Tag: tone at the top

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Tone at the Top Week: Part 1 – The Mandate

The 2022 Monaco Memo emphasized that the key to every company is culture. The bottom line is that corporate culture matters, and a corporate culture that fails to hold individuals accountable and invest in compliance—or worse, thumbs its nose at compliance—leads to bad results.

From the enforcement perspective, the DOJ will assess companies’ ethical cultures. From the compliance perspective, the ethical tone of a company and accountability all start at the top and, most specifically, senior management. The 2020 FCPA Resource Guide, 2nd edition, stated, “Beyond compliance structures, policies, and procedures, it is important for a company to create and foster a culture of ethics and compliance with the law at all levels. The effectiveness of a compliance program requires a high-level commitment by company leadership to implement a culture of compliance from the middle and the top.” The 2023 Evaluation of Corporate Compliance Programs (ECCP) sets out the following inquiries to assist companies in understanding this requirement.

Conduct at the Top—How have senior leaders encouraged or discouraged compliance through their words and actions, including the type of misconduct involved in the investigation? What concrete actions have they taken to demonstrate leadership in the company’s compliance and remediation efforts? How have they modelled proper behavior for subordinates? Have managers tolerated greater compliance risks in pursuit of new business or greater revenues? Have managers encouraged employees to act unethically to achieve a business objective or impeded compliance personnel from effectively implementing their duties?

These requirements are more than simply the ubiquitous “tone-at-the-top,” as they focus on the conduct of senior management. The DOJ wants to see a company’s senior leadership doing compliance. The DOJ asks if company leadership has brought the right message of doing business ethically and in compliance to the organization through their words and concrete actions. How does senior management model its behavior based on a company’s values, and how is such conduct monitored in an organization?

This means you must document corporate decisions where a compliance solution was proposed but rejected. In other words, is there a business justification for moving forward with the action? How will the compliance risk be managed going forward if this action occurs? Similarly, compliance techniques should be documented to demonstrate that your compliance function has met the requirements of the final question.

In-house compliance professionals know an effective compliance program requires more than policies, procedures, and controls. It needs commitment from every level of the organization, starting at the top. Senior executives, especially the CEO, set the tone that trickles down through the ranks, influencing how employees perceive the importance of compliance. Why is tone at the top so essential? Consider the following:

  • Leadership Drives Culture: Employees take their cues from the behavior of senior leaders. If executives demonstrate a strong commitment to ethical practices and compliance, employees are more likely to follow suit. Conversely, that mindset will permeate the organization if leaders appear indifferent to compliance or cut corners.
  • Trust and Transparency: When senior executives consistently emphasize ethical behavior, transparency, and accountability, they build trust with employees, shareholders, and external stakeholders. This trust is critical in creating an environment where employees feel empowered to speak up about potential compliance concerns.
  • Mitigating Risk: A strong tone at the top can help an organization avoid costly regulatory fines, reputational damage, and legal penalties. It also creates an environment where potential issues are identified early and addressed promptly.
  • Sustainability of the Compliance Program: A compliance program can only thrive if integrated into the company’s everyday operations. The CEO and senior executives are key to embedding compliance into the organization’s fabric and ensuring its long-term sustainability.

The tone at the top is more than simply words. It is easy for senior executives to talk about compliance, ethics, and integrity. What matters, though, is action. Employees are quick to notice when words don’t match actions, and a disconnect between what leaders say and do can be toxic to the compliance culture. Senior executives must integrate compliance into the company’s DNA to demonstrate a commitment to compliance. It cannot be seen as a “box-ticking” exercise or a legal necessity; it must be embraced as a core value that drives business decisions. Below are 10 practical ways senior executives can lead by example and set the right tone at the top for a best practices compliance program.

Senior management must share these same values through operationalizing compliance going forward. Lynn Paine, in her seminal article, Managing for Organizational Integrity, laid out five factors that can be used as guideposts to not only set the right tone for senior management on doing business ethically and in compliance but it can also lay the groundwork for senior management to model appropriate behavior and then have it monitored by the company going forward.

  • Senior management must understand and effectively convey a company’s guiding principles to the workforce in various contexts.
  • The company’s leader must be committed and willing to act on the values. This means that management must not simply ‘overlook’ the transgressions of top producers.
  • A company’s systems and structures must support its guiding principles, and senior management cannot override these internal systems and structures without justification and Board approval.
  • A company’s values must be integrated into normal management decision-making and reflected in its critical decisions. Sometimes, a company must turn down a business if there are too many red flags, or its values and ethics will be violated by engaging in such behavior.
  • Managers must be empowered to make ethically sound decisions daily. This means senior management must fully support and back up such decisions.

In corporate compliance, a guiding principle is the foundation for success or failure: Tone at the Top. This phrase encapsulates the role of senior executives—notably the CEO—in setting the ethical standards, cultural expectations, and overall mindset toward compliance within an organization. Without a strong, consistent tone from leadership, even the most well-designed compliance programs will falter. However, the entire organization benefits when senior executives actively lead with integrity and prioritize compliance. Over the next week, we will lay out how an organization’s CEO and senior leadership can foster a culture of compliance by laying out practical ways CEOs and other senior executives can demonstrate the appropriate tone at the top.

Ed. Note: Some years ago, I asked a good friend what I could do with the blog posts to help them with their work as a CCO. They laughingly replied that they should put my blogs in outline and bullet point formats rather than in my lawyerly paragraph format so they could cut and paste my blog posts into memos that could be sent to senior management. So, for the rest of this blog post series, I will respond to this request and write blog posts using more outlines and bullet points. The heart of each blog post will find its way into a usable Memo for you and your compliance program.

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Bank of America’s Corporate Culture Crisis: Part 2 – Lessons Learned for Compliance

Compliance professionals constantly seek to understand how systemic issues within corporate hierarchies can lead to severe consequences. The recent revelations about Bank of America’s (BoA) persistent workplace culture problems are a powerful reminder of compliance’s critical role in safeguarding employees and the organization.

This week, I will explore the BoA failure around workplace culture from various perspectives articulated by the Everything Compliance gang, including Karen Woody, Jonathan Armstrong, Matt Kelly, Karen Moore, and Jonathan Marks. This exploration will include the failure of internal controls, failures by the Board and senior management, culture failures around highly driven, self-selecting employees, and the cultural miasma that is BoA from a perspective from across the pond. In Part 2, we journey through some key lessons learned for compliance professionals.

In the high-stakes world of investment banking, where deals are won or lost in hours, the pressure to perform can push individuals to the brink. Unfortunately, that brink has meant a premature end to some people’s lives. The recent tragedy at BoA, where a junior banker named Leo Lukenas died after working over 100 hours a week for weeks on end, has cast a harsh light on a decade-long problem. This is not the 2013 scandal revisited; it’s an ongoing crisis, a corporate culture problem that has festered for years. The lessons from this ongoing debacle are critical and chilling for compliance professionals.

Lukenas was not the first casualty of this toxic culture. In 2013, an intern in Bank of America’s London office, Moritz Erhardt, met a similar fate after enduring a grueling workload. Following that incident, the bank promised to implement policies to prevent such tragedies from recurring. Yet, a decade later, Lucas’s death is a stark reminder that those policies have either failed or were never truly enforced.

The investment banking division at Bank of America has been likened to a “white-collar sweatshop,” a description that, sadly, fits too many high-pressure work environments. While the term “sweatshop” might conjure images of factories in developing countries, overwork and exploitation can happen in plush office towers just as easily. Lucas’s death has brought into sharp relief the human cost of such environments, where the relentless pursuit of profit eclipses the well-being of employees.

What is particularly concerning is that this issue is separate from a single office or even a single country. The WSJ’s reporting has revealed that overwork at Bank of America is a pervasive issue, affecting employees in New York, London, Tokyo, and Latin America. Former employees have cited overwork as a primary reason for leaving the bank, underscoring that this is not a localized problem but an enterprise-wide failure of corporate culture.

This brings us to a crucial question: Where was compliance? Why have the policies and controls put in place to prevent overwork ineffective? The answer lies in a deep-seated cultural issue that transcends mere policy implementation. Middle management has tolerated if not outright encouraged, this culture, which senior management has failed to address with the necessary urgency.

Middle management is often described as the “meat grinder” of corporate culture, where good intentions from the top can get mangled into toxic behaviors at the bottom. In the case of Bank of America, middle managers were reportedly telling their subordinates not to report excessive working hours to HR, effectively bypassing the controls that were supposed to prevent overwork.

This is a classic example of what can happen when senior management fails to engage effectively with middle management. Senior executives may have genuinely wanted to prevent overwork, but their message could have been more focused and addressed by those in the middle tasked with enforcing it. This disconnect is where corporate culture often fails. Compliance professionals understand that policies are only as good as their enforcement, and enforcement is only as good as the people who are responsible for it. For the compliance professional, this means you must directly connect what senior management has laid out as policy and not simply put procedures in place to implement the policy but then monitor the implementation to ensure the policy is being followed. Sadly, that was not the case at BoA.

Another critical factor in this crisis is the role of incentive structures. It is no secret that high-stakes deals and intense pressure to produce results drive investment banking. But the stage is set for disaster when bonuses and career advancement are tied to closing deals, even at the cost of employee health.

This misalignment of incentives is a fundamental issue that any compliance officer must address. If the financial rewards for middle managers are tied to delivering results, irrespective of the human cost, then it should be no surprise that overwork becomes a pervasive problem. Incentive structures must be reexamined and realigned with the organization’s ethical and operational goals.

As compliance professionals, it is imperative not just to address the symptoms of such crises but to dig deeper and identify the root causes. This case’s root cause is clear: a toxic corporate culture prioritizes results over people. But beyond that, it is about senior management’s failure to enforce a healthy work culture and the misalignment of incentives that drives middle managers to push employees to the brink.

Organizations need to examine their culture, management practices, and incentive structures to prevent such tragedies in the future. This is not just a problem for Bank of America; it’s an industry-wide issue that requires a collective response. Compliance officers have a crucial role in advocating for stronger controls, better communication, and a culture that truly values employee well-being.

The ongoing crisis at BoA is a sobering reminder of the human cost of a toxic work culture. For compliance professionals, it serves as a call to action. A culture that values employees as people, not just as cogs in a machine, is necessary for enforcing and supporting policies; having them on paper is not sufficient.

As we progress, the lessons from this tragedy should guide our efforts to create healthier, more sustainable work environments. Compliance is not just about ticking boxes; it’s about ensuring our values are reflected in our organizations’ day-to-day operations. Ultimately, it’s about protecting the organization and the people who make it what it is.

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Compliance Into the Weeds

Compliance into the Weeds: Toxic Workplace Culture at Bank of America

The award winning, Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. Looking for some hard-hitting insights on compliance? Look no further than Compliance into the Weeds!

In this episode, Tom Fox and Matt Kelly take a deep dive into the toxic workplace culture at Bank of America (BoA) around hours worked by junior employees, in spite of senior management saying the right things.

BoA’s investment banking division has long been plagued by a toxic work culture, characterized by overworked junior employees and severe health crises, despite repeated assurances of reform. Tom Matt discuss these pervasive issues within BoA’s work environment. Fox highlights the tragic consequences of this toxic culture, such as the deaths of junior employees, and criticizes the company’s failure to implement effective reforms, attributing this to a lack of accountability and ethical leadership. Kelly echoes this sentiment, emphasizing the necessity for senior management to set clear expectations and consequences for middle managers who perpetuate unethical behavior. Both stress the need for senior management to address the deep-seated cultural dysfunction, impose consequences, and foster a healthier, rule-abiding workplace to prevent further tragedies and promote employee well-being.

Key Highlights:

  • Toxic Workplace Culture at Bank of America
  • Proactive Controls for Preventing Employee Overwork
  • Consequences of Middle Managers in Corporate Culture
  • Cultural Impact: Negative Attitudes in Organizations

Resources:

Matt in Radical Compliance

How Bank of America Ignores Its Own Rules Meant to Prevent Dangerous Workloads, by Alexander Saeedy in the WSJ

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Setting the Tone at the Top in Star Trek: Devil in the Dark

In the world of compliance, the tone at the top is paramount. It sets the stage for the organizational culture, influencing every business layer. As an award-winning compliance blogger, I often seek examples from popular media to illustrate key compliance principles. One compelling example comes from Star Trek: The Original Series (TOS). The episode “The Devil in the Dark” demonstrates effective leadership and ethical decision-making, embodying the first Hallmark of an Effective Compliance Program: tone at the top.

Summary of The Devil in the Dark

In this episode, Captain Kirk and his crew are summoned to a mining colony on the planet Janus VI, where a mysterious creature has been killing miners and sabotaging equipment. The miners are desperate and demand the creature’s destruction. However, as the Enterprise crew investigates, they uncover that the creature, known as the Horta, is intelligent and acting out of self-defense to protect its eggs, which the miners have unknowingly destroyed.

Kirk, guided by his moral compass and influenced by Spock’s logical counsel, chooses to communicate with the Horta instead of destroying it. This decision leads to a peaceful resolution, saving the miners and the Horta and establishing a cooperative relationship between the two species.

Leadership and Ethical Decision-Making

Captain Kirk’s handling of the situation is a textbook example of setting the right tone at the top. His leadership in “The Devil in the Dark” highlights several critical aspects of effective compliance leadership:

1. Setting an Ethical Example. From the outset, Kirk exemplifies ethical leadership. Kirk remains open-minded and cautious despite the miners’ insistence on killing the creature. He refuses to jump to conclusions, instead opting to gather all necessary information before deciding. This approach mirrors the importance of due diligence in compliance practices, where leaders must ensure they have a comprehensive understanding of situations before acting.

  1. Encouraging a Culture of Integrity. Kirk’s decision to explore non-violent solutions fosters a culture of integrity among his crew. By valuing life and seeking understanding over immediate destruction, he sets a precedent for ethical behavior. This decision demonstrates that ethical considerations should be paramount, even when facing significant pressure. In a corporate context, this translates to promoting a culture where employees feel empowered to act ethically and report misconduct without fear of retribution.
  2. Transparent Communication. Throughout the episode, Kirk maintains open and transparent communication with his team. He discusses options, seeks input from his officers, and explains his reasoning behind decisions. This transparency fosters trust and ensures all team members align with the organization’s mission and values. This underscores the importance of clear and honest communication for compliance leaders in promoting a compliant and ethical workplace.
  3. Empathy and Understanding. Kirk’s empathy towards the Horta is a defining moment in the episode. Instead of viewing the creature as a threat, he considers its perspective and motivations. This empathy leads to a peaceful resolution and mutual understanding. In the corporate world, leaders who demonstrate empathy can better understand the concerns of their employees and stakeholders, fostering a more inclusive and supportive work environment.
  4. Decision-Making Under Pressure. Kirk’s ability to make ethical decisions under pressure is another critical aspect of his leadership. Faced with the miners’ demands and the immediate threat the Horta poses, he remains composed and focused on finding a solution that upholds the Enterprise’s values. This mirrors the challenges compliance leaders face, who must often navigate complex situations and make difficult decisions that align with ethical standards and regulatory requirements.

Lessons for Compliance Leaders

The Devil in the Dark offers several valuable lessons for compliance leaders seeking to establish and maintain a strong tone at the top.

  1. Lead by Example. Leaders must consistently demonstrate ethical behavior and decision-making. This sets a standard for the entire organization and encourages employees to follow suit. As seen with Captain Kirk, leading by example can inspire confidence and trust among team members.
  2. Foster a Culture of Integrity. Creating a culture where integrity is valued and ethical behavior is rewarded is crucial. This involves setting expectations and providing the necessary support and resources for employees to act ethically. Compliance leaders should encourage open dialogue and create an environment where employees feel safe reporting concerns.
  3. Prioritize Transparency. Clear and transparent communication is key to building trust and ensuring alignment within the organization. Leaders should be open about their decisions and reasoning, fostering an environment of honesty and accountability.
  4. Demonstrate Empathy. Understanding and considering the perspectives of others can lead to more effective and ethical decision-making. Leaders who show empathy are better equipped to address concerns and build strong, collaborative relationships.
  5. Make Ethical Decisions Under Pressure. Compliance leaders often face high-pressure situations where the right course of action may not be immediately clear. Maintaining composure and staying true to ethical principles is essential. As demonstrated by Captain Kirk, ethical decision-making can lead to positive outcomes, even in the most challenging circumstances.

Captain Kirk exemplifies the core principles of effective leadership and ethical decision-making in The Devil in the Dark, setting a strong tone at the top. His actions demonstrate the importance of leading by example, fostering a culture of integrity, prioritizing transparency, demonstrating empathy, and making ethical decisions under pressure. For compliance leaders, these lessons are invaluable. By embracing these principles, leaders can create a compliant and ethical organizational culture that meets regulatory requirements and promotes long-term success and trust.

As we navigate the complexities of the modern business world, let us remember the timeless lessons from Captain Kirk and the crew of the Enterprise, boldly going where few compliance programs have gone before.

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Trekking Through Compliance

Trekking Through Compliance – Episode 37 – Ethical Decision-Making Lessons and the Return of Harry Mudd in I, Mudd

In this episode of Trekking Through Compliance, we consider episode I, Mudd, which aired on November 3, 1967, and occurred on Star Date 4513.3.

The Enterprise finds Harry Mudd (Harcourt Fenton Mudd) on a planet and the “ruler” of 500 robot women. Mudd is being studied by the robots, who are accommodating but refuse to let him go. The androids tell Kirk people from the Andromeda galaxy built them. However, the civilization that constructed them was destroyed by a supernova, so the androids were left without supervision. Now, they have found a new purpose in Mudd. Spock makes inquiries and discovers that there are 207,809 androids, and, most importantly, they seem to be controlled by some central coordinating power.

The robots find people too destructive and plan to take over and “serve” all humans in the galaxy to control them. Kirk leaves Harry on the planet with his attendant robots to serve as an example of human failure to them. The robots are also reprogrammed to perform their original task of rendering the planet fit for human life. As a final blow to Mr. Mudd, Kirk also leaves behind several android copies of his shrewish wife, Stella.

Commentary

The episode features the return of Harcourt Fenton Mudd, who hijacks the Enterprise and takes it to a planet of robots. The crew must outwit the androids using illogical actions to regain control. We delve into the episode’s ethical lessons and connect them to compliance practices, emphasizing the importance of ethical decision-making, ethical leadership, and continuous improvement in compliance programs. Fun fact: NBC considered a spin-off series for Harry Mudd due to the episode’s success, although it never came to fruition.

Key Highlights

  • Plot Summary: The Hijacking and Mudd’s Rule
  • The Androids’ Purpose and Kirk’s Plan
  • The Climax: Overloading the Androids
  • Ethical Decision-Making in Compliance

Resources

Excruciatingly Detailed Plot Summary by Eric W. Weisstein

MissionLogPodcast.com

Memory Alpha

 

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Trekking Through Compliance

Trekking Through Compliance – Episode 33 – Mirror Mirror

In this episode of Trekking Through Compliance, we consider the episode Mirror Mirror, which aired on October 6, 1967, Star Date unknown.

During an ion storm, the Away Team is transported into a parallel universe and a mirror image of the Enterprise. There, they find members who are mirror images of themselves and belong to an evil Federation known as the Empire. Kirk, Uhura, McCoy, and Scotty impersonate their mirror-image counterparts while finding a way to return to their universe.

Discovering that a switch has occurred, anti-Spock then assists Kirk in returning his landing party to their universe so that the Empire landing party may return to its. When Kirk and the party return, they find their Empire counterparts immediately recognized and detained. The Enterprise’s crew attributes this to the fact that it is easier for logical men to appear barbarous than for barbarous men to appear civilized.

Commentary

In this episode of ‘Trekking Through Compliance,’ Tom Fox delves into the Star Trek original series episode ‘Mirror, Mirror.’ The episode aired on October 6, 1967, and involved Captain Kirk and his team being transported to a parallel universe with an evil version of the Enterprise. The narrative unfolds with themes of power struggles, ethical contrasts, and survival. Tom extracts crucial compliance lessons from the story, including the importance of strict access controls, fostering a culture of ethics and compliance, rigorous oversight, planning for contingencies, and encouraging a culture of speaking up. These lessons are vital for building robust compliance programs. Tune in to discover how ‘Star Trek’ can offer valuable insights into modern compliance challenges.

Key Highlights

  • Episode Synopsis: Mirror, Mirror
  • Fun Facts and Behind the Scenes
  • Compliance Lessons from Mirror, Mirror

Resources

Excruciatingly Detailed Plot Summary by Eric W. Weisstein

MissionLogPodcast.com

Memory Alpha

 

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12 O’Clock High-a podcast on business leadership

12 O’Clock High: Gary De Rodriguez on Garnering The Competitive Capitalistic Edge

In this episode, Tom Fox welcomes Gary De Rodriguez, an expert in humanistic neuro-linguistic psychology. We take a deep dive into his unique journey from volunteer work in the AIDS community to becoming an expert in neuro-linguistic programming and humanistic psychology.

De Rodriguez shares insights into how he developed accelerated change techniques to help people resolve issues quickly, leading to his current role in training and consulting. They discuss the importance of self-leadership, the impact of executive alignment on organizational culture, and the significant role of emotional intelligence in fostering successful work environments.

De Rodriguez also highlights the transformative power of kindness and humanity in bridging generational gaps within the workforce.

Key Highlights:

  • Professional Background and Early Career
  • Transition to Neuro-Linguistic Programming
  • Corporate Training and Self-Leadership
  • Humanistic Business and Conscious Capitalism
  • Implementing Cultural Change in Organizations
  • The Importance of Self-Awareness in Leadership
  • Challenges of Multi-Generational Workforces

 Resources:

Gary De Rodriguez on LinkedIn

Gary De Rodriguez

Peopleistic

Humanistic Business: Profit Through People with Passion and Purpose on Amazon.com

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Creativity and Compliance

Creativity and Compliance: Innovative Leader Engagement through Creative Communication

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.

Ronnie’s company, Learnings and Entertainment, utilizes the entertainment devices that people use to consume information in their everyday, non-work lives and applies them to important topics around compliance and ethics. It is not only about being funny. It is about changing the tone of your compliance communications and messaging to make your compliance program, policies, and resources more accessible.

Today, Ronnie and Tom consider the role of leadership in fostering a culture of compliance.

The pivotal role of leadership engagement in fostering a culture of compliance within an organization cannot be overstated. In this context, thought leaders like Tom Fox and Ronnie Feldman provide insightful perspectives on the importance of involving and engaging leadership in promoting ethical compliance.

Fox emphasizes the necessity of personalizing leaders to their employees through open communication, thereby improving corporate culture. He suggests that leaders should share their personal experiences, including ethical dilemmas and decisions they have made in the interest of ethics.

Feldman brings attention to the importance of leaders actively participating in compliance efforts, especially in large multinational companies. He stresses the need for leaders to be personable and relatable and for integrating ethical leadership training into existing leadership programs.

Both Fox and Feldman underscore the need for authentic, engaging, and impactful communication strategies to effectively drive the message of compliance and ethical behavior amongst leaders.

Key Highlights:

  • Ethical Message Engagement for Leadership Success
  • Innovative Leader Engagement through Creative Communication
  • Entertaining Brand-Driven Zoom Talk Shows

Resources:

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For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

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Leadership’s Conduct at the Top

The 2022 Monaco Memo emphasized the basic point that the key to every company is culture. The bottom line is that corporate culture matters and corporate culture that fails to hold individuals accountable, or fails to invest in compliance—or worse, that thumbs its nose at compliance—leads to bad results.

From the enforcement perspective, the DOJ will be assessing companies for the ethical cultures. From the compliance perspective, the ethical tone of a company and accountability all starts at the top and, most specifically, senior management. The 2020 FCPA Resource Guide, 2nd edition, stated, “Beyond compliance structures, policies, and procedures, it is important for a company to create and foster a culture of ethics and compliance with the law at all levels of the company. The effectiveness of a compliance program requires a high-level commitment by company leadership to implement a culture of compliance from the middle and the top.” To assist companies in understanding this requirement the 2023 ECCP sets out the following inquiries.

Conduct at the Top—How have senior leaders, through their words and actions, encouraged or discouraged compliance, including the type of misconduct involved in the investigation? What concrete actions have they taken to demonstrate leadership in the company’s compliance and remediation efforts? How have they modelled proper behavior to subordinates? Have managers tolerated greater compliance risks in pursuit of new business or greater revenues? Have managers encouraged employees to act unethically to achieve a business objective, or impeded compliance personnel from effectively implementing their duties?

These requirements are more than simply the ubiquitous “tone-at-the-top,” as they focus on the conduct of senior management. The DOJ wants to see a company’s senior leadership actually doing compliance. The DOJ asks if company leadership has, through their words and concrete actions, brought the right message of doing business ethically and in compliance to the organization. How does senior management model its behavior on a company’s values and finally, how is such conduct monitored in an organization?

This means you must document corporate decisions where a compliance solution was proposed but rejected. In other words, is there a business justification for moving forward with the action. If this action occurs, how was the compliance risk managed going forward? Similarly, compliance techniques used should be documented to demonstrate that your compliance function has met the requirements of the final question.

Senior management must share these same values through operationalizing compliance going forward. Lynn Paine, in her seminal article, Managing for Organizational Integrity, laid out five factors, which can be used as guideposts to not only to set the right tone from senior management on doing business ethically and in compliance, but it can also lay the groundwork for senior management to model appropriate behavior and then have it monitored by the company going forward.

1. The guiding values of a company must make sense and be clearly communicated by senior management in a variety of settings, to the entire company workforce.

2. The company’s leader must be personally committed and willing to act on the values. This means that management must not simply ‘overlook’ the transgressions of top producers.

3. A company’s systems and structures must support its guiding principles and these internal systems and structures cannot be over-ridden by senior management without both justification and Board approval.

4. A company’s values must be integrated into normal channels of management decision-making and reflected in the company’s critical decisions. Sometimes a company must turn down business if there are too many red flags present or by engaging in such behavior the company’s value and ethics will be violated.

5. Managers must be empowered to make ethically sound decisions on a day-to-day basis. This means senior management must fully support and back-up such decisions.

I once had a Chief Executive Officer (CEO), observe the following, “You want me to be the ambassador for compliance.” I immediately said yes, that is exactly what I need you to do. A CEO, as an “Ambassador of Compliance”, can fully model the conduct that senior management engage in going forward. Another area a CEO can forcefully engage an entire company is through a powerful video message about doing business the right way and in compliance. A great example was a CenterPoint Energy video put out in 2015 after the Volkswagen (VW) emissions-testing scandal became public. The video featured Scott Prochazka, former CenterPoint Energy President and CEO. He used the VW scandal to proactively address culture and values at the company and used the entire scenario as an opportunity to promote integrity in the workplace. But more than simply a one-time video, the company followed up with an additional resource, entitled Manager’s Toolkit—What does Integrity mean to you? that managers used to facilitate discussions and ongoing communications with employees around the company’s ethics and compliance programs. Finally, the cost for the video was quite reasonable as it was produced internally.

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Daily Compliance News

Daily Compliance News: November 17, 2023 – The Broken Code Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News. all from the Compliance Podcast Network. Each day we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

Stories we are following in today’s edition:

  • The top really does set the tone.  (WSJ)
  • Matt Kelly declares SCt Code of Ethics is broken (already). (Radical Compliance)
  • Is it safe for businesses to return to China? (NYT)
  • Who needs a lawyer? (Reuters)