ethics and compliance go hand in hand

with co-authors Ellen Hunt and Fiona Beddoes Jones

What would you do?  In this classic situation, all the elements for staying the course rather than disclosing the truth are present and the question is: should you tell on yourself?  Ellen Hunt sets forth the dilemma that we have probably all found ourselves in, and Richard Bistrong and Fiona Beddoes Jones help us answer the question: should we lie to win or be honest and lose?

C.S. Lewis said, “Integrity is doing the right thing, even when no one is watching.” A scene in Robert Redford’s movie, “The Legend of Bagger Vance” beautifully illustrates the tension in doing what is right at the cost of our own self-interest – when we are caught between lying to win or being honest and losing as a result.  In this scene, the main character, whose reputation is on the line, is in a tie in a big golf tournament.  Winning matters to him as a way to regain his status and respect in the community, as well as to his former girlfriend as a way to revive the golf club, her family business.  As he approaches his next shot, he moves some twigs from around his ball and accidently moves the ball.  Only he and his friends have seen this.  There is no referee.  His competitors and others have no way of knowing.  Nonetheless, he calls a penalty on himself, placing his ability to win in jeopardy.

While golf might not be your game, you can probably relate to the situation where even though no one may be looking, your integrity is on the line and you must make a choice between lying to win or being honest and losing.

Nick is a star sales manager at his company.  He has worked very hard at growing the market by attracting government clients for his company’s products.  While working with government clients is new to Nick and the company, he does know it ups the ante on risk and that the consequences for non-compliance are serious and can even result in jail time.  It is five business days before the first large U.S. government bid is due and, frankly, the team is struggling with answering all of the questions.  There have been endless meetings about what the right answers could be, as there are a number of contractual terms – like screening for debarment, flowing terms down to subcontractors and avoiding organizational conflicts of interest – that Nick knows his company doesn’t currently have in place.  This contract is so large that if the company wins this bid, Nick and his sales team will have earned their bonus for the year and then some.

Amy, a member of Nick’s sales team, is responsible for getting the bid completed and out the door on time.  Amy knows someone at another company that is also bidding on the same contract and has gotten a draft of their bid.  She hasn’t shared it with Nick or anyone yet but is pressuring Nick big time to let her turn it over to the team.  Nick is not sure but thinks that at least in the U.S., just having a copy of a competitor’s bid is illegal and, if not illegal, has crossed the line.

The latest draft of the company’s bid is sitting on Nick’s desk and Amy is calling about every hour to find out when he will sign off with his approval.  Nick feels that a number of answers are not quite truthful.  He has cautioned Amy that with government clients, there is no wiggle room and that this is not the place to be creative with answers.  Amy has been insistent that the way the draft reads now is the way it has to be for the company to have any hope of winning the bid.  Nick doesn’t know if this is just Amy’s opinion or she believes this because she has reviewed the competitor’s bid.

Is Nick in a “The Legend of Bagger Vance” situation?  Will anyone ever know about Amy having a copy of a competitor’s bid?  How would anyone find out that some of the answers to the bid might not be quite true?  As in the movie, is Nick in a spot that requires him to call a penalty on himself and his team even if that means that his company may lose the bid?  How should Nick proceed?

Richard Bistrong’s Response

This dilemma finds us at a dangerous intersection of willful blindness and what I often describe as “this is only a red flag if I make it one.” Nick now knows that Amy has seen nonpublic information on a competitor offering. That’s toothpaste that can’t be put back into the tube. In addition, Nick does not know under what circumstances that information was obtained. From my perspective, there are two elements at work as Nick ponders his options.  First, Nick should know from an ethical perspective that he has a problem. Second, if that fails to influence his decision, he then has to consider the legality of his options.

When we think of ethical decision-making, both of these elements come into play.  First, consideration of the ethical consequences of our behavior is undoubtedly related to “how we are wired.” This is not something we think of having to teach, train or incentivize. Doing the right thing should be instinctive. The other element is the series of “policies, rules and procedures “which is designed to govern corporate conduct. Clearly, in this situation, Nick encounters both.

I often share that during my own decade in the field of international business, I failed to consider the ethical consequences of my decisions and only contemplated the risks and consequences of getting caught. So let’s see if we can’t help Nick to make some better decisions!

If Nick solely bases his decision on “getting caught,” then he is ignoring the first line of ethics, which is doing what is right without indexing that decision to the risks and probability of detection.  Someone on his work team has seen the competitor’s offering. That is an ethical breach irrespective of discovery. Nick, not knowing why Amy is guiding him to respond to the request for proposal (RFP) in a certain way, should raise enough suspicion as to pause the process, even with the looming deadline.

The context of an intimidating deadline should not be ignored. As Nick gets closer to the “drop dead” date, the risks of him making the wrong decision might increase, as his thought process shortcuts more rational guidance in the desire to “get the job done.” We have a rich field of behavioral research to demonstrate this peril, including Kahneman, Bazerman and Tenbrunsel, among others. As Tenbrunsel and Bazerman well state in “Blind Spots: Why We Fail to Do What’s Right and What to Do About It,” when making quick decisions, “our visceral responses are so dominant at the time of the decision that they overshadow all other considerations.”

In addition, the fact that Nick’s company does not have a robust contracting compliance program to address these issues should not be ignored. The need to make quick decisions in the absence of a well-embedded compliance platform presents the potential for even greater peril.

I often share that while my former employer did not have what we might now consider to be a vigorous anti-corruption compliance program, I was given plenty of opportunity to review the FCPA and ask questions if I required additional information or clarification. Thus, I knew that bribing a foreign official was immoral and illegal even without the type of anti-corruption training that we have today, almost 20 years later. Nick is in a similar situation. Even in the absence of contracting guidance, Nick knows that the information Amy possesses is ethically wrong and, most likely, illegal. He doesn’t need to consult Federal Acquisition Guidelines to figure that out.

Thus, from a compliance perspective, even with a less than adequate program, Nick has a duty to report this breach to his superiors. If he is working over a weekend, as often happens in these types of work groups, he needs to find someone who can listen to his concerns. Nick has to discard his bonus expectations and realize that this breach has ethical and possible legal consequences.

As to Amy and other peers, Nick needs to internalize that if he discloses, it’s going to have potential career-changing consequences for Amy and financial consequences for his team. If I was Nick, I would be thinking “do I tell her first,” but that would not help anyone, since it would only give Amy an opportunity to retract her statements with a “you misunderstood what I was saying” retort. Nor should Nick confide to anyone else in his work group; other peers might think of lost bonus opportunity as more pressing than compliance and the law, thus giving Nick self-serving counsel. If Nick should call anyone before compliance, as I often share, let him “call home” or a someone in his life that cares about his well-being, not his paycheck.

Then Nick needs to call compliance or legal right away and ignore any of Amy’s e-mails, calls or text messages until it is taken out of his purview. Of course, the danger here is that given the lack of experience in government contracting, Nick’s organization might “botch” how his disclosure is handled and potentially create even greater friction between Nick, Amy and other team members. Nick will have to decide later, based on how his organization handles his disclosure, if it’s the right place to grow his career.

As Tanbrunsel and Bazerman well state, we need to be aware and to avoid situations where “our ‘want’ self wins out, and unethical behavior ensues.” Nick is now in possession of what the authors call “the appropriate data” and has an opportunity to take notice and act upon that information.

The consequences might not be pleasant, including forgoing what could have been a lucrative business and bonus opportunity, as well as “scoring big” in his new role. Nick might even be ostracized by some of his own peers by not remaining “willfully blind.” After all, Nick really didn’t know the precise nature of Amy’s recommendations. It doesn’t matter.  Nor does it matter what criteria Nick uses – ethics or compliance or both – to make his decision and to disclose the ”red flag” that he knows exists. In sum, if the atmospherics of a deal don’t make sense, if they counter to basic logic, then it’s time to hit the pause button. Let’s remember, no one ever went to jail for saying no or for being overly cautious in disclosing their concerns.

Fiona Beddoes Jones’s Response

The following points aren’t in any particular order, and they are numbered simply for ease of reference.  As you read through each one, consider whether you think it could be classified as a strength, a weakness, an opportunity or a threat.

  1. Whatever decision Nick makes, he has to be able to live with it.  Personally, and rather obviously, this relates to his personal values, his integrity, his conscience and his authenticity.  Professionally, he will need to be able to justify his decision – to his team, potentially to the board and worst case scenario, in court.
  2. Amy can’t be trusted.  She’s obviously very pushy, very competitive and opinionated.  What she says may be true; equally it may not be.  If she has obtained a copy of a competitor’s bid, she may have broken the law.  With her winner-take-all attitude, she seems to have not considered the costs of her actions.  Her values and her behaviours so far, from an ethical standpoint, are already questionable.
  3. Who’s the boss here?  Nick is, not Amy.  Not only is the ultimate decision his, if he gets it wrong and there is a head to roll, it will be his.  So there’s a big risk factor here for him that won’t apply to the rest of his team.
  4. The reputation of the company and the team is also on the line here.  To date, the company has a good reputation within government and with the slowly increasing list of government clients.  So far so good.  This reputation and these relationships have resulted in “being on the list” of companies invited to tender.  A whiff of malpractice or unethical behaviour and all of these things will evaporate like the morning mist, and the company’s reputation, as well as the reputations of each team member, could be ruined as a result.
  5. Are they really ready? At the moment, it’s clear that the company isn’t really in a good position to submit a tender bid at all.  The team is inexperienced, they don’t understand the language of the bidding process and they don’t have many of the systems, processes and procedures that are critical to the bidding process in place.  Put simply, they are just not ready.
  6. Who else is bidding? Nick and his team don’t know who else is bidding.  They know of one other firm, but not all of them.
  7. What is the risk of losing the bid on the merits? If Nick does as Amy is suggesting and they submit a bid which would not stand up to scrutiny if the company is “found out,” they would be blacklisted from all future government bids and tenders, regardless of whether they utilized the draft bid of the other company. So, from this perspective, it’s not the other company’s draft bid that is the sole ethical issue here, but whether the company fakes it and/or lies about their readiness to tender at all.
  8. The clock is ticking, but it’s not a minute to midnight yet. There are still five days before the bid is due.  A lot can happen in five days, and there is no immediate imperative to submit the bid just yet, despite Amy’s hourly insistence. However, Nick does need to decide on his approach now and share that with his team, getting more senior management support if necessary.  His decision now will determine his future course of action.

Have you come to a conclusion yet and decided what Nick should do?  Let’s present the issues in the SWOT format and see if that aids our thinking in any way.

Strengths

  • Nick and his firm are beginning to develop good government and partner relationships
  • They have been invited to tender, so they are obviously on the preferred supplier list
  • So far, their reputation is a good one and they are trusted

Weaknesses

  • Amy and her lack of integrity
  • They could pull out all the stops over the next five days and make an honest bid and still not win the bid despite all of the effort and hours they have put in (and not know why unless they receive honest and useful feedback from the client)
  • They aren’t yet ready to tender if they are unfamiliar with the language and terminology and if their systems and procedures aren’t yet in place

Opportunities

  • This is a learning curve for future bids
  • It’s also an opportunity to get the right systems, procedures and processes in place now so that the team and the company are ready for future tenders
  • To recruit a new member of the team who has real government tender and winning bid experience to strengthen the current team and teach the team what to do and how to understand the terminology used in the bid processes

Threats

  • Jail/prison
  • Blacklisting from future tenders and bid opportunities
  • Ruined reputations – individually and also the company’s
  • Nick could lose his job and would struggle to get another

Presenting the scenario this way gives us a different perspective and I think, makes it easier to see a way forward.  How you would proceed if you were Nick will depend on your personality, your experience and your risk profile.  Personally, my approach is always to capitalize on and protect the strengths and opportunities whilst finding ways of mitigating the weaknesses and avoiding the threats.

So if I were Nick, my first stop would be to see the Chief Ethics and Compliance Officer and the General Counsel.  A determination has to be made regarding Amy’s behavior, and if she in fact has obtained a copy of a competitor’s bid.  Since it’s unlikely that any investigation will be concluded by the deadline, I would then bring the team together for a morning and ask them to conduct their own SWOT analysis so that we can submit a successful bid next time.  I would be clear that our absolute best is required to submit a winning tender bid without being unethical in any way, as we are all accountable for our actions – to each other and ultimately to the Board.  All of our reputations are on the line.  That’s the short-term.  In the medium term, we would be ensuring that the systems and procedures were accurately and effectively in place to support future tenders.  I would be recruiting a new member of the team to strengthen it and we would be continuing to develop our excellent relationships within government.  In the long-term, I would be expecting us to win some future bids, even if they were initially smaller ones, and I would want to take all of the team with me.   I would also be clear that if they wanted to take any alternative approach, then there was no place on the team for them.

Leadership is all about integrity and ethics and making our position crystal clear so followers can predict what we would say and do from an ethical perspective.  This is an opportunity for Nick to really lead from the front.


Richard Bistrong

Richard Bistrong, CEO of Front-Line Anti-Bribery LLC

Former FCPA Violator and FBI/UK Cooperator; Anti-Bribery Consultant; Writer & Speaker

Richard Bistrong spent much of his career as an international sales executive in the defense sector and currently consults, writes and speaks on foreign bribery and compliance issues from that front-line perspective. Richard’s experience included his role as the Vice President of International Sales for a large, publicly traded manufacturer of police and military equipment, which required his residing and working in the UK. For well over 10 years, Richard traveled overseas in his sales responsibility for approximately 250 days per year.

In 2007, Richard was targeted by the U.S. Department of Justice in part due to an investigation of a UN supply contract and was terminated by his employer. In that same year, as part of a cooperation agreement with the DOJ and subsequent Immunity from Prosecution in the United Kingdom, Richard assisted the United States, Great Britain and other governments in their understanding of how FCPA, bribery and other export violations occurred and operated in international sales. Richard’s cooperation, which spanned three years of covert cooperation and two years of trial preparation and testimony, was one of the longest in a white-collar criminal investigation. In 2012, Richard was sentenced as part of his own plea agreement, and served fourteen-and-a-half months at a federal prison camp. Richard was released in December of 2013.

Richard now consults, writes and speaks about current front-line anti-bribery compliance and ethics issues. Richard shares his experience on anti-corruption and ethical challenges from the field of international business, reflecting on his own perspective and practice as a former sales executive and law enforcement cooperator. Richard currently consults with organizations through his company, Front-Line Anti-Bribery LLC, and welcomes the opportunity to exchange and share perspectives on real-world anti-bribery and compliance challenges.  Richard has shared his experience, via keynotes and panels, with the OECD, World Bank and International Anti-Corruption Academy, as well as major multinationals and leading academic institutions.

Richard can be reached via his website www.richardbistrong.com  or email richardtbistrong@gmail.com and he frequently tweets on #FCPA & #compliance via @richardbistrong.  Abstracts on his consulting practice can be found on his website. Richard is also a Contributing Editor to the FCPA Blog at www.fcpablog.com.

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