Journalism professors will rap my knuckles for leading with a question (or two), but here goes: Are we designing our compliance programs all wrong? Are we programming our compliance programs for failure?
Consider this: Compliance programs are intended to be an antidote to greed. That’s because greed, as we all know, motivates corporate crime. So far so good. But what if greed doesn’t motivate all or even most corporate crime? What if something else is behind those FCPA violations?
Wait. Fear? Corporations aren’t afraid of anything. They’re big and powerful. They bully their way through life.
Except they don’t. In reality, corporations live in fear. At least the smart ones do. They know that every day, no matter how hard they try, they’re facing economic extinction.
Why? Because that’s capitalism. Someone out there is always trying to eat your lunch. This could be the day when a previously unknown competitor swoops in and takes it all away. Today you own the market. Tomorrow you’re on the trash heap of history. Remember MySpace, Compaq, Yahoo, Polaroid, and Netscape? Neither does anyone else. For those a little older, how about Blockbuster Video, and who has their old World Book Encyclopedia set?
Oh, you’re thinking, that can’t happen to Amazon, Apple, Microsoft, Google, and Facebook. They’re bigger, smarter, and more “modern.” They’ve surrounded themselves with giant moats that protect them from competition — interlocking patents, robot controlled distribution centers, a billion lines of unique code, the biggest user base on earth. Why should they be afraid of anything?
Moats, huh? Warren Buffett (of course) talked about them first. He said he searches for companies to invest in that have big moats. But he had another profound insight — that ultimately moats, even the deepest and widest, have no real value.
“Most moats aren’t worth a damn,” he said. No company is ever safe. That’s competition. The Oracle of Omaha, by the way, owned World Book Encyclopedia. Ten years after buying it he called it “Berkshire’s most difficult problem.”
Warren Buffett isn’t the only person who knows that moats aren’t worth the strategic plan they’re written on. In any corporation there are smart people — from leaders to worker bees — who get it. They know success in business is fragile and fleeting. Disruption happens. Technology shifts. Consumers move on. One day everyone is drinking pinot noir. The next day, it’s boozy seltzer water.
But hold on. Facebook has 2.5 billion users. That’s the greatest network-effect moat on the planet, the experts say. Notwithstanding Warren Buffett’s caveat, Facebook’s market position must be unassailable. The company has nothing to fear.
And yet . . . . that’s not how Facebook behaves. This month the Wall Street Journal reported that European Union antitrust investigators are looking into Facebook’s “alleged efforts to identify and squash potential rivals.”
If Facebook has an uncrossable moat, why does it allegedly need to “squash potential rivals?” Could it be afraid of them?
Ok, maybe Facebook is just greedy. That’s a possibility too. Greed also plays a role in a lot of corporate crime. I asked a former FCPA defendant why he had bribed foreign officials. “The short answer,” he said, “is that it started with fear and ended up with both fear and greed.” In other words, as motivators of graft, fear and greed are two sides of the same coin. They produce the same result.
But when a big corporation cops to an FCPA offense or other crime, we automatically point to greed as the reason. Fear isn’t mentioned. Are we overlooking something important?
So, let’s close this with a final question (or two): Has our fixation on greed distracted us from seeing how fear motivates so much corporate crime? And does that mean compliance programs are still falling short because we’re trying to cure the wrong disease?