridge Analytica data sharing revelations.  The fourth and final post, on March 24, will discuss Gawker.

American Apparel was once one of the largest apparel companies in North America.  Founded in 1989, at its peak in the early 2010s the company had over 250 locations.  It was widely-known for its provocative, attention-grabbing advertisements and trendy yet utilitarian clothing.

However, after several years of not operating profitably and dogged by controversy courted by its founder, Dov Charney, and his attendant legal troubles, American Apparel filed for bankruptcy in 2015 and in 2017 was sold to the Canadian apparel company Gildan Activewear.  While the company’s manufacturing operations and headquarters were once based in Los Angeles, American Apparel is now an online-only retailer and makes most of its clothing, which is still touted as ethically-produced, in international locations.

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Starbucks and CSR

Starbucks is one of the best-known companies and brands in the world. The success of Starbucks in the global market is not just, or even mainly, about the popularity of the coffees, teas, and snacks it serves to guests. Customers want to know where companies like Starbucks stand on social and political issues too. They’re eager to engage with the business values and cultural strategy of the company, in order to distinguish the choice for Starbucks over any of its many other competitors they could patronize for a drink or a pastry instead.

Corporate social responsibility (CSR) is a prominent strategic consideration for many companies. Authentic and convincing expression of CSR values can gain the attention and appreciation of consumers, competitors, and stakeholders. For a broad overview on the importance of inspiring this engagement for organizations seeking to use their interest in activism or social justice issues, check out this post on CSR tips for compliance programs.

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Corporate cultural change: Consistent and visible enforcement

This is the second in a series of five posts suggesting best practices for implementing corporate cultural change.  For an overview of all the tips on this subject, check out this preview postLast week’s post discussed tone and conduct at the top.  Today’s post is about enforcement.  Next Monday’s post, on March 12, will discuss effective policies.  The fourth post in the series, on March 19, will focus on procedures to complement those policies.  Finally, on March 27, the fifth post in the series will discuss tips for going beyond training in order to create effective and engaging employee education initiatives to boost awareness and compliance culture.

Last week’s post discussed the importance of commitments by executive boards, senior management, and top leadership in organization to expressing tone and modelling conduct to enable change.  Once the path is cleared for institutions to follow, by the statements and actions that aim to define and promote the necessary change, effective and bold enforcement actions must follow.

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Corporate cultural change: Tone and conduct at the top

This is the first in a series of five posts suggesting best practices for implementing corporate cultural change.  For an overview of all the tips on this subject, check out this preview post.  Today’s post will discuss tone and conduct at the top.  Next Monday’s post, on March 5, will be about enforcement.  The third post in the series, on March 12, will discuss effective policies.  The fourth post, on March 19, will focus on procedures to complement those policies.  Finally, on March 27, the fifth and final post will provide insights about innovative approaches to take employee and organizational education beyond the basics of routine training.

Building on the momentum created in 2017 by the brave and bold disclosures of the Silence Breakers, the #MeToo movement, and the #TimesUp initiative, in 2018 it is more timely and important than ever to throw major weight behind the need for disclosure, self-analysis, and change within organizations in all industries.  The focus on individuals – both in protecting those who have spoken up, enabling others to speak out, and keeping people safe in the future, and in properly punishing those who abused and harmed others as well as deterring further misconduct – must continue.

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Round-up on compliance issues with #MeToo in academia

An extended cultural reckoning spurred by public disclosures and investigative reports about sexual harassment and abuse has been ongoing since mid-2017.  The #MeToo sharing inspired by many high-profile Silence Breakers joining investigations by journalists or courageously sharing their personal stories has led to an ongoing public discussion about power, consent, disclosure, reporting, and enforcement.  Societal expectations and stakes for organizational justice and reform are deservedly higher than ever before.

While time will tell the ultimate shape of concrete, forward-looking change within institutions and communities, the one truth that is already apparent is that no industry will be exempt from having its organizations and their employees at all levels engaged in the change to social and corporate norms that must take place.  The current public discourse was kicked off by stories told by people who were abused, preyed upon, and suppressed by individuals and organizations in the Hollywood entertainment industry, but survivors from every sector have joined to share their experiences to expose their harassers and abusers and seek justice.

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Ethical decision-making and hard choices

Encouraging ethical decision-making is one of the main aspirations of any corporate compliance program.  At both the employee and organizational level, it’s important to support and promote the choices that are most consistent with both explicit rules and implicit values.   Individuals and corporations can demonstrate their principles-based identity through the choices they make.

Genuine commitment to making the most ethical decisions through the complex environment of inadequate information, lack of connection to consequences, competing interests, and limitations of belief systems/choice frameworks – just to name a few of the many risks inherent – is a critical component of a culture of compliance.  Individual persistence to honor internal codes of ethics and moral convictions will scale up to create heuristics and habits across the organization that support responsibility and thoughtfulness rather than a culture of fear and habits reflecting limited vision.

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Ben & Jerry’s CSR origins

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

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

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CSR tips for compliance professionals

Corporate social responsibility (CSR) is closely related to business compliance.  Both CSR and business compliance share the objective to integrate requirements from legal, regulatory, and social expectations with organizational strategy.  Business compliance has the broadest mandate of creating both rules-based and values-based structures and systems to support corporate and employee integrity and adherence to laws, regulations, and norms.  In contrast, CSR has these same goals but focuses on engaging in corporate actions that contribute to social good, generate positive public relations attention, and promote ethics and accountability.

While compliance is often focused on defining internal standards for conduct and strategy in order to follow or improve upon outside requirements, CSR has a much more public posture.  CSR is focused on defining the company’s positions on the environment, reform, justice, philanthropy, community relations, and other outwards-facing social initiatives.  After these objectives are defined, the company then presents and promotes its positions to consumers and society. CSR and compliance both contribute to a company’s mission statement and values, but CSR has a heavier hand in guiding the corporate image that is presented to consumers, industry partners, and society as a whole.  

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Tony’s Chocolonely and a Roadmap for CSR principles

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

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

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Compliance must-haves for changing organizational culture

The ongoing public disclosures about sexual harassment and abuse that have filled the news since mid-2017 have led to a major cultural reckoning.  Courageous people have come forward to share stories about inappropriate and dangerous behavior of high-profile individuals.  The public discourse about these people who were violated by abusers and predators with the complicity or support of other individuals or organizations has, to this point, focused largely on bringing these offenses to light, in order to listen to and believe in victims, so that they may be supported and empowered as survivors and as bearers of new societal norms.

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