In today’s edition of Sunday Book Review:
· Net Positive: How Courageous Companies Thrive by Giving More Than They Take by Andrew S. Winston
· Defining Moments: When Managers Must Choose Between Right and Right by Joseph L. Badaracco Jr.
· Business Ethics by Stephen M. Byars and Kurt Stanberry
· Business Ethics: Best Practices for Designing and Managing Ethical Organizations by Denis Collins
Resource
Best 12 Ethics Books to Read in 2022 in Teambuilding.com.
In this edition of Popcorn and Compliance, Richard Lummis and Tom Fox review the Best Picture-winning movie Schindler’s List. Highlights include:
Resources
10 Leadership Lessons from Schindler’s List
Oskar Schindler-a Sheep in Wolf’s Clothing
I have been — and continue to be– hyper-focused on the proper role and responsibilities of Chief Compliance Officers. Not that I see any cause for alarm, but it is easy to lose focus in the sea of so-called hot issues — ESG, Diversity, Climate Change, Threats to Democracy, Cybersecurity and Data Privacy, each of which is an important component and focus for organizations. All of these issues intersect, are interdependent and should be addressed through organizational commitment. But I want to take a step back and return to an issue of importance — the proper role of CCOs. To do so, we need to remind everyone about basic requirements, lessons learned and ways forward to meet the fast-changing times. CCOs have to maintain and then advance their positions. In my view, given the interdependence of all the important issues mentioned above, the role of the CCO has become even more critical. In this episode, Michael Volkov reviews the standards applicable to the CCOs function in an effective compliance program.
Decision making is a critical skill for any Chief Compliance Officer (CCO) or compliance professional. Continuous monitoring and continuous improvement are now accepted as standard components of any table stakes compliance program. The Department of Justice (DOJ), in the 2020 Update to the Evaluation of Corporate Compliance Programs, made clear the need for continuous improvement in any compliance program. It stated quite succinctly, “One hallmark of an effective compliance program is its capacity to improve and evolve. The actual implementation of controls in practice will necessarily reveal areas of risk and potential adjustment. A company’s business changes over time, as do the environments in which it operates, the nature of its customers, the laws that govern its actions, and the applicable industry standards. Accordingly, prosecutors should consider whether the company has engaged in meaningful efforts to review its compliance program and ensure that it is not stale.”
Indeed, the 2020 Update posed the following questions that the DOJ might ask a company under a Foreign Corrupt Practices Act (FCPA) investigation, “How often has the company updated its risk assessments and reviewed its compliance policies, procedures, and practices? Has the company undertaken a gap analysis to determine if particular areas of risk are not sufficiently addressed in its policies, controls, or training? What steps has the company taken to determine whether policies/procedures/practices make sense for particular business segments/subsidiaries? Does the company review and adapt its compliance program based upon lessons learned from its own misconduct and/or that of other companies facing similar risks?”But one question not posed is around your decision-making process in when to move from continuous monitoring to continuous improvement. I was therefore interested in a recent FastCompany.com article, entitled “3 Steps Navy SEALs Use to Make Decisions”, by Stephanie Vozza. Vozza quotes former Navy SEAL and Chief Executive Officer (CEO) of ADS, Inc., Ryan Angold who said, “With so much information out there, a lot of people get analysis paralysis. You want to do your research and you want to access all the resources you have so you can make the right decision. But you can’t sit in analysis paralysis forever. Ultimately, there’s no 100% perfect decision.”
For her piece she also interviewed former Navy and current VMWare Chief Digital Transformation Officer Mike Hayes and author of the book, Never Enough: A Navy SEAL Commander on Living a Life of Excellence, Agility, and Meaning, who laid out a framework he used as an active SEAL for decision making.
When you are a CCO or compliance professional in a corporate compliance function, you most probably have created experiences from which you can draw. Angold noted, “The requirement in SEAL teams is that you have you’ve gone through multiple different scenarios, you’ve trained for the most extreme environment, the most challenging environment, the worst-case scenarios. These reference points are helpful. You can say, ‘Okay, we’ve seen something like this before.’ Maybe this isn’t the exact scenario—it never is. But you’ve learned how the team works and can make quick decisions.”
Both Jonathan’s from the award-winning Everything Compliance gang, Jonathan Armstrong and Jonathan Marks, talk about not simply crisis and scenario planning but practice as well. Such practice not only gives you the muscle memory of what to do when a true crisis appears but also provide the types of experiences that Angold references that the SEALs then use in missions.
Hayes added that you should listen to difference voices or inputs, noting, “Too often, we tend to seek out like-minded input. Artists tend to hire artists and engineers hire engineers. By getting input from people who don’t think like us and by having a culture that celebrates differences and raising other ideas, you help people be comfortable saying things like, ‘Hey, sir, I don’t think that’s a great idea. Here’s how I would do it.’ That framework enables the best possible decisions.” Note that Hayes’ remarks also illuminate the importance and benefits of a true “Speak-Up Culture”.
Most interestingly, the first thing you have to determine is when to make your decision. Hayes said, “The first decision is when to make your decision. That’s the thing that most people get wrong.” Obviously in combat your decision-making window can be quite short, but the same principle applies in the corporate world. Here Hayes noted, “At some point, the value of those extra inputs in your input streams costs more than the time associated with getting more inputs. At that inflection point is when you want to make your decision. You start losing value by waiting longer.”
But this point is where experience can become more paramount. In the corporate compliance world, you will likely get information, which is both quantitative and qualitative, particularly through continuous monitoring. Do not become paralyzed at this point, and you can rely on your gut or, as Hayes said, “there are other times where you need to operate in instinct. Instinct is really a set of experiences that you can’t quite crystallize, but that you extract logic from.”
Here a key CCO and compliance professional soft skill, that of humility, both “intellectual and real will help you get to the right decision.” Do not let your ego get in the way or start considering your sunk costs. You may garner new information which gives new input. Even John Maynard Keynes said, “When my information changes, I alter my conclusions. What do you do, sir?”
Hayes said this is “the ultimate sign of leadership because it’s a sign of comfort in your own skin and not needing to look good in front of an organization. Instead, you’re putting the organization before self and doing the right thing.” Angold phrased it as “It takes a lot of humility for someone to be able to recognize it was the wrong call,” he says. “That’s where the communication is important and having that transparency with your team. You can gain a lot of additional trust from your team, when you acknowledge a wrong decision.”
Continuous improvement through continuous monitoring or other similar techniques will help keep your compliance program abreast of any changes in your business model’s compliance risks and allow growth based upon new and updated best practices specified by regulators. A compliance program is in many ways a continuously evolving organism, just as your company is. You need to build in a way to keep pace with both market and regulatory changes to have a truly effective anti-corruption compliance program. By using this three-step approach, you can best determine how to move from the monitoring to the improvement phase.
Welcome to From the Editor’s Desk, a podcast where co-hosts Tom Fox and Kyle Brasseur, EIC at Compliance Week, unpack some of the top stories which have appeared in Compliance Week over the past month, look at top compliance stories upcoming for the next month, talk some sports and generally try to solve the world’s problems.
In this month’s episode, we look back at top stories in CW from July around the EY cheating exam enforcement action and a discussion of a potential CCO liability framework. Kyle previewed some of the topics Compliance Week will report in August, including how technology innovation is causing heartburn for regulators and current issues in crypto enforcement. We previewed some upcoming CW events, including the ESG virtual event, CW 2022 in Europe, which will be held in Scotland and the 3rd Party Risk conference, scheduled for December. Kyle also discussed the upcoming Inside the Mind of the CCO survey in October.
We conclude with a look at some of the top sports stories, including the induction of David Ortiz into the Baseball Hall of Fame. Kyle talked about what Big Papi meant and continues to mean for Boston, and Tom spoke about him on the national stage. We touched on the new LIV pro golf tour.
Where does creativity fit into compliance? In more places than you think. Problem-solving, accountability, communication, and connection – they all take creativity. Join Tom Fox and Ronnie Feldman on Creativity and Compliance, part of the award-winning Compliance Podcast Network. In this episode, Tom and Ronnie continue their shorts series on provocative statements on compliance training and communications, followed by discussion. In this episode, Ronnie riffs on the question is it OK to laugh at work? Highlights include:
o Common excuses for not doing things creatively.
§ we’re a conservative company
§ we take the issues very seriously
§ it doesn’t fit our culture
§ my boss doesn’t have a sense of humor
§ we’re global
o How to build a business case because entertainment and learning is more effective.
§ emotional connections
§ memory and recall
§ stands out in a noisy environment
§ It open people up
§ It helps increase airtime and exposure
o The Fun Theory
o Other examples in life
Resources:
Ronnie Feldman (LinkedIn)
Learnings & Entertainments (LinkedIn)
Ronnie Feldman (Twitter)
Learnings & Entertainments (Website)
60-Second Communication & Awareness Shorts – A variety of short, customizable, quick-hitter “commercials” including songs & jingles, video shorts, newsletter graphics & Gifs, and more. Promote integrity, compliance, the Code, the helpline and the E&C team as helpful advisors and coaches.
Workplace Tonight Show! Micro-learning – a library of 1-10-minute trainings and communications wrapped in the style of a late-night variety show, that explains corporate risk topics and why employees should care.
Custom Live & Digital Programing – We’ll develop programming that fits your culture and balances the seriousness of the subject matter with a more engaging delivery.
Tales from the Hotline – check out some samples.
The first 100 days. Franklin D Roosevelt’s first term is the standard by which all other Presidents are measured for their first days in office. Why? It is because not only did FDR hit the ground going full speed but also passed legislation, which changed the shape of America for years to come. While the first thing he did was declare a Bank Holiday to save the nation’s banking system, he also passed significant legislation to try to stem the effects of the Great Depression. These bills included the Agricultural Adjustment Act, the Federal Emergency Relief Administration, the Civilian Conservation Corps, and, finally, the National Industrial Recovery Act. He also enacted the Truth-in-Lending and Glass-Steagall Acts to help regulate the stock market, whose collapse had heralded the economic downturn. Even if these acts did not turn the tide of the Great Depression, it gave people hope because at least it appeared FDR was doing something to fight the economic calamity.
Now imagine that you finally have been able to secure a new position as Chief Compliance Officer in the compliance field. Every company believes that they are ethical and that they certainly do business ethically but what are some of the things that you can do in your first 100 days? Hopefully you will not be dropped into a corporate situation as dire as the one FDR faced for the US in 1933 but the reality is that many new heads are still judged on these mythical first 100 days.
One obvious thing to generate success in the corporate world is to have a good relationship with your boss. You should have important conversations around expectations, working style, resources and your personal development. To facilitate these discussions the following points are posited:
These first 100 days will be a time of very high stress. This may well be compounded by your travel schedule and working very long hours to try and fulfill the concepts. The right advice-and-counsel network is an indispensable resource. Use your outside network of mentors, coaches and friends which you have developed over the years, to discuss your part at the company and what you have been experiencing. The key is to use whatever resources are available to you during your first 100 days.
Just as FDR accelerated his actions during his first 100 days, a large part of his success was that he accelerated those around him. You should take this key component of FDR’s success to heart in your new role. Get your direct reports, bosses, and peers to accelerate their own transitions. The fact that you are in transition means they are too. The quicker you can get your new direct reports up to speed, the more you will help your own performance.
It is difficult to imagine today a harder situation than the country faced when FDR came to power in 1933. The task must have seemed overwhelming. Starting a new compliance leadership position at a new company can seem equally daunting. You need to not only think through your steps going forward but also how to execute them for maximum performance in this early part of your corporate career.
Each person who becomes a naturalized citizen of these United States is required to swear the following Oath:
“I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty, of whom or which I have heretofore been a subject or citizen; that I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will bear arms on behalf of the United States when required by the law; that I will perform noncombatant service in the Armed Forces of the United States when required by the law; that I will perform work of national importance under civilian direction when required by the law; and that I take this obligation freely, without any mental reservation or purpose of evasion; so help me God.”
The principles embodied in the Oath are codified in Section 337(a) in the Immigration and Nationality Act (INA), which provides that all applicants shall take an oath that incorporates the substance of the following:
The language of the current Oath is found in the Code of Federal Regulations Section 337.1 and is closely based upon the statutory elements in Section 337(a) of the INA.
I know all this because my wife recently became a US citizen this month and I could not be more proud of her for this accomplishment. Reading the Oath she swore did give me some pause to think about what does it really mean to be a citizen of these United States.
First and foremost, I have never been required to swear this Oath, as a natural born citizen of the United States. Now I wish I had done so because the Oath makes clear that as citizens, we all have obligations to our country. Right about now the language “Support and defend the Constitution and laws of the United States against all enemies, foreign and domestic” is as important as it has ever been, given the events of January 6, 2021 and the involvement of the highest levels of former administration.
But I also reflected on Clause Five quite a bit as well. Although I am far past the age where I might reasonably be expected to be drafted, if there was a total war and the existence of our country was in such grave danger, I could be called on to bears arms in support of the US. If I am too old or infirm to bear arms in support of this country. I still be could called on to “Perform noncombatant service in the Armed Forces of the United States when required by the law”. Finally, I can be called upon to “Perform work of national importance under civilian direction when required by the law.” There have been few true national emergencies in my lifetime. Perhaps the Cuban Missile Crisis and the Covid-19 pandemic are the only true national emergencies during my lifetime. I was too young to understand much about the Cuban Missile Crisis other than my father was called to active duty over a weekend.
But the language does not specify you can be called only in a military emergency. It can be to perform work of national importance. Certainly, following the government’s directions during the pandemic was such an instance of performing work under the direction of civilian authority.
John Lee Dumas, in his concluding remarks when I asked him to reflect on 9/11 and the intervening 20 years in the award-winning podcast series, Looking Back on 9/11 said that America is the Land of the Free because we are the Home of the Brave. Re-reading this Oath drove home to me that we are all obligated to be and act as citizens of these United States. Even if you are like me and never been required to take this Oath or like my wife, who had to swear this Oath to become a US citizen, and everyone in between.
According to Juan Toribio, writing in MLB.com, Blake Grice waited patiently with his right hand raised for about two minutes to hear his name called inside the Dodgers’ interview room. When he was finally noticed, LA Dodgers star pitcher Clayton Kershaw asked “Whatcha got?” The 10-year-old related that his dying grandfather, Graham, had created a bucket list of things he still wanted to do, one of which was to meet Kershaw. Blake was credentialed by MLB to attend the Post-Game Press Conference and when he did, he dedicated the moment to his now deceased grandfather.
As reported by Toribio, Blake told Kershaw ““My grandpa loved you. He watched the 1988 [World] Series and he wanted to meet you and Vin Scully one day. So this moment is important to me because I’m meeting you for him.” Before he finished telling Kershaw the story, Blake began to cry” and Kershaw responded by going over to Blake and consoling him with a hug. Kershaw the said to him, “Come here, dude, great to meet you. Thanks for telling me. That took a lot of courage to tell me that. Great to meet you. Your granddad sounded like an awesome guy. Thanks for coming up.””
With a nod of the (St. Louis Cardinals) hat to Tim Erblich for sending me this story, I thought it was a very good way to introduce Part 2 of my series on advancing ethical culture through psychological safety. This series is based on a recent article in the MIT Sloan Management Review, Summer edition, entitled “Fostering Ethical Conduct Through Psychological Safety” by Antoine Ferrère, Chris Rider, Baiba Renerte, and Amy Edmondson. The authors believe “there are a number of things organizations can do to make it more likely that people will speak up when they observe unethical behaviors.” But one key is psychological safety, defined by co-author Edmondson as “a shared belief held by members of a team that the team is safe for interpersonal risk-taking” — or, put another way, that “we can say what we think” or “be ourselves around here.” Today, we look at how to determine the state of psychological safety in your organization.
The authors’ research concluded that while many employees “said that they spoke up after witnessing perceived unethical behavior, a substantial minority said that they did not speak up.” The authors found that “those who felt less psychologically safe were significantly less likely to report those behaviors via channels where organizational leaders might act on them.” Conversely, employees “who felt the most psychologically safe were most likely to have reported the misconduct they observed. This held true even after taking into account a range of other psychological factors that could influence incident reporting, such as perceived levels of organizational justice, fairness, and trust. Psychological safety is therefore important for more than just team effectiveness and well-being; it may also be critical for forming strong ethical cultures where employees feel comfortable speaking up.”
Interestingly, the authors realize the non-siloed nature of psychologically safety at the workplace. They note that ethics, risk management, legal and compliance functions, plus Human Resources (HR) all share an interest in fostering such an environment. This mandates a cross-functional approach as an essential requirement of molding an organization’s culture to include psychological safety. The authors believe, “Managers throughout a company must become aware of the blind spots created by a psychologically unsafe environment, along with the associated risk of underreported misconduct.” They also caution that a formal program such as a reporting hotline “may capture only a fraction of the problematic behaviors that occur.” This leads the authors to posit that gauging psychological safety “may help companies determine whether misconduct is being reported and, in turn, enhance the effectiveness of their formal speak-up programs.”
After 15 years of the Department of Justice (DOJ) and other regulators talking about “tone at the top”; the authors credit that most organizations appear to have senior leadership that talks about ethics positively. They believe “CEOs emphasize that integrity is a core value of their organizations, and that point is reiterated in calls with shareholders and during employee town hall meetings.” Unfortunately, while this messaging is important, the research indicated “it is not sufficient to prevent the derailers of ethical conduct that occur deep within an organization.”
The authors recognize what compliance professionals have known for some time, that it is middle managers, and “not just official speak-up channels are often on the front lines when it comes to hearing about unethical behavior.” They found that 80% of employees who did report internally, went to their direct managers, who are almost always in middle management. This is because middle managers are the company leaders play who play the critical role in ensuring that an employee speaking up feels supported and heard. The authors noted, “Our data shows that how line managers act has a disproportionate impact on the way potentially unethical behavior is addressed within organizations.”
Unfortunately, simply because a middle manager may feel psychologically safe you must not assume that their direct reports feel the same way. Confirming the findings from the ECI Report of its 2021 Global Business Ethics Survey, “managers and senior leaders tend to feel more psychologically safe than their employees and have a more positive perception of their organization’s ethical climate than the rest of the workforce. When you put these two findings together it makes clear that the higher up in the organization you go, there may well be “an ethical blind spot. That makes the role of team managers even more important when it comes to fostering an environment conducive to both engaging in ethical behavior and talking about ethics in an open, constructive way.”
The authors also confirmed a greater problem which is that “in a global context, psychological safety is not uniform across nations.” Survey respondents from “the Americas and Europe tended to score higher on psychological safety than respondents from Asia.” This suggests to the authors that “the potential effectiveness of tailoring interventions that promote speaking up in order to address the specific circumstances of different groups of employees.” Moreover, “global organizations that seek to build psychological safety must assess its various region-specific drivers and derailers to adjust their activities to specific seniorities and cultures.”
Join us tomorrow in Part 3 where we consider why a company that does not have psychological safety throughout it can not only be so toxic but in serious danger as well.
