In the latest of our conversations with leading thinkers in compliance, governance, and accounting, we caught up recently with Dov Seidman, founder and CEO of LRN, a strategic advisory firm that specializes in ethics training and corporate culture building.
We spoke to Seidman about how the compliance and ethics landscape has changed in the 20 years since he founded LRN and the importance of enterprise-wide values.
Looking back over the past 20 years, how has corporate compliance and ethics evolved?
When we started there really weren't compliance programs. It was lonely, but think of what has happened since. Now, we can celebrate that employees are getting education that is culturally sensitive, and they are getting the right knowledge to the right person, with the right medium. We have really mature programs to detect and prevent misconduct. There are controls in place. Codes of conduct have become the centerpiece of companies. They are not just posters on the wall, they really are starting to animate decision making. We are able to audit and provide employees helplines.
We take these things for granted now, but when we started this stuff did not exist. Looking at the fact that ethics and compliance are now on the board agenda, CEOs are looking to dashboards, and it is now global; it has been a tremendous journey.
In recent years, there has been an explosion in the number of rules and regulations issued. Do they help build programs or run the risk of being a distraction? Are folks so in the weeds trying to make sure that the minutiae are followed they may lose sight of the bigger picture?
A colleague pointed out to me that the Federal Register has grown to a whopping 78,961 pages. Just reading the regulations is a full time job.
But three or five core values, if they are translated into shared values and understood behaviors, are more potent and powerful than 1,000 rules with all their carrots and sticks. If you put a rule in a company kitchen that says don't leave the food in the microwave, people will leave it on the counter. If you teach them to truly respect common places, it works much better.
DETAILS
In the latest of our conversations with corporate governance and compliance officers, we talk with Dov Seidman, founder and CEO of LRN, about the progress corporate compliance programs have made in the last two decades.
Dov Seidman’s professional career has focused on how companies and their people can operate in both a principled and profitable way.
Seidman is the founder and CEO of LRN. Since 1994, LRN has helped hundreds of companies simultaneously navigate complex legal and regulatory environments and foster ethical cultures.
Seidman is the author of HOW: Why HOW We Do Anything Means Everything recently published by Wiley & Sons in an expanded edition with a foreword by President Bill Clinton and a new preface from Seidman on why how we behave, lead, govern and relate to others matters more than ever and in ways it never has before.
Fortune called Seidman the “hottest advisor on the corporate virtue circuit” and Economic Times named him a “Top 60 Global Thinker of the Last Decade.” He became the exclusive corporate sponsor of the Elie Wiesel Foundation for Humanity Prize in Ethics in 2008.
Compliance is about proactivity. Let's be proactive and preventative. It's the right intent, but the mechanics selected to be proactive have not always been the most optimal ones. Just because you want to be proactive, doesn't mean you need a rule for everything. When you had nothing, you needed to put the apparatus and rules in place. Now, we are seeing what works and where the limitations are, and we are in the next phase of scaling values and developing corporate character. In other words, culture.
Why is culture so important?
Why [in the Federal Sentencing Guidelines] does a company get credit for having a helpline even if there is so much fear and distrust in the culture that people wont pick up the phone and call it? The problem here is that we are being programmatic when launching compliance and ethics programs when what we really need to understand is that the culture defines how things really work. Culture guides all decisions and all behaviors.
Look at what is happening at all the big banks. Five years ago, if they had a problem, they would say they were going to redouble accounting oversight and controls and processes. Now they say they are going to take a deep look at their culture, values, and decision-making frameworks.
The only thing that controls against unwanted behavior and simultaneously guides and propels you are values. What you can and can't do is one thing; what you should do comes from somewhere else.
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Isn't it a challenge, however, when all it takes is an individual or two to unravel a company's compliance and ethics efforts?
If there is a bad apple causing problems, usually someone to his left or right knew about it. In nearly every case where there is real misconduct, before the person whose job it is to detect and deal with misconduct knew, many other people knew. You have to create a culture where behavior is everyone's responsibility.
What role can metrics play in the evolution of compliance programs?
Metrics are the holy grail of the ethics and compliance industry. The adage that you manage what you measure remains as valid as ever. If you measure something, you are saying it matters; if you don't measure something, it says it doesn't matter. We need to realize that metrics are a window into our values and what we value. What we choose to measure is what we choose to be.
Almost every metric in business is a “how much metric.” For compliance it is how many open cases, how many calls to the helpline, how many compliance failures. We expect calls to the helpline to go down, however, when maybe we should see the number going up as a good thing because there is more trust in the culture. It means more people are bringing problems to the surface so we can deal with them.
Where does compliance continue to evolve from here?
The most exciting thing that has happened for the compliance industry is that it has moved from just keeping companies out of jail and from being fined. Just like in bowling, how the guardrail keeps your ball from going into the gutter. That's where compliance and ethics used to be. It was the guardrail. Now, ethics and compliance propels the ball to the strike zone.
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