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The future calls: Guiding companies through lawful but new and novel

In the first post in this three-part series, I wrote about decision-making when the project is lawful but awful. But there are also risks when situations are lawful but new or novel.

Often these risks aren’t acknowledged. No one owns them. I believe compliance officers should be subject matter experts for some of these lawful but new and novel situations, as they already are for scenarios that are lawful but awful. Here’s what I mean.

Some companies use the latest research in behavioral science to design and market their products. The public would be shocked to know how far that science has come. Companies have career lines for top executives who study the latest advances and integrate the findings into business operations.

But Nobel prize winners and leading behavioral scientists say their work is misused today for evil nudging — pushing customers purely for profits and not in customer’s best interest. Is there an ethical line between legitimate marketing and manipulating customers without their realizing it? If there is a line, who is deciding when we’ve crossed it?

Good people can make consistently bad decisions in certain kinds of pressure-cooker or biased situations. They will defend those decisions later as fair and factual. Controlled experiments with all kinds people and many contexts, replicate the same bad decision-making outcomes. Anyone can be influenced profoundly by cognitive bias and conflict of interests.

Jeff Kaplan and Scott Killingsworth believe companies should use this research the right way — to recognize and avoid bad decision-making situations especially in the C-suite.

Finally, shifts in public opinion will always happen. In my lifetime, there have been astonishing changes: civil rights and diversity, what’s inappropriate workplace conduct, sales of tobacco products, privacy of personal records, protecting wildlife and the environment, living wages, and so on.

A company cannot thrive or possibly even survive unless it can foresee and plan for shifts in what the public will consider immoral or irresponsible in the near future.

Compliance officers are experts in identifying risks and managing them. They should be tasked with helping spot the risks that come with shifts in public opinion, and guiding decisions on appropriate uses of the behavioral sciences to advance the company’s interests in an ethical manner. They can fill the current vacuum of expertise and decision-making for situations we can think of as lawful but new and novel.

Just a few decades ago, the universal use of personal computers and mobile devices was unthinkable. The internet was still unknown, as were YouTube, Facebook, Twitter, LinkedIn, and blogs. No one worried about online privacy and data protection.

Today we’re talking about using artificial intelligence systems to guide board decisions, and orbiting supply lines in space, and due diligence on third-party robots. Change, as the saying goes, is constant.

How will companies keep up?

Chief compliance officers in the C-suite, working for and reporting to the board, overseeing compliance officers who are executives and subject matter experts, can help companies respond to the challenges of change. It’s called Compliance 2.0. And it’s the future.


Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.

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