Is Your Legal Department Creating Organizational Risk?

This piece, written by Ethical Systems CEO Azish Filabi, was originally published on The FCPA Blog and is cross-posted here.

 

At the 2017 Global Ethics Summit, put on by the Ethisphere Institute, Caroline Rees of SHIFT spoke on a panel about business and human rights.

When asked about differences in stakeholder management approaches between European and U.S. businesses, and why U.S. companies are not as far along as their European counterparts, she highlighted that U.S. lawyers have a more dominant role. 

When business leaders want to audit their supply chain, for example, lawyers often warn against such initiatives in the absence of a regulatory mandate. But, as Rees discussed, the existence of human rights risk in your supply chain is not a secret -- it’s just a question of when and how it will be exposed.

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Sharing: The Five Levels of Building an Ethical Culture

We are republishing this piece by Alison Taylor, via Richard Bistrong, exploring the five levels at which companies should build an ethical culture. 


This guest post is by Alison Taylor, Director, BSR,  and first appeared on BSR here

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Featured Ethics [and Human Rights] Scholar for April: Mike Posner

Interview with Mike Posner, Jerome Kohlberg Professor of Ethics and Finance and Director for the Center of Business and Human Rights at NYU Stern School of Business

 

What are your main areas of research/work?

When we launched the Center in 2013, we sought to pioneer new ways of investigating business practices at the industry level. Our methodology prioritizes interview-based research with business leaders and other stakeholders, combined with documentary evidence, policy and data analysis, and visualization.

 

How does strengthening human rights help reduce ethical misconduct in companies?

To date, most approaches to address human rights or sustainability in business have focused on what happens within the four walls of the firm. They focus on the activities of individual managers to improve company practices or corporate financial contributions to improve the environment, women’s empowerment, or public health. We are very focused on how large global companies make money, their business models for doing so, and the human rights risks in their industry that accompany that model.

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Bank Culture: Can regulators have an impact?

A March 14 New York Times Dealbook article by David Zaring of the Wharton School looks at bank culture from a regulatory perspective and questions why NY FED regulators are taking on the grand task of attempting to make culture and ethics an important part of bank supervision- especially when “creating and regulating culture by regulatory fiat is so difficult.”

 

Ethical Systems has made fortifying ethical corporate culture a main concentration of our efforts, as there is no better determinant to predicting misconduct. An ethical systems approach to business ethics considers the interplay between corporate culture with considerations for how to motivate individual to be more ethical (nudging),and the regulatory (guiding policies that impact behavior and outcomes).

 

When examining company culture, leaders should consider whether it is one in which company values are infused into all aspects of the operation, where managers lead by example and teams are encouraged to speak up about ethics and other issues? Or, if it is a culture in which checking the compliance boxes off a list is seen as most important and certain behavior is tolerated by high-performers but not allowed for others?

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Making Business Ethics a Cumulative Science

When businesses and researchers cooperate, collaborate and communicate, everyone wins. A new article in the premiere edition of Nature: Human Behavior by Ethical Systems founder Jonathan Haidt of NYU Stern and collaborator Linda Trevino of the University of Pennsylvania  illustrate just how far deeper partnership can take the field of business ethics research and why that will help companies and people to flourish.

In their piece, entitled “Make Business Ethics a Cumulative Science” Haidt and Trevino outline the various factors that have impeded ties between the business and research communities. Some are due to the misalignment between operational models— academics depend on open access to information towards the goal of building on research and understanding, while businesses need to maintain tight control over information about their inner-workings and ethics— while others are based in the complexity of business ethics as a field.

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Varying Tasks to Increase Compliance

A new study illustrates how providing variety in job-related tasks for workers contributes to rule adherence and stymies unethical decision making.

The paper “Reducing Organizational Rule Breaking Through Task Variety: How Task Design Supports Deliberative Thinking,” is authored by Rellie Derfler-Rozin, ES collaborator Celia Moore and Bradley R. Staats and published in Organization Science.  The authors discuss the positive implications of this research for designing roles and responsibilities in various organizational settings, and the beneficial outcomes for both workers and businesses.

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Ethical Decision Making: Easy in Training, Harder in Reality

Over the course of a workday, people make innumerable decisions ranging in degrees of severity, from critical to mundane. Often times, choices are made in a vacuum and are considered for only as long as it takes until the next intellectual dilemma or distraction demands our attention. A recent piece by Eugene Soltes in Harvard Business Review explores the difficulty around  ethical decision-making, while also exploring the gap between attempts to train or educate people on organizational ethics and the real-world pressures people face when face with an ethical dilemma (or even recognizing that they may be in an ethical quandary).

Soltes, an Associate Professor of Business Administration at Harvard Business School, points to a variety of executive misdoings by ostensibly smart and talented— not to mention prominent— leaders that illustrate that even those under scrutiny and fully aware of their responsibility for shareholder funds can act in self-serving ways that, in retrospect, they realize are obviously unethical. And, as Soltes writes, in hindsight the fact that these were adverse decisions are not lost on  these individuals, but in the moment they failed to consider the impact or consequences.

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Interview with Rashmi Airan: Law, Blindspots, Prison and Redemption

An interview with Rashmi Airan, speaker on ethics, law and culture; leadership and compliance consultant; and growth strategist

 

Background:

Rashmi was a successful lawyer who graduated with honors from Columbia Law School. After working for several major corporations, she launched an independent law practice in Miami, Florida. During the housing boom, she was recruited to work with a local real-estate developer who later engaged in shady business practices. Her involvement resulted in a one year sentence in Federal prison, alongside a $19M judgment against future earnings, required community service hours and 3 years supervised release.  As a mother of two and devoted community activist, Rashmi has reconfigured her subsequent career to focus on growth strategies and leadership/compliance training for firms, corporations, and graduate schools.  She has also become widely known as a public speaker, sharing her story to help illustrate the ethical perils and situations that can result from a drive to succeed and the blindspots created when pursuing a goal.

This interview has been edited and condensed from a conversation on January 19, 2017.

 

1) What are the main takeaways from your story that you want others to know?

I believe there are many reasons why I am telling my story. I want to help people so that they do not find themselves in the same predicament that I was in and make different choices when faced with daily “gray” decisions.  I finally came to a place of peace that I had done something wrong when I gave myself the freedom to forgive.  After I forgave myself, my lessons became clearer. I reflected on different business relationships and the fact that I had not looked into things deeply enough.  I know there are lessons for both young and seasoned professionals. I believe I can enlighten people to the fact that there is a fine line and we must all walk between the two sides of right and wrong and choose to be on the right side of the line.

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Book Summary: The Rule of Nobody

In The Rule of Nobody, Philip Howard describes how bureaucracy is stifling U.S. institutions as well as the spirit of autonomy and free will among Americans. We live within a system whereby layers upon layers of often incomprehensible and inconsistent regulations, mandatory disclosures and requirements create a society that is “governed by dead laws” — meaning that since many of today’s laws are so outdated, they have been rendered irrelevant because layers of new (and sometimes inconsistent) laws have been enacted after them, or they have become otherwise destructive to the social good because they hamper progress. 

The Rule of Nobody [homepage | public library]

By: Philip K. Howard

Summarized by Azish Filabi

The book is packed with examples of inept laws replacing common sense human judgment.  In many cases, government agencies are comprised of well-meaning individuals who can’t apply their common sense and best judgment to resolve the problems they are hired to manage.

His recommendations for restoring human control of democracy and bringing about good government involves a series of reforms (summarized below) towards principles-based regulation, including appointing independent commissions to review and propose amendments to existing laws, to mandatory sunset provisions of all laws with budgetary impact, thus compelling Congress to consider the present needs of constituents when allocating expenditures.    

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Behavioral Ethics: From nudges to norms

Scott Killingsworth, Senior Counsel with Bryan Cave, LLP, writes a broadly applicable and thought-provoking piece on nudges vs. culture. Killingsworth illustrates how a strong ethical culture can take the place of consistent, ongoing nudges and shows that culture should be considered through the lens of not just preventing ethical mishaps, but also about creating a positive environment “where the good apples can thrive”. 

We encourage you to read this informative article >>

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