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Lessons on Incentives and Discipline from Star Trek: Mirror Mirror

Last month, I wrote a blog post on the tone at the top, exemplified in Star Trek’s Original Series episode, Devil in the Dark. Based on the response, some passionate Star Trek fans are out there. I decided to write a series of blog posts exploring Star Trek: The Original Series episodes as guides to the Hallmarks of an Effective Compliance program set out in the FCPA Resources Guide, 2nd edition. Today, I will continue my two-week series by looking at the following Hallmarks of an Effective Compliance Program laid out by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in the FCPA Resources Guide, 2nd edition. Today, we look at lessons on financial incentives and disciplinary measures in a best practices compliance program from the episode Mirror Mirror.

The episode Mirror, Mirror offers a unique and insightful perspective on the importance of financial incentives and disciplinary measures in shaping organizational culture. Through the lens of a parallel universe where the Federation’s values are inverted, this episode provides valuable lessons for compliance professionals on how incentives and disciplinary measures can influence behavior and promote ethical standards.

In Mirror, Mirror, Captain Kirk, Dr. McCoy, Scotty, and Uhura are accidentally transported to a parallel universe due to a transporter malfunction. A brutal Terran Empire stands for the United Federation of Planets in this “mirror universe.” Here, officers advance through assassination, and disobedience is met with severe punishment. The stark contrast between this universe and the ethical Federation highlights the significance of well-structured incentives and disciplinary measures in fostering a culture of compliance.

Lesson 1. The Role of Incentives in Promoting Ethical Behavior

Incentives motivate employees to adhere to compliance standards and ethical behavior. The episode illustrates the impact of perverse incentives and how they can drive unethical actions. You must work to align your financial and non-financial incentives with your organization’s ethical values. Businesses should design incentive structures that promote compliance and ethical behavior. This can include recognition programs, bonuses for ethical conduct, and career advancement opportunities for those who demonstrate integrity. Celebrating and rewarding employees who adhere to compliance standards reinforces the importance of ethical behavior and encourages others to follow suit.

Through this episode’s ‘mirror’ structure, we can use examples of perverse incentives to gain insight into the incentives that will work in 2024.  In the mirror universe, officers are incentivized to commit acts of violence and treachery to earn promotions and power. This system rewards unethical behavior and creates a toxic environment of fear and mistrust. Now, contrast these actions with the universe, which encompasses the United Federation of Planets (UFP) and promotes values of cooperation, integrity, and mutual respect. This contrast emphasizes aligning incentives with ethical standards to foster a positive organizational culture.

Lesson 2. Fair and Consistent Discipline

Disciplinary measures are essential for maintaining accountability and addressing non-compliance. However, they must be implemented fairly and consistently to avoid creating a culture of fear. Every compliance function must ensure that disciplinary actions are consistent, fair, and proportionate to the severity of the violation. This approach helps maintain trust in the compliance program and encourages accountability. Moreover, it creates an environment where employees feel comfortable reporting non-compliance without fear of retaliation. This requires clear communication about the disciplinary process and assurance of confidentiality.

Once again, in the alternative universe our Enterprise crew finds itself in, we can learn from the converse of that from the UFP. In the mirror universe, there is severe punishment, and discipline is maintained through fear and harsh punishment. As a result, people develop a toxic culture where self-preservation takes precedence over commitment to moral behavior. Our universe’s Enterprise’s approach to discipline emphasizes accountability and correction rather than punishment, illustrating how fair disciplinary measures can support a healthy compliance culture.

Lesson 3. The Influence of Leadership on Incentives and Discipline

Leadership is critical in shaping the effectiveness of incentives and disciplinary measures. Leaders set the tone for organizational culture and can influence employee behavior through actions and decisions. Top management should lead by example.  Business leaders should model ethical behavior and demonstrate a commitment to compliance through their actions and decisions. This sets a positive example for employees and reinforces the organization’s values. In addition to leading by example, the C-Suite and Board of Directors should actively support compliance initiatives, including developing and promoting incentive and disciplinary systems that align with ethical standards.

In both universes, Captain Kirk’s leadership style is a key factor in influencing the behavior of his crew. In the prime universe, his commitment to ethical standards and fair treatment promotes a culture of integrity. In the mirror universe, the universe’s leadership at all levels encourages treachery and violence, demonstrating how leaders can perpetuate a toxic culture through negative incentives and harsh discipline.

Lesson 4. Designing Effective Incentive and Disciplinary Systems

To create a culture of compliance, organizations must carefully design their incentive and disciplinary systems to align with ethical standards and organizational values. First and foremost, your incentives and discipline must align with your organizational values and goals. This helps reinforce the importance of compliance and ethical behavior. When it comes to incentives, they are not simply financial but non-financial incentives. Your organization should offer a variety of incentives, such as financial rewards, recognition programs, and career development opportunities, to appeal to different motivations and preferences.

To design appropriate incentives and discipline, you should start with clear and transparent policies governing the incentive and disciplinary program. These policies should be well-defined, communicated, and easily accessible to all employees. This includes the specific rewarded or penalized behaviors, the criteria for determining appropriate incentives or disciplinary actions, and the appeal and review processes.

Lesson 5. Continuous Monitoring and Improvement

Your compliance team should continuously solicit employee feedback on the effectiveness and fairness of the incentive and disciplinary programs. This is a part of any Speak Up culture, as you want to encourage open communication channels for employees to raise concerns or suggest improvements. Metrics are a part of every system used to track the program’s performance, including incident rates, consistency and fairness of disciplinary actions, and employee satisfaction and trust in the program. Benchmarking against industry trends can also be a critical piece of information.

Always remember that unintended consequences can negatively impact every compliance program. Therefore, you should proactively identify and address any unintended consequences or perverse incentives that may arise from the program. Finally, adjust and improve your program to mitigate potential negative impacts on employee behavior or organizational objectives.

Mirror, Mirror provides a powerful illustration of the impact of incentives and disciplinary measures on organizational culture. By learning from the stark contrasts between the mirror and the prime universe, compliance professionals can design systems that promote ethical behavior and foster a culture of compliance. Incorporating these lessons into your compliance strategy can help ensure that your organization is prepared to navigate the complexities of today’s regulatory environment while upholding the highest ethical standards. As the episode demonstrates, the right incentives and disciplinary measures can make all the difference in creating a positive and compliant organizational culture.

Join us tomorrow as we consider the lessons from the Star Trek episode The Omega Glory on dealing with third parties.

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Watson Disciplinary Hearing to Begin

The sorry spectacle of Deshaun Watson continues to haunt the National Football League (NFL). Today a disciplinary hearing starts with US District Court Judge Sue L. Robinson, as the disciplinary officer appointed by the NFL and players association. The outcome of this hearing will be a recommendation of discipline for Watson from his misconduct. Watson has been accused by 24 women of sexual harassment for a variety of sex acts he allegedly performed on them, with them or to them. No doubt anticipating this hearing, Watson settled 20 of these cases last week.

According to SI.com, the lawsuits “detailed graphic accounts of sexual harassment and sexual assault that occurred during massage therapy sessions. The accounts range from Watson allegedly refusing to cover his genitals to the quarterback “touching [a plaintiff] with his penis and trying to force her to perform oral sex on him…The latest suit detailed that Watson masturbated and ejaculated on the plaintiff without her consent. It was expected that more lawsuits could be on the horizon.”

The discipline levied against Watson will be a critical factor in the NFL regaining any credibility in this matter. SI.com reported the NFL will ask for an ‘indefinite suspension’ so that the league can protect itself if more negative information comes out in the upcoming civil trials. Settlement negotiations for a one year agreed suspension broke down as Watson still believes he did nothing wrong. The NFL Players Association (NFLPA) also points to the essential meaningless disciple given the teams owners who allegedly engaged in some form of untoward sexual conduct, with SI.com reporting “The NFLPA argued for a lighter punishment, pointing to a precedent set in cases involving three of the league’s owners—the Commanders’ Daniel Snyder, Patriots’ Robert Kraft and Cowboys’ Jerry Jones.” Unfortunately for Watson, players are always given much more severe discipline than owners (See Brady, Tom re: Deflategate).

According to the New York Times (NYT), “the first public allegation against Watson of sexual misconduct during a massage appointment was made in March 2021, resulting in an avalanche of lawsuits filed by additional women. The claims against Watson involved massage appointments he had in 2020 and early 2021, when he played for the Houston Texans. He was traded to Cleveland in March after a grand jury in Harris County, Texas, declined to indict him on criminal charges. The Browns gave Watson an unprecedented, fully guaranteed five-year, $230 million contract.

What about the Cleveland Browns and their signing of Deshaun Watson? How much due diligence did Cleveland do before it signed Watson to a fully guaranteed $231 million contract. After signing the contract, the NYT broke the story that Watson had used “at least 66 different women in just the 17 months from fall 2019 through spring 2021” rather than the 40 in five seasons he had previously claimed. Conor Orr, writing in SI.com, reported that the Browns had engaged in due diligence the team described as an “odyssey” to become “comfortable” with Watson. He went on to add, “If nothing in the Times report was new information to the Browns, they should come out and admit as much. If much of what surfaced in the Times report is new information to the Browns, they should come out and admit as much.” What do you think Watson told the Browns when they asked, “Is there anything else we need to know about?”

The Browns face a looming public relations disaster for their actions. If and when Watson ever takes the field for the Browns, the protests will be loud and boisterous with this person they have now gotten ‘comfortable’ with enough to give him the richest contract in the history of the NFL (did I mention it was ‘fully guaranteed’?)

Of course, there is the question of knowledge and ultimate liability of his prior employer, the Houston Texans. After the NYT story broke, the plaintiffs’ attorney Tony Buzbee announced he would be adding the Texans to his lawsuit. He did so this week. As reported by the Houston Chronicle, the Texans claim that when the story broke back in March 2021, the team “issued a statement that said the post was “the first time we heard of the matter” and the organization hoped to “learn more soon.”” However, according to the amended claim, either the Texans knew all along or failed to do so through conscious indifference.

It turns out that the Texans had provided Watson with a form non-disclosure agreement (NDA) when he said one of the message therapists raised a claim against him back in 2020. Additionally, the Texans were allegedly aware of Watson not using the Texans facility for massages with team therapists and looking on the internet for his own set of therapists even when using non-Texan facilities. Of course, there is also now the allegation that Watson used 66 different therapists over 17 as noted above. Did the Texans know, or should they have known?

We have a full cacophony of allegations of sexual harassment, actual knowledge or conscious indifference, failure to engage in substantive due diligence, likely discipline for the player but not enabling teams with an appeal to the NFL Commissioner and at least four trials in the offing. Just imagine how much worse it will get for everyone involved.