Imagine this: You’re a large financial institution that has secured a government contract to collect, and then separate, tax returns and payment checks during tax season. But your employees feel overwhelmed and can’t handle such a tedious workload, so they put bundles of returns and checks in a bag and throw them away.

Buchanan

Sound like a bad knock-off of an “I Love Lucy” episode? Guess again. Real-life situations like these (and yes, this one did happen) underscore how some workers are just “too dumb,” according to Mary Beth Buchanan, U.S. attorney for the Western District of Pennsylvania. Lamentably for compliance officers everywhere, many employees often don’t know what they’re doing—either by pure carelessness, she said, or worse: They get the wrong message from senior management.

In the situation above, the company could have taken several possible steps to ensure compliance, such as asking for an extension or hiring more employees, Buchanan said. “There are a lot of ways to try to gauge the effectiveness and sincerity of a compliance program.”

Horowitz

Michael Horowitz, a partner with law firm Cadwalader, Wickersham & Taft, puts it more directly: “For a compliance program to work,” he said, “there needs to be a strong corporate culture.”

Establishing that strong culture of compliance—in other words, striking a good tone at the top—was a main theme at the Society of Corporate Compliance and Ethics annual conference last month. Never, said Dov Seidman, chief executive officer of training company LRN, has there been “such an unprecedented focus, if not scrutiny, on human conduct. We’ve never found ourselves at a time where visibility and access into the deepest corners of operations and how we conduct ourselves has been so transparent.”

Such transparency requires employee values and corporate culture to be one in the same. What that means, said Ron James, CEO of the Center for Ethical Business Culture at the University of St. Thomas, is to not only explain what behavior is expected, but to recognize that behavior when compliance is followed, and to enforce it when it’s not. “This is where most organizations slip,” he said.

Friestad

Scott Friestad, deputy director of the enforcement division of the Securities and Exchange Commission, agrees. Often times, managers will say all the right things, but take little action, he said. “The key is to identify values and to translate them into behaviors they’ll be accountable for.”

Culture is about how an organization operates on a daily basis, “not what you write on a page, not what processes you put down on paper,” said Stephen Paskoff, president and founder of Eli, a training company that teaches professional workplace conduct. “You have to have senior executive management at the CEO-level saying, ‘I agree with this, and I will lead this.’”

If violations occur, companies must then have leadership that will say, “‘We won’t put up with it. You’re gone,’” said Paskoff. “The problem with Enron, the problem with Tyco, the problem with all these organizations is that the values did not translate into cultural standards.”

Cooper

At Worldcom, for example, “there was no hotline, there was no compliance officer,” said Cynthia Cooper, on the former internal auditor at Worldcom who blew the whistle on its gigantic fraud. “There was very minimal communication at the top. Worldcom probably should have gone into bankruptcy long before it did.”

The events that unfolded at Worldcom demonstrate why establishing a culture where people feel comfortable stepping forward is critical to a values-driven compliance program. “Hotlines are great, but they won’t be as effective as someone coming to your managers and leaders and saying, ‘I have a problem,’ and having leaders know how to respond to that,” said Paskoff.

“We’ve never found ourselves at a time where visibility and access into the deepest corners of operations and how we conduct ourselves has been so transparent.”

— Dov Seidman,

Chief Executive Officer,

LRN

Repeating that philosophy is vital to its success. At the Home Depot, for example, associates receive a communication signed by CEO Frank Blake on a regular basis reiterating the company’s desire to be in compliance with laws, said Randy Stephens, director of internal audit compliance at the $77 billion home improvement company.

By reinforcing such a culture, said Stephens, employees are not afraid to tell him when they’re uncomfortable with something they see in the organization. “They’re honest. They’re direct. They’re straightforward. Their communication reflects that.”

Several factors can deter employees from stepping forward, including whether they feel excluded and unwelcome, or if they are treated disrespectfully, said Paskoff. “It’s eliminating these kinds of behaviors that will help people feel comfortable about helping you enforce your code of conduct, coming forward and knowing that their issues will be treated seriously.”

Elson

Charles Elson, director of the University of Delaware’s Center for Corporate Governance, agreed. If your company is of the mindset “get it done at all costs, certainly you’ll get good results…but, frankly, it’s how you get the results that are critical as the results themselves,” he said.

That’s best achieved by inspiring people to work ethically and in compliance with the company code, Seidman said. “An inspired person is acting on something they believe, and they are propelled by a value that they believe is fundamental.”

At the Home Depot, Stephens said, Blake regularly recognizes employees at company meetings who foster company values, such as employees who have donated time or energy, or donated vacation time for an associate who was having a problem, he said. “It’s not something Frank tosses off at the end of the meeting. You get the impression and the sense from Frank at those meetings that this is really important.”

For the employees, it means more to get an award than a cash reward. In turn, they practice that element of respect. “This is an easy thing to do,” Stephens said. “It’s not expensive.”

Seidman

Seidman acknowledged that inspiring people isn’t easy, “because we’ve developed a habit of carrots and sticks over many years,” he said. But in a society where “the grass is greener just by going online at Monster.com,” he said, “We can no longer coerce and motivate people; we have to inspire them, because they’re all free agents in a connected world.”