24 April 2012

The Dominion Post editorial today pulled no punches in commenting about the Bach affair; it criticises the long drawn out process, involving an independent investigator, coming to a bizarre conclusion. New Zealand is not the only place where the independence and effectiveness of ethics related investigations has been in the news this week.
The New York Times reported the extraordinarily self serving investigation used to cover up massive bribery by Wal Mart in Mexico – more might be expected of Wal-Mart as the largest private employer in both USA and Mexico. In Britain, the Leveson inquiry continues to disclose jaw dropping conflicts of interest and confirmation that the internal investigations undertaken within News International were structured to avoid disclosing the character and extent of corrupting influences, contrary to their purport.
A post-Enron phenomenon in the US is the expansive use of “special counsel” to conduct commercial investigations where the involvement of directors or chief executives may create conflicts of interest. The trustworthiness of  findings is strengthened by the independence of the investigator. This seems to be defeated in some case by disingenuous independence.
The NY Times report about Wal Mart was that the investigator was rebuked by the chief executive for being overly aggressive. The investigation files were then shipped to Wal Mart’s general counsel in Mexico – the person alleged to have organised massive payments to make legal and bureaucratic problems fade away – who then exonerated his senior executive colleagues. The cover up seems to reflect an acceptance by company leaders that some business involves “working on the dark side of the moon”. In public however, Wal Mart affirms a commitment to high ethical practices.
Which brings into question the genuineness of the ethics being promoted. The US Corporate Executive Board advocates the importance of organisations building integrity capital. A 2011 survey of approximately 600,000 employees in more than 150 companies in 2011 confirmed that corporate culture, not process failure, underlies most corporate catastrophes.
Managing that risk “… is simply the movement of information from the informed to the empowered. While employees are often not willing to share observations about compliance or ethics risks, some companies are markedly better at enabling and encouraging employees to do so. Because these firms’ employees understand the value of being transparent about compliance and ethics issues, the firms benefit from what CEB calls high integrity capital.”
This is done through “organisational justice”. Like all justice it must be expeditious, fair and open. Organisations must be quick and consistent when responding to integrity breaches. CEB guidance is that leading companies show employees that when unethical behavior is uncovered, people are held accountable and the company does the right thing quickly and consistently.  “To foster organisational justice, leaders should:
  • Set clear expectations that unethical behavior is not tolerated;
  • Hold employees at all levels consistently accountable; and
  • Share details regarding detected, punished misconduct (within the bounds of privacy laws).” 
These are reflected in the “Six Trust Elements” which the State Services Commissioner requires agencies to address in giving effect to the Standards of Integrity and Conduct for the State Services;
  • Agencies have standards of integrity and conduct
  • Agencies promote the standards of integrity and conduct
  • The standards of integrity and conduct are integrated into the behaviour of State servants
  • Managers model the standards of integrity and conduct in their behaviour.
  • Consequences for behaviour that breaches the standards of integrity and conduct are known by State servants
  • Agencies act decisively when breaches occur