Transparency or corruption

I have written before about the corruption risks related to major sporting events like The Olympic Games and The World Cup. Whenever billions of dollars converge on a single event, corruption risks are high.

There is an unusual event these days that is also attracting billions of dollars: the pandemic. Governments all over the world are spending billions every month trying to contain the virus and finding a vaccine. One way to mitigate related corruption risks is to clearly see how these billions are spent.

To that end, the US Congress passed a law earlier this year creating a database that was intended to track all COVID-related monies spent by the US government and to protect taxpayers. However, the current administration found a loophole and awarded $6B of vaccine contracts to a single company without taxpayer protections.

The US government is indicting more companies than ever under the “books and records” provisions of the FCPA (and for good reasons). So why is the same government not following its own advice and being transparent about how it is spending public funds?

COVID and corruption

Journalists and lawmakers are starting to investigate how certain public contracts related to COVID-19 have been awarded.

We should expect many more investigations of this kind all over the world. When billions of dollars converge on one event, whether it be the Olympics or a pandemic, there is bound to be corruption, self-dealing, and other improprieties.

With the Olympics or the World Cup, we understand the importance of augmenting corruption controls years before the event takes place. The minute the host city is announced, we can start reinforcing the compliance program and the ethical culture of our local operations before the first bid is due. With COVID-19, governments have not had time to do this. They’ve all had to rely on ordinary controls.

But here’s one thing we can prepare for: the reopening. Once the machine revs up again, and millions of customers are urging millions of companies to release goods that depend on millions of suppliers, the pressure will be on. And with pressure comes not only wrongdoing but a diminished capacity to fight wrongdoing.

On the other side of the reopening coin is the need to “ease” compliance. My friend Richard Bistrong wrote an excellent piece about it on the FCPA Blog, which I recommend you read with this one as an interesting balancing act.

Russia, sports and trust

The World Anti-Doping Agency just banned Russia from all international sporting events (including the Olympics) for the next 4 years.

It’s a severe sanction but perhaps justified when considering that Russia has been stripped of more than 40 Olympic medals since 2002 because of doping. This is more than any other country, 4 times more than runner-up (Ukraine) and about a third of all medals stripped for doping globally.

When considering disciplinary actions at work, I tell management to ask themselves this question: what is the smallest sanction you can impose that is likely to prevent a recurrence? Sometimes, a good discussion is all that’s necessary. At other times, termination is in order. In most cases, we settle for something in between (warning, suspension, transfer, bonus-cut, demotion, etc.).

When it comes to termination, the other question to ask is: did this employee commit a breach of performance or a breach of trust? The first one is easier to forgive than the second one. If we can’t trust the employee anymore, how can we keep them around?

Over the next 4 years, Russia should focus on regaining the sporting world’s trust.

Corruzione

Within 10 years, we will all be reading about corruption scandals in Italy.

How do we know this? The International Olympic Committee just selected the country to host the 2026 winter Olympics.

Billions (trillions?) of euros will converge on the cities of Milan and Cortina d’Ampezzo in the next few years. Corrupt business people and politicians have already laid their plans.

So if your organization has a presence in Italy, the time to start building your defenses is now. Review your policies, create a multi-year training plan, implement new controls and schedule audits. More importantly, review all your processes and make sure they create the right culture.

Olympic Games and corruption go hand-in-hand. You can choose not to be part of it.

Scary tactics

Politicians do it all the time. They use fear to gain votes, dividing countries that would be greater if united.

E&C professionals should avoid these short-term gimmicks. They should instead seek to inspire and to unite employees. Dangling the possibility of massive FCPA fines in front of a foreign manager is unlikely to eliminate corruption in their country. We have a better shot if we show them that ending corruption can lift people out of poverty and save millions of lives.

As you sit down to create your next communication, consider whether you want to scare employees into good behavior or inspire them.

Walking the talk

The recent US college scandal only revealed the end of a long bribery scheme.

The same type of parental behavior exists with preschoolers. After all, the best way to get into Harvard is to first get into the “right” prep school. And for that, you need to get into the “right” middle school. And so on, so forth. Bribes are paid at every stage.

In your corporation, what “clubs” are employees dying to get into? A rotation program? Expat assignments? Executive ranks? What are they willing to do to get in there?

I’m sure the parents involved spent a lot of time telling their children about the importance of telling the truth. Just like corporations spend a lot of time communicating their values. But did any of them really mean it?

The questions analysts aren’t asking

Larry Fink is at it again in his 2019 letter to CEOs. His message is clear: there is more to corporations than profits.

BlackRock is not alone. Big investors are now demanding more from issuers because they finally agree that purpose and planet positively impact the bottom line.

We need one more group to get the message: the analysts. For one hour per week, you can run an easy experiment for the next month or two. Listen to an analyst call each week and count how many times they ask a question about “doing the right thing.” I can give you the answer right now: zero. If a company is announcing the opening of a factory in a developing nation, analysts want to know if there will be enough skilled workers and whether the infrastructure is sufficient. The fact that corruption is rampant in that country seems to be irrelevant.

Companies take analysts’ questions seriously. When analysts finally become concerned with how things are done (i.e. with the culture), we’ll see a new wave of progress.

Training options

There are different ways to train employees. Depending on the risk we face, some ways are better than others. Here are a few options (among many others):

  • Onboarding training – That’s the one-and-done approach. It should be reserved for no/low-risk activities, like “Here is where the corporate policy manual is.”
  • Basic training – Also for one-time training events, and recommended for low/medium-risk activities, like “Careful Email Communications”.
  • Refresher training – The training we repeat every year or every other year, for specific groups of employees. Best for medium/high risk activities, like “Discrimination and Harassment”.
  • Task-based training – This is when the training is baked into the actual tasks of the high-risk activity. Ideal for significant risks like antitrust, corruption, or trade sanctions.
  • Simulated-risk training – I call it War Games. A common example today is phishing your own employees to test their alertness, awareness and decision-making skills. When used for high-risk activities, repeatedly failing these exercises could lead to disciplinary actions.

On making connections

Later today I will have the pleasure to visit with Richard Bistrong in New York City.

I first learned about Richard via LinkedIn in 2015. His personal experience with corruption was both dramatic and fascinating. I started to follow him on social media and eventually sent him a direct message asking if we could meet in person. He immediately said yes, we met for coffee, and we’ve stayed in touch ever since.

The point of this post is to encourage you to reach out to those you can learn from. I have done this with authors, business leaders, compliance executives, podcasters and many others. Most of them will gladly engage with you, especially when you can provide value in return or, even better, first. They can become allies and cheerleaders. They can open doors and provide opportunities. They can make introductions that lead to more allies, cheerleaders and opportunities. And not simply opportunities for you to receive but more importantly for you to contribute. It’s a virtuous cycle that starts with a simple click of a “follow” button.

Who would you like to connect with today?