Compliance Culture

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

TOMS and CSR

TOMS is a well-known California-based retail company.  The company sells footwear, eyeglasses, coffee, clothing, and handbags.  Its most iconic item is the alpargata shoe, a casual style based on a traditional Argentine shoe.  The TOMS business model began with this shoe, and every time TOMS sold a pair, a new pair was given to a child without adequate footwear.  As the TOMS product line expanded, this philanthropic mission was extended to each of the new business items.  With each pair of glasses sold, TOMS uses part of the profit on vision projects in the developing world.  In honor of each purchase of TOMS coffee, the company works with partner organizations to provide water to communities in need.  Handbags sold benefit maternal health and safe childbirth initiatives.

Corporate social responsibility (CSR), therefore, is a significant driver of the TOMS business strategy and purpose.  The company was started by entrepreneur Blake Mycoskie with the entire purpose of serving as a philanthropic project to provide shoes to children in developing nations.  Throughout the company’s history since, raising awareness of the importance of having shoes for best health and safety practices.  The TOMS “one for one” business model where a charitable contribution is made for each purchase imbeds CSR in the commercial strategy of the company.

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Round-up on compliance issues with online platforms: Facebook

This is the second in a series of six posts on compliance issues with various online platforms.  Last week’s post was about YouTube.  Today’s post will be about Facebook.  Next week’s post will discuss Instagram.  The fourth post in the series, on March 29, will focus on Twitter.  The fifth post, on April 5, will be about Snapchat.  On April 12, the sixth and final post in the series will discuss Reddit.

The online social media site Facebook was created in 2004 and in the following years has become one of the most well-known online platforms. Facebook was originally created as a social networking service by and for Harvard University students and then expanded to the broader Ivy League and then general university community before opening up in 2006 to all users who meet the local minimum age requirement.  Since 2012, Facebook has been publicly-listed on the NASDAQ stock exchange.

Facebook’s rise to extreme popularity coincided with the disruptive innovations in Internet-enabled devices other than traditional computers, such as smartphones and tablets. Therefore as the site grew its user base it became an immersive and highly-engaging platform for people to share a wide variety of personal information, partake in social interactions, upload media such as photos or videos, and participate in community-based activities organized by profession, background, and interests.

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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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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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Institutional responsibility and the US Olympic Committee

The end of 2017 has been an explosive and revelatory time for public disclosures about culturally-pervasive sexual harassment and abuse. In most cases the reporting has focused on exposing various individuals, who committed their offenses with the full force of their power and prominence within their communities, organizations, and industries. All too often, the courageous narratives presented by the individuals who come forward to tell their stories include the fact that their harasser or abuser systematically prevented them from work advancement or access to work at all, in many cases withholding employment opportunities and in some cases, even coordinating with other men in positions of authority to prevent the women from working in the future.

The many (and continuing) disclosures about the inappropriate and dangerous behavior of these high-profile men has been a cultural watershed moment. Hopefully this heightened awareness will lead to a transformation in the public discourse about societal expectations around these dynamics, as well as justice for the women who have had their lives negatively impacted and their careers curbed or ended. However, many questions remain in what structural progress, if any, will come from the individual cases, no matter how numerous they become.

Thus far, far-reaching institutional responses to the misconduct of these individuals has been lacking or entirely absent. The best most organizations have been able to muster is routine HR statements that the accused men are being suspended or will resign, sometimes accompanied by saccharine denials of knowledge and expressions of regret, and seldom followed up with any significant sort of commitment to organizational change or an authentic intention toward setting a standard for corporate social justice.

Corporate boards and senior management at organizations under fire for the unacceptable behaviors of their principals and often most visible representatives have proven lacking in the unfolding of this cultural moment, which is driven by individuals and targeted at individuals. While certainly these are cases where bad people did bad things, it is important to acknowledge that they were empowered to do so, implicitly or in some cases expressly but with a blind eye toward their malfeasance, by the organizational structures which promoted and supported them and oppressed and marginalized their victims.

For more on the complicity of corporate leadership and the dubiousness of their malleability to change even amid the major societal focus on these issues, check out these great pieces from Wired:  Corporate boards are complicit in sexual harassment and Making the silence breakers Time’s Person of the Year won’t change anything.

One particularly beleaguered institution that is confronting the limitations of its definition of its own institutional responsibility is the US Olympic Committee. Ethical and integrity questions about the actions of individuals associated with the US Olympic Committee are nothing new. Incidences of cheating, doping, and abusive behaviors by coaching and medical staff are, unfortunately, nothing new. Because the US Olympic Committee relies on a vast network of local personnel who train, recruit, develop, and support athletes often from a very young age. Under these conditions, athletes, their schools, and their families place tremendous trust in the representatives and related parties to the US Olympic Committee that they rely upon to bring their Olympic ambitions to fruition.

All too often, predatory coaches are reported by a victim only to have multiple other athletes come forward to say that they too were mistreated and abused. Organizations within the US Olympic Committee’s umbrella ban individuals proactively upon revelations of sexual abuse, and make efforts to distribute guidelines and ensure education, but underreporting of instances of sexual assault mean that predator coaches prey on athletes for entirely too long undetected.

The reality is, the US Olympic Committee has 48 national governing bodies underneath it which thousands of club teams and gyms underneath that. The sheer volume of organizational and administrative entities through which these abuses pass and would need to be addressed or investigated, all without a national entity or a mandatory supervisor to set a compulsory standard for this, is one of the greatest forces working against effective identification and removal of predatory coaches. In this context, major organizations such as the US Olympic Commission too often focus on removing individuals without identifying root causes or building defense structures against the underlying problems.

Changes are too often driven by media exposure and fear of reputational damage, and too infrequently motivated by compassion or justice. Until these institutions adapt their approaches to address sexual abuse as directly as they can their commercial concerns, and until adequate oversight and control measures are taken with meaningful enforcement actions to back them up, individuals will continue to be harmed.

Organizations must change from operating independently on these issues, which provides them with the plausible deniability of jurisdictional ignorance and a patchwork of ineffective rules and procedures for processing sexual assault claims and investigations. Instead, senior leadership must stand up and make these processes uniform and coherent so that they can be not just a pretense, but also effective in protecting individuals and taking responsibility. Only then can the brave testimonies of individuals lead to organizational change toward practices that will respect and protect them.

For more about the US Olympic Committee’s challenges in defining and enforcing a meaningful code against sexual abuse and misconduct in its ranks, check out this article from Harper’s Magazine:  Pushing the Limit.

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