Undermining the Fight Against Global Corruption

On September 22, 2016, in In the News, by Joe Murphy

September, 2016

Joe’s post on the legal system undercutting compliance programs, including corporate anticorruption efforts, was published on the Penn Law Global Affairs blog, https://www.law.upenn.edu/international/blog/ . This builds on Joe’s article, Joseph E. Murphy, Policies in conflict: Undermining corporate self-policing, 69 Rutgers U.L. Rev. 2 (forthcoming 2017), draft available at http://ssrn.com/abstract=2827324 .

 

By Joe Murphy, CCEP

In a short piece from Slate, L.V. Anderson takes on corporate ethics training.  Ms. Anderson’s revelation is that poor training doesn’t work.  For her, the solution for corporate crime is simple:  just have the right culture and the problem of corporate discrimination, corruption, and crime is solved.  No training needed.  And employees already know everything in the training anyway. In her telling, the whole problem arose from bad companies, getting off because government gives them credit for bad training techniques. Once government stops giving that credit, and companies get the right culture, the problem is solved.

Let’s be positive first.  Where is the author right?  Bad training does not work.  There is a saying in the compliance and ethics field that the big folks get in trouble and the little folks get ethics training.  This is indeed a prescription for failure. Issuing codes of conduct and having people swear mighty oaths that they will follow them does not work, as Cash Matthews noted in her studies decades ago. Little booklets are just that  – little booklets.  They have no effect when left alone.  In addition to bad training not working, it is also true that any management method done poorly does not work. So even if one could come up with some special formula for changing culture, if it is done poorly it will also fail.

I also give the author credit on the point that actual “ethics” training that purports to tell people what is morally right and wrong, in particular, can be marginal and even insulting to employees’ intelligence.  When it is inflicted solely on employees without hitting the executives equally hard, this is one of the clearest signs it is not effective. Employees are smart enough to know when the training message is not reality and when executives are saying, “do as I say, not as I do.”

There is another point where implicitly the author is right, although she may not realize this.  To the extent enforcers and regulators impose training requirements and rely on this to prevent future misconduct, they are showing their ignorance.  Those in government need to up their games by increasing their knowledge of the field of compliance and ethics. There are many excellent steps agencies could require when they settle cases, but they need to learn about these.

Let’s now look at where the author goes off track. First, she starts with what appears to be an underlying assumption, held by many, that the sole purpose of training is to transfer information.  This certainly has its place.  Having done years of training in companies, I can say without doubt that there are people at all levels, from executives to the most junior folks, who are ignorant of key points that could get them and their companies in trouble.  I have had the experience of talking one on one with these people as part of training.  It is how I know that even the information transfer part is essential.  Antitrust, FCPA, export control – there are some tough, dangerous areas that can blindside people. Even harassment has pitfalls that can surprise people.  They do have a need to know.

But there is another aspect of this.  The target is not just wrongdoers, but potential witnesses and helpers.  I do not believe the C-suite in Enron lacked knowledge of the accounting rules.  But for every senior executive breaking the law there will be other employees who know or suspect something is not right.  Informing and empowering these employees is key.  And finally, an important part of training is motivation.  An employee may not believe any of “this stuff” applies to him or her, but good training should help bring the point home. (As noted below, however, the training works when it is part of a full compliance and ethics program with the other essential elements, such as whistleblower protection.  Telling people to raise concerns but not taking the necessary steps to enable this is a mistake).

Computer-based training?  Of course, the comments from Jeff Kaplan quoted in the article are right on point.  If you have tens of thousands of employees you cannot give them all live training on all the risk areas (and we tend to forget that some live training is just dreadful, and even sometimes incorrect in communicating what the rules are).  Online training allows companies to get key baseline messages out to larger numbers of employees.  Of course, it can be done well or done poorly.

The author seems to state that companies are doing this bad training because government mistakenly gives them credit for doing it.  But let’s start with the reference to Enron she offers; for those who didn’t live through the Enron era, here is a point:  Enron received no credit for its weak compliance effort. There was no compliance program there, just empty paper and preaching.  The code, for any compliance professional who has ever seen it, was a poorly written collection of legalistic statements, mostly in language typical employees would never read or understand. (In this age of hyperbole it has even been incorrectly described as “award winning” by those making the same points the author make.)  Nor am I aware of any company that has done what she describes that would receive a pass from any enforcement agency.  I have read quite a few government standards on compliance programs, and none do what she implies they do. Nor in my review of government cases have I seen any agency reward what she describes.  Of course, there is the State of California that purports to know the answer for culture change by prescribing exactly how much training companies should do on harassment. (She avoids any opinion on that.) I remain a big skeptic of the California forced-consistency approach, and believe that this might well incent what the author describes.  But note that California offers no reward for doing this, just a mandate.

The author, like many other writers looking in on the field of compliance and ethics, seems to assume mere paper and preaching is a compliance program.  The Sentencing Guidelines make clear that a number of steps are minimum requirements for a program.  It provides absolutely no credit for mere preaching (i.e., boring ethics online training, or even more boring live lectures) or paper (i.e., codes of conduct, which are not even mentioned in the Guidelines).  I cannot think of an example of an enforcement agency anywhere on the planet which would give a company credit for what the author describes.  For example, every guidance I have seen from the US Justice Department calls for real efforts, not the types of e-preaching the author describes.

As for her prescription, her bottom line appears to be that all you need is the right culture. I seem to be reading more and more statements like this from writers and academics.  Often this is based on a misreading of the results of behavioral research and a fixation on culture. I refer to this as the “bright, shiny object” phenomenon.  Some “new” concept comes along and everyone is mesmerized. But if an author at least reads the Sentencing Guidelines standards (very rare, in my experience), they would quickly realize the Guidelines point in the correct, indeed only possible direction.  One cannot get the right culture from applying magic fairy dust.  It takes work – hard, consistent work.  What does that work entail?  Following all of the management-oriented steps set out carefully in the Guidelines.  For example, in one of the Sentencing Guidelines elements (one that people tend to undervalue or not even read), the Guidelines make clear that no program deserves credit unless it covers incentives.  This step, in turn, calls for careful work.

Without question, communications also has a place.  Here the key is talking with your people and actively listening to them.  The first time you test out a Mickey Mouse ethics question you will get your head handed back to you on a platter.  Go back and re-think your training approach.  Your people will tell you when you have it right.  This is where culture comes in – recognize it and work with it.  Do not start by inflicting your training on the workers.  Start with where the highest risk really is – the executives.  If they find it boring or too unimportant for their time, then you must assume the same is true for the workers.  If you want to send strong messages, don’t emit meaningless blather.  Talk about real cases where managers and executives were disciplined for the things you are telling employees not to do (privacy protected, of course). This is what it means to say that the field of compliance and ethics is hard work.

How do you get commitment from the executives?  As sure as night follows day, if someone takes the author’s approach to a senior executive, the executive will say, “great, that will save us tons of money. Look, you just write up something and I will sign it and we’ll have our ethical commitment at the top.”  Twenty years of working in a company certainly taught me how things actually work in the real world.

Here is the revelation for the author and others looking at this area.  Compliance and ethics is very hard work.  It requires active listening skills.  The Sentencing Guidelines wisely require that a company keep evaluating its program to see if it works.  Obviously in the examples the author lives with no one did that.  If the folks who proposed this training bothered to talk with even a few employees they would have learned enough to change their approach.  Perhaps the training did raise awareness.  Or maybe it built antagonism.  Only talking with the employees would reveal that.  But having those discussions is one of the minimum elements for a program under the Guidelines.

What is the lesson of this little journey? For starters bad training, like anything else done poorly, does not work. A poor approach to changing culture will fail just as quickly as poor training. We should welcome those who challenge us to think.  But we should also expect them to do a bit more work before they tell us what to do.

 

Emil Moschella, Executive Director of the Rutgers Center for Government Compliance and Ethics, and Joe Murphy, CCEP, author of 501 Ideas for Your Compliance & Ethics Program (SCCE; 2008), have filed comments with the Organization for Economic Cooperation and Development’s (OECD) Council on Public Integrity, making some provocative suggestions on the Council’s draft Recommendation on Public Integrity. The OECD is a forum where the governments of 34 democracies with market economies work to promote economic growth, prosperity, and sustainable development.

The Recommendation deals with promoting integrity in government, with an emphasis on the use of management techniques.

Based on their decades of practical experience, Emil and Joe suggest:

1. The Council should use the concept of a compliance and ethics (“C&E”) program, as widely applied globally, as a starting point and model. C&E programs are already widespread – why reinvent the concepts?
2. The Council should consider using the OECD Working Group on Bribery’s Good Practice Guidance modified to address public integrity and public sector entities. These are good standards for compliance programs – why not use them?
3. The Recommendation should include a examples to illustrate how the suggestions in the Recommendation would work on a best practice basis.
4. The Council should include public international organizations, such as the OECD, in the scope of the Recommendation. We think it is good for those making recommendations to follow their own advice.
5. The Recommendation should call on the public sector to promote C&E in the private sector to protect public integrity. If we want honest government it helps to promote integrity in the private sector, and C&E programs there help protect everyone.
6. The Council should advise states not to take actions that undercut C&E programs anywhere, whether in the private sector or the public sector. There have been some terribly ill-advised actions by governments that hurt C&E programs. Why have one part of government undermining something that another part is promoting?
7. The Council should form an ongoing working group to promote and implement the Recommendation. The Recommendation is good, and should have some ongoing life.
8. The Rutgers Center for Government Compliance and Ethics offers an important resource for development of public integrity programs. The Rutgers resource is a one-of-a-kind source for guidance on how government agencies can implement their own, internal C&E programs.

Read the complete filing. (pdf)

 

Trailblazers and Pioneers 2014

On August 18, 2014, in In the News, by Joe Murphy

In July 2014 Joe was named by the National Law Journal as one of its Governance, Risk and Compliance Trailblazers and Pioneers 2014

 

 Local attorney and author lectured in the Middle East about Transparency & Accountability in corporate agendas

 

HADDONFIELD, NJ –Joseph E. Murphy, a Haddonfield-based attorney with a global reach, is just back from a December trip to Muscat, Oman in the Middle East. A popular speaker about compliance and ethics issues, Murphy was a panelist in a corporate roundtable with Omani business leaders and officials, an event organized by the Pearl Initiative.

 

The Pearl Initiative, a Gulf Corporation Council-based, private sector-led, not-for-profit organization, collaborated with the United Nations Office for Partnerships to promote the best practices in the Gulf region. Murphy said the discussion centered on the importance of improving accountability and transparency in the private sector among businesses in the Sultanate and region.

 

“This initiative is also part of the global fight against the curse of corruption.” said Murphy, who is the director of Public Policy at the Society of Corporate Compliance and Ethics.  “In Oman they have taken a leadership role in promoting good corporate governance; promoting effective compliance and ethics programs in the private sector is an essential part of good governance and the effort to prevention corruption.”

 

The Omani event created a dialogue about compliance and ethics in business at the highest level, among government, civil society and the private sector.

 

In his presentations around the world Murphy has also discussed his white paper, A Compliance and Ethics Program on a Dollar a Day, published by SCCE.

 

In the “Compliance and Ethics Program on a Dollar a Day” paper, the Society of Corporate Compliance and Ethics is showing that companies of any size can take effective steps to prevent and detect wrongdoing.  A company does not have to be big to do this; what it does need, though, is commitment by management.  If the commitment is there, organizations like SCCE are ready to help and provide ideas and assistance.

 

 

 

 

Compliance and the Defense of Competition

On August 18, 2014, in In the News, by Joe Murphy

Joe Murphy has been invited to speak by the Brazilian Administrative Council for Economic Defense (CADE), in partnership with the Center of Social and Economic Law Studies (CEDES), at a seminar in Sao Paulo, Brazil, entitled “Compliance and the Defense of Competition.”  Joe will speak on August 29, 2014, on the topic of “Essential Elements of Compliance Programs: Cartels.” The seminar will be an opportunity to assemble the international and Brazilian competition communities to discuss the relationship between competition law and policy and corporate compliance initiatives.

 

Local attorney and author lectured in the Middle East about Transparency & Accountability in corporate agendas

HADDONFIELD, NJ –Joseph E. Murphy, a Haddonfield-based attorney with a global reach, is just back from a December trip to Muscat, Oman in the Middle East. A popular speaker about compliance and ethics issues, Murphy was a panelist in a corporate roundtable with Omani business leaders and officials, an event organized by the Pearl Initiative.

The Pearl Initiative, a Gulf Corporation Council-based, private sector-led, not-for-profit organization, collaborated with the United Nations Office for Partnerships to promote the best practices in the Gulf region. Murphy said the discussion centered on the importance of improving accountability and transparency in the private sector among businesses in the Sultanate and region.

“This initiative is also part of the global fight against the curse of corruption.” said Murphy, who is the director of Public Policy at the Society of Corporate Compliance and Ethics.  “In Oman they have taken a leadership role in promoting good corporate governance; promoting effective compliance and ethics programs in the private sector is an essential part of good governance and the effort to prevention corruption.”

The Omani event created a dialogue about compliance and ethics in business at the highest level, among government, civil society and the private sector.

In his presentations around the world Murphy has also discussed his white paper, A Compliance and Ethics Program on a Dollar a Day, published by SCCE.

In the “Compliance and Ethics Program on a Dollar a Day” paper, the Society of Corporate Compliance and Ethics is showing that companies of any size can take effective steps to prevent and detect wrongdoing.  A company does not have to be big to do this; what it does need, though, is commitment by management.  If the commitment is there, organizations like SCCE are ready to help and provide ideas and assistance.

 

 

 

 

It’s been a busy summer of travel for Joseph E. Murphy, a Haddonfield-based attorney with a global reach. A popular speaker about compliance and ethics issues, Murphy visited India, Ethiopia and Malaysia to meet with government officials and industry leaders.

First stop was Mumbai, India in July, when Murphy was invited to speak and participate in the workshop “U.S. Department of Commerce and Confederation of Indian Industry, Business Integrity and Compliance Roundtable.” The presentation detailed the strategies for developing an affordable, practical, and effective company compliance program for Indian and global markets.

“It is important, in the fight against corruption, that we each be willing to play our part.  The companies and organizations at the conference showed that they understood this,” said Murphy, who is the director of Public Policy at the Society of Corporate Compliance and Ethics.  “In my experience, people in business either find a way or they find excuses. There are already too many excuses for corruption.  In this remarkable conference no excuses were on offer. Rather, the U.S. Commerce Dept. and the Confederation of Indian Industry convened a meeting of those looking to find a way to fight against corruption and not accept excuses.”

Next stop was Africa in August, where Murphy participated in the AGOA Ethiopia 2013 Forum held in Addis Ababa at the headquarters of the African Union, in an event called The Benefits of US African Public-Private Partnerships. Murphy’s presentation was entitled “Compliance Programs for Small and Medium-Sized Companies.”

At his final summer destination in August, Murphy presented on compliance and ethics programs for small businesses at a program sponsored by the Asia Pacific Economic Cooperation in Kuala Lumpur, Malaysia called “Train the Trainer Workshop for Codes of Ethics.”

In these three events, Murphy discussed his white paper, A Compliance and Ethics Program on a Dollar a Day, published by the SCCE.

“In the “Compliance and Ethics Program on a Dollar a Day” paper, the Society of Corporate Compliance and Ethics is showing that companies can take effective steps to prevent and detect wrongdoing.  A company does not have to be big to do this; what it does need, though, is commitment by management.  If the commitment is there, organizations like SCCE are ready to help and provide ideas and assistance.”

In the spring, Murphy lectured for the SCCE in London and Brussels to begin his globe-trotting year.

 

Joe was an invited speaker at a conference in Kuwait sponsored by the United Nations Development Program – Regional Workshop: Building Capacities and Promoting Collective Action to Strengthen Private Sector Integrity, Dec. 18-19, 2012, Kuwait City, Kuwait.

Participants in the conference represented 20 Arab nations; the focus was on practical steps to prevent corruption, working with the private sector.

Joe spoke on “International Frameworks and Emerging Global Trends on Private Sector Integrity: Reaching Small and Medium Enterprises.” He emphasized the important role governments play in promoting anti-corruption compliance and ethics programs, the need to encourage effective programs, and how governments can use their leverage to increase buy-in by small and medium-sized enterprises.

 

The Antitrust and Competition Law Compliance Forum announces its new web site, at http://www.compliance-network.com As noted on the site, this Forum is a discussion group focused on antitrust and competition law compliance programs.

“We are a non-profit network of individuals dedicated to the global advancement of highly effective anti-cartel compliance programs, as a means to prevent and detect cartel behavior. Our members, from various backgrounds and geographic locations, have come together to form an online resource hub for this area of study.”

Our mission includes the role of government in promoting effective anti-cartel programs. On the site we provide a broad range of resources that address how governments take steps to promote programs, and also how some governments have undercut such programs.

Ted Banks, Donna Boehme and Joe are organizers of this Forum.