Tips for leading from within

I wrote up some nitty-gritty tactics for how to “Lead Good” for the website of the Association of Corporate Counsel (ACC) — the leading trade association for in-house lawyers. My article, “Top Ten Practical Ways to Enrich and Empower Your Compliance Program,” is the ACC’s featured “Top Ten” article of the month.

The sub-text for my recommended methods: Don’t just administer. Be pro-active. Be creative. Lead.

The Days of Freedom’s Labors

As we approach early September, I’d like to make a proposal.

First, I propose that the Friday after Labor Day be designated a full federal postal and banking holiday, to be designated as Freedom Day.  I know that the idea for this kind of holiday, designed to commemorate the shock, losses, and resolve of 9/11, is not a new one — but I propose we take an additional step.

So I propose further that the week between Labor Day and Freedom Day receive a special designation.  I would call it “The Days of Freedom’s Labors.”  And it is that entire week that is the focus of my proposal.

The old saying goes, “a freedom isn’t free,” but after all, how much time do we spend talking about the price we pay for freedom?  So I view The Days of Freedom’s Labors as the time for a national consideration of the simple, individual work it requires to maintain a democratic society that operates under the rule of law.  That work begins with the kind of labor that Labor Day was established to commemorate in the first place: that people get up every day and go to work and keep our economy going.  But a week long consideration of freedom’s labors also provides time to reflect on the work of public servants, charities and faith-based organizations, simple basic acts of heroism, and yes, even of the work that lawyers (like me) do.  It also provides a time to celebrate how freedom arises from civil, respectful debate, and the work of an independent, active press.

But restoring meaning to Labor Day is only one of the many benefits of a week long commemoration of freedom’s labors.

The holidays would give provide a way to mark the 9/11 attacks that is meaningful, affirming and forward-looking… a way that moves away from the maudlin or from bringing too much attention to the attackers (which is all they wanted). This is also the season to mark the national tragedy that was Hurricane Katrina. Both events provide many examples of the value of individual civility, and the cost of its absence.

For companies, the national discussion centering on The Days of Freedom’s Labors could also be a touchstone for compliance efforts, perhaps providing a handy kick-off to a fall push to meet compliance targets by year’s end. And again, the touchstones of civility, mutual respect, and yes, the Golden and Silver Rules, are a natural tie-in to the best reasons for compliance.

The Days of Freedom’s Labors would also provide a useful, immediate focus for curricula at the beginning of the school year.  Rather than the usual drift through a slow ramp up of studies, celebrating The Days of Freedom’s Labors at the beginning of the academic calendar would give teachers an immediate focus to explore topics from civics and government, to ethics and diversity, to history and biography, to the rule of law.

Speaking of the beginning of the school year, few parents would not welcome another three day weekend to buy things like that exact form of binder that most pleases Johnny’s new teacher (a requirement that, in my district anyway, you never seem to hear about until after Labor Day).

Indeed, for retailers and tourist destinations alike, an extended end-of-summer holiday could even reap economic rewards.  For businesses looking for non-monetary forms of reward for their work forces, the close combination of the Labor Day and Freedom day weekends might provide some appealing opportunities.  And would it be all that bad if the weeklong commemoration of The Days of Freedom’s Labors brought our overworked country a step closer to that glorious continental institution they call vacance – the company-wide vacation.

But let me not get too far down the road of pleasing vacations and crowded stores. The point is, a week-long celebration of freedom’s labors fits our times and fits our unique national identity.  It is distinctly non-partisan. By its nature, it is an appropriate time for dissent as well as assent.  And that may be the greatest value of the Days of Freedom’s Labors: reminding all Americans that our progressive, prosperous society – where everyone gets a chance, and every vote counts – is built or abandoned in proportion not to how much we rigidly agree – but by how hard, how honestly, and how respectfully we labor for the rule of law, and institutions and businesses governed by the Golden and Silver rules.

Happy Freedom Day.

Everything I needed to know I learned at Summer Camp (Part 2)

This message from my 18-year-old son, a camp counselor this summer.

At orientation, the Camp Director talked about how the camp runs on “discipline of respect” that is “clear, calm, fair, and consistent.”

Isn’t this exactly the goal of good corporate governance?

This proves that (1)  you don’t need a pricey seminar to learn the keys to ethical leadership, and (2) we have dinner table conversations you might find boring.

Bone at the Top

Occasionally, company leaders just do the darndest things. Things like short-term decisions that wind up wrecking a company’s reputation long-term. Things that must make the company’s efforts to build a culture of ethics internally, just seem to its employees like so much window dressing. These bone-headed decisions set a “tone at the top” you don’t want. Call them cases of a “Bone At the Top.”

I came across two of them in the news this past week.

The first is a confession from the companies that sell re-filled propane gas containers for your backyard grill, that they have been putting less gas than they used to in the same sized gas canisters. As KYW-TV (Philadelphia) reporter Jim Donovan reported:

In the past you would take your empty tank and pay to exchange it for a full one.  But starting last summer, two big propane tank exchange companies, Blue Rhino and Amerigas decided that instead of raising prices they would put less propane in the same-sized tank. “The fact of the matter, those tanks weren’t full, they were partially full,” says Attorney Eric Gibbs, adding, “so consumers didn’t realize that they were getting 15 pounds instead of 17 or 18 pounds.”

This is worse than shrinking a 50 cent candy bar — you can see that. Now, I checked today at my neighborhood Lowes, and there was a sticker on the cage of Blue Rhino tanks saying they contained 15 lbs. of propane — but for that message to hit home I would have to (1) go to the cage and look at it (when to do the exchange you instead just walk into the store), and (2) remember that when I last got a tank, months ago, it had 17 lbs in it. But I don’t do either of those things. I hand them my old, empty Blue Rhino gas tank and some money and they hand me a different tank that feels heavier. It’s supposed to be an exchange, not a down-grade.

So maybe next time I’ll take my Blue Rhino canister over to my local farm-goods store, where I keep the tank and I watch them pump it full of propane. I get what I bargained for, and Blue Rhino gets its recurring-revenue business model severed. Short-term win becomes long-term loss. This may be more evidence, as I have mused before, that short-term executive thinking is unethical. It is certainly evidence that sometimes, the most ethical and transparent thing to do is just raise your prices.

It’s also possible that, as my family’s official Griller of Meat, I take this BBQ Propane thing a little too personally.

The second case is even more of a head-shaker.

It’s now been revealed that the National Arbitration Forum (the NAF) — one of the largest alternative-dispute resolution forums — is owned in large part by an investment fund that also owns a massive nationwide debt collection agency. I’m guessing the fund leaders thought they were making a nice, pure vertical play into the consumer debt collection sector: the ability to profit by being both the “prosecutor” and the “judge.” Now NAF has been on the receiving end of some awful press (like this and this and this) and a lawsuit filed by the Minnesota Attorney General (the Journal has a link to the complaint). The AG alleges as follows:

The consumer also does not know—and the Forum hides from the public—that the Forum is financially affiliated with a New York hedge fund group that owns one of the country’s major debt collection enterprises.  Beginning in 2006 and through 2007, Accretive, LLC (a family of New York hedge funds under the control of an investment manager named  J. Michael Cline and his associates), engineered two transactions.  In the first transaction, Accretive formed several private equity funds under the name “Agora” (meaning “Forum” in Greek), which in turn invested $42 million in the National Arbitration Forum and obtained governance rights in it.  In the second transaction, three of the country’s largest debt collection law firms (Mann Bracken of Georgia, Wolpoff & Abramson of the District of Columbia, and Eskanos & Adler of California) merged into one large national law firm called Mann Bracken, LLP.  Accretive then formed and funded (partly using federal money from the U.S. Small Business Administration) a debt collection agency called Axiant, LLC, which acquired the assets and collections operations of Mann Bracken.

Through these transactions, the Accretive hedge fund group simultaneously took control of one of the country’s largest debt collectors and became affiliated with the Forum, the country’s largest debt collection arbitration company.  In 2006, the Forum processed 214,000 consumer debt collection arbitration claims, of which 125,000—or nearly 60 percent—were filed by the law firms listed above.

Catch that? The NAF bills itself as a neutral forum, but it allegedly got 60% of its consumer debt collection cases from its sister companies.

The Minnesota AG filed her suit on Tuesday, July 14.  Less than a week later, on July 20, the NAF settled, and agreed that it would never, ever again handle a consumer arbitration. Said the AG, “The company will permanently stop administering arbitrations involving consumer debt, including credit cards, consumer loans, telecommunications, utilities, health care, and consumer leases.”

A broad, long term defeat, arising from what someone thought was a clever win. Ouch.

Want to know why the government is so hot right now on regs and statutes that impose mandatory disclosure or mandatory self-reporting of allegations? Consider this: at the heart of both of these instances of a “bone at the top” was the failure to fully publicize some key fact, to speak publicly about “the whole truth.”

But also consider the compliance teams at these companies, and their affiliates, who in the face of this news have to continue to tell their teams to reveal all possible conflicts of interest and play by all the rules. Problem: A Bone at the Top drowns out Tone at the Top every time.

Everything I Needed to Know I Learned at Summer Camp (Part 1)

I’ve got a lot of summer camp in my life these days, and compliance on my mind, and the two keep intersecting.

There is a lot of the art of marketing in leadership, and in corporate ethics. One example is the knack of coming up with a few words to summarize and represent your company values. These are the isolated, boldfaced words that become section headings in a Code of Conduct, or paragraph titles in a Mission Statement, or that turn into an anagram in posters hung in the coffee rooms.

If you are in the market for those kind of words, you could do a lot worse than these:


So consider this tribute to the Scout Law as my greeting card from Boy Scout Camp NoBeBoSco, near Blairstown, New Jersey, where I spent the last week.

6:45 AM on Saturday, July 18, 2009, in the Onandaga campsite
6:45 AM on Saturday, July 18, 2009, in the Onandaga campsite of Camp NoBeBoSco, near Blairstown, New Jersey

I hope you enjoy it. And remember to do your good turn daily.

(PS:  OK, I know you can’t use “Reverent” in most secular companies. And maybe you would only use “Clean” if you had manufacturing. And maybe you would like to use “Obedient” but you know it’s too medieval for an American workplace. But you get the idea.)

Anti-bribery enforcement is a real risk

I have sometimes gotten a sense of annoyance from executives — even the ones who are fairly ethically oriented — when it comes to the specter of the Foreign Corrupt Practices Act: the country’s primary statute to combat international bribery.  The law can hold a US company culpable for the actions of its people overseas, even something as (arguably) remote as an independent contractor sales agent being too lavish in entertaining a doctor who works at a foreign state-owned hospital. Somehow, the law’s sweep, and its ambitious aim of leveling the commercial playing field by prohibiting what for years had been viewed as an unavoidable way of doing business, seems to make some execs resent the serious work needed to avoid a violation. (It reminds me of sitcom cliches about getting kids to do math homework: “It’s so haaaaard. Do I hafta?”)

Yes, you hafta — and for potent proof see a new criminal plea that was in the news last week:

WASHINGTON, June 29 /PRNewswire-USNewswire/ — A former executive of Philadelphia-based Nexus Technologies Inc. pleaded guilty today in connection with his participation in a conspiracy to bribe Vietnamese government officials in exchange for lucrative contracts to supply equipment and technology to Vietnamese government agencies, in violation of the Foreign Corrupt Practices Act (FCPA),…

This was not a big FCPA case against a big company. Siemens wound up shelling out some $800 Million in fines and disgorgements. But Lukas could wind up with ten years in the slammer.

So I think the Lukas case is a more potent warning. It says that FCPA enforcement won’t be limited to monster claims against ginormous companies. Any company can get nailed, and more to the point, executives who are not little Madoffs can still go to jail.  Consider that, next time you hear an exec acting like her  lawyer’s warnings about FCPA are the compliance equivalent of the Boy Who Cried Wolf.

And on the positive side, setting up the training, and systems, and monitoring, to mitigate the risk of FCPA violations can pay corollary benefits in terms of setting”tone from the top.” You can always quote JFK, and say your team should do it because it’s hard.

Corporate campaigning may get new rules

Let’s say that as a business leader, you want your company to “Lead Good” in more than its own operations. You want your company to “Lead Good” across the country — by spending corporate coin on ads to promote (or oppose) candidates in a federal election.

Right now, as the law stands, you can’t do it, not exactly. You have to limit campaign spending to the company’s PAC. And there’s no buying TV or radio ads to support or oppose a specific candidate in the final days leading up to an election. Those restrictions are part of the fabric of campaign-finance reform rules and laws in place since the early ’70s, including the so-called McCain-Feingold Act.

But corporate political advocates may soon get their chance… and this campaign-finance fabric may be ripped to shreds. The US Supreme Court last Monday, at the end of its term, announced that it wants a major campaign finance case re-argued — not on the relatively narrow issues of the case itself, but on a whopper of a question: whether the Court should overturn the basis for McCain-Feingold jurisprudence: the Supreme Court’s 1990 decision in Austin v. Michigan Chamber of Commerce, and its 2003 decision in McConnell v. FEC.

One key issue is whether corporations get free speech and first amendment rights like any other “person” (because the corporation is a kind of “person” under the law), or whether special rules should apply to corporate speech to avoid corruption and the undue influence of money on elections.

It’s rare that you find an issue that puts Common Cause supporters on one side (“Fight Corporate Domination!”) and ACLU-types on the other (“More Choices in the Marketplace of Ideas!”), but this is it.  Another example: The Austin opinion was written by Thurgood Marshall, with former Chief Justice William Rehnquist among the Justices joining his majority.

The re-argument order suggests that there are five votes potentially ready to overturn the present scheme. If the cases are overturned, a lot of rules, regulations, and procedures that have become familiar, at the government and corporate level. will get scrapped. Could lead to a wild and wooly world of corporate campaign speech until the dust settles, with plenty of opportunities for CEOs to lead well or trip on their own feet.

In a dramatic and unusual move — and one that turns up the heat on the speed of the confirmation of Justice-Designate Sotomayor — the Court has set argument for September 9th, even before its next term formally begins on “the first Monday in October,” the 5th.

The Government as Shareholder

Followers of this blog might enjoy my essay-length article “The Government as Shareholder: Governance When Uncle Sam Takes Over.” It is the new featured article this week at the compliance industry website

For reality now confronting hundreds of American businesses, most notably and recently GM, the topic of “the Government as Shareholder” has attracted little published scholarly or professional thinking. I’d welcome colleagues to join me in considering it, by commenting here or (even better) on the Corporate Compliance Insights site.

My thanks to Charles M. Elson, Director of the University of Delaware’s Weinberg Center for Corporate Governance, for suggesting the topic, and to my colleagues Retta Riordan and Gloria Barr, for generously providing a peer review of the article.

You Better Get Ready

It’s not as lofty as my last post, but there is another enormous leadership message in this weekend’s events in Iran: as Andrew Sullivan so deftly puts it, “The Revolution Will Be Twittered.” Millenials took what oldsters think of as a plaything of a communications medium, and Carpe Diem! So Sullivan concludes:

That a new information technology could be improvised for this purpose so swiftly is a sign of the times. It reveals in Iran what the Obama campaign revealed in the United States. You cannot stop people any longer. You cannot control them any longer. They can bypass your established media; they can broadcast to one another; they can organize as never before.

Which, in a sign of the bizarre things that the human mind can do, suddenly made me hear a management and HR warning in a harmless offering from The Monkees, from my own revolutionary youth — something I never thought would be deep.

We’re the young generation/and we got something to say

So you’d better get ready/we may be comin to your town.

A Reminder from Iran: It Matters

Feeling cynical about leadership and ethics? Feel like compliance is an annoyance in a world of relativistic morals? Think the Rule of Law can be gamed?

Look at this, a Howard Beale moment but deadly serious, all organized by Twitter… and you will get over your cynical attitude.


I’m wearing green tomorrow, not because I think it will make a difference in Iran, but because I appreciate the rebuttal to they are providing to those of us comfortably here.