I recently had the chance to visit with Vincent DiCianni, founder and Chief Executive Officer (CEO), of Affiliated Monitors, Inc. (AMI). (AMI sponsors the podcast series This Week in FCPA). In this conversation, we explored how ethical culture is a part of an overall ethics and compliance assessment and how to go about performing such an assessment.

We began with an exploration around the areas assessed to help determine if a company has an ethical culture. DiCianni said you need a framework for such an assessment. DiCianni advocates  starting with the program itself. This means a review of what does the organization’s compliance program look like and does it meet the foundational tenants? He would ask such questions as whether it is educational; does it have a process for detection; and is there some type of remediation when something is found? From this baseline, you might consider what the company is doing for training to educate their staff, are they really touching on the elements of the parts of education that the staff need and is it meaningful to them in their positions? In other words, is the training both focused and effective?

Next DiCianni suggested talking to employees in the field. The goal here is to determine alignment between the aspirations laid out in the organization’s culture with the reality on the ground. It could be as simple as whether there is training and the depth of the training. Are there detection methods in place, i.e. hotlines and internal communications, and, most importantly, are people comfortable using a hotline? He added that when you talk about a culture, the effectiveness of compliance program is also critical.

I was quite gratified when DiCianni discussed institutional fairness and institutional justice as key indicia of culture. He called it accountability and internal enforcement. This can turn on whether there is an effective disciplinary process, if it is fair and is it objective. If it does not meet these basic criteria, the compliance program probably does not fulfill its obligations and this speaks to a low or even negative culture. He even said this reaches to how companies may treat third parties.

Some companies have very strict disciplinary processes for dealing with ethics violations. Then you find out, the same company’s efforts to instill that type of accountability and enforcement with its third parties is meaningless. Put another way, if you have a zero-tolerance policy and allow someone to work with your organization who violates this policy, it may well negatively impact your culture. DiCianni advocates reviewing the foundational elements of culture. He suggests holistic pieces around an ethical culture, including the recruiting process, performance metrics, the communications process, internal controls and, of course, an independent assessment.

Yet the institutional fairness reaches beyond even the specifics noted above. DiCianni said, “if you’re talking about culture, you’re talking about people and how they perceive things and how they perceive their role and how they perceive people above them.” This means that if the senior leaders are perceived as being fair, employees generally view them with greater favorability. However if there a perception that if “you’re on the inside, you will do well in the organization and if you’re not on the inside then you don’t do well”, it is a strong statement of culture. He believes that how you treat your employees and how they see themselves within this organization structure is a foundational element of a strong culture. This means in focus groups and interviews, one item that is important to discern is whether there is a perception of fairness, objectivity and transparency.

All of these factors are important because even if a company puts in place a gold standard compliance program and conclude they have a great compliance program, the reality is quite different as it is just a paper program. You have to determine if the compliance program is real and then how to make it impactful. The Department of Justice (DOJ) would say the program must be operationalized. DiCianni said, “staff should be vested in that compliance program.”

He then tied the compliance program to the organizations ethical culture. He analogized it to  neon signs as “these flashy policies and processes that companies will put in place, employee of the month or something that is very flashy but only lasts for 10 minutes.” This type of approach will not last, for if an organization is going to achieve cultural change, it must be done in a manner which “really touches people and it’s not just the flavor of the month kind of thing.” This is achieved by learning about your people and learning about what is important to them. Some suggestions to get them involved in the compliance and ethics culture might be to have them speak up at a meeting, lead a discussion on an ethical moment, have them participate in the creation of a policy or the design of compliance training.

DiCianni concluded with accountability. He said, “I think the other one that I can’t emphasize enough is accountability. You know if there are serious violations of an ethics policy of the company, be it conflicts of interest or code of conduct. If nothing is done about it, everyone in the organization knows about that. It diminishes all of the efforts that have gone into creating this program and trying to have an ethical culture. If you do not do anything to enforce it, when something serious happens, it literally becomes a futile exercise”.

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, 2018