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Whistleblowers Still Get No Love

Jim Slavin
SAI Global Compliance

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Crime and Culture

Kirsten Liston | Senior Compliance Advisor

The Rise of the Super PACs

John T. Dalton | SAI Global Compliance

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SAI Global's advisors include our Law and Ethics Advisors, practicing lawyers and ethicists who are subject matter experts in fields of particular relevance to compliance and ethics programs, and others in the field of ethics, governance, risk management and compliance. They share their viewpoints about emerging issues, items in the news, and thoughts to ponder on this Website. We look forward to reading your comments in response.

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Whistleblowers Still Get No Love

by Jim Slavin, Mar 27, 2012

Recently I’ve been contemplating the Dodd-Frank whistleblower bounty provisions.  I just completed an article enumerating the steps that companies should take to promote a “Speak Up” culture encouraging employees to report wrongdoing internally, rather than to the government. Given that recent focus, I was pleased to see that the Ethics Resource Center’s 2011 National Business Ethics Survey results indicate that 65% of employees are willing to step forward and report wrongdoing (presumably internally). 

Sadly, the very next survey result suggests that retaliation against such whistleblowers is at an all-time high, with 22% of reporters experiencing retaliation as a result of their having come forward.  Subsequent results indicate that the collective strength of ethical cultures declined dramatically in 2011, with 42% of employees reporting “weak” or “weak leaning” cultures within their organizations. Assuming the accuracy of these figures, it seems the SEC will have no shortage of bounty-seeking employees eager to blow the whistle on their employers.

Against this backdrop, I was not surprised when I read Greg Smith’s New York Times Op-Ed letter describing his opinion of the “toxic” culture at Goldman Sachs.  I was, however, surprised and dismayed when I read about Mayor Bloomberg’s reaction to Mr. Smith’s depiction of unethical attitudes within Wall Street’s most powerful investment bank. 

Bloomberg’s quick dismissal of Smith’s article as an “unfair attack” and his eyebrow-raising decision to visit Goldman Sachs the next day for a supportive lunch with the CEO make me wonder where his priorities lie.  His comments would suggest that the protection of tax revenues to the city and the importance of Goldman Sachs’ longstanding cachet outweigh the possibility that Smith is right and the ethical core of the organization has rotted from within.

Two of the tenets of my aforementioned article are that Tone from the Top is critical for an ethical culture, and that organizations must take a firm non-retaliation approach to whistleblowers.  In fact, they need to take steps to affirmatively protect them.  In an effort to promote business ethics, perhaps government officials should think like a Chief Compliance Officer instead of, in this case, like a Mayor.  An effective CCO would not publicly dismiss a whistleblower’s report without any investigation, nor would he dine with the accused wrongdoer immediately thereafter to demonstrate solidarity. 

Despite the best efforts of compliance professionals, legislators, regulators, whistleblowers, and “Occupy Wall Street” demonstrators, it seems that the Golden Rule on Wall Street is still “those with the gold make the rules.”

Crime and Culture

by Kirsten Liston, Mar 06, 2012

People often ask us if a good corporate compliance program can change culture—and, if so, how we know. Is it something that can be measured?

Adam Gopnik had a piece in the New Yorker recently that made me think about the issue from a different perspective.  Gopnik’s piece was about crime and imprisonment, and much of what he covers is beyond the bounds of our discussion. But in the middle of the piece, he talks about a huge drop in crime over the last 30 years—a 40-80% drop across the U.S.

He writes about a book by Franklin E. Zimring, a criminologist at Berkeley Law, which basically says that the numbers of crimes rise—and fall—with the opportunity to commit them: 

…[I]in a virtuous cycle, the decreased prevalence of crime fuels a decrease in the prevalence of crime. When your friends are no longer doing street robberies, you’re less likely to do them. Zimring said…“Crime is a routine behavior; it’s a thing people do when they get used to doing it.” And therein lies its essential fragility.

Or, as Gopnik concludes:

Curbing crime does not depend on reversing social pathologies or alleviating social grievances; it depends on erecting small, annoying barriers to entry.

Applying this thinking to the corporate compliance program, some of those “annoying” barriers to entry have everything to do with culture. For instance:

  • Managers who are evaluated on ethics and compliance issues will pay attention not just to goals and business targets, but to making sure high-performers are getting results the right way
  • Colleagues at a facility that has put up posters and distributed mousepads to publicize its reporting resources know how to report misconduct if they see it
  • Potential accomplices at a company that shares the outcomes of recent ethics and compliance disciplinary cases may be less willing to help or even to look the other way, since they know there can be real consequences for their actions

What are some of the more successful “annoying barriers to entry” you’ve seen?

The Rise of the Super PACs

by John T. Dalton, Feb 22, 2012

As the U.S. presidential race begins to heat up, a great deal of attention is currently being paid to the increasing role that companies can play in financing political candidates and causes. In particular, the buzz term “super PAC” seems to be omnipresent. These political action committees offer deep-pocketed donors (including corporations) a means of contributing unlimited donations indirectly to political campaigns and causes.

Super PACs became even more visible this week when it was announced that Republican presidential hopeful Rick Santorum had to refund a $50,000 donation from the Red, White and Blue super PAC because the funds in question originated from a foreign firm. Under U.S. law, foreign organizations, governments and individuals are prohibited from contributing to U.S. national elections.

I mention the Santorum story namely because it highlights the Supreme Court’s 2010 decision in the Citizens United case, a controversial decision that constituted a sea change in terms of the role that corporations can play in the political arena. In Citizens United, the Supreme Court ruled that U.S. corporations were permitted to contribute to political action committees that “avoid direct coordination with individual campaigns.”

For many of our clients, this newfound ability to contribute to political causes and campaigns impacts various aspects of their compliance and ethics programs, from their codes of conduct and corporate policies to their disclosure and conflicts of interest programs. As compliance and ethics professionals, it is advisable to ensure that your organization complies with U.S. election laws and that all internal aspects of your compliance and ethics program reflect the changes from Citizens United.

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