January 14, 2020
The role of the ethics & compliance professional – Enforcer
The role of ethics & compliance enforcer is challenging. Especially in small E&C teams where the same people also have to try and win colleagues’ trust (counselor) and confidence (educator), and then investigate possible wrongdoing and enforce standards.
A good enforcer employs consistency, fairness, and transparency. This can be very difficult across globalized organizations.
Consistency – Globalized but not localized
Localization, to meet customer needs and/or to comply with local regulations, is the norm. Consider if this is beneficial for your E&C enforcement function. For example, local law may be very weak on human rights, worker welfare, or discrimination. Your Code of Ethics should sit above, not skirt, the law. If you pick a high benchmark it will be easier to enforce standards consistently.
Don’t be concerned about imposing foreign values on a local culture; localization is not a strong argument to defend wobbly ethics. You have a right to expect certain standards and commitments from your employees and stakeholders (including third-parties). Make this clear during onboarding and through training.
Ethics & compliance enforcer – challenge checklist
Enforcement of disciplinary procedures and measures can be very tricky. We have instead included a list of some commonly challenging areas (to discuss with counsel, as relevant):
- Interview not interrogate: Suspects (and witnesses) should be interviewed, not interrogated. Forget the good cop and bad cop routines. Forget dark interview rooms with bright lamps.
- Check contracts: Some employment contracts will include obligations to cooperate with internal investigations. Other employees – especially those belonging to unions – may not be so compelled to cooperate and may have rights to have a union representative present. Check the laws.
- Careful what you take: Check the contract, but generally this should be limited to company property (company laptop, phone, etc.). Be careful when searching workspaces, as some jurisdictions will have ‘intrusion upon seclusion’ elements covering invasion of privacy. Never take personal property without the express written consent of the subject.
- Use ears and mouth in the ratio they were given to you: The interviewing model we prefer is PEACE (Prepare, Engage/Explain, Account, Clarify/Closure, Evaluate). It allows the interviewee to provide an open account. Resist the temptation, unless absolutely necessary, to interrupt. Take notes and clarify when the account/response has been provided.
- Be patient: TV shows often depict near-instant confessions, you may be lucky, but that is not often the case. Allow considerable time for interviews.
- Guilt not shame: Your objective is to find truth. For a confession it is often necessary to have the suspect in an emotional state where they feel guilt, not shame. Guilt is directed at the act; shame is directed at the self. People experiencing shame often shut-down.
Fairness – No one is above the law
The fish rots from the head, as the saying goes. In our experience there is a direct correlation between cultures that tolerate discrimination and harassment, and those that experience other violations (fraud, bribery, conflicts of interest, etc.).
The management may not be directly implicated in acts committed by their subordinates, but instrumental in creating an environment where violations are more likely. For example, if leaders set overly aggressive targets the salespeople are more likely to fake sales data or offer kickbacks to clients to win business. Only punishing the salespeople may worsen morale, and increase unethical behavior.
This is where accountability and KPIs can help with enforcement. Leaders should be accountable for the acts and omissions of their teams. Leaders should also be subject to KPIs that reward ethical behavior. This is where transparency becomes crucial…
Transparent – confidential vs. confident
The legal and regulatory environment may make it difficult to fully explain investigative details. However, every effort should be made to at least explain the basics.
For example, if a group of employees has been running a complicated supplier fraud, explaining the details may not be possible. It should be possible to communicate that problems with supplier management have been identified; that all parties involved will be dealt with fairly but firmly; and the remedial steps taken to prevent/reduce reoccurrence.
You hire smart people, who tend to be curious and observant. Trying to hide an investigation from these folks isn’t realistic. Furthermore, people love to gossip. Therefore, no secret stays a secret, it instead becomes a variation (often exaggeration) of the truth! Try and explain as much as you can as early as you can.
Fail forward, learn, fix, improve, move on!
In all the training we run the most consistent feedback is, “We found the case studies from within our organization most useful.” Mistakes, missteps, and failures are all part of the human experience. They are fantastic learning opportunities. Don’t miss this opportunity! Organizations that don’t allow case studies, or gloss over ethical lapses, generally experience higher instances of recurrence. Fail forward, learn, fix, improve, move on!
Measuring the success of the ethics & compliance enforcer
We see an increasing trend in splitting the ethics & compliance enforcer function from the other more proactive and supportive functions. That is the first and major success factor!
Some jurisdictions and industries make successful enforcement tricky. For example, if firing locals favored by positive discrimination legislation is not possible, then measuring your enforcement team using metrics for disciplinary actions may be unfair. Before you decide on the measures for success, factor in context. Then consider:
Make sure you respond quickly to increase the chances of gathering and preserving evidence, and gain the confidence of those taking the risk to speak-up. Although not all investigations can be concluded swiftly – being thorough is essential. You should have case tracking tools in place (they need not be complex, we’ve built some basic ones if you need). Be sure to measure the closure rates and look for trends (type of violation, location, etc.).
If allegations aren’t leading to findings it generally means either reporting channels are being misused/misunderstood or your enforcement resources are under-resourced. Work out which it is by looking at case closure reasons. A simple framework might be:
- Verifiability (ability to confirm allegations and identify evidence);
- Credibility (legitimacy of the allegation); and
- Materiality (whether the allegation related to a material ethical issue or not).
Input into other processes
- Risk assessment & monitoring: Ensure the enforcement team are inputting findings and case closure data (including remedial actions) into the risk assessment and monitoring frameworks.
- Training and communication: Write case studies for use in training and communication. These case studies should explain the issue, the findings, and remedial actions. The perception that detection resources are strong is one of the more effective deterrents to unethical behavior.
It is important to use anonymous surveys to measure if employees feel enforcement is fair and transparent. Even if the findings seem unfair, it is useful data to better communicate the nature and intention of the enforcement function.
We haven’t covered some of the tools required for successful enforcement, more the framework. If you’re interested in the role of the ethics & compliance enforcer, or learning more about tools for monitoring, investigating (both forensic technology and interviewing skills), and resolving, let us know.