What does anticorruption have to do with CSR?
Today’s Q & A is with Alison Taylor.
Hi Alison, thank you for participating in today’s Q & A. While we have had the opportunity to collaborate on a number of guest pieces, including Reconciling Sales Strategy with FCPA Compliance (link here), perhaps you can share some of your background and perspective with our readers.
AT: Thank you Richard. I have a background in corporate investigations and intelligence, including anti-corruption consulting and compliance training. I spent 11 years at Control Risks as a Senior Managing Director, focusing on risk management, market entry, due diligence, stakeholder mapping and corporate intelligence. More recently I became interested in the gap between policies and procedures – how things look on paper compared to how people actually behave. I studied organizational psychology at Columbia, and used the concepts of organizational psychology to look at the challenges in embedding risk and anti-corruption in a company’s culture. I have found that a focus on human behavior, group dynamics and social relationships is hugely valuable in understanding what makes compliance programs more or less effective. The area tends to be neglected, as it is difficult to quantify, measure and build a process around. But understanding what really motivates people and what they really care about is crucial if we want to address the corruption challenge. I have recently moved to the world of sustainability and CSR, as I think company’s ethics and corruption challenges need to be addressed and framed in terms of a wider perspective on mission, strategy, leadership and culture. Some of my work is here and here . Also, here is my Linkedin profile if someone would like to contact me.
Thank you Alison, so, what does the anti-corruption world have to learn from sustainability and CSR? And for all who might be “afraid to ask,” what does CSR mean, beyond the acronym.
AT: CSR stands for ‘corporate social responsibility’. The term is bandied around a lot, but involves thinking about the way your business does business, going beyond the idea of compliance and not breaking the law, and considering the spirit of the law, ethical norms, and the consequences of your business activities across all stakeholders. The term is often used interchangeably with sustainability, showing that there is a need for further definition in the field. Sustainability is often associated with environmental ‘green’ initiatives, but is in fact about running your business with a long term view, about protecting the needs of future generations, and about bringing social and governance as well as environmental concerns to the forefront of managing a business.
As a field, CSR and sustainability are still very young, and are often criticized for being vague, and ill-defined. However, we only need to open a newspaper to see that sustainability is the single biggest issue for business leaders today. Whether we are thinking about future business models for the traditional oil and gas industry, human rights abuses in the supply chain, managing the environmental impacts of your business, or providing access to energy and health services for people that have historically lacked both, there is no doubt that sustainability is here to stay. It is the single most effective way to reduce reputational risk, but it also makes employees happier and more productive. There is a growing body of research showing that it improves corporate financial performance over the long term. It also suggests a fundamental transformation of a company’s relationships with all its stakeholders, not just its customers, suppliers and distributors. It is a new model of how business fits into society, and there are strong grounds for thinking that it is a fundamental basis for future commercial success.
Thank you, but where does that intersect with anti-corruption efforts?
AT: The anti-corruption field is also evolving fast, driven primarily by enormous new media and public interest in issues such as money laundering through property, the theft of state assets by kleptocrats, and offshore ownership structures facilitating organized crime and tax evasion. However, corporate responses to anti-corruption have so far remained overwhelmingly narrow and process-driven. There are entire conferences dedicated to the nuances of niche areas like gifts and entertainment policy and whistleblowing lines. There is a sense in which the legal frameworks for anti-corruption, which have driven an entire industry of compliance program design, are meaning that companies miss the wood for the trees.
I think that speaks to one of my favorite “go-to” Alison Taylor quotes that “compliance needs to be more than a bolt on set of rules and procedures.” Correct?
AT: I am not saying that the internal compliance approach is misguided, as in the right hands it can clearly reduce a company’s risk and drive better employee behavior. However, process is no match for organizational culture. Too often, companies are putting in place policies and procedures that forbid the payment of bribes, at the same time as incentivizing sales teams to take immense risks to meet punishing sales targets. Or, they are entering markets with high integrity risk, and not factoring this into their growth forecasts. Or, they are encouraging leaders not to ask penetrating questions about how these forecasts are being met, in case they lose the opportunity to plausibly deny any involvement in wrongdoing. In these circumstances, employees will make trade offs about whether a company’s commercial or ethical goals are more important.
Well said Alison. As I have often asked, when those stretch goals are reached in low integrity regions, is it all “high fives” in the C-Suite and Board Room, or is someone asking “how did we get there.” But, as you have said, if the current compliance models are not working, and we only need to look at the enforcement news streams to see that, what are the alternatives?
AT: All of this means that companies need to take a more holistic approach to anti-corruption, transparency and governance, and to ask tough questions about the implications of their entire business model. I have recently completed research for a thesis in which I interviewed 23 prominent anti-corruption experts. They shared my view that companies with market leading approaches to anti-corruption are also the companies that respect human rights, that favor transparency even if it leads to short term difficulties, and that limit their environmental impact. Because none of these things are fundamentally about compliance processes, reporting or gaming the system to make things look OK, while still doing business in the same way. They require a new approach to doing business, and one that takes account of group behavior, norms, and incentives.
The financial crisis demonstrated clearly that battalions of lawyers and compliance officers could not control pathological risk taking behavior on the trading floor. This is a question of status, culture, and what kind of behavior gets rewarded. This says to me that embedding anti-corruption programs within a wider culture of sustainability and ethics makes sense. Compliance teams need to be empowered to move beyond tick box solutions, but companies also need to consider the needs of their stakeholders, the structure of their supply chain and the social risk dimension more broadly. By considering all these things from a sustainability perspective, it will be easier to fight corruption. If your biggest supplier is paying kickbacks to your procurement team, it is probably not putting in place protections for workers’ human rights, either. If your community engagement strategy is focused on getting benefits to the people that need them, and not just awarding contracts to powerful local businesses, it is less likely that you will have a negative impact on your surrounding environment.
So, how does this circle back to sustainability?
AT: Sustainability issues tend to sit within CSR departments, and anti-corruption is the responsibility of the legal and compliance team. These teams don’t always speak the same language. But there is a high correlation between success in sustainability and in ethics and anti-corruption. Companies that consider anti-corruption not in terms of ticking the box and evading legal scrutiny, but rather in terms of whether their businesses can grow and thrive sustainably in their surrounding environments, will be much more successful, and can even reduce costs in the process. We need to bring these conversations closer together.
The other issue is that people aren’t particularly influenced or inspired by a set of rules telling them what they shouldn’t do. Negative, risk-based cues just aren’t inspiring. But a company that is genuinely focused on sustainability, that considers its social relationships and its reputation, is inspiring. To behave well when no one is watching, because it is the right thing to do – that’s a sustainable, ethical culture. Right now it is still a very innovative and cutting edge approach. But I am very confident that it is key to future commercial success, to employee engagement, and to operating ethically and effectively.
Thank you Alison, and I look forward to more of your contributions.