My Proposals for the 2016 #SCCEcei – What’s Your Fave?

I’m really excited about the three panel proposals I submitted last night to the Society of Corporate Compliance and Ethics (SCCE), for its 2016 Compliance and Ethics Institute. Thanks to Amy Hutchens, JD, CCEP, Page Motes and Heather Powell for joining in.

Our proposed topics were:

  1. An advance workshop on drafting and negotiating contracts with compliance provisions — this would take the next step from the compliance contract panels that Amy and I did at the CEI in 2014 and this year.
  2. “The Good Reasons Why People Do the Wrong Things” — Exploring the frequent instances when people follow their own ethical code and choose to break rules. (Think about teachers or nurses following their deep ethic of care.) The lesson: it’s not just greed or “bad guys” that lead to misconduct.
  3. “Fostering a Speak-Up Culture: What Really Works” — Now more than ever, it’s critical for compliance professionals and business leaders to focus on what, objectively, has worked best to foster and maintain a culture in which people report suspected wrongdoing freely, constructively, and internally. So how do you make that happen?

I wish they’d let us do all three of them! So tell me, what’s your favorite?IMG_3426

Tone at the Very Top: The Umpire Strikes Back

The other shoe has dropped.

I wrote last month about concerns that the Justice Department may have gotten off to the wrong foot, tone-wise, following its “Yates Memo” declaration that it intended to prosecute individuals within companies for their organization’s wrongdoing.

But, as Mike Volkov so well summarizes, the top enforcer on this playing field quickly found a case with which to make its point. On October 29th, the DOJ announced a $125 Million criminal settlement with pharmaceutical company Warner Chilcott (once Galen, now Actavis). In the same breath, Justice also announced criminal charges against four company employees — including the company’s former president. According to the release, several other employees have already pled guilty or been indicted on criminal charges. The cases arise from Warner Chilcott’s payment of kickbacks to physicians to induce them to prescribe its drugs.

DOJ’s press release makes its intended message explicit:

“Pharmaceutical company executives and employees should not be involved with treatment decisions or submissions to a patient’s insurance company.  Today’s enforcement actions demonstrate that the government will seek not only to hold companies accountable, but will identify and charge corporate officials responsible for the fraud.”

Interesting, and not surprising, that Justice struck this blow in the healthcare industry. Pharma and Medical Technology have been the industries on the bleeding edge of enforcement (and internal compliance efforts) since the 90’s (at least).

In commenting on my earlier post about the tone being struck by the DOJ, Scott Killingsworth pointed out that “the DOJ will tell you what they are going to do, and then by golly they will do it.” I agreed, and I speculated that the Department must be “itching” to prosecute some company executives. Not that it took much in the way of powers of prediction, but it looks like we were right. Executives and companies who ignore the Yates Memo do so at their peril.

 

Tone at the Very Top, DOJ-Style

As compliance professionals and leadership counselors, we focus on “tone at the top.” What the C-Suite says is critical to establishing an ethical culture in an organization. What is even more important to foster that culture is whether top executives speak and act consistently. We advise our leaders that even one act of apparent hypocrisy, or of “looking the other way,” can undo a lot of cover-letters-with-Codes-of-Conduct.

With this perspective, I commend to you two recent blog posts by fellow compliance lawyers, about the tone coming from the very top, compliance wise: the Department of Justice.

One is Mike Scher’s post this week in the FCPA Blog about the DOJ’s findings that downplay the alleged corruption violations by WalMart in Mexico.

The other is  Michael Volkov‘s comment on the outcome of the DOJ’s investigation at General Motors, first published in September but recirculated through LinkedIn this week.

Screen Shot 2015-10-24 at 10.26.38 AMAt the SCCE’s annual Compliance and Ethics Institute earlier this month, I perceived a consensus of approval among the compliance community for the DOJ’s September 9th “Yates Memo,” in which Deputy Attorney General Sally Quillan Yates sought to send a strong message that the DOJ would henceforth be eager to prosecute culpable individuals for wrong-doing within the corporations they lead. There were many concerns (see this and this), yet the general thought seemed to be that the tone set by the Yates Memo would reinforce our efforts to get buy-in within our companies.

But Mike Volkov raises this concern: with the GM case (as now with WalMart), do the DOJ’s actions speak louder, tone-wise, than Yates’ words?

 

Two Things Watching The Oscars Taught Me About Ethics and Compliance

Patricia Arquette, accepting the 2015 Oscar for Best Supporting Actress.
Patricia Arquette, accepting the 2015 Oscar for Best Supporting Actress.

Last Sunday, three of us compliance lawyer types had ourselves a virtual Oscar Party.

We three – Amy Hutchens (CCEP), President of CLEAResources; Kirsten Hotchkiss, now an employment and employee relations counsel with American Express Global Business Travel, and I (President of LeadGood, and also CCEP)– conducted an experiment with the following hypothesis:

  • IF the leaders of an institution, through their every message and action, set a “tone from the top” that either fosters or undermines the ethical culture of that institution; and
  • IF the culture of our nation – an institution we all share — is in part determined in those rare events that a large proportion of the population share in-common;
  • THEN an ethical “tone at the top” will be set by the cultural stars and leaders who speak and act during the massively multi-person annual event that is the Academy Awards.

Amy, Kirsten and I made that hypothesis the topic of a “live-blog” that we conducted Oscar-night on my company’s website. We watched the Oscars along with everyone else, and reacted in real time to those things that compliance lawyer types notice. (You can still read our stream of observations and musings here.)

Our hunch going in was that we might hear a few moments of ethical leadership, and maybe a few ethical gaffes, among the presenters, red carpets types, and the commercials of the Oscar telecast. To our surprise, we (along with the rest of the billion-plus viewership) wound up hearing an almost continual series of stars speaking out forcefully and fervently for noble causes that should command our attention. Just in the acceptance speeches, we heard advocacy for:

 Gender Equality (Best Supporting Actress)

A.L.S. (Best Actor)

Alzheimer’s (Best Actress)

Whistleblowers (Best Documentary Feature)

Teen Suicide Prevention (Best Adapted Screenplay)

Returning Veterans (Sound Editing)

Civil Rights (Best Song)

Immigrants’ Rights (Best Picture)

Calling Your Parents (Best Supporting Actor)

 

As the New York Times put it, “Oscar nights usually do have their share of political posturing, but this was a particularly passionate evening. “

But there was a tone from the top, and it was this: “Speak Out for your Beliefs! Take Action to Help Others!” It was Corporate Social Responsibility Night at the Movies. Hooray for Hollywood!

Seriously, Oscars 2015 was a big-time, highly public, star-studded endorsement of a speak-up culture. (Even the Lego Movie’s brainwash-the-citizenry song, “Everything is Awesome,” lost.)

But on reflection, I wonder if all those appeals blurred together, and if any of them still stand out in the memory of most viewers. It was almost as if the message was, “Everyone has their own cause – so any cause is right.” Having heard so many appeals for action, viewers may have felt ironically unmotivated to action.

So I ask: Was the experience of the Oscar viewer on Sunday that different than the experience of our employees, in this time of the multi-modal, socially savvy, short-message-oriented, compliance communications program? I happen to love the practice of delivering compliance information in shorter bursts at higher frequencies, of “social learning streams” and the like. If we’re not careful, though, does it sound like this?

Don’t discriminate! (HR).

Recycle! (Sustainability).

Wear safety glasses! (EH&S).

No gratuities! (Commercial Compliance).

Donate! (United Way).

Protect our Trade Secrets! (General Counsel).

Protect our Company Data! (IT).

Follow our Code! (CCO).

 

If our quick compliance hits seem a blur, then the Oscars may have offered two lessons for our programs.

First, Focus. Too many emotional appeals may leave me numb. Too many instructions at once may strain my memory. If everything is important, nothing is important. (Maybe those programs that stress a theme-of-the-month have the right idea.)

Second: don’t just send a message; tell the story.Still Alice” had a compelling message about Alzheimer’s, and “American Sniper” about veterans and war, because of the power of their storytelling. The movies had the time, and craft, and humanity to make a social issue real. By contrast, the short plugs in the acceptance speeches at the Oscars were only reminders: they returned an issue to the front of mind, and reminded us of something we care about. That is an excellent thing to do in the short nuggets we have added to our compliance messaging.

But the power behind those messages originates in good old-fashioned storytelling. And even in this social age, it is the story that provides the inspiration to act.

Hooray for Hollywood!

 

P.S. Since our little experiment worked, we’ve resolved to do our “Ethics and the Oscars” live blog again next year. Hope you can join us!

 

(Note: A version of this post also appears on LinkedIn.)

The Oscars, and The Sting Rule of Ethical Leadership

Will the billion-plus viewers of the Oscars this year hear messages that promote a culture of ethics, or erode it?

My compliance chum Amy Hutchens and I, and others we hope, are planning to have some fun with that question as we “Live Blog” during the Oscars telecast tomorrow (Sunday, February 22). You can follow along with our observations and musings, and chip in your own, on the “LeaveGood Live!” page of this website.

As compliance pros have observed as frequently as Liam Neeson makes his voice all gravely, an institution fosters (or wrecks) its ethical culture with every statement and communication that its leadership makes. I think of this as the Sting Rule of Ethical Leadership (Every Little Thing You Do Is Culture). So when it comes to one of the central events in the American culture — the Academy Awards — what are our cultural leaders saying about ethics? Rather than add to more learned commentary about the movies themselves, our main focus will be the speeches, the jokes, bits of the Twitterverse, the commentary and the commercials (second in mass cultural importance only to the ads during the Super Bowl).

What ethics messages or miscues will we hear this year? An actor’s appeal to a moral cause with all the wrong language? A major product ad that encourages you to lie to your boss? Or just conspicuous over-consumption?

In large part, Amy and I are just going to see what comes up, and wing it. Our hope is that we can all have a little professional fun — us, and you (dear reader), if you choose to add your comments along the way. We’re going to start up at 7 PM EST and plan to keep going until the thing is over.

If you are watching the big show, I hope that you’ll bring us up on your little screen.

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:

Trustworthy
Loyal
Helpful
Friendly
Courteous
Kind
Obedient
Cheerful
Thrifty
Brave
Clean
Reverent

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.

What becomes a CEO most (Part 2)

I promised in an earlier post to revisit a study, publicized by David Brooks, about what characteristics seemed to make for the most successful CEOs.

The study is actually from July 2008, by Kaplan, Klebanov and Sorensen. It set out to compare the relative contribution to CEO success of what the study calls “execution” skills versus “interpersonal” skills.

The study concludes, in part:

[S]uccess and performance are more strongly correlated with execution-related skills than  with interpersonal and team-related skills, conditional on hiring a CEO.  In other words, CEOs with the execution-related skills of a Jack Welch appear more successful than CEOs with the more team-related skills of Jeff Immelt.

So I reviewed the study and tried to put aside how badly Brooks interpreted it. I already did that rant.

The first thing to point out is the authors’ study sample, and their definition of success. The leaders they evaluated were 316 candidates for the CEO job at companies funded through private equity — either VCs or leveraged buy-outs (LBOs); the main measure of their success for purposes of the study was whether they got the job. In that respect the study may tell us more about what private equity firms think matters in a CEO than they do about what actually works and doesn’t work.

(Which off the bat reminds me of a comment I once heard at venture capital event, that VCs were like a Kindergarten soccer game: the ball rolls one way, and all the kids chase after it in that direction; the ball rolls the other way, and all the kids chase after it again. The VCs in the room laughed and nodded. But I digress.)

Even between the LBOs and VCs, there were differences:  “Buyout CEOs score higher on characteristics related to a broader range of managerial and executive functions while VC CEOs appear to score higher only on characteristics related to intelligence and vision.”

To the extent the study measures performance success, it looks only at factors it concedes are “coarse.” Performance success means a good exit or good press; failure means being fired, going bankrupt, or getting bad press. By these measures, the authors conclude “Success tends to be positively related to execution-related skills, particularly for LBO CEOs, and tends to be
unrelated or negatively related to team-related skills, particularly for the VC CEOs.”

But the part of the study I dwelled on, were the distinctions the study makes to categorize skills as either “execution” or “interpersonal” — the key distinction in the study:

[W]e informally refer to characteristics as interpersonal / team-related, neutral, and execution-related.  Based largely on the factor analysis we describe below, we refer to “Develops People,” “Treats People with Respect,” “Calm,” “Flexibility,” “Listening,” “Open to Criticism,” and “Teamwork” as interpersonal or team-related skills.  We view “Removes Underperformers,” “Efficiency,” “Aggressive,” “Moves Fast,” “Persistence,” “Sets High Standards,” “Proactive,” “Work Ethic,” “Holds People Accountable” as execution-related skills.  We classify “Network,” “Hires A Players,” “Follows through on Commitments,” “Organization,” “Brainpower,” “Analytical,” “Strategic,” “Creative,” “Attention to Details,” “Integrity,” “Enthusiasm,” “Writing,” “Oral Communication,” and “Persuasion” as neutral or mixed.

These are some fascinating distinctions. Spend a few seconds picking out a skill and see how the authors categorize it.

And see that the study basically does not measure the contribution to success of CEO skills like organization, analysis, and attention to detail… or like enthusiasm, communication, and persuasion. Those are considered “neutral” skills. (So why did Brooks say the study reported those skills don’t matter? (Oops. I said it again.))

“Follow through” is neutral, not an execution skill.

“Holds people accountable” and “removes underperformers” are scored as execution skills, not an interpersonal skill, like “develops people.” A bias toward firing instead of building?

Finally —  but fundamental for the purposes of this blog — the study also treated “integrity” as a neutral skill. The study just doesn’t evaluate if integrity is good for business, or not.

So if you like to talk up mission and values, you don’t need to feel daunted by this study.