This year is the 200thanniversary of the birth of Wuthering Heights’ author, Emily Brontë. While her sister Charlotte received more acclaim as an author, I found Wuthering Heights to appeal much more greatly to my dark side. Many moons ago I read Wuthering Heights in high school. I thought it was one of the most disturbing books I had read up to that point in time. Heathcliff’s love for Cathy was eternally awe-inspiring but his retribution was all consuming. This week I will take Wuthering Heights as an inspiration and write a series of blogs around it. Today, we use it as a starting point for an integrity agenda framework.

Although the novel is now a classic of English literature, original reviews of it were deeply polarized. It was considered very controversial at its publication due to the unusually stark depiction of “mental and physical cruelty, and it challenged strict Victorian ideals of the day regarding religious hypocrisy, morality, social classes and gender inequality. The English poet and painter Dante Gabriel Rossetti, although an admirer of the book, referred to it as “A fiend of a book – an incredible monster  […] The action is laid in hell, – only it seems places and people have English names there.”” When I read it, I saw it as the most formidable gothic novel I had read to that point. Of course, you cannot go the dark side in a much better setting than the moors of Yorkshire.

A must-read for every compliance practitioner, is a recent Fraud Magazine article, entitled “What’s Your Integrity Agenda”, edited by Vince Walden, partner at Ernest and Young LLP (EY), with contributions from Professor Eugene Soltes, Ph.D., of Harvard Business School, Jon Feig, CPA, and Andrew Reisman, J.D., of EY’s Forensic & Integrity Services practice. The article explores how to assess the strength of an organization’s integrity capabilities and operationalize integrity processes and provides you with the underlying framework from which to make this journey and the specific steps you can take moving forward. Over the next couple of blog posts, I will be investigating this article.

The authors begin with a basic understanding of determining your integrity agenda. They cited to Stephen Covey, author of The 7 Habits of Highly Effective People,for “Integrity is conforming reality to our words, in other words, keeping promises and fulfilling expectations.” They pointed to many recent scandals where the corporation had clear policies and procedures in play and even well-positioned internal reporting mechanisms in place. Yet major ethics and compliance failures ensued due to the lack of integrity at the highest levels of the organization. Simply put, “the point of the tension is between an organization’s intention and its actual performance.”

They also pointed to EY’s recently released 15thGlobal Fraud Survey, which noted, “that 52 percent of respondents in emerging markets believe that bribery and corrupt practices happen widely in their countries, and 19 percent of the respondents say they can justify cash payments to win or retain business when helping a business survive an economic downturn.” He also cited to Feig in finding that many companies were looking at compliance simply through the lens of increased cost, yet not confronting integrity risks directly; Feig said, “More than ever, we see companies react to the increased cost of compliance programs. They look at the effectiveness of their programs through a lens of cost/benefit and risk tolerance”.

All of this is even more so when companies enter emerging markets or those which are viewed as high risk for bribery and corruption, under the Foreign Corrupt Practices Act (FCPA). The authors believe it is incumbent that companies maintain a focus on integrity initiatives and communications in such markets so that employees understand not only what is expected of them but also to understand they are being supported by the home office by a manner other than simply saying ‘No’; stating, those businesses “that emphasize integrity and transparency in their relationships with their business partners and other stakeholders can more confidently operate in high-risk countries, navigate new markets and potential acquisitions, and integrate innovative solutions and processes to increase business transparency.”

Interestingly, the article emphasized it is not all about costs, nor should it be. Succinctly put, “doing things wrong means lost opportunities to do right things”. Further, the authors provided a couple of examples. First, “What more could an organization have accomplished if it had focused on innovation instead of covering up frauds?” Second, “How would an organization have improved if its leaders prioritized integrity and quality over setting unrealistic revenue targets?”

Here is where the article moves to the realm of a must read. It advocates using the “science of compliance” which is defined as fulfilling the regulatory and legal framework for a best practices compliance program within a company, such as the Ten Hallmarks of an Effective Compliance Program, stating, “the art of using innovate techniques to bridge the gap between organizational intentions and actions.”

Feig points to a framework for such an approach. It provides a manner which an “organization can best operationalize an integrity agenda by evaluating four foundational elements that align actions with organizational objectives:

  • Governance:The structure of integrity management, which encompasses board, line management and corporate functions, and the policies that guide organizational behavior.
  • Culture:The commitment to integrity that guides decisions across the extended enterprise. A culture of trust is vital for success, which we see in changed employee behavior.
  • Controls and procedures:These embed integrity into daily operations to deter and detect violations of laws and policies.
  • Data-based insights:These insights about emerging risks and integrity performance drive measurable program effectiveness and enrich employee knowledge and awareness.”

Walden cited to Soltes for observations on the ubiquitous Code of Conduct. Starting with the Ten Hallmarks and many other formulations of a robust compliance program, regulators and others feel a Code of Conduct should explain a company’s expectations of its employees and should also exist as a guide for “employees on how to deal with difficult issues. A code is a good starting point for employees, but they also need specific policy guidance, education and compliance advice as practical issues arise.” However, it is only a starting point as senior management must do more than pay lip service to the Code of Conduct and not simply signal that its make your numbers ‘or else’. The article posed such as questions as do “business leaders must support the right path? Do employees feel that using the internal hotline helps to protect the organization? Do they feel that the organization will reward them for choosing the right paths or will regard them as troublemakers? Can employees easily access the code of conduct and in their local language?”

Tomorrow we will consider Cathy and see how the authors bring these elements to life.

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

0 comments