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Memo to Compliance Officers: Everyone has something to contribute

Goldman Sachs CEO David Solomon recently made headlines with his statement at the annual World Economic Forum meeting in Davos, Switzerland. “Starting on July 1 in the United States and Europe we are not going to take a company public unless there’s at least one diverse board candidate, with a focus on women,” Mr. Solomon told CNBC. Goldman’s push for diversity is a change for the firm as it had previously argued that it would simply let investors decide if they liked a company’s board.

This is a logical move given the wealth of evidence indicating that more diversity on boards leads to greater profitability. The advantages of a diverse workforce are also well recognized – better performance, more creativity, improved team morale, and employee retention rate, to name a few. But do these benefits impact a company’s compliance efforts? And if they do, how can we leverage diversity to foster the culture of ethics in our organizations?

First, let’s be clear on definitions. From experience, companies realize by now that diversity is not something that will just happen because different people have been put together into one office. A diverse workplace is more than hiring people who fit into different age brackets or creating the perfect male to female ratio. To reap its benefits companies have to look beyond formal initiatives and embrace cognitive diversity.

Defined as differences in perspective or information processing styles, cognitive diversity at the workplace means there are opportunities for everyone to express and challenge different views. A cognitively diverse environment builds upon the understanding that everyone has something to contribute. Employees are more likely to feel more comfortable to share opposing ideas and provide constructive criticism, and that leads to at least two important implications for E&C programs.

Cognitive diversity has a clear role in encouraging speak-up culture and internal reporting. When employees feel safe to share their opinion they are more likely to raise the concerns. In a cognitively diverse environment employees feel more secure in terms of potential consequences. The fear of retaliation is less likely to occur in organizations where employees are expected to question how the business is managed, and the information flows from the bottom up. Freedom to express views without fear or favor thus reduces the risk of having whistleblowers turn to a “silent mode.”

Secondly, cognitive diversity empowers employees to “speak truth to power.” By providing constructive and meaningful criticism when the situation calls for it employees can encourage ethical behavior in their leaders. There are times when a leader’s conduct can fall short of what is required – when a leader fails to appropriately deal with the unethical conduct of their team member, or when a leader’s own behavior is inappropriate.

The important task of keeping leaders grounded and aware of their responsibilities is more likely to occur in an environment where management is engaged in dialogue with its workforce. As Dennis Gentilin points out, “Challenging leaders is no easy task, but we should not underestimate employees’ ability to shape the behavior of their leaders by doing so.”

Arguably the biggest obstacle to creating a cognitively diverse environment is the leader themselves. In a recent study, Boston Consulting Group found participative leadership is the most important work condition necessary to encourage diversity, with 68 percent of the companies seeking this as a prerequisite. If diversity is to be more than just a slogan, it is up to the management to set the tone and show that employees’ opinions matter. Ultimately, the speak-up culture is hardly possible without the “listen up” component.

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