As a company’s most valuable intangible asset, we have witnessed the wreckage of companies that have fallen victim to reputational damage, scandal and ultimately the wasteland of a rotten corporate culture.  In these situations, employee misconduct rates increase, wrongdoing and scandal surround the company, and corporate leaders ultimately fall from failing to sail the corporate ship in the right directions.

There are tell-tale signs of companies that fall down this drain – employee misconduct occurs, corporate actors are not held accountable in this environment, and the message, whether implicit or even explicit, is anything goes in pursuit of business or short-term objectives.  The risk of short-termism, rather than long-term sustainability, inevitably challenges companies to forego instant gratification for long-term financial sustainability.  Leaders have to manage this perspective and rely on a defined corporate culture to do so.  Managers and employees take their cues from corporate leaders and the examples they set.

We often cite the importance of organizational justice as key moniker of a culture of accountability.  Justice has to be blind within a corporate setting.  Bad actors have to be investigated, and senior leaders “responsible” for such wrong doing, whether personally committed or whether causes by lack of appropriate supervision, have to be held accountable through disciplinary actions including financial penalties.

The Justice Department’s focus on recoupment and accountability provides companies with an opportunity to design and instill a framework within which accountability can be achieved.  Senior leaders who accomplish certain objectives, including promotion ethical cultures, should be rewarded.  On the other hand, those that engage in wrongdoing or permit others to engage in misconduct have to suffer discipline, up to termination, and recoupment of financial benefits.

The Justice Department’s emphasis on this basic point is correct.  Companies that fail to act in response to DOJ’s direction are playing with fire and ignoring a real opportunity to instill positive change.  Corporate cultures and financial performance will improve and a failure to act means standing still and waiting for something bad to happen – it inevitably will.

There are two basic principles underlying DOJ’s recent actions promoting organizational justice – first, that companies have to hold actors accountable on a consistent and equal basis.  Uneven discipline and consequences will damage a company’s culture in no time flat.  Second, companies that hold actors accountable for wrongdoing or failure to supervise need to do so quickly and in an even handed manner.  Adding to this mix, those companies that provide positive incentives for officers, managers and employees who adhere to and promote ethics and compliance will inevitably benefit even more.

Organizational justice has to be swift, fair, even-handed, and ultimately transparent to the internal corporate world.  Companies have to publicize its rewards and its punishments to ensure that the message is clear – the company means what it says and will enforce its expectations.

Transparency and publicizing corporate rewards and discipline are two distinct and mutually reinforcing concepts.  Transparency builds trust and increases employee engagement of the system.  If employees believe the system works, they will engage the system, report concerns, seek justice, and bring important insights to supervisors, human resources and compliance staff.  Transparency means openness and accuracy with regard to the system and how it works and what expectations are real.

Publicizing rewards and disciplinary actions is another important way to build trust by showing the company’s officers, managers and employees that the system is working.  For years companies have been making such disclosures as part of their sustainability reports.  Corporate disclosures in this area use anonymized references and general descriptions of specific actions taken in disciplining corporat actors.  Within this framework, companies can publicize employee misconduct rates, reporting of employee concerns, internal investigations, substantiation rates and disciplinary results.  DOJ has categorized all of these factors under the new umbrella “consequence management.”  In other words, companies have to devote attention to incentives, disincentives and the resulting performance of its culture under this general rubric.  The message now has become much clearer – accountability is at the core, but the fact is that companies have to ensure that incentives, disincentives and critical functions surrounding accountability are operating together to create a positive result.