Corporate culture is finally being acknowledged as a key ingredient in a successful business, particularly one which operates ethically and in compliance. The Department of Justice (DOJ) formally recognized the need to assess corporate culture in the speech by Deputy Attorney General Lisa Monaco to the ABA White Collar Conference in October 2021. But what are some indicia of good culture and more importantly what are some indicia of a toxic culture? A recent article in the MIT Sloan Management Review provided some guidance. In Why Every Leader Needs to Worry About Toxic Culture, Donald Sull, Charles Sull, William Cipolli and Caio Brighenti posited that by pinpointing the elements of toxic culture in a company, its leaders focus on addressing the issues that lead employees to disengage and quit. These ideas have significant importance for the compliance function as it navigates corporate culture, both in assessing and improving it.
Moreover, the Chief Compliance Officer (CCO) and corporate compliance function were identified in the 2020 Update to the Evaluation of Corporate Compliance Programs as the keepers of institutional justice and institutional fairness. This mean recognizing and then preventing a toxic culture from spreading and infecting your entire organization is squarely in the compliance wheelhouse. The article lays out key red flags for every CCO and compliance professional to look for in assessing culture. Finally, for any company with a toxic culture, the chances are much greater to be defrauded by its own employees or to defraud others through bribery and corruption by violating such laws as the Foreign Corrupt Practices Act (FCPA).
The authors identify behaviors that they call “the Toxic Five attributes”, being “disrespectful, noninclusive, unethical, cutthroat, and abusive – poison corporate culture in the eyes of employees. While organizational culture can disappoint employees in many ways, these five elements have by far the largest negative impact on how employees rate their corporate culture and have contributed most to employee attrition throughout the Great Resignation.” As a CCO or compliance professional you need to be on the watch for them and take steps to remedy them if you see or hear about them.
Non-inclusive Behavior
This is about whether your employees are “treated fairly, made to feel welcome, and included in key decisions.” It is “the most powerful predictor of whether employees view their organization’s culture as toxic. It applies to all demographic groups; “gender, race, sexual identity and orientation, disability, and age.” It can be outright discrimination to the equally invidious but more subtle conflicts of interests of nepotism and playing favorites. The topic of non-inclusiveness includes “terms like “cliques,” “clubby,” or “in crowd” that indicate that some employees are being excluded without specifying why.”
Disrespectful Behavior
The authors found that “feeling disrespected at work has the largest negative impact on an employee’s overall rating of their corporate culture of any single topic.” Lack of respect can occur in many areas. The most obvious is the lack of a speak up culture where employees understand it is useless to raise issues to management; whether serious matters such as FCPA violations to more straight-forward ideas such as process improvement. It can also be something as simple as whether or not to return to the office on a fulltime basis and whether management listens to employees about their desires to continue working from home or utilize some type of hybrid working arrangement. The authors noted, “whether you analyze culture at the level of the individual employee or aggregate to the organization as a whole, respect toward employees rises to the top of the list of cultural elements that matter most.”
Ethical Behavior
The authors believe that ethics “is a fundamental aspect of culture that matters at both the organizational and individual levels.” Interestingly, there are several different aspects to ‘ethics’ that every CCO needs to consider. Unethical behavior is “about integrity and ethics within an organization.” It also includes dishonesty, which “employees described dishonest behavior in many ways”, from outright lying to making false promises to shading the truth to simply “sugarcoating.” Under regulatory compliance employees talked about failure to comply with applicable regulations, including failure around safety standards.
Cutthroat Behavior
I found this category fascinating as it included both uncooperative co-workers and the lack of harmonization across organizational silos. This was not simply “friction in coordination” but situations where “employees talked about colleagues actively undermining one another.” It included what the authors termed as a “vivid lexicon to describe their workplace, including “dog-eat-dog” and “Darwinian” and talked about coworkers who “throw one another under the bus,” “stab each other in the back,” or “sabotage one another.””
Abusive Behavior
Having worked in law firms long ago, I understand abusive behavior. The authors called it “sustained hostile behavior toward employees” including such actions as “bullying, yelling, or shouting at employees, belittling or demeaning subordinates, verbally abusing people, and condescending or talking down to employees.” While one would hope such behaviors do not exist in the 21^st century, they apparently still do. 0.8% of the employees surveyed for the article described their manager as abusive, however, when employees did mention abusive managers, it significantly depressed a corporate culture.
What CCOs and compliance professionals should try to drive forward is a “culture that is inclusive, respectful, ethical, collaborative, and free from abuse by those in positions of power.” But the authors caution that these are really the “baseline elements of a healthy corporate culture.” Employees want more than the basics and other stakeholders in an organization want companies to have strong official core values. In an interview with LRN’s Susan Divers, she called it the ‘value in values’. From the compliance professional’s perspective in means values like integrity, collaboration, respectful, and DEI.