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 21st 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.
Tag: DE&I
Ben Colton has a fiery passion for ESG sustainability. In this episode, he guides us through companies’ responsibility in disclosing data, its financial benefits, and how his stewardship greatly influences businesses to eliminate hindrances in ESG reporting and allow diversity in thought among employees in all positions.
Watch ▶️ Embracing the Opportunity in ESG Stewardship with Ben Colton: https://youtu.be/r0-wSMGWabE.
Key points discussed in the episode:
✔️ Ben Colton defines his role as the Global Head of Asset Stewardship Team at State Street Global Advisors (SSGA). Regulatory advocacy, thought leadership, company engagement, and accountability mechanisms – these are the most powerful tools he uses.
✔️ All companies should report according to the TCFD framework. Engage with companies to understand sector specificity and disclosure laggards.
✔️ Ben Colton believes transition investing opens doors for business expansion and opportunities. He also points out polarizing the discussion and shaming companies can be counterintuitive. “Don’t ask them when they want to get there but how they want to get there.”
✔️ Ben Colton provides well-documented evidence on the positive impact of SSGA’s Fearless Girl campaign. Gender is just one facet of diversity, as his company aims to instill diversity in thought – more underrepresented communities in leadership positions.
✔️ SSGA has published guidance in 2017 on how companies can enhance diversity-related practices. They aim to imprint these methods on business in the United States and other prepared nations.
✔️ An SSGA article titled “The World Targets Change” says, “Climate strategies are driving economic transitions.” Ben Colton states the SSGA has outlined expectations based on the IIGCC, Climate Action 100+, and high-emitting companies.
✔️ With ESG, companies can be part of the solution. Bigger names shouldn’t receive the brunt of the blame as businesses of all sizes should be accountable.
✔️ The proprietary ESG score, created by SSGA, intends to establish credibility in disclosure expectations, engagement priorities, and voting activity.
✔️ Diversity is closely correlated with human capital management and corporate culture. Progressive diversity and inclusion practices promote employee satisfaction.
✔️ Companies that tap into the opinions of employees are willing to listen to diverse perspectives, putting them on equal footing with stakeholders.
Ben Colton is the Global Head of the Asset Stewardship Team at State Street Global Advisors (SSGA). His team is responsible for developing and implementing SSGA’s global proxy voting policies and guidelines across all investment strategies, and managing SSGA’s proxy voting activities and issuer engagement on environmental, social, and governance (ESG) issues. His team aims to generate a positive impact on financially material ESG issues through voting, engagement, thought leadership, and advocacy.
LinkedIn: https://www.linkedin.com/in/benjamin-colton-20b73521/
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.
As Russia invades Ukraine, Tom and Jay settle in and are back looking at some of the week’s top compliance and ethics stories this week in the Russia Invades edition.
Stories
- What Russia invasion could mean for corporate governance. Michael Peregrine in Forbes.com. What do sanctions mean for US companies? Jaclyn Jaeger in Compliance Week (sub req’d)
- Why is subculture audits so critical? Vera Cherepanova explains in the FCPA Blog.
- KT Corp. settles FCPA enforcement action. Tom (FCPA Compliance and Ethics Blog) and Mike Volkov (Corruption Crime and Compliance) both have 3-part series. Matt Kelly’s take in Radical Compliance. Tom and Matt in Compliance into the Weeds.
- National Cryptocurrency Enforcement Team and what it means. Kathleen McDermott and Mark Krotoski in CCI. David Smagalla in WSJ Risk and Compliance Journal.
- How Credit Suisse facilitated crime, corruption, and dictators. Jessie Drucker and Ben Hubbard in the New York Times.
- Why diversity on investigation teams matters. Karin Portlock and Jabari Julien in Compliance and Enforcement.
- Could small-cap directors & officers could face ESG liability. Lawrence Heim in practicalESG.
- Global trends in corporate governance for 2022. Richard Fields, Rusty O’Kelley III, and Laura Sanderson, in Harvard Law School Forum on Corporate Governance.
- Roger Ng trial in danger of collapse due to prosecution ‘inexcusable error .’Stewart Bishop in Law360. (sub req’d)
- Using the FCPA to fight the demand side of bribery. Matthew Stephenson in GAB.
Podcasts and More
- In February on The Compliance Life, I visited with Ellen Smith, a former Director of Trade Compliance who recently started her consulting firm. In Part 1, she discussed her academic background and early professional career. In Part 2, Ellen discussed her move in-house. In Part 3, Ellen discusses being a part of the Compliance Dream Team at Weatherford. In Part 4, Ellen moves into the world of consulting.
- On the FCPA Compliance Report, Tom began a 2-part series with Trade Compliance guru Matt Silverman on possible Russia sanction (Part 1) and the corporate response (Part 2). Part 2 posts Monday, February 28.
- CCI releases a new e-book from Mike Volkov, “Compliance Culture Revolution .”Available free from CCI.
- Gwen Hassan has a special 2-part pod series on Hidden Traffic with Jeff Bond, from the Global Fund to End Modern Slavery, on the impact of climate change on modern slavery. Part 1 and Part 2.
- Are you a Star Wars fan? How about an uber-Geek? You will love the 5-part series on Science of Star Wars in the Greeting and Felicitations podcast series on the Compliance Podcast Network if you are either or both. In this series, Tom visits astrophysicist Dr. Ben Locwin on the following topics: Episode 1-Traveling in Hyperspace, Episode 2-Fighting with a Light Saber, Episode 3-Mechanical Prosthetics, Episode 4-Cyborgs, and Robots and Episode 5- Death Star. It is a ton of fun, and you will love it.
Tom Fox is the Voice of Compliance and can be reached at tfox@tfoxlaw.com. Jay Rosen is Mr. Monitor and can be reached at jrosen@affiliatedmonitors.com.
Welcome to the Great Women in Compliance Podcast, co-hosted by Lisa Fine and Mary Shirley.
As this is Black History Month, we are thrilled to have Jennifer Newton join Lisa on this episode. Jennifer is the founder and CEO of the National Association of Black Compliance and Risk Management and Compliance Professionals (“NABCRMP”), NABCRMP, which is dedicated to networking, promotion and the advancement of Black Risk Management Professionals NABCRMP, which is dedicated to networking, promotion and the advancement of Black Risk Management Professional. In the past 18 months in particular, it has grown in numbers of employees, influence and incredible work to move our profession forward.
Jennifer shares some of the work that NABCRMP has done, including their first annual meeting, the building of networks, and the significant corporate sponsors supporting their initiatives.
Jennifer and Lisa also discuss the importance of having a diverse team – how can a team without different viewpoints and perspectives accurately view and consider risks? She also discusses her view about how risk and compliance professionals are well placed to collaborate on DEI initiatives.
We also get to hear about the opportunities that NABCRMP has for us to help mentor and support a new generation of Black risk and compliance professionals and make compliance an inclusive space.
The Great Women in Compliance Podcast is on the Compliance Podcast Network with a selection of other Compliance related offerings to listen in to. If you are enjoying this episode, please rate it on your preferred podcast player to help other likeminded Ethics and Compliance professionals find it. You can also find the GWIC podcast on Corporate Compliance Insights where Lisa and Mary have a landing page with additional information about them and the story of the podcast. Corporate Compliance Insights is a much-appreciated sponsor and supporter of GWIC, including affiliate organization CCI Press publishing the related book; “Sending the Elevator Back Down, What We’ve Learned from Great Women in Compliance” (CCI Press, 2020).
You can subscribe to the Great Women in Compliance podcast on any podcast player by searching for it and we welcome new subscribers to our podcast.
Join the Great Women in Compliance community on LinkedIn here.
Welcome to From the Editor’s Desk, a podcast where co-hosts Tom Fox and Dave Lefort, Editor in Chief at Compliance Week unpack some of the top stories which have appeared in Compliance Week over the past month, look at top compliance stories, 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 November including the final results from the CW survey ‘Inside the Mind of the CCO’. It includes a discussion of the gender gap in pay for compliance professionals, the role of compliance in ESG and the role of compliance in fighting cyber breaches. We discuss the Compliance Week 2022 Conference scheduled for May in DC and upcoming CW event on best practices to prevent a ransomware attack. We conclude with a look at some of the top sports stories including the MLB lock out by management, Michigan beating Ohio State and the storyline of a potential Brady v. Belichick Super Bowl.
Check out the CW articles on Inside the Mind of the CCO, here, here and here.
Early register for CW 2022 Conference here.
Is compliance the happiest profession? Are you passionate about compliance? If you are either or both, you are not alone. Guest Host Karen Woody and Tom Fox look at these and other stories this week in the Happiest Profession edition.
Stories
- Is Compliance the happiest profession? Amii Bernard-Bahn explores in Compliance Week (Sub Req’d)
- Report on SEC Enforcement Activity: Public Companies and Subsidiaries for 2021. Tom Gorman in SEC Actions.
- Supply chain and compliance. Mike Volkov in Corruption Crime and Compliance. Dick Cassin in the FCPA Blog.
- What does ESG mean for the SEC? Commissioner Crenshaw remarks to the Pepsico-PWE Conference in the Harvard Law School Forum on Corporate Governance.
- Corruption as psychic revenge. Richard Bistrong in the FCPA Blog.
- Mitigating cyber risks. Debevoise Plimpton lawyers in Compliance and Enforcement.
- COP26 wrap up. What are the lessons for compliance? Lawrence Heim in PracticalESG.
- SEC broke all whistleblower awards in FY 2021. Aaron Nicodemus in Compliance Week (Sub Req’d) Carrie Penman says it’s a wakeup call for companies in Ethics and Compliance Matters.
- Diversity at the top. Jim Deloach in CCI.
- How did Classical Athenians define corruption? Kellam Conover in GAB.
Podcasts and Events
- Have you or a loved one been impacted by Lyme Disease? This week I have run a 5-part series on this most misunderstood malady with Dr. Ben Locwin and Scott Endicott. In Part 1 we looked at Origins. In Part 2 we considered the Diagnosis Dilemma. In Part 3 we reviewed Treatment and Innovation. In Part 4, we discussed Prevention and Immunity. In Part 5, we looked ahead for where this disease detection, prevention and treatment might be heading.
- Are you exasperated? Then check, F*ing Argentina. In this podcast series co-hosts Tom Fox and Gregg Greenberg, author of F*ing Argentina explore the current American psyche of being overworked, over leveraged, overtired and overwhelmed. Find out about modern America’s exasperation with well…exasperation. In Episode 10, a trip on the New Jersey Turnpike.
- This month on The Compliance Life, I visit with Wendy Badger, CCO at Tennant. In Part 1, she details her academic career and early professional life. In Part 2, changing ladders to advance your career. In Part 3, Wendy moves into the CCO Chair.
- How does a Compliance Bible become a best-seller? Check out Tom’s appearance on the C-Suite Network’s Best Seller TV to find out. Purchase The Compliance Handbook, 2nd edition here.
Tom Fox is the Voice of Compliance and can be reached at tfox@tfoxlaw.com. Karen Woody is Associate Professor at Washington and Lee University School of Law and can be reached at kwoody@wlu.edu.
Board Oversight of Racial DE&I
In this episode of Across the Board, I visit with Ben Colton- Global Co-Head of Asset Stewardship at State Street Global Advisors and Rusty O’Kelley Managing Director at Russell Reynolds and Associates. They join me to discuss their recent article Board Oversight of Racial DE&I. Some of the highlights include:
- Who the article is it aimed at.
- What should motivate board oversight of racial equity?
- What does Board oversight look like in practice?
- What metrics can Board’s employ?
- What are the challenges in a global context?
- What guidance do you jointly suggest for a Board to employ?
- Why is this issue so critical now for stakeholders and asset stewards?
- How does this issue relate to the overall sustainability of a corporation?
- Why are these issues critical to the success of an overall ESG program?
Resources
For a copy of the article Board Oversight of Racial DE&I click here.