Years ago, before Enron and the avalanche of business ethics scandals that followed, there was a theory that predicted who was most likely to violate company ethics and compliance policies. According to the theory, mid-level employees who had plateaued in their career were the likely suspects. The theory held that these individuals were often frustrated or even angry at their organization, were under considerable pressure from a variety of sources and they knew enough about how the company operated that they were confident they could break rules and not get caught. A new subculture had developed and been identified in corporate America. With this theory in mind, corporate leaders designed and delivered awareness and training campaigns to target this audience and to address what became known as the tone in the middle.
Today corporate leaders need to shift their focus up the ladder to another subculture – their own.
Today corporate leaders need to shift their focus up the ladder to another subculture – their own. While the number of mid-and lower-level employees who violate policies will dwarf the number of CEOs, an executive scandal, or even an ambivalent response to a scandal, will have a much larger impact on an organization. While it is still important to address risks throughout our organizations and to help create a proper tone at the top, these steps are only part of what’s needed. It’s not enough for leaders to say the right things. They also need to acknowledge when they or their C-suite peers are at fault and have the courage to respond decisively when action is needed.
You Can’t Delegate the Ethics of Respect & Dignity
This may seem obvious, but part of the problem is that we too often assume that policies, ethics training, and helpline reporting systems are equally effective at all levels of the organization. We assume it’s enough that leaders are aware of enterprise-wide ethics efforts. But this neglects the fact that the C-suite is its own distinct culture, and traditional efforts may not be effective with this critical risk group. It is not hard to find examples of leadership teams that are responsible for creating, approving and implementing internal controls yet nevertheless take those same controls for granted, or worse – assume they don’t apply to them. Executive leaders and directors at a minimum need to ensure they are living up to the compliance efforts they lead. But more is needed. Leaders must recognize the unique characteristics of their executive-level subculture and take steps to ensure that ethics and compliance efforts are tailored to meet the C-suite challenge and are applied and effectively enforced at the top of the organization.
Executive Ethics & Compliance Can’t Be Happenstance
There are numerous examples that could be cited to illustrate that the C-suite operates differently and requires its own distinct brand of ethics and compliance. Here are three examples and what you can do to address the problem:
- It Is Highly Unlikely That a Senior Leader Will Ever Use the Helpline
If senior leaders are aware of ethics or compliance issues or if they have questions, they will usually employ other channels than a helpline to resolve the matter. It may be impractical to mandate the use of incident management channels, but if other, informal channels are to be used we need to ensure the effectiveness and accountability those channels provide. If leaders are likely to first turn to colleagues or perhaps the General Counsel, are you confident that adequate steps are in place to ensure that the issue will be properly addressed? Are there procedures in place to ensure that issues won’t be ignored or minimized due to misplaced loyalties, conflicts of interest, pressure or skewed priorities?
- Employee Training Is not Executive Training
While board training is becoming more common, distinct executive level training is not.
Similarly, training that is geared to employees is unlikely to address the unique roles, responsibilities, and challenges that executives face. As the above example illustrates, leaders must be acutely aware of the risks of personal and professional conflicts of interest and it is best to address head-on how they should respond to misbehavior by a fellow leader. For this reason, every organization should require separate training geared to the unique risks and challenges faced by executives. While board training is becoming more common, distinct executive level training is not. And too often the training that leaders receive is inadequate to meet the unique challenge.
You Can’t Delegate Ethics on the Issue of Sexual Harassment
- Executives Need Champions, Too
Just like any other team, C-suites cultures are driven by champions who advocate for ethics amongst their peers. If you are a senior leader in your organization, then you are well positioned to take the necessary steps to ensure that the C-suite culture challenge is being met. You are in a position to convince your colleagues of the importance of compliance training as well as scheduling time and resources to do it right.
It’s been 18 years since the Enron scandal began to unfold and since then the number of examples of CEOs and board members who have directly or indirectly damaged their organization’s reputations is growing. It’s time to reassess how the ethics message resonates at the top, not just from the top. Ask yourself what do you need to do to ensure that fellow senior leaders not only “get it” but they’re held accountable when they don’t?
Definitive Guide to Compliance Program Assessment