A leading expert on business ethics, Richard Bistrong is the founder and CEO of Front-Line Anti-Bribery LLC. After spending the first decade of his career as an international sales VP, his career took a turn when he pleaded guilty to violating the FCPA and served 14.5 months in prison. His valuable assistance as an international law enforcement cooperator paved the way for a transition into full time work in anti-corruption efforts. With his unique perspective, he is now an award-winning consultant, writer and speaker on current front-line anti-bribery and compliance issues for businesses and organizations around the world.

Richard will be leading an instructive and eye-opening discussion on how to mitigate one of the uglier aspects on international business at Your Future in Global Markets on October 4^th – bribery and corruption. As one of the world’s leading compliance experts with a truly unique perspective on these issues, we’ve asked him how companies can do better to protect their people and their organizations from corruption.

Listen to the full interview here:

Richard Bistrong – The gaps in your compliance program and how to fill them

You have a unique perspective when it comes to corruption and compliance efforts. What has that taught you about corruption in international business, and how to identify and mitigate it?

Well, Pamela, thank you for the question, and thank you for the opportunity to chat a little bit today. Firstly, people who work on the front lines of international business like I did are far away from home, working in remote offices or even from their hotel rooms, and often thinly supervised. And this is what my experience as a 10 year international sales vice president taught me the hard way, and what some of the challenges are today:

When it comes to anti-corruption compliance efforts and ethics programs, they don’t always make sense on the front lines of international business, particularly where local cultures might appear to conflict with the rules.

Think about the environment in which people work today – who are they talking to on a daily or weekly or quarterly basis? They are talking to their supervisor or their regional manager, and they are talking mostly about commercial objectives. They’re talking about business success, meeting their quota, their forecast and their bonus plan. So those are the conversations that you’ll find most among a commercial workforce. So how does a compliance program, or an ethics initiative make sense as a partner to those tasks at hand?

I think for people who are in the home offices or well-staffed and supervised regional offices, compliance doesn’t look that complex. What are the problems here, what’s not understood? But, for those who are forward-based, working in the field, compliance might not look so simple. The program might appear to have gaps, be contradictory. Maybe the compliance program and those messages seem to conflict with the unspoken messages of incentive systems. So I always ask from the field perspective, do anti-bribery compliance programs just look like a business partner to success? And are they geared and calibrated to the tasks at hand?

Corruption’s ‘Perfect Storm’

Can you tell us more about how international business people find themselves in the position to rationalize bribery? What is the “perfect storm” for corruption?

I didn’t ever wake up in the morning and say, “how am I going to violate the FCPA today, or how am I going to violate international bribery conventions?”

People are out there in the field thinking “how do I execute on my commercial objectives?” There are some very strong winds that can tip people in the wrong direction.

I’ll talk about a few of these in my session at Your Future in Global Markets.

Corrupt conversations are typically camouflaged using many interesting and colourful words from ‘taking care of people’ to ‘paying tolls’. Recently there was a leader at the World Bank who said he heard of a situation where the farm bribes were referred to as ‘sunshine payments’ or ‘chocolates’.

These conversations and these colourful words used to describe bribery are happening all over the world, often in remote regions, where people aren’t thinking they are within the earshot of international law enforcement or their company’s compliance programs. So the first rationalization is often, “I won’t get caught”. For those that are interested in social psychology theory, they call that optimism bias.

On the other side of that storm, are people who might not jaywalk when they’re back home, who are good, honest hard-working people. I’m often asked “When you were basically breaking the law, conspiring to bribe people for a decade, did you ever lose any sleep over it?” This is still tough to talk about, but I did it because I was ethically numb to the consequences and implications of my decisions. I wasn’t spending my nights on the Transparency International website. I wasn’t thinking about how bribery and corruption robs whole societies of governance, of human rights, of social and economic development. I wasn’t thinking about the consequences to my employer, and regrettably, not to myself and my family.

What was I thinking about?

I was thinking “who’s losing here?” I was in the defense business, and I wasn’t pulling layers out of a bullet-proof vest. The end-user was always getting a world class product. Maybe the company would have to hire workers to manufacture the order, creating more jobs. The company is happy.

They make the sale, I get my quota, my forecast, my bonus, the intermediary moves on to the next sale, and the public official who, in many parts of the world are paid at poverty wages, get a little something to make ends meet. So from the field perspective, as difficult as it is to say this, I looked at it as a win-win. Who’s getting hurt here?

There’s a wonderful book called Sidetracked by Professor Francesca Gino at Harvard, and she wrote a really interesting paper that talks about how, when we think our unethical actions benefit others, we come to think of them as morally acceptable and maybe even altruistic. So for me, over those 10 years traveling from nice business class lounges, hotels and restaurants, I wasn’t thinking about the wider consequences of my behaviour. And I certainly wasn’t thinking about the consequences when I looked at my incentive programs, which were very heavily geared to a win above all else. In many parts of the world I thought of my commercial success as a zero sum game to executing on my FCPA training. I thought,

What does my management really want? All of this FCPA paperwork I’ve signed, or success? Because where I’m sitting, I can’t deliver both.

So those are a few things professionals on the front lines of international business encounter. But just to make this clear – this isn’t an exercise in ethical spinning. I wasn’t forced to break the law. I didn’t need to bribe to be successful. And while I shared these rationalizations and justifications, it’s in no attempt to deflect responsibility on other people or other organizations. I wasn’t a fall guy. There’s only one person who was responsible for Richard Bistrong going to prison and that’s Richard Bistrong, and I paid the consequences for that.

I think that’s all really relatable, which is what’s so interesting about your story and why it’s so important to hear from people with your perspective,  people who have been under pressure, and faced opportunities to cross a line. It provides a lot of insights into what the challenges are and why you can’t just say “here are the rules, don’t break the rules,” and everything just goes smoothly from there.

Let’s remember these multi-nationals and the people who write these compliance programs, they’re living and working in what we call the ‘green zone’.  But the people who are responsible for executing on commercial objectives are often working in the ‘red zone’. We should consider what this all looks like from their perspective.

Creating an environment for ‘courageous conversations’

What are some things that organizations of all sizes can do to mitigate corruption within their organization?

In other words, how can a corporation insure that the front line international business teams are highly successful and rewarded both individually and corporately while embracing an anti-bribery program and ethic? – Richard Bistrong, FCPA Blog

The first thing to look at with any compliance program, is what’s happening in the world right now. We always have change in our external environment  – for example, countries like Brazil are going through dramatic societal change. This is not an issue that’s fixed, it’s ever evolving and compliance programs need to evolve with it. This means that every program is going to have gaps. It’s going to have weak points. And that’s the whole goal, discovering what compliance leaders can do to lean in, and listen to get to what they don’t know. If you want to try to mitigate risk, who knows how to do that better than the people who are working in the middle of it? So, what successful compliance leader will do is say,

Even with a well-intentioned program, we might get it wrong, there might be a gap.  And no one would see that quicker than the people that are in the field. So where there’s a problem, come talk to us about it. Let’s unpack that together.

If you think that your incentive system and your forecast is drowning out the voice of compliance you need to be able to recognize that and act on that. You don’t want your front line staff trying to figure out what the company really wants. You don’t want them to try to untangle what they think are conflicts between commercial objectives and compliance, you want them to talk to you about it as the compliance leader.

You want your employees to hear “don’t assume anything, and let’s unpack those challenges together. Because if we do it together, we’re going to help you, we’re going to fix that problem. We’re not going to put you back in the field where it’s unresolved. Just don’t make that decision on your own.”

And I think when compliance leaders can show that, for lack of a better word, humility or humanity, it’s really encouraging the workforce to speak up when they do think there’s a problem or a conflict. When you have ambassadors, where compliance leaders feel like they are the champion for the commercial workforce, and people in the commercial workforce think of themselves as compliance ambassadors as well, those weak points are always getting mitigated and they’re always getting raised up and addressed. From a communications standpoint that is critical.

Is it important to empower potential whistleblowers within an organization? Are organizations doing this successfully today?

Let’s talk about whistleblowing in a wider sense. It takes a village to deliver international goods or services. Think about all the people involved. You have sales order processing, people in logistics, accounts receivable and finance, and people who are wide and deep in the org. chart.

I always like to ask, do these people – no matter where they are – feel like they are a part of the ethics and compliance team? If someone gets a piece of paperwork, even if it’s from their supervisor, and something doesn’t look right do they feel empowered to hit the pause button and to speak up about this? Or do they feel like they’re just a small gear in a large machine, and “who am I to make issue of this”?

It’s about more than just whistleblowing, it’s courageous conversations. Being able to talk about problems where you see them.

Some recent surveys have demonstrated that people down in the org. chart don’t feel like they’re compliance ambassadors – but they are such a wonderful ethics and compliance resource.

Compliance leaders really need to think holistically about all the people who might touch international goods and services when they think about their anti-bribery and compliance efforts, just like they need to encourage people in the commercial workforce to speak up when they see an issue. Even to the point when they can say, “You know what? If you do speak up and you hear that we’re upset, that actually means that it’s a good conversation, because you’re sharing something with us and we’re fixing a problem together.”

I think companies have a long way to go to really be encouraging that in a wider sense than just whistleblowing.

It sounds like that would have to originate from and really permeate the entire company culture.

That’s exactly right. It has to go wide and it has to go deep to people within an organization who are all working for the same company, but they’re not necessarily on the same team organizationally. They’re in different divisions. It has to span support functions.

What resources are out there that can help organizations of all sizes set up successful compliance programs?

There are so many of them. There’s a proliferation of publicly sourced material out there, including videos and compliance organizations offering programs and certifications. I don’t think there’s any single source of information, but in a way that’s a good thing because there’s so much data and thought leadership out there that it’s a little bit overwhelming right now.

So compliance leaders really need to focus on where they think their program needs a little bit of support, and then to do the online searches and ask within their networks to find out what the best sources of that information might be.

And really take advantage of those on the front-line within their organization.

That’s the wonderful part about how much the whole compliance field has evolved right now. There’s really some wonderful, incredible thought leadership. And it’s one of the things I love about the work that I do now. It’s anything but static. It’s changing and it’s getting richer and deeper year after year.

Richard, thank you so much for taking the time to chat with me about this. It’s so great to hear from people who have different perspectives on this, who have been involved on the front lines and are watching compliance issues evolve and giving people and organizations the tools to tackle often complicated issues. We are really looking forward to hearing you talk about these issues and others at Your Future in Global Markets October 4^th!

It’s a pleasure, and our panel is going to be really interesting. We’ve got Kristine Robidoux who has extensive experience as both in-house and external counsel and has had involvement in some really interesting anti-bribery cases in Canada. And we’ve got Sgt Pat Poitevin from the RCMP with the enforcement perspective, and we’ve got my perspective. So I think we’re going to have a lot of different perspectives on this issue up in the National Capital Region, and I am super excited to see you up there!

The post How to protect your organization from the “Perfect Storm” of corruption – A Q&A with FCPA expert Richard Bistrong appeared first on Trade Ready.

Philosopher and novelist Ayn Rand recognized in her masterpiece “Atlas Shrugged” that corruption leads to the interference of trade and, eventually, to a doomed society.

Several different studies and articles confirm the negative consequences and costs of corruption for a country.

But it does not stop there. As business is part of society, corruption also dooms companies.

The known corporate corruption cases of the past show that it is impossible to control bribery and limit it to just one area or region. Even if corruption is practiced only in receptive sectors and/or countries, it is not a sustainable business strategy.

The infection can begin with one simple bribe

Companies are like living organisms that can be infected by the virus of corruption.

Similar to a viral contagion, corruption will spread throughout an organization if not treated intensively at the onset of symptoms with an antibiotic called “zero tolerance.”

To illustrate this point, let’s imagine that a sales employee pays a bribe to a procurement person at a potential customer’s company to ensure a project win. From this point in the decision-making process, the combination of price and quality plays only a subordinate role.

The winning factor is the bribe.

Inside the selling company, the impact is a decline in the importance of production and project management relative to sales. Management attention and employee focus shifts to sales, as this function is considered most valuable for the company.

In this situation, the selling company ensures business by strengthening relationships through illegal payments.

Production and project management employees are less motivated, as they feel they are no longer valued.

In response, these teams produce lower-quality work. Poor motivation leads to a decreased sense of employee loyalty, which can result in higher rates of theft, sabotage, internal fraud and employee turnover.

Meanwhile, management loses interest in how tasks are achieved, preferring instead to focus only on sales results.

The virus easily spreads from department to department

The growing infection soon spreads to the procurement department. As the internal priority is clearly the “successful” sales department, procurement loses its independence and is now advised by sales.

Procurement is pushed to use certain providers, based on whether the bribery model requires a third party or if the supplier is a family member of the prospective customer. As with the production team, we find the same effects of employee demotivation.

Corruption is not part of a culture, but a learned behavior often used to create a shortcut through complex legal environments. Many companies have an extensive system of guidelines, policies and tools.

Employees who see that bypassing external laws is acceptable corporate behavior may also assume this practice applies to internal regulations.

Conflicts of interest can increase, as internal connections become more important than the quality of employee output.

A common result is that talented employees offered the opportunity to work elsewhere will leave, while less talented employees remain.

In addition to the psychological effects on employee behavior, corruption also affects transparency and internal processes.

Winning a project with a bribe sends the wrong message to the development team, as they can only analyze the relationship between price and quality to the project win rate, but cannot include illegal payments as a key factor.

The infection starts effecting quality of work, competitive edge

Due to this hidden information, the development team wrongly concludes that the company’s solutions are competitive and that investment is unnecessary. In contrast, competitors that work with full transparency foster the development of better solutions.

Over time, the company that succeeds because of bribery loses its competitive edge. To compensate for this weakness, it has to increase the size of bribe payments – a situation that the potential recipients exploit.

Eventually, the bribes are not large enough to justify the difference in competitiveness. And if a significant number of talented employees have left to work at another company, it will be difficult to switch strategies to foster the development of superior products or identify less costly production methods.

By this time, the virus has also infected the bribed company. Because of bribe payments, the procurement employee has selected a sub-optimal solution for the company. Now this company is not using the best and/or the most cost-effective materials for its own production.

It becomes less competitive and no longer offers attractive solutions. A sales employee working for the bribed company needs to find another factor to win business, and may be tempted to offer a bribe.

You can kill the virus

If we see a company as a living organism, then some kind of preventive treatment should be prescribed for this disease.

Compliance workshops can work much like vaccinations. With relevant case discussions and role-playing exercises, employees can learn about potential situations they could face, how to react, and what consequences could occur.

Like an antivirus, this knowledge stays inside the employee and can be activated when needed.

Bureaucracy provokes corruption and vice versa.

To avoid this downward spiral, a company should establish internal processes that are as simple as possible to ensure transparency and employee accountability. Compliance Officers cannot do their jobs only from behind closed office doors.

They must be easy to reach and well-known across the company. Trusted employees can be offered the additional role of “Compliance Promoter,” and IT tools can ensure that an anonymous reporting system is available 24 hours a day.

Compliance training sessions cannot be limited to presentations about rules and regulations. It they are, employees will only behave if they feel controlled.

Instead, companies need to establish a values-based culture where employees understand their role inside the organization and how corruption could affect their job.

In this culture, everyone is equipped to face difficult situations – and not just employees in typical risk groups such as sales or procurement.

Is your company protected against this kind of “corruption contagion”? What kinds of “vaccinations” does your company have in place to stave off bribery and corruption?

The post How corruption spreads like a virus and what you can do to stop it from infecting your company appeared first on Trade Ready.