In his most recent book Thank You for Being Late, Thomas Friedman cited BusinessDictionary.com for the following definition of culture:
It is the “pattern of responses discovered, develop or invented during the group’s history of handling problems which arise from the interaction of its member, and between them and their environment. These responses are considered the correct way to perceive, feel, think and act, and are passed on to new members through immersion and teaching. Culture determines what is acceptable or unacceptable, important or unimportant, right or wrong, workable or unworkable.”
Adapting the above to the business setting, I would say that a company’s culture shapes its business decisions and its senior management shape the company’s culture. This definition seems to answer the question of how companies such as Volkswagen and Wells Fargo fell so far with their recent and ongoing scandals.
Robert Armstrong, writing in the Financial Times, expanded this idea to corporate governance as a key issue for VW. He noted that with its “fractious and unfocused board” there was no adult in the room overseeing senior management in its slide down the ethical hill which led to the ever burgeoning scandal.
Friedman and Armstrong both seem to point towards a larger concept, which is the importance of an integrated approach to compliance which works to prevent, detect and remediate issues and problems before they arise to become full legal violations.
Each part of a compliance interacts and flows both up and down a corporate organization to help build and reinforce culture. The FCPA Guidance talks about compliance from the board room to the shop floor. The board must engage in oversight, senior management must set the tone, compliance must lead the communication, training and provide the subject matter expertise to push compliance into the very fabric of an organization.
Armstrong ends his piece, saying “culture is there and it matters. And if we ignore it, there will be more dieselgates in the future.”
I would add that compliance is there to reinforce culture and it also demonstrates why those who advocate a paper compliance program are wrong. It is the doing compliance, not simply having it on paper, that makes it all work.
Tom Fox is a Contributing Editor of the FCPA Blog. He has practiced law in Houston for 30 years. He’s the creator of the award winning FCPA Compliance and Ethics website. He is the Compliance Evangelist. His best-selling seminal book, “Best Practices Under the FCPA and Bribery Act: How to Create a First Class Compliance Program” (available from Amazon here) is widely viewed as one of the top volumes on the nuts and bolts of compliance.