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When Corporate Leaders Fail to Listen

There are an infinite number of ways that corporations can end up violating the law resulting in a government enforcement action.  There is no way to define the nature and extent of all of these possibilities.

But one thing for sure is that when a company’s leadership is not committed to compliance, falsely believes that its compliance program is effective, or simply ignores information suggesting that there are problems in a company, you can bet that the company will suffer some serious harms.  In many cases, these harms can have a devastating impact on the company, its finances, and most importantly, its reputation.

This breakdown in communications and understanding has two very distinct results – a failure to listen can lead to a failure to act; and a failure to listen can also lead to negative actions that cause tangible harm.  What do I mean by these two distinctions?

Let’s take an unfortunate scenario, which is becoming more common (at least in enforcement actions):  The internal audit department identifies a number of ongoing risks and serious problems occurring in the business.  When presented with these reports, senior leadership either ignores the impact of these reports, causes changes to be made to the reports, and otherwise seeks to dilute the implications of a failure to remedy the situation.  Unfortunately, if you parse through all the government enforcement actions, you will find numerous instances where internal audit uncovered part or all of a serious problem, they reported it, and then the internal audit reports were either changed or ignored.  (Kinross Gold Mining and VimpelCom are examples (here and here)).

The board’s audit committee has a specific responsibility to review these reports and ensure that appropriate remediation is taken.  If a senior executive, such as the CEO or CFO, are able to derail this process, the company is sure to suffer.  The integrity of the internal audit process is essential to a healthy functioning corporate governance environment.

A second scenario based on a failure to listen is a deeply troubling trend.  When a corporation encourages employees to speak up, the company has to embrace the messenger and the message.  This requires patient listening skills and commitment to addressing possible concerns.  Forward-thinking companies know that soliciting employee concerns is an important means to prevent serious harm to the company.

Unfortunately, we are learning from recent compliance surveys that instances of retaliation against employees is increasing significant, especially in the immediate weeks after an employee raises a concern.  Instead of listening, companies are actively punishing employees who raise concerns.  This is untenable and ensures that any semblance of corporate trust and integrity will evaporate quickly, leaving only a culture of fear and distrust.

Employees expect corporate leaders to listen and respond appropriately, not to punish employees for raising important concerns.  Of course, everyone knows that not every employee concern is significant but maintaining effective communications – listening and responding – is an important insurance policy for protecting the company.  In retaliation situations, the company not only fails to listen but actively takes the situation and acts to the detriment of everyone involved.

These situations all sound theoretical but in fact they occur more often than everyone will admit.  It is even more important for corporate leaders who are committed to trust and integrity to affirm their willingness and respond appropriately.  Words are important but conduct is even more critical in these situations.  One misstep can have a serious impact on a company’s culture and its ability to embrace its employees to ensure they are productive and committed to advancing the company’s objectives.

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1 Response

  1. June 8, 2018

    […] Channelling his inner Churchill, Mike Volkov asks what happens when corporate leaders fail to listen. Find out in Corruption, Crime and Compliance. […]