A recent story in National Defense Magazine described one engineering firm’s approach to promoting sound decision making within the expectations of an ethical culture (Hartman, 2016). Part of the firm’s ethics decision-making process is to acknowledge “the bias that can occur when financial stakes are high.”

This firm of engineers has captured that potential bias in an equation: P=f(x), where P is the probability of an ethical outcome and x is the amount of money involved in the situation. Their objective is to have all employees make the kinds of decisions that will “keep P at a value of 1, regardless of the function of x.”

A formula like that might be clear only to engineers, but the goal can be clear to everyone—“no matter how much money is involved, make ethical decisions.”

This point was made especially interesting by a recent short article in the online Risk & Compliance Journal blog of the Wall Street Journal.

In “Does Your Company Have a Toxic Sales Culture,” reporter Ben DiPietro quoted a recent survey by international law firm Hogan Lovells that found 57% of compliance officers said the sales culture at their organization posed a threat to anti-corruption programs; many if not all of their organizations “prioritized a culture of ‘profits over prevention.’”

The Hogan Lovells study reports that more than half of the surveyed chief compliance officers (CCOs) said people fear losing their jobs if they don’t meet sales targets. Almost as many of the CCOs believe that sales pressure and incentives are two of the biggest challenges when trying to reduce the risk of bribery and corruption.

This can be especially true when sales compensation is linked to the individual sales person’s results rather than to overall division or company performance. It is important for companies to understand their own sales culture. As stated in DiPietro’s story, companies should look at how often sales groups meet with compliance professionals, how strongly sales managers emphasize ethics and compliance, and the extent to which the focus is on making quarterly sales numbers.

More broadly, according to Hogan Lovells, senior management needs to show visible commitment to anti-corruption activities and to ethical behavior. “A lack of direction from the board and senior management about how to balance targeting profit with managing the compliance risk can result in some dangerous business decisions being made.”

Ethical Advocate provides comprehensive ethics and compliance solutions, including ethics and compliance training and confidential and anonymous hotlines, meeting Sarbanes-Oxley (SOX), Federal Acquisition Regulation (FAR), and other regulatory and reporting needs.

References:

DiPietro, Ben. “Does Your Company Have a Toxic Sales Culture,” Risk & Compliance Journal blog, April 19, 2016. http://blogs.wsj.com/riskandcompliance/2016/04/19/the-morning-risk-report-does-your-company-have-a-toxic-sales-culture/

Hartman, Ryan. “A Simple Equation for Ethics in Action,” National Defense (Ethics Corner). April 2016. http://www.nationaldefensemagazine.org/archive/2016/April/Pages/ASimpleEquationforEthicsinAction.aspx

Hogan Lovells. Steering the Course: Navigating Bribery and Corruption Risk, a Global Study by Hogan Lovells. 2016. http://www.hoganlovellsabc.com/_uploads/downloads/Steering-the-course-report.PDF