Just in case Dodd Frank was falling off your radar, the SEC just reminded us that whistleblower awards are here to stay in a big (as in 14 million dollar) way. As reported by CNNMoney, the SEC recently awarded its largest monetary award ever, to an unidentified whistleblower. In fact, prior to this award, the largest award ever issued was $125,000, an amount over ten times less than the amount reported this week.
As we all know, whistleblowers still get no love. Myriad surveys and reports indicate that employees are becoming more and more comfortable reporting wrong doing, yet the number of whistleblowers who experience retaliation is also increasing. I think we can all agree “that’s no good!” With that reality in mind, I was encouraged to hear a whistleblower story on National Public Radio earlier this week.
In the perfect, abstract world of traditional economics, everyone behaves in a way that maximizes his or her benefit and no one acts against his or her self-interest. Unfortunately, as the emergent field of behavioral economics has shown, human beings are remarkably unpredictable and given to myriad biases and random, non-rational (and irrational) influences. This complicates the compliance and ethics professional’s job, especially with respect to incentives and discipline. Even more dishearteningly, even when we are able to predict initial effects, unintended consequences frequently exacerbate the very problem we were trying to solve.
As we close out another year with the promise of beginning anew, it bears remembering from whence we came. Here are Three Top Compliance Stories from 2012 (courtesy of my colleague, Jamie McKillop!):
By now, everyone in the world who is even remotely tuned into compliance has chewed on, digested, and spit out the Morgan Stanley declination-to-prosecute story. We all know that Garth Peterson is a criminal who is guilty of myriad wrongdoing. We are aware that Morgan Stanley’s compliance program has been upheld as a model of effectiveness and that its global head of anticorruption compliance has been called "the most marketable compliance officer in the world." We understand that Peterson received FCPA training seven times and FCPA reminders no fewer than 35 times while he was employed at Morgan Stanley. And, all of that is good – great, in fact – for Morgan Stanley and for the compliance profession as a whole.
I was struck by today’s New York Times article on “Elite School Students Describe the How and Why of Cheating.” The article discusses what appears to be an accepted standard for behavior at Stuyvesant High School – “New York City’s flagship public school.” What is striking is how rational the students are when making their decisions:
Can a basically good person do something profoundly unethical—without even realizing it? According to some social scientists, the answer is yes.
While reading my alumni magazine from Boston College this morning, I came across an interesting discussion of the “Trolley Problem,” which is a thought experiment in ethics, first introduced by Philippa Foot in 1967. You can find a description of the experiment here and participate in a brief version of it here. The experiment involves questions about peoples’ decisions and the outcomes of their actions. While not intended to relate specifically to the problems and challenges surrounding modern day corporate whistleblower programs, I couldn’t help but draw parallels between the two.
Over the past week the Olympic Games have once again captured the world’s attention. According to its charter, the goal of the Olympic Movement “is to contribute to building a peaceful and better world by educating youth through sport practiced in accordance with Olympism and its values.” Part of that movement includes promoting ethics in sports. While there have been multiple displays of this mission in action over the past week, there have also been a few incidents that remind us that corruption can come in many forms and occur in many different arenas.
In his new book, The Honest Truth About Dishonesty, How We Lie To Everyone—Especially Ourselves, social psychologist and Duke University professor Dan Ariely, examines what he calls the “Simple Model of Rational Crime (SMORC)”, which is the idea that people cheat solely in order to increase rewards to themselves. In my view, this intuitive model may also form the basis for certain compliance and ethics practices.
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