Yesterday I paid tribute to Malcom Young, co-founder of AC/DC. Today I go in another musical direction to pay tribute to Paul Buckmaster who, according to his New York Times obituary, brought power and poignancy through orchestral arrangements to signature songs by David Bowie, Elton John, the Rolling Stones, Carly Simon and countless other rock, pop, country and jazz stars. His early work was with Elton John on John’s second album, simply titled Elton John.  Buckmaster arranged the hit single “Your Song” which became John’s first signature hit. John said ““He helped make me the artist I am,” calling Mr. Buckmaster “a revolutionary arranger” who “took my songs and made them soar.”” In many ways, he brought the human element into arrangement.

Buckmaster was classically trained, having shown a gift for music at an early age. “His mother tutored him in piano and music theory and signed him up for cello lessons when he was 4. He won his first cello competition in the 5-and-6 age group at a youth music festival. He later studied cello in Italy, and at 17 he was awarded a scholarship to the Royal Academy of Music in London.” He worked with artists as diverse as David Bowie to Guns N Roses to Miles Davis to Dwight Yoakam. Ben Folds summed it up best with this tribute posting on Facebook “I don’t want to disparage all of the brilliant arrangers out there but there was Paul, and then there’s everyone else.”

I thought about the work of Buckmaster, adding the incredible arrangements to song writers and singers work when reading an article in the Financial Times (FT), entitled “Best practice needs the human touch”, where Brian Groom posited that “resilience in business is rooted in paying heed to staff behavior.” He stands the myth of the rogue employee on its head by saying “policies and procedures count for very little if they ignore the human element.” He ties all of this into the risk management process, as it is through the management of risk that companies not only innovate but also succeed.

The key begins with leadership, where top management needs “to define the corporate culture and standards of behaviour, and improve capabilities in technology and processes. They also need to build trust among customers, suppliers and employees.” This extends to technology, which brings new challenges. Groom cites to John Ludlow, chief executive at Airmic, “If you think about kids and cyber bullying, do you think adults are going to be any different? Relationships are more detached and I think people will feel naturally easier about bullying another company with which they just have a digital relationship.”

Many issues turn on the work of two Israeli psychologists Amos Tversky and Daniel Kahneman, who Michael Lewis’s wrote about in his seminal book The Undoing Project: A Friendship that Changed Our Minds. It was the story of two Israeli academicians who authored a series of papers on humans’ decision making process. Lewis, a well-known author of such works as Liar’s Poker and The Big Short, first heard of the two psychologists after publishing his book Moneyball. Indeed, it was another paper in response to Moneyball which directly led to The Undoing Project.

The main thesis for Moneyball was that baseball was inefficient because judgers and raters of baseball talent misjudge that talent due to their mind’s biases. However, this thesis was developed by Kahneman and Tversky almost 30 years ago. They were so well known in the academic community that Kahneman won a Noble Prize in Economics. The book should be studied by every compliance professional for its insights into how the human mind works, or in some cases fails to work, when forming judgments and making decisions. In short, people do not always make rational decisions.

The implications for anti-corruption compliance programs under the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act. Often one hears legal types advocating simple rules and regulations as a compliance program. They opine a compliance professional only must understand the law and then communicate that understanding to employees in a corporation to create an effective compliance program. In short, the rational mind will always make the rational and rules based decision.

In his book, Lewis explains the research and publications of Kahneman and Tversky to destroy and debunk this myth. There are wide variety of other factors which go into an employee’s decision making process, least of which could be summarized as ‘What’s in it for me?’ The work of Kahneman and Tversky also explain not only why you must have a compliance program but why a company must do compliance for the rules and regulations to gain and hold effectiveness.

In his FT piece, Groom spoke with Hersh Shefrin, professor of finance at Santa Clara University who “believes companies are not taking sufficient heed of the behavioural roots of risk-taking.” Professor Shefrin said, “What we know from psychological advances in the last 40 years is that people are highly imperfect when it comes to making judgments about risk. It’s important to understand how to improve decision-making, to identify vulnerabilities, by bringing together the quantitative tools of risk management with the qualitative psychological perspective.”

Individually, the “problem usually starts with a bias towards excessive optimism, where people expect the future to be rosier than it is likely to be, and overconfidence, where they are too sure of their capabilities and tend to under-assess risks. In organisations, there is a tendency towards collective biases such as groupthink, where people reinforce and magnify individual biases.”

Groom’s article and Lewis’s book point towards another key insight. A rules based approach, focusing simply on policies and procedures which employees will follow is not enough. There must be a human element which not only fine tunes the compliance regime but also understands that employees do not always act as rational actors. Managing the human risk in compliance requires much more than a simple legal perspective to effect.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

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