Further thought on a culture of trust versus compliance

Jun 23, 2015
<p>Leaders can achieve better compliance results by providing a safe place such as an ombuds office for employees to explore their options when considering reporting misconduct&nbsp; </p>

Knowing how integral compliance is to the jobs of most of our readers, to suggest that governance professionals aim more at creating a culture of trust than of compliance within their organizations is to risk an outright uprising. We hope the cover story about ombuds programs in Corporate Secretary’s summer issue (due out this week), whose subtitle embodies that suggestion, will instead provoke some thoughtful discussion about the best ways to encourage suspected misconduct to be brought to the surface with minimal risk to the company.

Although the article illustrates what we mean by ‘creating a culture of trust rather than compliance’, the statement itself isn’t explained, nor is the person who said it cited. I’d like to give credit where it’s due to Jon McBride, a corporate governance consultant and president of McBride Associates, who not only provided the impetus for the cover story but showed me that people do read our Wednesday newsletter, even if I seldom hear any feedback.

A newsletter we published last August highlighted the likelihood that recent judicial rulings, such as one by the New York Southern District Court, would spur more employees to opt for external rather than internal whistleblowing to address corporate wrongdoing. As I wrote then, ‘growing publicity around enticing bounties being paid to whistleblowers who report first to the government and whose actions result in large fines and penalties imposed on the company doesn't make internal reporting any more attractive.’

A lawyer I interviewed for that newsletter ‒ the chair of the whistleblower representation practice at a major law firm ‒ urged companies to find creative ways to incentivize people to come forward to report internally, such as small monetary awards. His question, which closed the newsletter, was: ‘How do we get people to do what we want [when] we want people to tell about bad things going on in their midst?’

McBride’s email response arrived a couple of days later. He said he was puzzled as to why this question hadn’t prompted more organizations to embrace the organizational ombuds function, which firms such as American Express and United Technologies have effectively used in their global operations. This kicked off a series of meetings and other conversations between us and others who have extensive experience with this function, out of which came the cover story.

Here’s how McBride sees the situation: today, companies pride themselves on having a culture of compliance. In response to all the legislative and regulatory initiatives coming at them, they set up various formal communication channels from the compliance and ethics office to internal audit to risk management to HR to comply with all these initiatives. McBride calls them silos.

‘From the leadership’s point of view, be it management or governing, this makes sense,’ he says. ‘You’re ticking the boxes you need to show you tried. Also, those who create them understand all the nuances ‒ how they work, what they’re supposed to accomplish. Sometimes forgotten is the fact that the recipients aren’t familiar with all the nuances and they perceive it as the police laying out what they can and can’t do and [telling them] there are consequences if they don’t, so it winds up inadvertently being a fear-driven culture. That brings up my conviction that dangerous silence happens in a culture of compliance [because] people are scared. And compliance actually happens in a culture of trust.’

The mere presence of an organizational ombudsman ‒ whether or not people use it ‒ demonstrates that the leadership, both in the C-suite and on the board, understands the importance of having an informal channel where it’s safe to go to explore how all these other channels and processes within the company work and what an employee can expect if he or she uses them. ‘The fact that leadership provides that safe place to go shifts the culture all by itself toward one of trust,’ says McBride. Providing ‘a safe place to sort this out where nobody’s going to know about it’ shows that leaders trust employees, he adds.

Our summer cover story explores some of the reasons senior management may be resistant to an ombuds office and a few things ombudsmen can do to prove their worth to the C-suite and the board. Has your company considered creating an ombuds office? We’d like to hear your thoughts on this.

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