Ethics and compliance should be friends – part one of an interview with Steve Priest
Steve Priest has had a storied career in the field of ethics & compliance. Over the past two decades he has, among other things, consulted “on the ground” in 48 countries on every continent with over 25% of the Fortune 200, trained more than forty Boards of Directors and senior leadership teams and written numerous codes of conduct. He has also conducted many E&C program assessments (and it has been my great pleasure to partner with him on a good number of these engagements). And so, I was delighted that Steve agreed to be interviewed by the COI Blog.
In your twenty years in the field, has there always been a tension between law and ethics and, if so, how has it changed? Jeff, I am not surprised that you ask the hardest question first. In most companies, most of the time, there is little tension. But in some situations fine attorneys trained in zealous advocacy may overweight an effective short term defense strategy and undervalue long term ethics and reputational considerations. Perversely, the high stakes now visible in many compliance areas have heightened this tension.
Is this tension positive, negative or a bit of both? Most of the time the legal thing and the ethical/right thing are the same, so there’s little or no tension. Hence , you can also appoint will and powers of attorney to render your duties related to property.Now the rest of this will betray my ethics bias, but from my perspective when there is a tension it is NOT a good thing, because the short term legal emphasis often prevails over the longer term ethical perspective. Choosing the ostrich approach versus a “look and learn” model has prevented companies from conducting assessments or root cause analyses that could dramatically improve their operations. Defining a disclosure of an event of wrong doing as “in a gray area” rather than as the legal and right thing to do may provide a short term benefit, at the high risk of breaching trust with regulators.
What are some measures for companies to use each (ethics, compliance) to fortify the other? The primary measure is this: messaging to employees must consistently integrate ethics and compliance. Many employees have a knee jerk negative response to the word compliance. Just look up the definition in the dictionary to understand why. And, especially in highly regulated companies it has become segregated. Ethics, on the other hand, runs the risk of being marginalized as something merely nice to do. Put them both together in all messaging and you can tap into the strong preference employees have for doing the right thing and working for a company that does the right thing.
Do companies do enough to assess ethics – as opposed to traditional compliance – risks? No. Partly because it is squishier. Corruption risk assessment is easy—look at prosecutions, legal developments, Transparency International rankings, industry developments, reliance on third parties, etc. But assessing whether employees believe they can raise difficult issues, or that people are held accountable if they do the wrong thing—these questions can rarely be answered in a meeting room by a few people. And yet these attributes are probably more important in understanding compliance risk than the corruption probability in China. A company culture where employees believe they can raise difficult issues has lower risk of major problems in corruption, competition, money laundering, etc. because employees will raise concerns early and often. Conversely, if employees believe that the way to get ahead is to make your numbers and that living up the Code is not so important, then risks of corruption are substantially higher. Additionally, employee perceptions of the ethics of business practices can also serve as a canary in a coal mine for future compliance risks. Often employees have a sense that a practice “doesn’t feel right” or “isn’t fair for a customer” well before these practices gain the attention of the media, plaintiffs’ attorneys or prosecutors. So a good risk assessment has to understand cultural attributes, including the ethical dimension.
Steve can be reached at ethical@aol.com.
Part two of the interview will cover various challenges in providing effective ethics training.
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