3:08
The second step is to, based on the assessment risk,
develop a clear program, that addresses that risk.
Now this program should be proportionate.
It will be a different program going into Sweden,
than it will be going into [COUGH] say, the Central African republic.
Probably, this involves a written code of conduct.
I say probably, because there is some debate as to whether or
not a firm should focus on integrity, or should focus on compliance.
We're going to talk about that a little bit later, but the general consensus is,
particularly for larger firms, even if integrity is the objective,
it's very useful for employees, agents, and other associated people
to have a written policy that specifically addresses corruption.
And that policy, whether written or unwritten, needs to address issues
that have been identified in the assessment as particularly difficult.
And typically, difficult issues include gift giving, entertainment, travel.
And something that some firms don't think of, how should employees,
agents, managers, etc., respond to extortive demands?
Pay me or I will deny you this service.
The third step is to implement this policy, this policy that's been
developed in response to the risk assessment, in a meaningful way.
And a meaningful way includes, the policy needs to be communicated clearly.
11:59
The Panama Canal Authority is supervising what is called the Third Locks Project,
and the Third Locks Project is, at this time, the largest single public
construction in the entire world, it is an enormous undertaking.
And as an enormous undertaking,
it involves literally thousands of contracting agents.
And each of these contracting agents potentially could involve kickbacks,
commercial bribery, a very common form of private sector corruption.
As well as, the potential for corruption in any relationships
that the Panama Canal Authority has with a number
of governments that have some kind of stake in the Panama Canal.
Now, no business is perfect, but the Panama Canal Authority has done
an incredible, and that's the only word I can think of, an incredible job of
controlling these thousands of potential areas and
interactions in which corruption could occur.
And they did so by very conscientiously assessing the risk
attendant to a large construction project, such as the Third Locks Project,
by developing a very clear policy, and articulating that policy.
And by very carefully educating, training, embedding within
the thousands of people involved in this project including suppliers,
subcontractors, other construction firms.
And then, by having a very clearly
articulated mechanism for dealing with any questions, concerns, or
issues that arose with respect to potential issues of corruption.
14:57
That means that rules themselves can not govern all of behaviors that people and
business firms are going to undertake and going to encounter.
And so, an alternative, a suggestion,
is rather than spell out rules, spell out norms.
This is how we want you to behave.
This is our objective.
This is the spirit of our organization.
This is the soul of our firm.
Problem of course with norms is that they don't necessarily
provide the clearest guidance to a person who's in an ambiguous situation,
or who's at a new situation that wasn't necessarily
anticipated when those norms were generated and articulated.
All right, and so in the real world, what we usually see.
Is a sentences of the two.
But clearly integrity is very important and
clearly having some sort of guiding spirit is going to be
very useful to people in the field who encounter,
new situations that the rules do not cover.
Now, the country of Australia is filled with agencies,
business firms, government offices,
that have done very interesting research on how one creates integrity.
If we synthesize some of the things that these Australian agencies have found
[COUGH] we can get some guidelines for how to create integrity in an organization.
And once again the most important guideline is ethical leadership,
right the tone at the top.
But here's particularly important because we trying to convey,
without finite articulated words how people should behave.
And in the case of integrity, we can convey that through example.
So an ethical leader, leads by example in the case of corruption,
the example instructs those who follow, how to behave.
That's buttresses by active management and supervision.
A hands off manager is less likely to be able to imbue in
those who that manager manages, and
understanding of how to deal with corruption.
Unethical workplace a place with integrity is
also made more feasible by employing the right people.
We sometimes are very teleological in this skill set that
we want to bring in to our workplace we want the best Math person.
We want the person who is the best proof reader.
But in a place with integrity will also look at the character of people.
Interestingly this is something that the Fed,
the Federal Reserve in the United States is asking banks
to do as they bring on new cadres of young bankers.
And of course assessment of risk is important.
And not just assessment of the risk but developing a process for
addressing that risk in particular.
Same as department of justice and serious fraud office recommendations.
And again somewhere to the recommendations of the department of justice and
serious fraud office.
It helps if people feel confident in reporting actions that
may not fit within the vision of integrity in this particular firm.
If people can talk to their managers about these kind of
issues without fear of negative repercussions.
One of the most respected business managers who
created a workplace of integrity is Toyoda,
the founder of Toyota Motor Company.
Toyoda himself was considered by all who met him and
who work with him to be a man of substantial integrity.
And he led the nascent Toyota company in the creation of a work place,
an organization that placed integrity at the forefront
of its interactions and its business endeavors.
Now Toyota Motor Company has grown immeasurably since its founding by Toyoda.
And it's interesting to know that Toyota has now extensive policies,
written rules, written procedures that's probably a function of the fact
that Toyota Motor Company has become a global company of immense size.
But we can look to Toyoda as a sterling example a very
good example of how a person with integrity can imbue a firm,
imbue an organization with that sense of integrity.
The last thing I want to talk about is something that's kind of train you right
now and that's Mock Investigations.
A number of business firms consider it to be to their
advantage to have pretend investigations into offices,
bureaucrats, divisions, subdivisions with an aim for
finding whether or not there is corruption.
It sounds good, and I'm sure iterations of this
type of activity will continue for decades.
But I want to point out a couple of problems.
Research into these kinds of activities, these Mock Investigations and
some of the best research that's been done, has been done in Canada.
Has found that, rather than teaching people how to avoid these behaviors,
corrupt behaviors.
It actually teaches people how to avoid detection of these behaviors.
All right, people learn to not be explicit about corrupt activities
in their email to one another.
People learn to use code words.
It becomes almost a game, all right?
There's a mock investigation, so there's no serious repercussions.
And how can I fool them?
How can I avoid Their detection of any activities I'm engaged in?
So rather than mock investigations, research suggests that
it's actually beneficial to use mock audits, right?
So this isn't the official audit that will be released as a report to
stakeholders rather it's an exercise in an audit.
And better than a mock audit it's a self audit an audit that is real.
It's an audit that's actually trying to find out not for
communication to stakeholders but instead as an exercise in
self-diligence whether or not there are activities that raise questions.
A useful way of evaluating and measuring in a self
audit is something called a Balanced Scorecard.
And balanced score card is a means of self evaluation that has been used for decades.
If you are not familiar with the balanced scorecard,
there are any number, enumerable resources that can be
used to assist you in developing a balanced scorecard.
This balanced scorecard was borrowed from the Center for Business Ethics.
And it is aimed at, it's intended to get at issues of trust
with respect to stakeholders flowing from issues of corruption and performance.
So when we talk about control of corruption by firms a very useful starting
place is the Department of Justice Serious Fraud Office recommendations.
And those two agencies if we synthesized the recommendations that we've made.
We can come up with a fairly clear and
fairly comprehensive steps, set of steps for creating and
implementing an effective program for controlling corruption.
As another approach or better yet,
the complimentary approach we also want to build integrity
into our organization, into our business firm.
And probably want to avoid exercises that look good
that make it kind of common sense that actually backfire.
Instead I suggest that we audit ourselves in a useful means
of evaluating that audit is a balanced scorecard that
looks at things like will our stakeholders trust us?
Are we acting in ways that are trustworthy rather than ways
that might be considered corrupt?
Thank you and I look forward to seeing you for our next lecture.