This week returns to one my favorite themes for every Chief Compliance Officer (CCO), compliance professional and compliance program: Sherlock Holmes. Over the next few days, I will be blogging on themes from the short stories to illustrate broader application to components of a best practices compliance program. I have used three primary resources in putting together this series: Maria Konnikova’s Mastermind (Konnikova); the online site shmoop.comand its blog post, The Return of Sherlock Holmes (shmoop); and finally the most seminal print work on the entire Holmes canon, the three-volume The New Annotated Sherlock Holmes (Klinger) edited with notes by Leslie S. Klinger. Today, I consider the theme of institutional justice.
Shmoop believes, “If Sherlock Holmes ever got his own reality show, we think he might go for something with a Judge Judy format. Holmes is pretty much already doing a sort of TV judge routine in his own living room. He enjoys having people come tell him their life stories; he tends to show off his intellect; he likes surprising people (and even causing the occasional near heart attack); and he is a big fan of dramatic statements, revelations, and judgments. Holmes really only likes having people around when is in all out, dinner theater mode and is ready to sum-up the case for everyone. Justice and judgment are closely linked for Holmes since they are both very final. Holmes prizes his own judgment and reasoning above all else. And he also prizes his own code of ethics and understandings of justice, sometimes above the actual law. In fact, Holmes sometimes wraps up cases as if he is the law.”
In the story The Adventure of the Abbey Grange, Holmes feels something is just not right about the story told by Lady Mary Brackenstall regarding the death of her step-father Sir Eustace Brackenstall. Holmes’ largest concern turns on the contents of three wine glasses, one of which contains beeswing and the other two do not. It turns out that Sir Eustace was killed by a companion of Lady Mary, which Holmes uncovers. However, Holmes has an adaptability for justice when the situation demands it, stating, “Once or twice in my career I feel that I have done more harm by my discovery of the criminal than ever he had done by his crime.” Satisfied the actions of the criminal and his accomplice (Lady Mary) were both warranted and just; Holmes does not report his findings to the local police. Klinger dryly noted, “his sympathies may have overridden his judgement: Many scholars believe that Holmes lets himself be fooled by a villainess clever than he credited.”
This story illustrates a key point for every CCO and compliance practitioner; institutional justice. As a CCO or compliance practitioner how can you work towards achieving it? One of the ways to insure institutional justice is through the Fair Process Doctrine. This concept is so important and so universal that it permeates many facets of the workplace today, specifically including the realm of anti-corruption in compliance. The Fair Process Doctrine mandates that every hotline complaint should be treated with both dignity and respect; with an efficient and thorough vetting. From there if discipline is warranted, a company should follow a prescribed process. Follow that process and an employee would almost always uphold a company’s decisions. Fail to follow the process and the employee would be required to engage in remedial action.
Institutional justice is a primary factor as to whether an employee will come forward with a concern. Management might try a quick-fix reaction to a messy investigation with more reporting mechanisms, posters or asking a Chief Executive Officer (CEO) to use compliance training to generally get the word out. Employees view it as a trust issue, and you must garner that trust through providing institutional justice. If an employee chooses not to report and an outside source later discovers misconduct, the organization will certainly be subject to potential financial losses and reputational damage that could have been avoided. If the employee does report, but the culture of trust is lacking or they face retaliation, up to and including termination, then you have a disgruntled employee who is most likely going to go to the Securities and Exchange Commission (SEC) under both Sarbanes-Oxley (SOX) and Dodd-Frank.
However, this concept is now a part of the broader concept of institutional justice. Companies that seem to get into the most trouble are those that lack this basic concept. It means more than simply fair and equitable treatment; it requires employees concerns, once raised, be listened to and addressed, all without the fear of retaliation. Wells Fargo is but one example. At the company many former whistleblowers allege they were terminated for raising concerns internally that the fraudulent account-opening scheme was a violation of the company’s Code of Conduct or even illegal. Such whistleblowers allege they were singled out for unfair and discriminatory treatment for speaking up or even trying to speak up. Others allege they were told to meet their sales quotas by any means necessary, with a wink and a nod to how they might do so. Finally, employees who failed to meet the unreasonable quotas were sanctioned through wage loss or discipline up to termination.
Companies must have an absolute prohibition against retaliation. If not, any sense of institutional justice will be destroyed. When an employee is mistreated for following the organization’s reporting policy, it will sustain severe damage to its credibility and viability as a safe and secure mechanism. The damage from mismanagement and reprisals is memorialized on the internet and court records or public documents can create a devastating silent, do-not-report culture. Companies must communicate they have a zero tolerance for retaliation and deal with any retaliation swiftly and publicly.
A final problem of inconsistent outcomes is that companies must demonstrate that consistent and fair outcomes are routine, regardless of people, relationships or scenarios. Employees will learn through the grapevine if the organization delivers fair, consistent discipline, regardless of how confidentially an organization hides such outcomes. Of course, if employees view outcomes as fair, they will be more compelled to report concerns. Employees know that inconsistency equals personal risk.
Both the Fair Process Doctrine and the more recent concept of institutional justice are central to the modern compliance profession. The compliance profession must remind companies that even if they can engage in an action, they should not always do so. Sometimes the reputational damage, even if an action is legal, is so great that the risk cannot be managed. The compliance discipline within every company is the one corporate function most well suited to bringing institutional justice into the fabric of a company.
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© Thomas R. Fox, 2018