The Reality of Compliance: The Individual Employee

I have had more than one corporate general counsel tell me that anti-corruption compliance is not very effective in protecting against foreign bribery.  Their argument is that a company’s compliance program boils down to the behavior of individual employees.  An employee will either decide to violate the law or comply with the law; the company’s compliance program has no influence on this decision.  According to this argument, the only important part of any compliance program is to discipline wrongdoers swiftly and surely in order to deter all employees from engaging in misconduct.

I agree with only a small part of this argument – compliance does boil down to the actions of individuals – swift and sure punishment for any violation will increase deterrence and cause employees to reconsider violating an anti-corruption policy.  Individuals act out of self-benefit and avoid negative consequences.  We can all agree on that.

However, this argument ignores a significant contributing factor to individual decision-making and responsibility.  The environment in which the employee operates and makes decision can influence the employee’s decision to comply or violate the policy.

Going back to my days as a federal prosecutor and criminology concepts, New York City reduced its serious crime rates in the 1990s by following the “broken windows” theory of prosecution – if small crimes (e.g. property crimes, car thefts) occur with little to no enforcement or punishment, the rate of serious crime such as murder, gun assaults and other violent offenses will rise.  The theory lead to a crackdown on petty crimes in New York City which eventually resulted in declining violent crime rates in the New York City.

The moral of the New York City story was that an environment in which such petty crimes are allowed will inevitably cause serious offenders to believe that they can commit crimes without fear of prosecution.   An environment of misdemeanor criminals leads to less regard and respect for authority and structure.

The same lesson applies to anti-corruption compliance.  If there is no tone-at-the-top or company culture of compliance, the environment will inevitably breed disregard for corruption controls and overall compliance.  If everyone is out to game the system, the system itself will crumble and corporate productivity will suffer.

A company which places a premium on ethics will instill in employees a commitment to compliance.  This will translate into improved employee moral, productivity and ultimately profits. 

It is easy to imagine how employee moral is improved by compliance expectations.  A model of individual discipline, deterrence and compliance ignores the human reality – the sum of individual efforts in a corporate community is always greater then the individual parts. 

Compliance is an important part of every company’s business plan.  It breeds a healthy respect for the company, its leaders and individuals. You can try and boil down companies into individual actors and respond to their motivations but in the end the sum is always greater than the parts – that is a fact of life.

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2 Responses

  1. The rate of overall economic and moral decline (DOJ lets Goldman go free), eroding protestant ethic amidst bloated financial sector which does not abide by it but by greed alone heavily contribute to further lowering of moral anchors for being ethical and compliant. This backdrop affects people more than internal ethics and compliance hooks that try to keep employees in line.

  2. Donna Boehme says:

    You’ve nailed it again. Sure, individuals commit acts of bribery but that completely overlooks the environment that makes that possible or even probable. It also overlooks the colleague who sees the bribery and then decides to report it because of that environment. That’s what compliance programs are all about. General counsels who make statements like that are Exhibit A for why they should not be in charge of compliance. They should keep their day jobs and let the CCO do her job. They should also read David Gebler’s book on The Three Power Values on the impact of culture on individual actions or my column on the role of the CCO
    Either way, we need fewer GC’s trying to run compliance based on outdated notions through a purely legal lens and more empowered, independent CCOs who know what they are doing. That’s my 2Cents for the day.