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Thursday
Jul282016

Davide Torsello: How do employees from corrupt organizations view their companies’ cultures?

We conducted research on 30 corporate corruption FCPA cases resulting from SEC investigations and sanctions over the last 15 years. The aim of this research was to uncover what negative features these organizations have in their cultures.

Strictly speaking, this cannot be done retrospectively, after bribery cases happened. But we nonetheless believed that the very fact of having been caught in criminal activities of such scale has some long-terms effects on the cultures of these organizations.

Should some of the weaknesses of these organizational cultures be strongly represented currently in other companies, then it might really be the case that they constitute red flags on which to build, or monitor properly to consolidate integrity as a habit, i.e. an integral (repetition sought) part of the culture of the company.

We utilized companies’ work culture reviews, focusing in particular on the cons of working at each of those companies as developed anonymously in three online review sites.

All of the 30 companies researched are multinationals. Their HQs are located in 17 countries, and they cover almost all the possible main industries (except for aerospace). We used about 1,500 review entries, or an average of 50 reviews per company.

Understandably, the biggest negative factor about working at a company that was the subject of an SEC anti-bribery-related enforcement action was “poor career advancement and recognition perspectives” (87% of cases).

Other big factors were:

  • weak or hostile management (86%)
  • excessive company politics (83%)
  • poor communication from management (80%)
  • poor work/life balance (77%)
  • uncooperative behavior among divisions (67%)
  • hierarchical organization structure (63%)
  • widespread sense of urgency and stress (60%), and
  • bureaucracy and micro management, both at (53%).

Interestingly, leadership was a negative issue in only 40% of cases of companies that were fined for FCPA violations and it is considered less important than issues such: complexity of the organization, ambiguity of processes, too many mergers and acquisitions, frequent management changes.

If among all these SEC cases, corruption has already been an issue, then some positive trends should be visible after the enforcement actions. One would be the adoption of “integrity” as a core value in the company’s statement, which is observable in only 30% of the cases (9 companies).

Rather, when considering if unethical behavior at the workplace (including, but not limited to, corruption) is still an issue, our research revealed it as a factor in just 50% of the organizations. This might be interpreted as a sign that half the companies may be doing things in the old bad way.

This research outlines, at empirical and experimental levels, two big truths.

The first is that there is no assurance that companies which have been exposed to anti-corruption investigations and have paid a high price for that will not possibly again fall in the same trap.

The second point, even more important, is that a number of organizational failures, risks and vulnerabilities are responsible for poor integrity levels in general, even with the due differences. Business organizations are coherent entities that face similar problems when dealing with foreign markets.

An attentive and theoretically sound measurement tool for organizations’ cultural features may well constitute an innovative and needed approach to not only initiate integrity but to consolidate it as a form of habit, i.e. to make it part of the corporate culture, and not only as a label attached to it.

Business integrity is a complex being. On the one hand, executives who encounter cases of bribery in their organizations may say that, after all, it was just one case. Some managers and employees might have been involved, they might say, but this should have nothing to do with the “daily customary running” of an organization.

With that thinking, the executives might wrongly conclude that it would be sufficient to remedy the problem simply by paying any fine and legal and other expenses, dismiss an employee or two, enhance the powers of the compliance department, endure a few years of company blacklisting and reputational losses, and then it’s done.

Is all this really enough? Our evidence suggests it isn’t.

A recent Harvard Business Review article argues that culture is not the mantra of organizations. The authors -- Jay W. Lorsch and Emily McTague -- state that true leaders know how to set the direction and pace, and once this is done, the company will follow and adjust. I don’t challenge this.

I challenge the idea that integrity is built and cemented in organizations outside of their culture, as though integrity can appear suddenly as a new habit. Instead I like the idea that “Culture is habit, strategy is intention.”

To paraphrase the famous saying by Peter Drucker, “Culture devours integrity for breakfast.”
_____

Davide Torsello, Professor of Anthropology and OB, is Director of the Center for Business Integrity at CEU Business School, Budapest. Please feel free to contact him for any further detail on this research and on its applications.

Reader Comments (2)

Professor Torsello – A quick question for you. How do your statistics compare to companies in general, without FCPA violations? I ask because I think employees in many companies complain generally about the points you identified. But are the percentages greater in companies with bribery failures? That would be helpful in interpreting your data. Cheers, Joe
July 29, 2016 | Unregistered CommenterJoseph Murphy
The article states that there were eight negative factors but surprisingly not Leadership. Surely Leadership, includes managing those eight factors!
August 4, 2016 | Unregistered CommenterFrank Numann

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