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FCPA Blog Daily News

« Job: Associate General Counsel, Investigations | Main | Leadership lessons from the center of Operation Car Wash »
Friday
Aug102018

Why do ‘normal’ employees violate the FCPA?

People who've violated the Foreign Corrupt Practices Act fall into two categories: those who had criminal intent from the start, and those who stumbled into the offense.

It's the second group -- the regular folks who've done a bad thing -- who are so tragic. They're just like the rest of us -- except they've ruined their careers and professional reputations, and sometimes lost their freedom and more.

It's also the second group -- the "ordinary, well-meaning people" -- who are the focus of an article Margaret Steen wrote ten years ago. She looks at how easy it is for well-intentioned corporate employees to break the law. She also recommends ways to reduce corrupt behavior -- without crippling the organization with too much internal regulation.

Promote a culture of compliance, encourage dissent, hire an ethics officer, rethink goals and rewards, and marginalize misconduct. Sound familiar? The article doesn't say so, but those recommendations echo elements of an "effective compliance program" described in Chapter 8 (pdf) of the U.S. Federal Sentencing Guidelines.

So why do "normal" corporate employees break the law?

Here what Margaret Steen said:

  • Group Power. If there’s a single, most primitive lever for behavior in our species, it’s the power of the crowd.
  • Organizational Structure. “My lifetime’s work in business ethics suggests that business corruption has everything to do with culture and with incentives,” says Kirk Hanson, MBA ’71, executive director of the Markkula Center for Applied Ethics at Santa Clara University and an emeritus GSB faculty member. For example, auditors want smooth working relationships with their clients, and they don’t want to be fired, so they have an incentive not to ask awkward questions.
  • Rationalization. The division of labor required for much corporate work, with many people contributing a small amount to a project, makes this easier. For example, an employee can tell himself, "I’m not the person who falsified the safety data for the product; I just reported the data that I had.”
  • Fear and Confusion. For most people, fear is a more common cause of corrupt behavior than greed. People want to avoid conflict, and being a whistleblower can ruin a person’s career, even if the person is vindicated. So, many people keep quiet.

The lesson? It's easy (and wrong) to think compliance programs should be aimed only at stopping hard-core criminal activity. The more subtle internal threat comes from regular employees -- those who wouldn't jaywalk outside the office but who fall into illegal behavior at work, one tiny step at a time.

____

Richard L. Cassin is the publisher and editor of the FCPA Blog.

Reader Comments (4)

This is part of what makes compliance work so challenging. We clearly need to work toward having an environment that keeps the well-intentioned employees on the right road. Unfortunately, we also need to keep watch for the sociopaths who are not so well intended. I once heard a statement, that in any group of 10 people, one will always do the right thing, one will do whatever they can get away with, and the other 8 wait to see who gets rewarded and who gets punished. It is critical to understand and manage group dynamics. And the Sentencing Guidelines lay out a pretty good roadmap for doing this. Cheers, Joe
August 10, 2018 | Unregistered CommenterJoseph Murphy
I find this post troubling on a number of (cultural) levels. I will, out of a sense of humility and self-preservation common to "normal" employees, stick (mostly) to one. You seem to be implying that there is no mens rea element in these types of criminal cases and I don't believe that's correct. I admit I'm no expert in the FCPA area but my current understanding is that for any charges that are going to stick the government must at least pretend to be able to prove intent. I have read Why They Do It, so I have heard this description before but it still strikes me as a way we have of minimizing criminal conduct, particularly of the white collar variety. One could also talk about "normal" burglars and "hard-core" burglars but this doesn't often happen as they don't usually have high priced attorneys. I could go on but TGIF.
August 10, 2018 | Unregistered CommenterWilliam Weaver
Readers can find the Margaret Steen article that Richard references freely available on the Stanford Business Magazine back issues page at https://www.gsb.stanford.edu/sites/gsb/files/2008August.pdf, page 18 - Prescriptions for Preventing Cheating.

I appreciate readers' concerns about appearing to condone corrupt behavior, but by understanding why good people do bad things we can guide leaders towards the creation of work environments in which people become their best rather than their worst selves.

The prescriptions for the two groups Steen describes are different. In the case of the first group, (ideally) don't hire them, and if you do, fire them as quickly as possible. For the larger group - which includes most employees - the creation of a culture that is not only compliant with but whole-heartedly embraces the principles contained in the relevant provisions of the FCPA and UK Bribery Act decreases the likelihood of their unwitting stumble into situations against their better judgement.

My support for Richard's article referencing the original Steen paper is based on 30 years' experience specializing in organization behavior with a focus on building ethical workplace cultures (primarily in Southern Africa) and as author of a specialist certificate in global anti-corruption for an international compliance association.

In an interesting recent meeting with fellow anti-corruption trainers in Rome, Italy, I saw how they are teaching public servants about how potential conflicts of interest faced by good people can over time develop into active conflicts and eventually corrupt relationships due to changing personal circumstances. Most people see themselves as good people, and if we start our ethics and anti-corruption compliance training of leaders and employees from this viewpoint, we experience a great deal of success.
August 12, 2018 | Unregistered CommenterPenny Milner-Smyth
There is just one more element that has gone unmentioned in the article and the posts, but which, in my experience managing compliance in the corporate setting for many years, is a predominant factor that pushes ordinary people to break the rules in corporate life: performance pressure. This is the story of the ordinary person who has to report to a leader who demands that a project or objective happen, in record time, no matter the sacrifice. Their project is so important, the average employee is told, that stopping it is a firing offense, or a career precipice. The leader is too smart to suggest overtly that if the law needs to be broken to achieve the result, so be it, but without breaking the law or corporate policy, the desired result is impossible. Mechanisms have to be in place to detect such situations, and compliance officers have to have the stature within the organization to stop them.
August 13, 2018 | Unregistered CommenterRoberto Berry
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