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Creativity and Compliance

Creativity and Compliance: Transforming Toxic Cultures

Where does creativity fit into compliance? In more places than you think. Problem-solving, accountability, communication, and connection—all require 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, uses the entertainment platforms that people engage with in their everyday, non-work lives and applies them to important topics related to compliance and ethics. It’s not just about being funny; it’s about changing the tone of compliance communications and messaging to make compliance programs, policies, and resources more accessible. In this episode of Creativity and Compliance, hosts Tom Fox and Ronnie Feldman discuss the concept of nudges in compliance.

In this episode, Tom and Ronnie take a deep dive into the complexities of transforming a broken and toxic corporate culture, using Boeing’s recent challenges as a case study. Feldman addresses the pitfalls of traditional compliance training and emphasizes the need for fostering a supportive culture where employees feel psychologically safe and empowered to speak up. He highlights the importance of rebranding compliance departments to create a more positive and approachable image. They also stress the crucial role of leadership in driving cultural change and the value of authentic communication and creativity in compliance initiatives. The episode underscores the necessity of addressing cultural issues openly and authentically to build trust and facilitate meaningful change within organizations.

Key Highlights:

  • Addressing a Toxic Culture
  • The Importance of Authenticity
  • Starting from Scratch

Resources:

Ronnie

  • Learnings & Entertainments (Website)
  • Compliance Confessions – inspired by “Mean Tweets” these 90-second commercials address misconceptions and excuses to promote speak up culture and the E&C team as positive and helpful.
  • E&C Training Jams – a soulful singer banters with ethics & compliance explaining policies, sharing examples and debunking excuses. 
  • Tales from the Hotline – Real speak up-themed stories about workplace behavior gone wrong.
  • Workplace Tonight Show! – E&C meets SNL Weekend Update explaining corporate risk topics and why employees should care.
  • 60-Second Communication & Awareness Shorts – A variety of short, customizable, music and multimedia, quick-hitter “commercials” promoting integrity, compliance, speaking up and the E&C team as helpful advisors and coaches.
  • Custom Live & Digital Programing – Custom creative programming that balances the seriousness of the subject matter with a more engaging delivery. After all, you can’t bore people into learning.

Tom

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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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Daily Compliance News

Daily Compliance News: August 19, 2024 – The Workplace Assassin 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 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.

In today’s edition of Daily Compliance News:

  • What to do about workplace assassins? (NYT)
  • SEC censorship? (FT)
  • Santos is expected to plead guilty. (WSJ)
  • Putin was shocked to find corruption in Russia. (Newsweek)

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

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Culture Crafters

Culture Crafters – Turning Around a Toxic Culture: Part 5 – Ongoing Monitoring and Continuous Improvement of Culture

Boeing is not the first company to find itself amid a massive scandal. You can think of Siemens’ bribery and corruption scandal, the VW emissions-testing scandal, the Wells Fargo fraudulent accounts scandal, or any other myriad of corporate scandals where culture failed and created a toxic culture. The question for any organization in such a situation is how to transform its culture.

In this special five-part podcast series, Sam Silverstein, the most trusted voice in America on accountability, and Tom Fox, the Voice of Compliance, look at the ways a company in the depths of such a situation can plan out and take concrete steps to turn around and rebuild its culture. In this concluding Part 5, we explore the dynamism of culture and why ongoing monitoring and continuous improvement are so critical for a true culture transformation.

Leaders must set a clear vision for a positive culture, emphasizing values such as excellence, safety, and community involvement, and stress the importance of proactive actions to foster a culture of excellence. However, even after assessing a culture, the culture transformation strategy, and the plan’s implementation, the culture transformation must be nurtured through ongoing monitoring and continuous improvement. Leaders must make culture a primary objective, consistently demonstrating core values while advocating for continuous culture monitoring and improvement. Both agree that cultivating a solid culture improves the organization’s bottom line, enhances the quality of products, and contributes to the betterment of communities.

Key Highlights:

  • Continuous Monitoring of Organizational Culture
  • Driving Cultural Change in Mergers Successfully
  • Culture is Dynamic

Resources:

Sam Silverstein

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Sam Silverstein

The Culture Audit™

Tom Fox

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Culture Crafters

Culture Crafters – Turning Around a Toxic Culture: Part 1 – The Problem

Boeing has recently seen one of the most public meltdowns over corporate culture. In 2024 alone, there have been multiple incidents, allegations, and reports about the company in the public arena. The company is under investigation by numerous governmental agencies. Several news organizations have reported a ‘toxic’ culture at the company, and there are ripples throughout the worldwide aviation industry. In such a situation, the question for any organization is how it thinks about turning around its culture. In this special five-part podcast series, Sam Silverstein, the most trusted voice in America on accountability, and Tom Fox, the Voice of Compliance, look at the ways a company in the depths of such a situation can plan out and take concrete steps to turn around and rebuild its culture. In Part 1, we consider the steps that led Boeing to the current state of its corporate culture.

A culture does not go toxic overnight. There are always multiple steps, roads taken (or perhaps not taken), and sometimes years for the toxicity to manifest itself. The cultural problems of Boeing can be traced back to its 1997 merger with McDonnell Douglas, which has since manifested in significant safety and quality issues. This issue highlights the importance of prioritizing quality over stock performance, a lesson to be learned for the future of the commercial airline industry. The root of Boeing’s problems lies in this shift in culture post-merger, from a quality-driven ethos to a profit-centered one, leading to a compromising situation for safety and quality. The company needs a cultural transformation that values quality, safety, and employee feedback for an improved company reputation. Silverstein highlights that the company’s cultural problem stems from a shift towards short-term financial gains after the merger. Drawing on his expertise in accountability, Silverstein underlines the importance of a culture that values quality, safety, and open communication, which is vital for attracting top talent, enhancing productivity, and, ultimately, maximizing profitability.

Key Highlights:

  • Shift in Boeing’s Prioritization Towards Stock Performance
  • Impact of Culture on Mergers and Acquisitions
  • Workplace Culture’s Influence on Business Outcomes

Resources:

 Sam Silverstein

Sam Silverstein on LinkedIn

Sam Silverstein

The Culture Audit™

Tom Fox

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Compliance Tip of the Day

Compliance Tip of the Day: A Toxic Culture and The Fraud Triangle

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

In this episode, we review the interesting intersection of a toxic corporate culture and the fraud triangle.

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

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Blog

Culture Week: Part 3 – A Toxic Culture and the Fraud Triangle

We continue our exploration of corporate culture. Today, we consider the intersection of the Fraud Triangle and a toxic culture.

The Fraud Triangle is well-known to most compliance practitioners. It is pressure, opportunity, and rationalization. When these three factors converge, there is a danger of an ethical lapse that could violate the law. Bribery and corruption under the Foreign Corrupt Practices Act (FCPA) are types of fraud in which the employee or employees do not keep the direct proceeds of their conduct but enrich the company. Of course, if their collective bonuses are drawn from fraudulent conduct, the cycle is complete around how the Fraud Triangle applies to the FCPA.

Bret Hood, writing in a Fraud Magazine article, entitled Twisted Rationalization, said the following: “We might commonly assume that fraudsters choose to commit fraud by deploying rational cost-benefit analyses of potential rewards against the consequences of being caught. However, most fraud perpetrators completely ignore this calculation. Most of their decisions are automatic and unconscious. Sometimes, others massage circumstances so the fraudulent decision maker doesn’t comprehend the ethical implications.”

That sounds suspiciously like someone who has been treated so poorly in a toxic culture that they feel like they have nothing to lose.

David Schrieberg, writing in a Forbes.com article entitled How Does Corporate Culture Fuel Fraud? Start With Volkswagen And Wells Fargo, cited to Steve Morang, who said of those entities and their scandals, “The brains behind the strategic decisions that organizations make, whether Volkswagen or Walmart or Wells Fargo, don’t understand that those decisions, as they get implemented and trickle down the organization, could very much affect their fraud risk profile.” These comments were aimed at the culture of sales, but those same cultural morals created a toxic culture in both organizations. I believe the Fraud Triangle provides insights for compliance professionals to help adapt a compliance program to prevent fraud that leads to bribery and corruption.

Todd Haugh, an assistant professor of business law and ethics at Indiana University’s Kelley School of Business, posited in an MIT Sloan Management Review article entitled The Trouble With Corporate Compliance Programs that even best practices compliance programs fail to take into account behavioral best practices, and one important, but too often overlooked, key to strengthening both individual and overall corporate behavior is eliminating rationalizations.

Haugh’s conclusions were drawn from his long-term research on the causes of white-collar crime and more general corporate wrongdoing. His research has led him to flagrant rationalizations engaged in by those who commit white-collar crimes. This insight led him to see the behavioral aspect of compliance programs as lacking, but that can be remedied. He listed eight different types of rationalizations.

The first is simply denying responsibility. When offenders “deny responsibility by pleading ignorance, they were acting under orders, or contending that larger economic forces caused them to act.” In denying an injury, “an offender often excuses his or her behavior if no clear harm exists.” In denying a victim, the offenders claim the “victim deserved the harm; or when the victim is unknown or not clearly defined.” Through condemning the condemners, “offender’s conduct is to attack the motives of others, such as regulators, prosecutors, and government agencies.” By appealing to higher loyalties, the fraudster claims “to protect a boss or employee, shore up a failing business, or maximize shareholder value.” By using a ledger metaphor, employees claim there is a “behavioral balance sheet” whereby employees “balance out negative actions against positive accomplishments.” Through claiming entitlement offenders assert “that they deserve the fruits of their illegal behavior.” In claiming acceptability or normality, employees compare their “bad acts with those of others to relieve moral guilt.” The FCPA violator has probably several of these rationalizations going on at once. The compliance professional needs to look for ways to counter-act or overcome them.

Haugh considers the Wells Fargo scandal, not from the actions of the former Chief Executive Officer or other senior executives but from the failure of the company’s ethical culture and compliance program to stem illegal conduct. He believes the scandal occurred in large part because of multiple rationalizations at multiple levels, stating “preliminary reports suggest it allowed an environment riddled by employee rationalizations. On the heels of the bank’s $185 million settlement agreement with the Consumer Financial Protection Bureau, a number of former employees have reported that, despite ethics training and messages from headquarters to not create fake accounts, the bank’s aggressive sales culture drowned out any explicit compliance measures.”

Haugh believes the “compliance program failed to address the systemic problem of managers pressuring employees to meet unrealistic sales goals.” He cited to one former employee on the pressure employees felt, quoting “The reality was that people had to meet their [sales] goals. They needed a paycheck.” It was this push by management that led employees, under pressure to meet unrealistic goals, to rationalize their conduct by denying responsibility and claiming relative normality in creating fraudulent accounts. Also remember that the fraudulent accounts were not limited in geographic or any other scope. They were literally created across the U.S. by Wells Fargo branches.

As a prescription, Haugh recommends several steps. The first was one of the most intriguing and it was for a company to employ a behavioral specialist to take current research and theory into practice in an organization. He believes such a behavioral specialist could help multiple corporate departments construct both training and communications by creating “a behavioral compliance curriculum tailored to various groups of employees, giving all members of the organization insight into their ethical decision-making processes. Such a curriculum can become the backbone of a behaviorally cognizant compliance program.” Note how Haugh’s suggestion on a tailored approach to training echoes the language from the DOJ’s Evaluation of Corporate Compliance Programs (Evaluation) to have tailored anti-corruption training. Wedding these two types of tailored employee training, anti-corruption and anti-fraud, could be quite powerful.

Haugh’s next suggestion was to “use behavioral best practices to eliminate rationalizations.” He believes that the compliance practitioner should use behavioral insights to improve company practices. When you consider that most compliance programs were initially written by lawyers, this is not too surprising. He wrote, “This will necessarily go beyond the traditional law-driven compliance practices employed by the vast majority of Fortune 500 companies.”

Haugh advocates that compliance programs should attack rationalizations directly, with an aim towards eliminating them. Here Haugh provided the simple yet direct example of an honesty certificate on an employee gift, travel and entertainment (GTE) reimbursement form as a starting point. I would add this has the added significance of an effective internal control. He also noted that companies should facilitate communications around fraud, rationalizations and, compliance by encouraging “employees to openly discuss rationalizations and how they affect ethical decision-making. This can be accomplished through storytelling by employees and the company. Employees should be encouraged, even required, to meet periodically in small groups to explore the potential effects of compliance violations and white-collar crimes.” To make this communication technique more powerful and to make this strategy more powerful is to fully operationalize by having business leaders guide such discussions including “topics such as what regulations are relevant to the business, common compliance pitfalls, and how some business practices produce externalities that negatively impact stakeholders.”

Finally, every compliance practitioner is well-aware of the role of financial incentives in compliance. I write about this topic on a regular basis. But Haugh takes the incentives discussion in a different direction, suggesting there are non-monetary incentives that could positively impact compliance. Haugh concludes by noting that companies should “use incentives to influence behavior in the right direction” by understanding how rationalizations come into play. Most interestingly, Haugh believes that employee “praise and expressions of gratitude motivate more than money”. Think of the cost of a good word now and then or a pat on the back. But more than a pat on the back, such an approach emphasizes that good compliance is seen as the “governing ethos” of the company where the goal is “to build a corporate culture that incentivizes the rejection of rationalizations through the creation of shared values.”

Haugh concludes by recognizing that no compliance program will always eliminate bad employee behavior. However, his article and research give the compliance practitioner new insights into how to motivate employees and to make compliance more effective in an organization. Further, many of the ideas and suggestions put forth by Haugh would help to operationalize your compliance program more fully, as specified by the DOJ in the 2023 Evaluation of Corporate Compliance Programs. Finally, the use of behavioral techniques can add a powerful tool to the compliance practitioner in more fully integrating a good culture into your organization.

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Compliance Tip of the Day

Compliance Tip of the Day: Characteristics of a Toxic Culture

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

In this episode, we consider the 5 top characteristics of a toxic corporate culture.

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

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Blog

Culture Week: Part 2 – Attributes of a Toxic Corporate Culture

We continue our exploration of aspects of corporate culture. Today, we turn to the dark side by reviewing some of the characteristics of a toxic corporate culture. An 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 are essential for compliance as they navigate corporate culture and assess and improve it.

Moreover, the Chief Compliance Officer and corporate compliance function were again identified in the 2023 Evaluation of Corporate Compliance Programs (ECCP) as the institutional justice and fairness keepers. This means recognizing and preventing a toxic culture from spreading and infecting your entire organization, which is squarely in the compliance wheelhouse. The article lays out vital red flags for every CCO and compliance professional to look for in assessing culture. Last but not least, for any company with a toxic culture, the likelihood that its employees will commit fraud or bribe and corrupt others by breaking laws like the Foreign Corrupt Practices Act (FCPA) is much higher.

The authors identify behaviors they call “the Toxic Five attributes,” which are being “disrespectful, non-inclusive, unethical, cutthroat, and abusive—poison corporate culture in employees’ eyes. 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 must be on the lookout for them and take steps to remedy them if you see or hear about them.

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 with management, whether serious matters such as FCPA violations or more straightforward ideas such as process improvement. It can also be as simple as whether to return to the office full-time and whether management listens to employees about their desires to continue working from home or to utilize some 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.

Non-inclusive Behavior

This concerns 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 against 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.

Ethical Behavior

The authors believe ethics “is a fundamental aspect of culture that matters at both the organizational and individual levels. Interestingly, there are several different aspects of “ethics that every CCO needs to consider. Unethical behavior is “about integrity and ethics within an organization. It also includes dishonesty. “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 to meet safety standards.

Cutthroat Behavior

I found this category fascinating as it included both uncooperative coworkers and the lack of harmonization across organizational silos. This was not simply “friction in coordination, but situations in which “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 “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 still do. The article’s authors reported that only 0.8% of the employees surveyed described their manager as abusive. However, when employees did mention abusive managers, it significantly depressed the 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. However, the authors caution that these are the “baseline elements of a healthy corporate culture. Employees want more than the basics; other organizational stakeholders want companies to have official, solid core values. In an interview with LRN’s Susan Divers, she called this emphasis on core values the “value in values.” From the compliance professional’s perspective, it means values like integrity, collaboration, respect, and DEI.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Culture: Day 6 – Attributes of a Toxic Culture

Corporate culture is finally being acknowledged as a key ingredient in a successful business, particularly one that operates ethically and in compliance. 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, the authors 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 and corporate compliance function were identified in the 2023 3 Evaluation of Corporate Compliance Programs as the keepers of institutional justice and institutional fairness. This means recognizing and then preventing a toxic culture from spreading and infecting your entire organization 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.

 Three key takeaways:

1. Are the attributes of a toxic culture present in your organization?

2. The 2020 Update to the Evaluation of Corporate Compliance Programs mandated the compliance lead this effort.

3. Does your organization have abusive behavior?

Check the free webinar on the new tool, The Culture Audit with Tom Fox and Sam Silverstein on Tuesday, November 28, 12 CT. For more information and registration, click here.