Reframing Compliance Failures: Discovering Misconduct Signals that a Compliance Program is Working
Years ago, I was providing anti-corruption compliance training to the C-Suite of a large company when I discussed the importance of hotlines in company ethics and compliance programs. After I finished my overview, one of the executives proudly stated, “We don’t have corruption problems in our company. We never get calls on our hotline.” His colleagues began nodding their heads in agreement as I prepared to burst their happy bubble.
“If you are not receiving calls on your hotline, it’s because your employees either don’t trust it or don’t even know it exists,” I explained. “No organization is immune from misconduct and compliance failures,” I continued. I then explained that the key difference among organizations is whether they have fostered an environment and implemented tools to help employees report misconduct, or whether they continue to operate in the dark.
This interaction is emblematic of the problems plaguing ethics, compliance and anti-corruption discourse around the world. If a company or country reports no instances of misconduct or corruption, we consider them “clean.” Companies win awards for being “the most ethical” and countries are ranked as “the least corrupt in the world.”
Yet despite these accolades, many of us who work in the anti-corruption space know that this is often masking undetected, unreported, and unpunished misconduct. For example, many of the “least corrupt countries” (per high-profile corruption rankings), often lack robust whistleblower protections or disclosure obligations, have weak anti-corruption enforcement mechanisms, and offer less transparency into the operations of their governments. Are these countries truly the “least corrupt” or are their corruption “scandals” simply going undetected?
I have similar concerns about anti-corruption campaigns that claim they will “stamp out corruption” or promise “zero tolerance” for corruption. Although I certainly applaud robust anti-corruption enforcement, it often leaves the public with the impression that uncovering any instances of corruption or misconduct is a failure. In reality, it should be deemed a success. Discovering misconduct means that the system actually worked.
We all know that corruption is incredibly hard to detect. It is therefore critical that companies and governments implement tools and foster an environment that encourages individuals and companies to disclose misconduct.
For example, in the government context, this can take the form of mandating disclosures in certain instances (i.e., for contractors or other recipients of government benefits), or rewarding the voluntary disclosure of wrongdoing with reduced penalties or the avoidance of prosecution. In the company context, employing tools and procedures that encourage disclosures (i.e., hotlines/reporting tools and training for supervisors to encourage and manage reporting) is also critical. In both types of entities, creating an environment in which individuals and companies feel comfortable disclosing this information is imperative.
And of course, whistleblower rewards and protections are critically important to detecting misconduct and corruption. After all, there’s a reason why the False Claims Act is considered the most powerful anti-fraud tool in the world.
This brings me back to my initial premise: we need to reframe how we talk about corruption and misconduct. Our obsession with labeling companies and countries as “clean” or “ethical” because they haven’t reported compliance failures is harming efforts to truly prevent, detect, and mitigate corruption.
I will say it again: no entity is immune from misconduct. Corruption is everywhere. So, let’s focus on what really matters: does the company or country encourage disclosures? Once the company or country learns about misconduct, what does it do with the information? I could go on, but it would be easier to just read this.
We need to reframe the discovery and effective remediation of misconduct as a success, rather than as a failure. We also need to rethink whether rankings and accolades actually help the cause, or if they simply hide serious issues beneath the surface. We are long overdue for an honest discussion about the impact our rhetoric has on global anti-corruption and compliance efforts.
Associate Dean, Government Procurement Law,