(This article was originally posted on April 6th, 2009 and was a special contribution to Corporate Compliance Insights by our founder Mr. Maurice Gilbert, also the Managing Director of Conselium. Mr. Gilbert can be contacted via email at maurice@conselium.com or by phone at 972-934-8444.)
——————–
Economic Recovery Plan
Compliance Professionals Can Lead the Charge by
Restoring Trust Through Ethics and Compliance
How did we get here? Unemployment is mounting, the stock market is on a roller coaster ride, and the banks aren’t lending.
Any number of factors contributed to our economic collapse—credit default swaps, mortgage-backed securities, Ponzi schemes, subprime mortgages, and all sorts of other things that most of us had never heard of a year ago. But they all boil down to one simple concept: a loss of trust.
The American economy is a little bit like Tinkerbell. It thrives when we believe in it, and it dims when we lose our faith. Unfortunately, merely saying “We do believe in capitalism, we do believe in capitalism” won’t stabilize the economy. To achieve economic recovery, we need to focus on restoring trust, and the only way to do that is to make ethical behavior, not just legal behavior, the rule and not the exception.
It’s important to remember that many of the financial instruments that got us into this mess were perfectly legal. Subprime mortgages, mortgage-backed securities, credit default swaps—none of these things broke the law. But the policies behind them—e.g. loaning money to people with neither the income nor the assets to repay it—were unwise, to say the least.
But there was also more than enough illegal behavior to go around. Bernie Madoff and his fabricated account statements; Siemens, the German engineering giant, and its bribery slush fund; Satyam Computer Services Ltd., the Indian outsourcing company, and its bogus balance sheet—all these scandals and others tear away at consumers’ faith.
We lost faith in everything our economy relies on: businesses and the people who run them, Wall Street, the regulators, and the government as a whole.
While we, as individuals, can do little to restore trust in The Market, as compliance professionals, we have the ability, indeed, we have the duty, to uphold the highest possible professional standards and do what we can to restore the public’s trust in our corner of the marketplace. Quite simply, restoring trust equals economic recovery.
To paraphrase Mahatma Gandhi, we must be the change we want to see in the world.
Trust is earned one relationship at a time. So, what can we, as compliance professionals, do to instill trust, both in ourselves and in our companies?
Integrity
“I look for three things in hiring people. The first is personal integrity.”
–Warren Buffett, CEO, Berkshire Hathaway
The price of entry to building trust is acting with integrity. That means you must act as though your children, grandchildren, and mother-in-law are watching you all day. If you say or do anything that would shame these people, you’ve probably acted unethically.
That means being scrupulously honest, even if being honest doesn’t work to your advantage.
Our integrity is most tested in situations where authority figures, such as CEOs and supervisors, openly espouse policies and procedures that are not in our company’s or its customers’ long-term best interest. Just about every high-profile corporate collapse has a wealth of tales in which employees went along with patently dishonest or unethical policies, convincing themselves that, although the policies may not pass “the smell test,” if the CEO was okay with them, they must be okay.
In the case of Enron, which collapsed in 2001 in a wave of accounting scandals, even its auditors, the prestigious (and now dissolved) Arthur Anderson, were okay with what turned out to be sham transactions. In the case of Archer Daniels Midland, which in 1997 paid the largest (at the time) antitrust fine over an international agricultural price-fixing scandal, the company’s biggest competitors were also in on the plan.
It’s easy to convince yourself that everything is okay, even when you know it’s not. Imagine, then, how difficult it must be to speak up when everyone around you is in “go along to get along” mode. Yet that is exactly what is demanded of us when we see unethical behavior, particularly in our role as compliance officers.
We are the ones our colleagues look to for guidance on what is and is not ethical. Let it never be said that we were the ones looking for loopholes or ways to sidestep regulations, laws or what we know to be right. And let it never be said that, when it was time to speak up, we remained silent.
Speaking up is not without risk, however, as any whistleblower can testify, sometimes before Congress. But the risk of losing a job, however difficult and unimaginable it may be in the short-term, is nothing compared with the loss of our own integrity.
Acting with integrity is crucial to restoring trust and ensuring economic recovery.
Intent
“Let your intentions be good – embodied in good thoughts, cheerful words, and unselfish deeds – and the world will be to you a bright and happy place in which to work and play and serve.”
– Grenville Kleiser, author, 1868-1953
Of course, the cliché is that “The road to Hell is paved with good intentions,” but it should be noted that while bad things sometimes happen when people intend to do good, almost nothing good comes out of bad intentions.
Transparency is one of the hallmarks of intent. If we truly have nothing to hide, we should act that way. While there may be trade secret reasons to keep certain proceedings or information from the public at large, companies and the professionals within them should disclose as much information as possible to their employees and other stakeholders.
Rather than look for reasons and ways to keep information secret, we should work with a presumption of openness and, if needed, only keep confidential information that is truly confidential. Obviously, employee privacy and, as mentioned earlier, trade secrets must be honored. But company finances, policies, and other similar information should be, for the most part, transparent to those with a stake in them.
Secrecy breeds distrust and does little to restore others’ faith in us. Transparency is another crucial ingredient to restoring trust and bringing about economic recovery.
Expertise
“The guy may be totally motivated, connected and inspired, but if he doesn’t know how to do it, he’s not the guy to take out your appendix.”
–Robert Genn, painter
Are you good at your job, all parts of it? Is your team well-trained? Is continuing education a part of your corporate culture?
If you didn’t answer “yes” to all of these questions, you probably have some work to do.
Many corporations run into trouble not because those at the top were engaged in a conspiracy to defraud their investors, but because they didn’t know what they were doing. Their accountants didn’t catch red flags, their technology couldn’t keep up with the demands put on it, their products weren’t as well-made as they should be, or any number of other problems companies face on a daily basis.
Granted, we’re all constantly learning, and sometimes we get it right by accident. But luck and a good wind aren’t enough to make it to the finish line. To do our jobs well, we need both technical and interpers
onal skills, and we need to ensure that our teammates have them too.
Continuing education—whether required or not—should be an important part of your company’s ethics and compliance practices. Compliance professionals, in particular, need to stay on top of regulatory, legislative and technological changes in our industry and profession.
We should also encourage best practices in our places of business. There’s no reason to start from scratch with every problem. Chances are, someone else has resolved the same issue and found the best way to handle it. Industry best practices are usually available at industry association websites.
Only by being the best we can be can we assure that our clients and customers are getting the services and products they deserve. And only when we deliver that level of service will we inspire their trust in us.
By restoring trust in our companies, we are creating the building blocks to economic recovery.
Produce results
“Advice is judged by results, not by intentions.”
– Marcus Tullius Cicero, 106 BC-43 BC
Ultimately, we are judged by the results we produce. When we meet or preferably exceed our clients’ and customers’ expectations, we develop trust. When we do that consistently, we develop a reputation for honesty and good character that will ultimately pay greater dividends than even the best stock tip.
Being realistic is key. Don’t promise your clients the moon and the stars when you can only deliver the moon. It’s a much better idea to do the reverse—promise them the moon, but deliver it and the stars (preferably earlier than expected and under budget).
One of the best ways to build loyalty is to fix problems immediately and sincerely, should we make a mistake. This is good news, obviously, since none of us are likely to go our entire careers (or even an entire quarter) without making the occasional mistake.
I recently heard a story that proved this point beautifully. An acquaintance of mine went to Nordstrom to pick up a suit that was being altered. When he turned his ticket over, the attendant went to the back and came back looking contrite.
“I’m terribly sorry,” he said, “but your suit isn’t ready. However, I’ve asked the tailor to stop what he’s doing and do your suit right away while you wait.”
My friend, who needed the suit and didn’t want to make another trip, approved the plan and proceeded to browse the store while his suit was being finished. Guess what he does while he’s waiting for his suit? That’s right, he buys another suit.
The moral of the story is: We all make mistakes, but it’s what you do to rectify your mistakes that can either build a relationship or tear it down.
Consistency
“Consistency is the foundation of virtue.”
–Francis Bacon, 1561-1626, British statesman and philosopher
Consistency is what pulls all of the other qualities together. After all, what good does it do to act with integrity, be transparent, know your stuff, and deliver results—if you only do it some of the time?
We must act with honor and high character all of the time, or we may as well not even bother. And it’s most important to uphold the highest ethical standards when it’s most difficult to do so—when the stakes are highest, or when cutting ethical corners may be advantageous to us or our employers.
That is when our mettle is most tested; that is when our character is forged. Only when we act honorably, and do so consistently, will we earn the trust of others.
To be honest, I don’t know what magic combination of interest rate hikes or cuts, industry bailouts, tax cuts and government spending is going to pull our country out of its economic tailspin. Bigger minds than mine are working on that, and I’ll keep my fingers crossed that they know what they’re doing.
But at the heart of all our problems is a simple loss of trust in those institutions we rely on to keep our economic ship afloat. Until we can return trust to those institutions, nothing else matters.
As compliance officers, it’s worth remembering that our company’s greatest asset doesn’t appear on any balance sheet. It’s the trust of our customers and employees.
And unless we behave in a way that confirms and encourages their continued trust in us, we risk losing it.
——————–
About the Author
Maurice Gilbert, CPA, founded Corporate Compliance Insights in December, 2008 to further the discussion and professional knowledge exchange of important, forward-thinking GRC topics.
Mr. Gilbert is the Managing Director of Conselium, an executive search firm with a core expertise in corporate compliance, and he has been a featured speaker at The Institute of Internal Auditors and The Information Systems Audit and Control Association. Maurice Gilbert is a member of the SCCE, the HCCA, the AHLA, and the Institute of Internal Auditors.
He can be reached via email at maurice@conselium.com or by phone at 972-934-8444.
PDF 
