How does your company deal with the question of fairness in its compliance program? I thought about that question while reading an article in the New York Times (NYT), entitled “That Eternal Question of Fairness”, by Nancy Koehn. In her article, Koehn discussed the book “The Ajax Dilemma: Justice, Fairness and Rewards” written by Paul Woodruff which considers how a company might distribute rewards to its employees “without damaging the larger community.” I have written about the Fair Process Doctrine which generally is recognized as allowing employees to accept a negative result if they think that the process through which the result was determined was fair and not arbitrary and capricious. In the Department of Justice’s (DOJ) 13 point minimum best practices compliance program, Item 10 states:
10. Discipline. A Company should have appropriate disciplinary procedures to address, among other things, violations of the anti-corruption laws and the Company’s anti-corruption compliance code, policies, and procedures by the Company’s directors, officers, and employees. A Company should implement procedures to ensure that where misconduct is discovered, reasonable steps are taken to remedy the harm resulting from such misconduct, and to ensure that appropriate steps are taken to prevent further similar misconduct, including assessing the internal controls, ethics, and compliance program and making modifications necessary to ensure the program is effective.
However, I believe that the DOJ best practices are more active than the ‘stick’ of employee discipline to make a compliance program effective and I believe that it also requires a ‘carrot’. This requirement is codified in the US Sentencing Guidelines with the following language, “The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.”
I have advocated that the Compliance Department work with Human Resources (HR) to ensure that rewards are handed out to those employees who integrate such ethical and compliant behavior into their individual work practices going forward. One of the very important functions of HR is assisting management in setting the criteria for employee bonuses and in the evaluation of employees for those bonuses. This is an equally important role in conveying the company message of adherence to a Foreign Corrupt Practices Act (FCPA) compliance and ethics policy.
Ajax relates to all of these fairness issues through his story from the Iliad. He was one of two Greek warriors who were in line to receive the armor from the mighty Achilles, after he was slain by the Trojan Prince Hector. Achilles’ armor was to be rewarded by the Greek King Agamemnon to “the Army’s most valuable soldier.” Ajax and Odysseus competed for the prize via a speech made before the King. The book’s author uses this speech competition and Agamemnon’s subsequent award of Achilles armor to Odysseus to explore the issues of rewards, which he says “mark the difference between winners and losers.” Paraphrasing several questions that Koehn asked about communities: Which does your company value more: Cleverness or hard work?; Strength or intelligence?; Loyalty or inventiveness?
These questions can play out in a company in a variety of ways. Does your company identify early on in an employee’s career the propensity for compliance and ethics by focusing on leadership behaviors in addition to simply business excellence? If a company has an employee who meets, or exceeds, all his sales targets, but does so in a manner which is opposite to the company’s stated business ethics values, other employees will watch and see how that employee is treated. Is that employee rewarded with a large bonus? Is that employee promoted or are the employee’s violations of the company’s compliance and ethics policies swept under the carpet? If the employee is rewarded, both monetarily and through promotions, or in any way not sanctioned for unethical or non-compliant behavior, it will be noticed and other employees will act accordingly. I think one of requirements under the Sentencing Guidelines is to ensure consistent application of company values throughout the organization, including those identified as ‘rising stars’.
In her book review, Koehn states that she believes the Ajax example still has relevance today. Most employees are like Ajax, loyally doing the important day-to-day work. If doing business in a manner antithetical to a company’s stated culture of ethics and compliance is seen to be rewarded then those loyal, hard-working employees may well stop working in a compliant manner. The end for Ajax was not good, as after the King’s award of Achilles armor to Odysseus, his anger exploded and he lost his life, his family and his reputation down to this day. From this lesson we draw the conclusion that rewards must be distributed in a way to ensure a company’s health. This, the author believes, is why the “story of Ajax is sure to resonate with many” even today.
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© Thomas R. Fox, 2012