Encouraging ethical behaviour in multinational corporations

September 2013 | EXPERT BRIEFING | FRAUD & CORRUPTION

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In response to the UK Bribery Act and enhanced enforcement of the US Foreign Corrupt Practices Act, most multinational corporations have amended their corporate policies (and compliance requirements). However, such amendments are inherently reactive; they address the last problem surfaced rather than solving the next problem that may be facing multinational corporations with respect to ethical conduct. New control processes invariably seek to institutionalise the lessons learned from past experience. It is a valuable, but insufficient exercise. Programs and policies that exist only on paper and only with reference to past lapses in conduct will ultimately fail.

What are needed are sustainability control processes that can be insinuated into the hearts, minds, and actions of the employees of a multinational corporation. What is needed is a mechanism to create the type of corporate conscience that anticipates future lapses in conduct that are antithetical to long term sustainability of a multinational corporation, that undermine shareholder confidence, and that irrevocably damage the corporate image.

Such mechanisms must draw not only from the traditional ethics and compliance fields, but also from what has been termed “empathetic perspective-taking” by Dr Christopher Adkins. A multinational corporation must create sustainability programs that put employees in a position that (and equip employees with the tools and training to) allow employees to balance empathy and emotion with reason and intellect. Learning proper corporate conduct is not just about learning ‘how to behave’ – it is about erecting corporate emotive barriers within the workforce that effectively prevent bad behaviours.

One large multinational corporation has institutionalised empathetic perspective-taking by employees in corporate decision-making and actions through a checklist process.

The threshold review of any employee decision or action is a legal review – is the decision or action consistent with the respective laws and regulations of the jurisdiction? The secondary review is based upon conformity to the company’s corporate policies and core values (the assumption being that the multinational has clear, concise, accessible documents that articulate these policies and values).

But then cognitive assessment of proposed decisions/actions gives way to emotive components and each employee must evaluate the proposed decision/action against: (i) the employee’s comfort level if the proposed action were made public (transparency); (ii) the Golden Rule (“would I want this to be done to me” or “what if I were on the receiving end of this decision/action”); and (iii) subsequent peer review (second-guessing by others after the fact, against the perception of peers in having acted fairly, with good intent, and in support of an acceptable corporate goal).

Forcing the employee to become an active agent, emotionally invested both in the process and the outcome of a decision/action, consistently results in outcomes that are more acceptable to society and the multinational employer.

The lesson for multinational companies is clear. Cognitive education with respect to ‘ethics and compliance’ in the workplace is essential to prevent lapses in employee behaviour that endanger corporate sustainability and shareholder value. However, cognition alone is insufficient. Incorporating emotive components within employee decision making and action is essential in achieving outcomes that maximise long-term economic outcomes for multinational corporations and discouraging, and protecting against, errant behaviour at the individual employee level.

Compliance and sustainability programs are expensive. But compliance failures are even more expensive and in some cases can threaten the very existence of an enterprise (as well as the professional careers of the enterprise leaders).

We know that within any enterprise we will always have those who act ethically and those who will act unethically. The first class we merely need to support and reward. The second class is an issue for the gate-keepers of a company (the human relations department during the hiring process, the legal department during the termination process).

But there is a third class of employee – the employee that can be swayed by exigent circumstances, self-interest, the influence of superiors, and moral relativism. It is this class of employee who can benefit most from non-cognitive, empathetic perspective-taking control processes (and whose conformity to sustainable decision making and actions will provide the best return on investment for multinational corporations).

How can leaders evoke the ethical response in workers?

My belief is that humans are invariably storytellers. Whether it be around the campfire, the hearth, the dinner table, the cafeteria, or in the digital corridors we create around the world with our colleagues through social media, emails and other collaborative digital tools, we all love a good story, told well. Historically, myth creation was based upon this premise, using stories to summarise the collective conscience of our tribe and articulate the appropriate mores expected. Multinational corporations can use this same modality to insinuate corporate value systems into their workforce.

Ethics, compliance and corporate sustainability are more than mere cognitive learning experiences from PowerPoint slides. In addition to such cognitive training, leaders need to encourage development of ‘corporate myths’ through the creation of evocative stories that define proper corporate conduct. Stories that require the workforce to empathise with the victims, condemn the villains, and identify with what I have called ‘ethical heroes’. Stories that become institutionalised as very visceral cues and reminders of appropriate corporate conduct.

Lead by example.

It is a simple maxim. But where example is lacking, fiction may suffice. And a good story, a corporate myth, reinforcing the enterprise’s values and told well, may be all that is needed to avoid that next employee lapse in ethical conduct that might just be the fatal mistake for the corporation and its leaders.

Kelly L. Frey is a member at Dickinson Wright PLLC. He can be contacted on +1 (615) 620 1730 or by email: KFrey@dickinsonwright.com.

Kelly L. Frey

Dickinson Wright PLLC