On August 19, 2019, the Business Roundtable (BRT) announced the release of a new “Statement on the Purpose of a Corporation” (BRT Statement) that was signed by 181 CEOs of some of the world’s largest companies.
The shareholder primacy myth is deeply entrenched in the business community and is very difficult to counter, especially when variable compensation is tied to achieving specified, short-term financial goals. But, if you succeed in at least raising awareness about how the shareholder primacy myth deflects moral compasses, you might help your leaders set a better course in the future.
This is a crisis in corporate governance. If not remedied, we will see no end of significant corporate scandals, and the next one could involve your employer. To turn things around, we cannot wait for additional governmental regulation. Our best hope of improving corporate governance is for us — corporate counsel and compliance and ethics professionals — to work together with our executive leadership teams to both educate our directors and get them in the game.
In 2008, I had the pleasure of interviewing Hoffman while he was visiting Rochester, New York. I asked him about the early days of the business ethics movement and his assessment of the impact that the compliance and ethics profession has had on the business community. After learning of his passing, I retrieved my notes from that interview, which are partially reproduced in this article.
The professionalization of the field of business management seems no closer today than it was 10 years ago. For those of us in the business of promoting ethical business practices, the reasons for this are worth exploring.
It is hard to find evidence that corporate compliance and ethics professionals and corporate counsel are having a measurable positive impact on performance. Although we have produced policies, procedures, controls, and training programs by the truckload, we have failed to reduce criminal misconduct in the corporations we serve. A change in tactics and focus is required to achieve a different result.
Moreover, as often as not, I’ve observed that corporate executives outside of the law department and other corporate functions generally lacked an understanding of existential legal requirements that, if transgressed, threaten the company’s survival.
The key to achieving strong ethical cultures is as simple as it is difficult to achieve; strong ethical leaders at the top. Decades of work by social psychologists have consistently demonstrated that we follow our leaders. If they are corrupt, we are corrupt. If they are virtuous, we are virtuous.
Regardless of how well-intentioned or well-written they might be by themselves, corporate mission, vision, and values statements have no impact on employee behavior. Although people do not respond to slogans, they do respond to leadership.
Abandon the myth that policies and procedures drive behavior, and exert whatever influence you can to hold your leaders to the highest ethical standards. Experience has shown that when our leaders are corrupt, we become corrupt.
Despite their possible shortcomings, performance metrics — including profit and loss — are vital to helping businesses track and report results to shareholders. The question is, how can we craft meaningful performance metrics that incentivize desirable behaviors while avoiding potential negative consequences?
Internal politics, pressures to perform, unreasonable colleagues and bosses, vexing emails and voicemails, international travel, heavy workloads, long hours, and just plain nasty people often create a work environment that is difficult to bear. Numerous studies have shown that the unrelenting stress associated with office life not only causes significant misery, but it also leads to chronic health problems.
It is not enough for business professionals to just have an academic understanding of operational priority rankings. They must exhibit what DeMarco refers to as the five attributes of a “Good Will Leader.”
Like modern aircraft, businesses have a level of complexity that exceed any one person’s ability to manage without well-designed procedures to check the status and performance of critical systems. This is especially true for multinational corporations that must find a way, every day, to navigate a hazardous and byzantine legal landscape.
As governments around the world enact and enforce ever stricter anticorruption laws, the need to effectively manage sales intermediary corruption risks has become more important than ever. Although it is impossible to eliminate such risks, you can reduce them by implementing the following six essential elements of an effective sales intermediary anticorruption compliance program (ACP).
Susie and Celeste’s most excellent adventure reminds me of the perils of taking a job with a new company. Once you get on the “boat” and it pulls away from the “dock,” you may be disappointed to find out that your new work colleagues are dancing to a tune that is not to your liking. Your boss, your colleagues, your job responsibilities, and the company’s culture might be at variance with your expectations.
I think it is important for board directors and corporate leaders to face reality. Either acknowledge that their CCO is merely heading another corporate function with narrow responsibilities, or (and I prefer this option) empower them to also provide oversight for all corporate functions that manage legal and ethical risks.
When you are seeking a solution to a difficult problem, strive to create an environment in which dissenting opinions are welcomed rather than discouraged, and where no one feels as though they must choose between tolerating failure and risking, if not life and limb, their status or their careers to get the job done right.
If you are in a leadership position now, consider whether you may be falling into the trap that has caught so many others by taking liberties with the rules that you would not tolerate in your subordinates.