Netflix

When we sign up for a Netflix account, the company agrees to provide us with programming, and we agree to pay a monthly fee.

In addition, we agree not to share our password with people outside of our household.

Oh, but wait! That last bit is in the small print that no one reads. You know, just above the “I accept” button. If no one reads that stuff, and everyone knows that no one reads that stuff, then it’s not enforceable, right?

Wrong.

“I accept.” It’s pretty straight-forward English.

So Netflix is entirely within its rights to enforce the agreement, and everyone complaining about it should have an honest look in the mirror.

Cooperstown, performance, and trust

The big story in baseball this week is the induction of David “Big Papi” Ortiz in the Baseball Hall of Fame.

But for me, the bigger story is how Barry Bonds and Roger Clemens did not make the cut. Bonds hit 221 more home runs than Ortiz. Clemens won a record seven Cy Young awards. But their accomplishments were tarnished by the performance enhancing drugs scandals of the early 2000s*.

This is a good reminder of the important difference between a breach of performance and a breach of trust at work. An employee with performance problem will often get a second chance. An employee who breaks your trust will be fired on the spot.

* It is not clear why rumors of Ortiz testing positive for PE drugs in 2003 did not tarnish his record to the same extent.

Neither snow nor rain nor overtime

The US Post Office has been in financial trouble for years.

As a governmental entity, it has reacted to those difficulties like most commercial enterprises: cut staff, and ask everyone to do more with less.

Fewer mail carriers means longer days. Longer days means overtime. Overtime means larger deficits. How do you curb overtime? Give pay raises only to supervisors who keep overtime low.

And so, for years now, there has been a well-known, and well-documented practice of supervisors not paying their mail carriers’ overtime. Should we be shocked? Hardly. This outcome was predictable.

The real culprits are those executives who created financial incentives to eliminate overtime. And they are getting off the hook. Instead, supervisors have been forced to lie, and front-line carriers are being cheated.

Make a list of your financial incentives. Then make a list of your ethical and compliance issues. Put the two side-by-side. Can you draw lines from one list to the other?

On purpose

Why do we do what we do?

What drives us to become ethics and compliance professionals? How does a person navigate the first 25 or 35 years of their life to land on this path?

Let’s be honest. Compliance work is difficult work. Where does the fire in our belly come from that makes us want to do this? Is it because we have a love for rules? Is it because we are crushed as the sight of injustice?

Some of us seek virtue, knowing that it will lead to order, fairness and justice. We long for significance through honest connections with others. Those connections reduce our existential angst. We give of ourselves out of a selfish drive to matter.

We become social animals so that we don’t die while we are living. The same desire leads others to become doctors, educators, firefighters, farmers, actors or soldiers. Like us, they find meaning in purpose, and happiness in the pure joy of the work.

Meanwhile, others run away from their existential angst by seeking immediate rewards that are, at best, external to their work and, at worst, obtained through cheating, lying and stealing. They don’t enjoy the work. They are unhappy and wasting their life.

Why do we do what we do?

Fair wages and generous tips

A waiter paid $2.13 an hour is as vulnerable as a salesperson who lives almost exclusively from commissions. Neither can earn a living without the tips or the commissions. In good times, that might not be a problem. In a downturn, that financial pressure will often lead them to engage in wrongdoing.

A recent study of “tipped service workers” show that many do not enforce COVID-19 safety measures at their bar or restaurant for fear of losing their tips (the study also shows in increase in harassment of such workers). In an economy where tip workers have lost half their income because fewer people go out to eat, workers cannot afford to lose their tips. Even if this means putting themselves and others at risk.

So when a patron gets up from their table to go to the bathroom and doesn’t wear their mask, the waiter reluctantly looks the other way. Or, worse, when a patron asks his server to take off her mask so he can decide how much to tip her (gasp!), she puts her health, and other people’s, at risk. According to the CDC, adults who had contracted COVID-19 were twice as likely as virus-free adults to have recently dined at a restaurant (source).

A big part of the solution is to pay employees a fair wage, so they don’t feel pressured to break the rules. A salesperson who can pay the rent is less likely to forge the signature of a customer on a fake contract to make his monthly commission. A waiter who can keep the heat on this winter is more likely to keep her mask on too.

And for goodness’ sake, let’s tip generously.

It’s gotta hurt

Major League Baseball has just severely punished one of its players.

The punishment is severe because the infraction was severe. Canó tested positive for a performance-enhancing drug and, as a result, has been suspended for an entire season. He will also forfeit his $24M salary.

Given that this was a repeated offense, I don’t understand why Canó wasn’t simply fired. He clearly demonstrated that he cannot be trusted. Perhaps it has something to do with his contract or with the union. In my company, if you survive one major violation, you won’t survive a second one.

That said, Corporate America might want to follow MLB’s lead and go after big bonuses more aggressively than it has in the past. An executive involved in serious wrongdoing, but not quite serious enough to get fired, should see their bonus disappear – completely. Perhaps the punishment should not be announced on Twitter, like the MLB did with Canó, but it should be shared with other executives, as a warning.

I’m sure Canó had plans for his $24M. And now he has time to reflect on why these plans won’t materialize.

Insider creativity

We have a rule preventing company insiders from trading their stocks on non-public material information.

This rule is frustrating to some insiders who otherwise could make millions of dollars. But what if there was a way around this rule?

Well, there is. Another SEC rule, Rule 10b5-1, allows company insiders to set up a predetermined plan to sell company stocks. The price, amount, and sales dates must be specified in advance. The rule assumes that insiders can’t possibly match these future trading dates with the release of material information. That’s an obviously wrong assumption in my opinion. Insiders are the very people who are most likely to be in a position to control when material information will be shared with the public.

And so, today, NPR reports that the Pfizer CEO implemented his 10b5-1 plan last August 19 and, the next day, announced positive news related to Pfizer’s work on a COVID vaccine. Pfizer stock soared. Then, this Monday, Pfizer announced that its vaccine candidate was found to be 90% effective. The stock soared again. Oh, and Monday was also the day that the CEO sold $5.6M worth of stock, as detailed in the plan filed in August.

Purely coincidental, right?

Of course we can expect the SEC to change the rule to prevent this type of abuse. And then we can look forward to the creativity of another insider.

Checkmate in three

Last night I finished watching the Netflix series The Queen’s Gambit.

The main character is a fictional female teenager from the ’60s. She’s a chess prodigy and climbs her way up the male-dominated chess world, eventually playing against chess grand masters. She goes on to beat several of them. Some gracefully shake her hand in admiration while others storm out of the room in embarrassment.

As the last episode concluded, I used my TV’s remote to switch from the Netflix app to ABC News, wanting an election result update. What I saw was a player realizing the inevitability of his loss, a player with no intention of gracefully resigning. Doing so would require civility and respect for the electorate, virtues he does not possess.

We’ll have to play this game to the end.

The second rule of the game

In today’s post, Seth Godin reminds us that the first rule of any game should be “All players must agree to not cheat.”

It’s a metaphor for workers, companies, governments and regulators. When only one of them cheats, the others can often contain the damage. When all of them cheat (think 737 MAX), you get a human catastrophe.

Thus, the second rule of the game should be “If a player cheats, no other player will tolerate it.”

Magic

The recent tropical storm Isaias left me without power for more than 3 days. It just came back at 2 AM this morning.

During the last 24 hours, I often thought of how my parents lived 3 weeks without power after an ice storm in 1997. For 40 miles in any direction, businesses were closed. No ATMs, no gas stations, no restaurants. No hot water, no heat. In the middle of winter.

I recall my dad telling me that after the power was restored, it felt like magic when he flipped a switch and a light went on. He felt gratitude every time. It was almost as if electricity had just been invented.

Imagine a world where we lose our ability to make ethical decisions for 3 weeks. Or even just 3 days. A relatively short period where everyone cheats, lies and steals. A time when you can’t trust anyone. You can’t trust your family members, or your neighbors, or your boss, or the press, or the government. Then imagine trust is suddenly restored and when you ask a question you can trust the answer.

It would be like magic.

This is my 700th post. Coincidentally, I also wrote about magic on my 600th post. You can find all my milestone posts here.