Sir Roger Bannister died over the weekend. Every runner in the world has likely heard of Bannister, as he was the first to break the once thought impenetrable 4-minute mile barrier. On May 6, 1954, at a university track meet at Iffley Road sports ground in Oxford, Bannister ran a 3:59:4 mile thereby forever cementing his fame in world of distance running. His record only lasted for 54 days as it was bested by Australian John Landy, but Bannister was the first. Bannister later bested Landy in the Commonwealth Games of the same year, when Landy made the critical error of looking back to his inside on the final curve to try and find Bannister. While he did so, Bannister sprinted past him on the outside. Both men broke the four-minute barrier, forever immortalizing the two competitors in the Miracle Mile race.
Breaking the four-minute barrier was once considered a physically impossible human feat. One article noted, “According to legend, experts said for years that the human body was simply not capable of a 4-minute mile. It wasn’t just dangerous; it was impossible. Further legends hold that people had tried for over a thousand years to break the barrier, even tying bulls behind them to increase the incentive to do the impossible. In the 1940’s, the mile record was pushed to 4:01, where it stood for nine years, as runners struggled with the idea that, just maybe, the experts had it right. Perhaps the human body had reached its limit.”
Yet Bannister, a medical doctor in training while racing “gave him a knowledge of physiology that no other runner who flirted with breaking the 4-minute barrier had. By measuring his oxygen consumption, Bannister discovered that running consistent lap times required less oxygen than running variable times, so he focused on running steady quarter-mile splits. Through intense interval training of running 10 laps with 2-minute breaks in between, Bannister had dropped his average quarter-mile splits from 63 seconds to 59 seconds, sufficient to break the elusive barrier.”
I thought about Bannister and how his insight overcame the unbreakable four-minute barrier when I read a recent article in the Financial Times (FT) entitled “Cleaning up after a crisis” by Joe Leahy. In his piece he detailed how the Brazilian entity Braskem has worked to overhaul itself from one of the largest corruption enforcement actions of all time from 2016. Braskem was a part of the Odebrecht corruption enforcement action (Odebrecht was Braskem’s controlling shareholder) and the companies were jointly fined $4.5bn, which was later reduced to $2.6bn (good for No. 2 on the all-time list). Of this amount, Braskem was fined approximately $1bn.
The article discusses the role of Fernando Musa, who was promoted to Chief Executive Officer (CEO) in mid-2016 before the corruption settlement was announced. The company Board brought Musa into the CEO role to navigate the company through the final resolution, then to keep the company afloat, and eventually right it. Musa (obviously) admitted that the company had made grievous errors and stated, “We are paying $1bn for corruption…it is a heavy penalty because we did things that warrant a heavy penalty. The important thing is that this will not happen again.” It turned out that the company had paid out over $250MM in bribes to “politicians and others.”
I have previously considered how a Chief Compliance Officer (CCO) should take steps in remediation after a corruption incident. I was therefore intrigued by the remarks from a CEO on how he worked to keep a company upright. Clearly setting the right tone that there will be full transparency and such actions can never occur again is important. It is important in the eyes of the regulators and to communications such a commitment to the employees. A CEO must also be transparent about the remediation steps that are being taken and why they are critical to the company moving forward.
But there are other stakeholders and other business relationships which must be considered. Musa took the bull by the horns and his “response was to hit the road to talk to his banks, business partners, customers and employees face to face.” He said that he literally went floor-to-floor in the corporate headquarters. He said that his “message was to stay focused on what is important: attend to your customers, run the plants productively, create new products.”
Musa worked to overhaul the corporate governance structure, doubling the number of independent Board members from three to six, out of 11 Board members. Indeed, at this point there is only one Board member still sitting from the pre-settlement date. Musa is also dealing with not one corporate monitor but two corporate monitors who are overseeing the compliance implementation efforts and work towards satisfying the commitments it made in the resolution documents. The company also terminated employees and third parties involved in the corruption scandal. The company is also working to get a handle on its some 6,600 third party service providers to manage this always key risk.
Of course, Braskem is still at risk in the rest of the South American continent and perhaps beyond for its prior corrupt activities. For instance, it is under scrutiny in Mexico for alleged improper
“payments in 2012 to a company connected to Emilio Lozoya, a former senior campaign official for President Enrique Peña Nieto and ex-head of Pemex, the state oil company.” Lozoya has denied the allegations and Braskem claims it has found no evidence of “illicit acts” in Mexico.
Perhaps the most important thing a CEO can do in this situation is make clear to all stakeholders and parties involved that there is a plan for the full implementation of a compliance solution going forward and the company is moving towards full execution of that solution. That is what employees, investors and the government all want to see from a company which has put itself in such a position as Braskem.
As an additional step, a company can become more involved in the greater compliance profession. This can be engagement with trade groups and becoming involved to being a force for positive change to increase the indices of compliance. Here one might consider Wal-Mart and how it has gone big and in a very public way about the implementation of a compliance solutions after the New York Times (NYT) broke the story of its alleged corruption in Mexico. Wal-Mart compliance professionals have hit the compliance speaker circuit to share what they have learned and what they have done to improve their company’s culture and compliance program.
Sir Roger Bannister broke the previously thought unbreakable four-minute barrier by recognizing they key to efficient running was a fast, steady pace throughout the four-lap mile race. That is the same tact being taken by Braskem and its CEO to make a comeback from one of the greatest corruption scandals of all time.
To see YouTube click of the Miracle Mile from the 1954 Commonwealth Games, click here.
What are the steps Braskem has taken to garner trust in the market and from its stakeholders?Click to tweet
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© Thomas R. Fox, 2018