Here in the DC Metro area, everyone is asking is how things could have gotten so bad at the Secret Service. Many employees of the Service must have known the vulnerabilities, so how could the folks at the top ignore this? My answer is that the bad news may never have reached the top. Several Service employees commented to the local media here that you simply did not raise issues or complaints. This is typical of line-of-command organizations, which turns out to be nearly all sizable organizations. In business, companies establish hotlines and compliance programs so that down line employees can short circuit the line of command. In fact, government often orders businesses to establish these mechanisms! But these mechanisms do not prosper in Federal agencies. Yes, employees can go to the Inspector General for their agency but these individuals are often closely bonded to the agency’s senior leadership. It is time for government to take some of the advice it freely gives to business and create genuinely safe channels through which employees can report concerns.
Compliance Interview
August 9, 2014 — MarkIn 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.
The Walmart Decision
July 26, 2014 — MarkA recent (July 23, 2014) unanimous decision by the Delaware Supreme Court has potentially momentous importance for ethics and compliance programs. Because Delaware is the “corporation state,” other courts tend to follow the Delaware courts on corporate governance issues – remember the “Caremark case.”
At issue was a discovery order on behalf of civil litigants in a Foreign Corrupt Practices Act (FCPA) case against Walmart alleging that Walmart’s board may have breached a fiduciary duty to investigate bribery allegations. (Wal-Mart Stores, Inc. v Indiana Electrical Workers Pension Trust Fund). Among the documents sought by the plaintiffs were files from Walmart’s former compliance officer and files allegedly pertaining to an on-going investigation being conducted under legal privilege.
I know little about the underlying litigation which concerns allegations of bribery in Mexico. And that is not what matters. What matters is that files and documents thought to be related to Walmart’s compliance program were deemed open to discovery in a civil litigation. The Court’s decision was focused in scope, pertaining to files and documents related to potential breaches of fiduciary duty. But it is likely that this decision is a first step toward breaking down the both the legal privilege and the so-called self-evaluative privilege concerning compliance matters. The impact of the decision is great as the plaintiff’s attorneys asserted breach of fiduciary partly on the grounds that the board was or should have been informed of an on-going compliance investigation. In other words, reports of compliance concerns should go to the board but may not be protected when they do.
I believe that this decision will have significant impact on ethics and compliance programs. The relatively free exchange of information between some compliance officers and their boards may well be impaired. More importantly, asserting legal privilege with respect to investigations that are or should be reported to the board is threatened. Like most of these matters, there is a good and bad. Arguments that compliance should report to legal to protect the privilege may be weakened. But compliance reporting to a board may be subject to far greater caution. You can read the decision at:
Author Interview
March 27, 2013 — MarkThe 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.
ethicswhisperer.com- An error has occurred; the feed is probably down. Try again later.
Mark Pastin 