by Walt Pavlo

I am commemorating a twentieth anniversary this year; my commitment of a financial crime while working at MCI Telecommunications. Over these years I have reflected on my reckless actions and have tried to make sense of it all. The fact is that I knew right from wrong and good from bad, but I had no experience in situations where the outcomes for making the right decision had such overwhelming consequences. Meeting financial goals through accounting tricks not only made our financials look good, it made me look good as well. There also seemed to be acceptance of my creative thinking, until it could no longer be sustained. That led to my belief that if I were going to cross the line further, why not do it for more personal benefit? It was a twisted way of thinking that cost me a few years in prison and a number of personal consequences … all well deserved. However, we still see otherwise good people making terrible mistakes. So is there anything more we can do? Allow me to speculate.

We have gotten better at developing compliance programs since the days of Enron and WorldCom. There are conferences, professional societies, corporate departments, consulting firms and law firms all dedicated to “Compliance,” making people conform to set rules and policies. The dedicated individuals involved in this profession have a difficult job that often draws more attention for their failures rather than their successes.

There are plenty of rules, but rules do not seem to be enough to stop bad behavior. Today, there are companies in the midst of crises that were meant to be avoided by adhering to the very compliance programs they have in place. Volkswagen, FIFA, Valeant Pharmaceuticals all have high quality Compliance Programs but now find themselves involved in scandal. While these companies dominate the headlines today, they are not alone, KPMG conducts its Integrity Survey of 3,500 individuals across the country to get a pulse of wrongdoing within companies. The most significant summary finding in its survey is as follows:

“A majority of employees nationally – 73 percent – reported that they have observed misconduct in the prior 12-month period More than half – 56 percent – reported that what they had observed could cause “a significant loss of public trust if discovered.”

Make no mistake, there are breaches in compliance programs going on as you read this. But the problem is not the Compliance Program, it is getting the people to adhere to it. So how do you put the rules into someone’s head so that they are engaged to do the right thing when the moment to ‘cross the line’ presents itself?

I was recently at a conference where former Enron CFO Andrew Fastow was presenting when an audience member asked him what measures should be taken to make ethics (compliance) training more effective. His answer was: “Teach less about ‘black and white’ ethical dilemmas and more about ‘gray.”’ Case studies on Enron, WorldCom and Adelphia, are often skewed by our knowledge of the known outcome with a tight narrative of what went wrong. This misguided view mostly overlooks the situation in which otherwise good people made the wrong choices. For instance, there is no ethical lesson to be learned from the case of Madoff Securities, yet many corporate cases are written in the same fashion … greed and corruption are the guiding influences for committing the crime. As Fastow noted about the infamous Bernie Madoff scheme, “Madoff was a bad guy, who did bad things …. and that’s coming from me, I’m Andy Fastow!” It should be noted, Madoff Securities had a Compliance Program.

Former heavy weight boxer Mike Tyson put it best when he said, “Everyone has a plan until they get punched in the mouth.” Compliance training coordinators could learn something from that by presenting cases that really test one’s ability to make choices in situations where the positive outcome of acting unethically seems to outweigh the negative outcome of acting ethically. Meeting financial results, no matter the means, have short term benefits, but they are most definitely benefits. Acknowledgement of helping the company, admiration for meeting the goals, financial incentives, promotions, can all result from delivering good results, even if those results do not reflect reality. Failing to meet those goals, have consequences, even if the decisions involved were ethical and the work required extraordinary effort. That is reality. It is not a matter of whether decisions based on ethics and compliance are a gray area, it is a matter of recognizing what those situations look like in real life. Introducing more realistic scenarios into training modules will most certainly lead to better outcomes for individuals and corporations.

Walt Pavlo is President of Prisonology and co-author of “Stolen Without A Gun,” which he co-wrote with Neil Weinberg (Bloomberg).

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