How can a company build a big enough bureaucracy to ensure that 100,000 worldwide employees follow each and every law and regulation? How can its leaders be certain employees act according to the higher standards demanded by stakeholders?
The answer? They can’t. Even if this hypothetical company’s compliance efforts are 99.9% successful, given its workforce size, there will still be 100 instances of non-compliance every day.
In 2013, companies will need to hone their focus on ethics and compliance, as regulators, NGOs and concerned citizens increase their attention on corruption and bribery. Of course, this is not only a corporate concern; corruption and bribery not only disrupt the business world but can severely harm economic development, societal well-being, the rule of law and public trust.
In 2013, expect vigorous enforcement of the Foreign Corrupt Practices Act (FCPA) in the United States and the U.K. Bribery Act in Britain. Criminal prosecutions of individuals and companies who violate these laws will remain a top priority for regulators.
Yet, while the U.S. Department of Justice and SEC have tried to remove a “culture of bribery” from business dealings by encouraging self-reporting, the UK’s Serious Fraud Office (SFO) has taken a somewhat more ambiguous position on the benefits of self-reporting in its latest iteration of UK Bribery Act guidance. In April 2012, a new director took charge of the SFO, which investigates and prosecutes complex fraud, and its October guidance on corporate prosecutions stated that “self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.”
Irrespective of the messages being sent from each side of the Atlantic, elevating employee behavior — not merely detecting illicit acts and reporting them to regulators — has never been more important. Unfortunately, even the best ethics and compliance risk program cannot address the scale of the challenge.
To be truly effective in inspiring the kinds of behavior they want from employees, companies should build and maintain a values-based system of governance and culture, and senior management and boards of directors must exert leadership to make culture fundamental to corporate strategy and see culture itself as a strategy for winning.
The only way for companies to create a real, tangible and sustainable change in behavior is to understand the ethics-based risks they face and address them—not through more rules and policies, but by inculcating their values into the company culture.