When does corporate culture lead to a corruption scandal? What about the myth of the rogue employee; that one who, in spite of all training and corporate guidance goes ‘off the reservation’ and engages in corruption for his or her on personal benefit. Yet this rogue employee’s conduct brings Serious Fraud Office scrutiny or worse? Alas there is a reason it is called the myth of the rogue employee and that myth is that there was as corporation behind the employee, incentivizing the employee to engage in the nefarious conduct.
Over the past year, we saw this play out again with the Tesco accounting fraud scandal, where the company admitted that it overstated profit by over £260 million. It not only led to the most serious crisis the company has ever become embroiled but also investigations by the Serious Fraud Office (SFO) and lawsuits against the company. Yet just as the accounting and corporate fraud of the US company Enron, the accounting fraud at Tesco did not appear overnight. It was the product of a hard charging corporate culture where the drive was to be Number 1, Number 1, Number 1. The company initially managed these growth requirements through acquisitions but once again, as with Enron, when the acquisitions slowed and organic growth was required, that is when things began to unravel.
While there has been no final resolution by the SFO, at some point Tesco had to resort to accounting tricks to manage the breakneck growth. A Financial Times article cited to industry analysis Richard Hyman that “one of the lessons from the Tesco debacle is that slavishly striving to meet one target can lead to unintended consequences.” But more than this it is top management who sets the tone. If it is meet your numbers at all costs, your employees will get the message and lie, cheat or steal to keep their jobs.
The same article quoted Samuel Johar, chairman of the headhunting firm Buchanan Harvey that it is up to top management to set the right tone, “If the one set is a bad one, then this can lead to all sorts of problems lower down.” So much for the Myth of the Rogue Employee.