No going back–compliance is here to stay

The idea that compliance will take a dive in importance due to a changed US administration is laughable, if it were not affecting some normally quite sane people.

It is true Donald Trump seems no fan of compliance and has gone on the record as saying the Foreign Corrupt Practices Act (FCPA) is

                “a horrible law and it should be changed”

and that it puts US businesses at a “huge disadvantage.” 

So some aspects of compliance may begin to fray at the edges. Certain bits of legislation will doubtless change.

But compliance requirements both in the US and elsewhere are likely to trundle on, probably growing ever more complex and ensuring everyone earning a living from them stays gainfully employed.

Wherever compliance moves, it will probably go towards: influencing corporate culture. Culture trumps (sorry about that) compliance every time.

Expect a greater focus in  the future on ways to move corporate cultures towards valuing ethical behaviour.

In particular, compliance regulators will be wanting to know not just about culture but on whether the company is using or generating ethical leadership. The latter is the elephant in the room during many discussions and decisions about compliance.

So how do we create, find, grow and build ethical leadership? This is no fluffy philosophical query. Most large companies change their CEO within half a decade. Leaders who’ve been in situ longer are growing scarcer.

Finding or developing top execs with a sound commercial grounding who can make things happen, yet with a strong ethical perspective remains more an ideal than reality.

The Employee Perspective

Suppose you are thinking of joining a particular company. You will certainly want to know, not just about its values and job possibilities. You’ll also want to learn how the CEO behaves, what is important to this person, and how this tone setter acts in day-to-day situations.

Ask people what they want from leaders and the universal reply is they want integrity. Someone who: “tells me the truth, shows me they care, keeps me safe and gives me hope.” Not much to ask, yet so few leaders seem able to do deliver these. People trust those leaders who can do so.

Yet trust is in short supply  For example, a recent study of where employees most trust their companies Mexico, India, and Singapore emerge as highest in the trust league. Meanwhile there is a serious trust deficit in Japan, France, and Russia.

 

Where do employees trust companies the most

To find leaders able to generate trust is therefore a serious challenge for even the most insightful HR team. Success at finding ethical leaders mainly stems from on-the-job testing: “Do we see this person demonstrating they care about ethics and “doing what’s right.”

Putting it slightly differently, can the potential senior leader create the sort of climate around them in which employees feel willing to put their trust in their leadership and the company?

Many ethically-minded companies recognise the value of trust and build it into their entire culture –see box on W.L. Gore Company.

Compliance, culture and the Gore company

People suitable to act as ethical leaders have also faced real time tests of their own ethics. For example, at some point in their career over half of all managers (63%) say they have been asked to do something contrary to their own ethical code. 

Just under half (43%) have been told to behave in direct violation of their organisation’s own values statements, and one in 10 (9%) had been asked to break the law.

Looking for quality leaders

Finding ethical leaders therefore means seeking potential recruits who can show:

  • Right Thinking. Companies that value an ethical approach want people who think that way too. Since not all such leaders will come from outside the organisation, training and development plays a crucial role in generating the right people. 
  • Influence. It’s essential to build into the recruitment process a check that potential new senior leaders know how to influence the culture and can convey the confidence to do so.  

    There’soften a serious disconnect between what leaders say and what they’ll do, compared to their actual actions. The worst and most common disconnect happens when the leader faces ethical dilemmas. According to researchers,  even a modest gap between what a leader says, versus what the person does creates, ethical dilemmas for followers. 

  • Values-driven. Finally, an ethical leader puts values at the centre of their actions. For instance, asked whether they ever referred to the company’s statement of values, more than three out of four CEOs (84%) and most Senior Managers (78%) did so:

compliance and whether managers refer to values

A values driven leader draws on values–their own and the company’s, morals and ethical stance. These can all be tested during a recruiting drive. For example, this may involve assessing authenticity. Does the person present an attractive image, yet is narcissistic, destructive or abusive. 

HR therefore plays an important role in helping to unearth these potential ethical leaders who are:  

“…self-aware, have a strong moral compass and understand that their behaviour is key to whether an organisation’s values are worth more than a passing reference in the annual report or on the company intranet.”
CIPD’s CEO Peter Cheese

The best companies will continue seeking out leaders able to go beyond the compliance boundaries. For ethics, begins where the laws and regulations end. Ethical leaders understand that.

Compliance and the seven questions ethical leaders need to answer

Sources:

Added values: The importance of ethical leadership, Business in the Community 2013

Developing Ethical Leadership R. Edward Freeman Lisa Stewart, Business Roundtable Institute for Corporate Ethics, 2006

A Review of the Literature Concerning Ethical Leadership in Organizations Kelly Monahan Regent University

Snell, Roy, Donald Trump’s Impact on Compliance Programs, Compliance and Ethics

 

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