google Archives - Compliance Culture

Inexperienced CEOs and immature compliance cultures

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

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

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

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

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

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

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

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

Round-up on ethics of design in technology

One of the most interesting and challenging inquiries in the evolving ethical code of technology has to do with design choices. Ethical decision-making and process design has direct impact on the fluid, complex process of creating the devices, interfaces, and systems that are brought to market and used by consumers on a constant basis. In such a disruptive and innovative industry, there are moral costs for every design decision: every new creation replaces or changes an existing one, and for everyone who has new access or benefits, others experience the costs of these decisions. Therefore the ethics of design as applied to technology and, of particular interest, social media, have concrete importance for everyone living in a world increasingly dominated by user experiences, communities’ terms of service, and smart devices.

Former Google product manager Tristan Harris has gone viral with his commentary on the ethics of design in smart phones and platforms creating apps for them. There is a balance in online design where the internet platforms go from being useful or intuitive to encouraging interruption and even obsession. Many people worry about the effect “screen time” may have on their attention span, quality of sleep, and offline interactions with people. Design techniques may actually keep people attached to their devices in a constant loop of advertisements, notifications, and links, as content providers and platforms compete to grab viewers’ attention. Alerting people to the control their devices have over their attention and time is one step, but urging more ethical choices in the design process is the next frontier for innovation reform: Our Minds Have Been Hijacked By Our Phones. Tristan Harris Wants To Rescue Them.
The above phenomenon of addictive design has become so imbedded in the creation of app features that even the most subtle changes can have a huge impact on the consumption practices of users. But when do features go from entertaining and user-friendly to compulsive, even addictive? Refreshing an app can be like pulling the lever on a slot machine, giving the brain rewards in the form of new content to keep the loop going at the expense of other activities and priorities. These design improvements, then, may actually affect users more as manipulations: Designers are using “dark UX” to turn you into a sleep-deprived internet addict
These small, ongoing redesigns are intended to make apps more readable and consumable. These periodic improvements are intended to make content more captivating and enable longer browsing – again prompting the question, what is the ethical code for the control designers wield over users with these choices? From a design ethics perspective, these small changes can be viewed as more alarming than major ones, as they are so incremental that many users do not consciously notice them and therefore “optimization” tips into “over-optimization,” meaningful interaction becoming possibly destructive: Facebook and Instagram get redesigns for readability
Artificial intelligence always captures the public’s imagination – thrills and fears about the possible developing capabilities of robots and predictive algorithms that could direct and define – and perhaps threaten – human existence in the future. AI has been developing in recent years at a breakneck pace, and all indications are that this innovation will continue or multiply in the coming period. The science fiction-esque impact of AI on society will grow and bring with it all kinds of ethical concerns about the abilities of humans to define and control it in a timely and effective way: Ethics — the next frontier for artificial intelligence
Social media platforms have developed into social systems, with all the dilemmas and dynamics that come along with that. These networks may face the choice between engagement and all of the thorny dialogs that come with it, and a simpler, more remote model that can be enjoyable but is less interactive and therefore, perhaps, less provocative: ‘Link in Bio’ Keeps Instagram Nice

Queries into design ethics and choice theory in technology, especially social media, ask the questions of what human experience will evolve into in a world which is increasingly digitized and networked. The design decisions made in the creation of these devices and systems require an ethical code and a sense of social responsibility in order to define the boundaries of what are the best collective choices.

Round-up on emerging compliance disciplines in diverse industries

Compliance programs of the last 20 years have taken the firmest roots in industries that are by definition highly-regulated or in those which have most potential for widespread damage from wrongdoing. These range from pharmaceutical companies in the former group to financial services firms in the latter group. Current trends indicate, however, that many other industries’ practices are being assertively investigated by the media, concerned citizens, and filmmakers. These investigations bring to light processes and practices that are governed by insufficient controls and often unethical cultures.

Doping in professional sport is under increased public scrutiny in the aftermath of scandals such as state-sponsored cheating by Russian athletes in the Olympics and the dramatic fall from grace of Lance Armstrong, who cheated without detection for years; as society deals with the fallout of these discoveries, far-reaching change in anti-doping programs is necessary: Icarus: A Doping House of Cards Tumbles Down
Evolving tech company organizational culture is under fire again, this time at Google, with an employee-authored document questioning diversity initiatives going viral and suggesting that gender inequality and treatment of people of color remain systemic problems in Silicon Valley that current corporate governance systems are insufficient to address. The employee in question was dismissed immediately, and Google leadership immediately started disclaiming the statements and apologizing, but it remains to be seen what substantive steps might be taken to actually address the root causes of this conduct and openly analyze the culture of compliance at Google. Hopefully a self-appraising, progressive conversation can take place in Silicon Valley rather than denial of the systemic issues that lead to these events time after time: Google Employee’s Anti-Diversity Manifesto Goes ‘Internally Viral’
Cybersecurity grows all the time as a risk factor to businesses, with hackers constantly outpacing efforts to prevent their intrusions; now moving beyond breaking into office e-mail servers or ransoming files from zombie computers, these cyber-thieves are exploiting differences in national laws and vulnerable devices to rig slot machines in casinos around the world: Meet Alex, the Russian Casino Hacker Who Makes Millions Targeting Slot
Campaign finance laws are a perennial hot issue in US politics; these laws are often intended to avoid corruption and increase transparency, but with the number of committees, groups, and shell companies participating in election fundraising constantly growing, following the money is becoming harder, complicating along with it efforts to establish accountability: Soft Money Is Back — And Both Parties Are Cashing In
Fascinating intersection of business and politics, with all the risks inherent in both, as consumer technology giant Samsung struggles against an increasingly complicated government relationship, intense corporate work culture, legal dramas, and public protests, despite an impressive commercial rebound: Summer of Samsung: A Corruption Scandal, a Political Firestorm—and a Record Profit

All the foregoing represents many growth areas for the welcome expertise of compliance practitioners and a possibility to drive change toward a society that places a higher value on accountability and integrity.