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Ugh: The Walmart Meltdown

Matt Kelly | April 23, 2012

Good Lord, considering all the sorry spectacle of Corporate America in the news right now, if I were a corporate compliance officer, I'd probably want to quit and walk away from the business too.

That was my recurring thought all weekend, as I read the New York Times' damning portrait of corruption and bribery at Walmart. Or as I read the latest efforts to salvage the ship at Best Buy, where the CEO just resigned over still-undisclosed misconduct with a female employee. Or as I read about the shenanigans at Cheasapeake Energy (sweetheart deals on energy exploration for the CEO) or Infosys (possibly fraudulent paperwork to bring Indian nationals to work in the United States illegally), or any other number of businesses behaving badly these days.

The real bummer is that all of this alleged misconduct has happened in recent years—that is, after the Sarbanes-Oxley Act was passed, after the Justice Department began enforcing the Foreign Corrupt Practices Act, after Hewlett-Packard fired its former CEO for inappropriate contact with a female employee, after Satyam imploded in fraud and disgraced “India Inc.” All of these companies had (or still have) top executives who knew what misconduct looked like, and had crystal clear examples of what the consequences would be.

And yet, here we are, staring at a whole new generation of misconduct. You have to wonder whether any of the work that ethics and compliance officers have done in the last 10 years makes much difference.

I can't help but recall the study published by the Society of Corporate Compliance & Ethics earlier this year, that found a stunning 60 percent of ethics and compliance officers are so stressed that they've contemplated quitting their jobs in the last 12 months. The single biggest stressor was, not surprisingly, the struggle to keep pace with new regulations (24 percent).

But next biggest causes of stress were preventing, detecting, investigating, and remediating misconduct—which altogether added up to 50 percent. In other words, the labor of finding and cleaning up other employees' misconduct is so exhausting, it has half of you wondering whether you should quit. Reading all these headlines in the last week, I can't say I blame you.

Compliance Week has been so alarmed by the SCCE study and its implications that we decided to devote a panel discussion to it at our 2012 annual conference. We've assembled a group of thoughtful compliance officers to speak, hailing from both government and the private sector, and last week all of us had a conference call to discuss the subject further. Our speakers wanted to divide the discussion into why compliance is exhausting (that is, too much work for one executive to manage), and why compliance is overwhelming (too much pressure for one executive to manage).

To that, however, I wanted to add a third element: why compliance is so frustrating. Because that is exactly how I feel when I read about Walmart, BestBuy, and so many others; and I suspect many of you feel the same way too. No matter how hard we try, lessons do not seem to be learned. 

The Walmart case, if proven true—and so far, Walmart has not denied anything the New York Times has published—is the most disturbing story of the lot. The Times has flat-out accused Walmart's current and former chief executives and many of its other leaders of covering up millions paid in bribes to Mexico in the early 2000s, and then whistling past the graveyard for the last seven years pretending all is well, Walmart is an ethical company, and we would never do anything like that.

Perhaps, in the literal sense, Walmart will never engage in corruption like that again. But the disgrace is that Walmart executives apparently did engage in corruption before, buried it, and then did an about-face to preach the gospel of good ethical conduct after their bad ethical conduct was in the past. According to the New York Times article, these are men (and so far they do all seem to be men) who worked side by side with ethics and compliance leaders at Walmart, ostensibly urging other employees to strive for something higher, when they had already done something lower and kept it hidden away.

I won't speculate on the cost of the bad publicity, or of the internal investigation Walmart recently re-opened, or of the settlement the company will presumably pay should this probe lead to a formal investigation by the Justice Department. What dismays me more is the demoralizing effect this scandal (and all the others lately) will have on the hard-working compliance officers who genuinely do want their organizations to be good corporate citizens and respectable places to work.

And that gets to the most disturbing statistic I saw in the SCCE report. When compliance officers were asked whether they felt isolated or in an adversarial position at work, 58 percent said yes. You can't have board members and chief executives everywhere preaching the glory of strong ethical culture and tone at the top, and 58 percent of compliance officers still feeling isolate. Both cannot be true at the same time.

At Walmart, at least, I have a sinking feel that we know which one of those statements isn't true. Little surprise, then, that so many compliance officers are wondering whether their effort is worth it.