Compliance, Culture and Ethics: An Interview with Dr. Nitish Singh

SPI: Your new book, Compliance Management, talks about corporate culture and ethics. Why is corporate culture important?

NS: Corporate culture sets the parameters and the tone for proper conduct in an organization. Corporate culture is a living and evolving entity, which is embodied in an organization’s code of conduct, vision and mission statements, and policies and procedures.

The notion that an organization should be focused solely on maximizing profits is coming to an end. Companies are realizing that they are not only accountable to their stockholders, but to a larger constituency, the stakeholders, whom they directly or indirectly impact. Thus corporate culture becomes the guiding framework for organizations to focus on encouraging an ethical workplace culture, and thereby earning the trust and respect of society and consumers, as well as their stockholders.

SPI: How is culture related to ethics?

NS: An organization’s ethical orientation is dependent on the broader corporate culture. If the company is driven by short-term profit orientation, by any and all means, then obviously that will impact the kind of employee’s ethical decisions. Some companies follow the “abiding by law” mentality and thus their corporate cultures are just aimed at preventing illegal outcomes. But other companies practice “moral imagination” by abandoning the myopic view of short-term profits and embracing a wider appreciation of the impact they have over time on diverse constituencies. This kind of moral imagination not only creates a business enterprise bolstered by pillars of integrity and moral certitude, but also leads to long-term profitable outcomes for all constituencies connected with the business.

SPI: Why is ethics important in compliance management?

NS:

• Can a business tolerate its employees to indulge in unethical behavior, like stealing from the company or perpetuating an atmosphere of lies and deceit?
• Can a business afford to lose the trust of its customers?
• Can a business continue to sell certain products or services after learning that some might be defective?

These are all ethical concerns which all organizations have to deal with. While compliance by law can provide you basic guidelines of legal conduct, it does not provide an ethical framework for fostering a culture of ethics. Thus, ethics should serve as a foundation for any compliance program. For example, misconduct in some instance may not directly violate a law, but still creates a culture of lies and deceit, which inevitably will lead to compliance violations. Thus, lapses in judgment generally occur when individuals lose their moral grounding, or when an organization’s insufficient ethical foundations and moral imagination fail to instill the importance of “doing the right thing.”

SPI: What kind of culture should financial services companies aim for?

NS: The foundation for a compliant organization is a strong ethical culture. However, various business disciplines have developed ethical principles and Codes of Ethics to guide professionals in ways most relevant for those in the profession. Although the core idea of ethics and ethical decision-making is the same across job functions, each profession presents different and complicated ethical challenges.

Ethical issues in accounting and finance often relate to transparency, conflicts of interest, fraud, disclosures, and reporting. Thus, in the finance and accounting professions, the culture needs to emphasize ethical decision making around topics such as:

• Objectivity and Independence
• Understanding of fiduciary duties
• Fairness and accuracy in reporting of financial data and statements
• Proper documentation and issues of creative accounting
• Issues related to misappropriation of assets through embezzlement, deception, and false expense claims
• Appropriately disclosing conflicts of interest

 SPI: How do you instill ethics in a corporation?

NS: Our upbringing, our communities, and our cultures are influential, even decisive, in shaping our ethical perspectives. Thus ethics are not innate, but are continually learned. For organizations to instill ethics, it is important to create a strong commitment to ethical underpinnings of day-to-day decision making. It is also important to showcase the commitment to ethics by having senior leadership lead by example. Finally, it is crucial to institutionalize ethical culture by proper ethics training, proper psychometric measurement of training effectiveness, and proper policies and procedures.

SPI: How do you encourage employees to take ethics training seriously and not treat it as merely another box to check?

NS: Education and training is not everyone’s cup of tea. You need to establish credibility, foster engagement, generate excitement, and lead to absorption of training material. That is a lot to ask for any compliance professional or trainer. Teaching and training is a skill that takes both training and time to develop. Buying off the shelf-generic training modules is a half-baked solution. You need to bring creative means of delivering knowledge, using knowledge experts who also happen to be effective trainers.

We at IntegTree generally propose a customized solution to training by developing an organization specific framework and a pathway to assist in resolving difficult ethical situations.

SPI: Do you have ethics training programs as well and how are they structured?

NS: At IntegTree we provide ethics training programs that are customized to specific needs of the clients. We promote a psychometrics-based approach to first identify the root causes of ethical concern, and then use that knowledge to deliver customized training. Our training approach is also unique as we can localize the ethics and compliance training to almost any country culture in the world. Thus, organizations, with employees in different countries, can benefit from training that is localized to specific communication and culture style.

SPI: Thank you.

Dr. Singh (PhD/MBA/MA) is the founder and President at IntegTree and also serves as Associate Professor and Director Innovations School of Business, St Louis University. He is deeply involved in spearheading ethics, compliance and sustainability education and business outreach. He developed and taught one of the first university Certification programs in Ethics and Compliance Management. The program is taken by executives from companies such as AT&T, Boeing, British Sky Broadcasting, Emirates National Oil, Monsanto, Northern Trust, Novartis, Suncor, Verisign, Wells Fargo, Weatherford, and many more. Dr. Singh has also developed one of the first and most comprehensive certification training programs in Sustainability Reporting and was instrumental in organizing Global Reporting Initiative’s first North American Sustainability reporting conference.

Dr. Singh’s and his co-author, Thomas Bussen’s recently published book is  Compliance Management: A How-to Guide for Executives, Lawyers, and Other Compliance Professionals.Readers can access free e-learning modules associated with the book.