Compliance Interview

In a recent interview, Mark Pastin discusses a wide range of issues on corporate compliance. Please feel free to offer comments on any of the topics discussed in the video.

 

Welcome

headshot of Mark PastinWelcome to Mark Pastin’s web site. You will find information about Mark and his publications, services and speaking engagements here. Mark started working on ethics and compliance problems in business, government and the professions in the early 1970s. His 1986 book, The Hard Problems of Management: Gaining the Ethics Edge, was the first to take a managerial approach to ethics in business. (See Publications for details.) In his new book, Mark shows readers how to use their own innate ethical sense to create organizational and social change. Make an Ethical Difference: Tools for Better Action was released late in 2013 and is available now at Amazon.com and Berrett-Koehler Publishers.

Author Interview

The attached video explains the main themes of Mark Pastin’s new book Make an Ethical Difference. One novel theme of the book is that individuals have an innate ability to make ethical judgments. Pastin calls this ability the “ethics eye.” More on this topic in coming posts as the main themes of Make an Ethical Difference are previewed.

In an Ethics Crisis Consider the Impact on Your Employees

A big risk in an ethics crisis is that your own employees will conclude that unethical conduct is the norm in the organization or at its highest levels, and adjust their behavior accordingly. In an ethics crisis, employees often learn about the crisis from the media. Organizations tend not to communicate openly with their employees about such matters, leaving employees to believe what others are saying. You risk an unplanned change in corporate culture unless you credibly communicate the organization’s position to its employees.

Hurdles for Compliance Officers

You may enjoy the attached article from the Report on Medicare Compliance on some of the practical issues that compliance officers face.

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In a Crisis Investigate Quickly, Objectively and Thoroughly

In an ethics crisis, you need to know what happened, who did what and who knew about it. An investigation into an ethics crisis cannot follow the usual internal investigation protocol since those running the investigation may be implicated in the crisis or in covering it up. You need an independent investigation. Even if you conduct the investigation under legal privilege, anticipate that the investigation may become public and that you may eventually be required to share the investigation with regulatory or enforcement authorities.

Recognize the Crisis

The biggest mistake made in an ethics crisis is not recognizing that it is an ethics crisis. Executives tend to overestimate the protection offered by the organization’s reputation and its legal defenses. And they often reason that the organization will not be held accountable for what someone did contrary to the organization’s direction or policy. This is untrue. The sooner you own any crisis, the less newsworthy it is. Early acknowledgement of an ethics crisis is particularly effective in showing that the wrong action is not characteristic of the organization.

How to Survive an Ethics Crisis

As a life-long ethics consultant, I have been in the middle of many ethics crises. You don’t hire an ethics consultant if everything is hunky dory. I have learned that ethics crises are different, and often more severe, than other corporate crises. An ethics crisis is about who you are as an organization and not just about specific actions that have gone wrong.

An ethics crisis is a crisis in which an organization is judged to have done something wrong due to poor ethics. Many business crises – whether it is the BP oil spill or the GM ignition switch – escalate into ethics crises. An initial unwillingness to accept responsibility is what turns a business crisis into an ethics crisis. The public will judge this unwillingness to accept responsibility as a sign of poor ethics. Most organizations eventually figure out that they won’t escape responsibility by denying it. But by then their credibility is shot.

Ethics crises are almost unavoidable for the simple reason that organizations are made up of people. Some of them will do unethical things in the organization’s name. If these actions have a significant impact, you have an ethics crisis. But even if ethics crises are not completely avoidable, there are things you can do to survive them. I will provide a series of tips on surviving ethics crises in coming posts.

The Ethics Strategy #5

As part of a long-term research project, I identified five competitive strategies common to organizations that are successful and ethical on a sustained basis. None of these strategies considered alone guarantees ethical success. I have been sharing these strategies through a series of posts. Here is the final strategy in this series.

I once worked with a CEO who temporarily suspended all of his company’s significant operations in Mexico because he couldn’t find a way for his managers to uphold the company’s ethics while doing business there. This is an extreme example of an important practice, which is looking at business opportunities in terms of their ethical implications. While this is especially important internationally, there are also business opportunities domestically that are hard to pursue ethically. For example, it is particularly difficult to pursue an ethics strategy in a market in which competition is based entirely on price. The time to exercise ethical judgment is when you are considering an opportunity as opposed to when you are in the middle of regretting it.

The Ethics Strategy #4

As part of a long-term research project, I have identified five competitive strategies common to organizations that are successful and ethical on a sustained basis. None of these strategies considered alone guarantees ethical success. I will be sharing these through a series of posts. Here is the fourth strategy.

Define the value of your ethics.

If you are committed to ethics, you probably believe that the company’s ethical stance provides a benefit to its customers. It is not enough to just hope that your customers will notice this. It is up to you to define that benefit and make it apparent to your customers. For example, if you take the extra time to ensure that your products or services fit the customer’s needs, make this effort a part of what distinguishes you in the market place. Nordstrom has made a simple ethical commitment a cornerstone of its reputation. That commitment is to treat customers making a return the same as customers making a new purchase. The benefit to customers need not be something earth shaking; it just needs to be something customers will recognize.

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