Auditing Culture

Culture trumps compliance, according to many ethics and compliance specialists—meaning that companies will not likely be able to overcome weak ethical cultures with compliance procedures alone. But is it possible for two or more cultures to exist inside a company, ethical and not, and for one to trump the other?

Yes, although one would hope that the culture of ethics would overcome the culture of greed, arrogance, fear, or any other undesirable attribute.

That seemingly did not happen at Wells Fargo, which finds itself on the wrong side of ethics again, with its recent disclosure that 1.4 million more fake accounts had been created than previously reported. This news will continue to cost the company, its employees, its shareholders, and its board.

It will now pay a total of $6.1 million to refund customers for unauthorized bank and credit card accounts, up from $3.3 million previously, and will pay $1 million more to refund customers for potentially improper online bill pay enrollments. It will also be paying a $142 million national class action settlement. More, Senator Elizabeth Warren is calling for a resumption of congressional hearings on the matter and is calling on the Federal Reserve to remove board members who served during the fraud-ridden years (Egan, 2017).

Which brings us to the issue of auditing company culture.

Culture is often thought of as a soft issue because companies struggle to measure its effectiveness. But culture and compliance are linked. … So why isn’t culture reviewed with the same principles and rigor that are used to test other aspects of compliance programs? (McLeod, July 2017)

Frances McLeod asked that question in a post on The FCPA Blog. Culture can be measured, she said, and should be done over various points in time using multiple tools, such as employee surveys and in-person feedback/focus groups, as well as by assessing leaders, using leadership values analysis tools and related assessment tools. In addition, she said, find out what others think of your company and its ethics.

Would a culture audit have helped Wells Fargo avoid the ethical mess they have found themselves in? Perhaps. If it had been an ongoing part of the corporation’s ethics and compliance toolset. Because the leadership team, including the board of directors it seems, had a blind spot—they “refused to believe the sales fraud could be systemic in a culture such as theirs” (Ochs, 2016), and overlooked warnings by whistleblowers and others. As Ochs said about Wells Fargo, “senior leaders need to see the truth about the bank’s culture and engage all employees in the effort to repair it.”

All organizations need to seek the truth about their cultures, to ensure reality maps with their desired ethical culture. Engaging in periodic audits of company culture can help.

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Egan, Matt. “Wells Fargo Uncovers up to 1.4 Million More Fake Accounts.” CNN Money (blog), August 31, 2017.

McLeod, Frances. “Frances McLeod: We Need to Audit Culture Change Too.” The FCPA Blog, July 6, 2017.

Ochs, Susan. “The Leadership Blind Spots at Wells Fargo.” Harvard Business Review (online), October 6, 2016.