HSBC AND THE DOJ: WILL THERE BE AN ACT II

Posted in Anti-Money Laundering, cheating the public, corporate integrity, Crisis Litigation, Crisis Management, Crisis Mitigation, DOJ, DPA and statement of facts, Ethics and Crisis Management, HSBC, HSBC Compliance failures, HSBC fine. Was justice done?, Setting ethical standards on January 4th, 2013 by mnayor

The New York Times editorialized that “It is a dark day for the rule of law” when it was announced in mid-December that British bank HSBC would pay $1.9 billion in forfeitures and penalties, but would avoid criminal prosecution for laundering Mexican drug cartel money and engaging in prohibited transactions with Libya, Iran, Burma, Sudan and Cuba,. Instead HSBC Holdings, plc, HSBC North America Holdings, Inc. and HSBC Bank USA (together referred to as “HSBC” or “the bank”) entered into a Deferred Prosecution Agreement (DPA) that requires the bank to clean up its act. The prosecution is deferred for five years and requires a neutral monitor. If the bank conducts itself responsibly, there is no prosecution. None of its executives were cited.

 

In 2003  the Federal Reserve ordered HSBC to police itself better for suspicious money flows. HSBC efforts not only failed, but since 2005 the bank violated the Bank Secrecy Act and otherU.S.laws on a large scale. It ignored massive transactions, including bulk cash and banknote activities, failed to establish or follow review procedures, and created seriously flawed risk assessment policies and procedures. HSBC executives and employees in its money laundering and compliance division were  found to be incompetent. Worse, HSBC failed to generate or did not review its own anti-money laundering alerts or create and report suspicious activity reports (SARs) toU.S.authorities. The Federal Reserve, the Office of Foreign Assets Control, the Office of the Comptroller of the Currency and the Senate Permanent Subcommittee on Investigations all investigated HSBC for similar activities.

 

Undoubtedly there was criminal activity. Lanny Breuer, assistant Attorney General, explained that HSBC was being held responsible “for a stunning failure of oversight and worse”. Worse for sure given DOJ’s own investigation. The Statement of Facts which is incorporated into the DPA is damning. HSBC stipulates that the information contained in the Statement is true and accurate. The Statement runs thirty pages and is rife with allegations against and admissions by HSBC. For example, DOJ alleges and HSBC BankUSAadmits that it violated the Bank Security Act that makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts.

 

DOJ deemed that the criminal Information it filed, without the accompanying Deferred Prosecution Agreement (DPA) would have been too disruptive, that in effect, HSBC and its subsidiaries were too big to fail. If that is the case, how effective is the DPA? While Breuer claims that it is a “sword of Damocles right over HSBC”, if the Bank is too big to be prosecuted now, it will be just that much bigger five years from now and DOJ will be even less willing to take decisive action if HSBC violates the DPA.

 

U.S.attorney Loretta Lynch stated that HSBC cooperated “immediately and extensively” and this was taken into account in deferring criminal prosecution. But that is not the case. HSBC has a paper trail, a track record that leads back to 2003. Nothing so far has seemed to work to get HSBC into line, and there are no concrete indications from insiders that this time it will be different.

 

There is some published speculation that Treasury and/or the Office of the Comptroller of the Currency put some pressure on DOJ to stop short of criminal prosecution in order to avoid significant disruption in the financial markets and perhaps to the world economy. Some say that HSBC would have been damaged, even “destroyed”, but there have been no specifics. This may merely be a bogeyman to convince the public that DOJ avoided a financial disaster. At the very least, DOJ could have wrung out criminal admissions from HSBC Mexico. This may have satisfied some. In the DOJ case against UBS for Libor manipulation the UBS Japanese subsidiary pleaded guilty to one criminal count of fraud. Looking at the bigger picture, the HSBC affair was an opportunity to fight the concept of “too big to fail”. Perhaps HSBC would have had to sell off some of itsU.S.banking operations, or even all of it. 25% of its total assets are located in theAmericasso we can assume thatU.S.assets account for less. It would not have been the end of HSBC. It is already selling assets in countries where it cannot compete and is in the process of eliminating a significant number of jobs.

 

HSBC is a behemoth As of mid-2012 HSBC was the world’s third largest bank, and had the second largest market capitalization on the London Stock Exchange. It was founded only in 1991 by the Hong Kong and Shanghai Banking Corporation which then enabled it to acquireUKbased Midland Bank. It remains the largest bank in Hong Kong and is now the largest international bank inChina. A guilty plea by HSBC in this case might have had serious consequences, but it would have survived in one form or another. For theU.S.government to essentially conspire with HSBC for the bank to remain “too big” is not in the best interests of theU.S.legal system, theU.S.banking system or the world banking system. Such  failure to fully enforce the statutes of theU.S.rightfully brings on criticism of our justice system. This was an opportunity to start whittling away at bigness, to begin to stop the tail wagging the dog. It was an opportunity lost.

 

Finally, in the UBS case, two traders were also charged with taking part in the scheme to manipulate Libor rates. It seems incredible that, at the very least, given the seriousness of the crimes committed at HSBC, that not one executive has been indicted. The Statement of Facts is riddled with the admitted words “knowingly” and “willfully”. What prosecutor, left to his/her own devices, wouldn’t love to have this case. These crimes were committed by individuals. DOJ investigations have been ongoing for several years. Surely a name or two has popped up. When asked whether there may be criminal cases brought against individual HSBC bankers, assistant AG Breuer said “There may be , but there may not be”. Let’s hope he’s merely playing coy because if no individual indictments are forthcoming it will be a travesty of justice. And Breuer has the weapons. The DPA provides that HSBC is obligated to use its good faith efforts to make available to DOJ at the bank’s expense all current and former executives, employees, directors and consultants, and further to provide any information, materials, documents, databases, etc, requested by the Department. There is no protection against prosecution for conduct that HSBC did not disclose prior to the DPA, and there is no protection against prosecution of any current or former officer, director, employee, agent or consultant for any violations committed by them, including conduct described in the Statement of Facts. These provisions in the DPA give the DOJ wide latitude to continue its investigation and take whatever action it deems necessary in its pursuit of justice. Obviously it is not necessary, as the assistant AG has stated, that any individual still be employed at HSBC. And it is not necessary that any individual be complicit with its customers in drug or terrorist activities. It is enough that acts were willfully perpetrated that are statutorily deemed criminal offenses. The Bank Secrecy Act, for example, provides for heavy penalties for individuals and institutions that fail to file SARs, currency transaction reports and money instrument logs. Penalties include heavy fines and prison sentences.

In order for DOJ to redeem itself it is clear that additional action needs to be taken. This may have to wait until the cast of characters inWashingtonchanges. The viewpoint of Treasury may certainly change when there is a new Secretary of the Treasury. Additionally, if the U.K does not remain silent about former executives who were active at HSBC during the times in question, our government may gain more courage. Take for example Stephen Green, now Lord Green. Lord Green  became chief executive of HSBC in June 2003 and was appointed chairman in 2006. According to the Huffington Post, in 2005 he was made aware of the bank’s alleged ties with “rogue” regimes in theMiddle East. The US Senate investigation released internal emails showing how in the same year Lord Green was warned by an internal whistleblower in the bank’sMexicosubsidiary that compliance staff had “fabricated records”. He was also told in 2008, two years after being appointed executive chairman, that the Mexican authorities had uncovered evidence of money laundering that “may imply criminal responsibility of HSBC”.

There is little question that the HSBC affair has left DOJ with a black mark against it. The DPA provides adequate remedies to monitor closely the activities of HSBC over the next five years and to take direct and effective action in case the DPA is violated. The DOJ also has the power to continue its investigation of individuals and to receive the cooperation of HSBC. If and when criminal activities are uncovered DOJ has the power and authority, and hopefully the will, to prosecute to the fullest extent of the law. It should take advantage of this opportunity in order to void the current impression that justice in this country is applied selectively.

 

 

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ETHICS AND CRISIS MANAGEMENT

Posted in Crisis Management, Ethics and Crisis Management, ETHICS FROM THE TOP DOWN, guidelines for ethical standards, including ethics as part of your corporate culture, problem employees, Setting ethical standards on September 12th, 2012 by mnayor

 On September 8, 2012 The New York Times ran a front page story about Marcone, a company that may well be the largest authorized dealer of appliance parts in theU.S.  it’s been around since 1932.The reason for its front page notoriety is due to one of its senior vice presidents, Carlos Garcia, buying, essentially smuggling, and reselling large quantities of a banned refrigerant for appliances such as refrigerators and air conditioners. Garcia imported the gas, HCF-22 which damages the ozone layer, without the necessary approvals, thereby violating international treaties andU.S.law. The substance has been prohibited in new appliances since 2010. In June, Garcia was sentenced to 13 months in jail.

 

Faced with a tempting or risky issue, a powerful person, a powerful company, a powerful country is most likely still to believe that there is a good chance of getting away with something. Lie low and time will make the issue recede into history. Put a band aid on and no one will dare to pierce your impenetrable shell. This is what happened to Wal-Mart in April of this year when its Mexican subsidiary was exposed as having engaged in  pervasive bribery as a normal course of business. What would have happened if Wal-Mart had entertained a genuine independent internal investigation when it had the opportunity, and made those findings known to the Justice Department and to the State ofMexico? There would have been a much smaller story. Wal-Mart would at least have been accused of being honorable. Its reputation for integrity would have been burnished. It would have paid a price but perhaps not as steep a price as it will now pay.

Why don’t people get it? Because there is a gambler in all of us, even when the odds are poor. Is there a chance we can get away with something? Let’s give it a try. What do we have to lose? Ask Richard Nixon. Ask Bill Clinton. Ask all those who have tried to wheedle their way out of messes only to get caught. Ah but then again there is always that other guy, the guy who got away with it. We should follow him. He’s a smart guy. He knew the angles. If he could do it, we can too. Right now things are calm. Let’s not rock the boat. But in the long run the straight-shooter almost always wins.

What’s the lesson for CEO’s of organizations? It’s simple really. Every organization has  a “culture”. An integral part of that culture should be a requirement for high ethical standards, communicated from the top down. Transmitting the idea of winning at any cost will most likely ensure that some manager or employee down the chain will misconstrue the message and take ridiculous liberties in order to be noticed. Turning a blind eye to actions that are suspect bears the same message, even if it takes a little longer to filter down. Excessive emphasis on the bottom line can put extraordinary pressure on executives and managers to wring blood out of a stone and look for routes that will pay huge rewards, oftentimes the risk be damned. Johnson & Johnson has certainly paid a huge price to its reputation under the leadership of William Weldon, who retired as CEO just a few months ago. Under his guidance J&J’s wonderful standing in the eyes of the public has plummeted. The number of recalls, dirty facilities and end-runs around regulations over the last several years have contributed to the erosion of its sterling reputation of putting the consumer first as it did in the Tylenol scare of 1982.

 

What can a CEO do? First establish a no tolerance rule for non-ethical behavior. Anyone whose conduct exceeds the bounds of propriety is gone. Second, very careful employment screening is a must. Thirdly, establish ethical standards. Easier said than done? Perhaps but the effort should be made. Obviously if certain conduct is illegal, then it clearly has no place in the organization. beyond that if conduct is egregious enough to create the valid claim of negligence or breach of contract it should not be tolerated. Finally, if conduct would offend any one class or more of your stakeholders then it should be carefully considered. No organization should take an action that has the potential for angering its customers or clients, its investors, suppliers, employees, government officials, the public at large or the media. Of course, angering your competition is a different story, unless it angers the public at large and boomerangs.

 

No organization can protect itself against the errant employee who may jeopardize its reputation, legal standing or success. Nevertheless, it is imperative that the CEO and the board of any entity establish the rules of conduct by which it wishes to be known and respected.

 

 

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PRE-CRISIS MANAGEMENT

Posted in Anticipation, CRISIS MANAGEMENT STARTS WITH PLANNING, Ethics and Crisis Management, PRE-CRISIS PLANNING on September 12th, 2012 by mnayor

 The term crisis management itself is enough to send executives and managers scurrying back to their desks, burying their heads in papers so they can be overlooked. If one is tapped to head a pre-crisis management team, it’s like being the designated fire marshal for your floor in the building. If you are appointed to manage a post-crisis event, you may have everything to lose and nothing to gain. After all you may be in the cross hairs of public opinion and totally distracted from your regular role in sales, marketing, advertising, or finance.

 

But crisis management is a vital function. It should be recognized as such by the CEO of any organization and communicated down the chain. Any one event, whether due to totally external factors or self created, a crisis can set an organization back years or deep six it, if not handled properly. Handling that one event may well far outweigh for example the importance of the market roll-out of a new product.

 

Pre-crisis management is preventative in nature. It helps you avoid a crisis. It also prepares you for handling a crisis in the event one occurs.

 

Post crisis management implements the plan you have prepared in anticipation of a crisis occurring.

 

So, what is a crisis. It can be any event or circumstance that has the potential for negatively impacting your organization whether it is damage to reputation, operations, markets, or products. Tainted, shoddy or defective products. High profile litigation. A government investigation. The resignation of a key officer. An environmental or natural disaster. n internet failure. Illegal employee activities. Computer data loss. A walkout or strike. The list goes on

 

The spill-over effect is the negative impact the event will have on your stakeholders – your customers, your suppliers, investors, employees, government officials, the public at large, the media. Major crises happen all the time. We have seen several  recently and they are not pretty.PennStateof course, Wal-Mart’s Mexican subsidiary bribery story, Netflix’s pricing fiasco, Olympus Corporation’s cooked books, J&J’s poor handling of product recalls. These stories and many more underscore the necessity for pre-crisis management.

 

Of course we are not all Wal-Mart or Johnson & Johnson.  But the owner of the local retail toy store has as much to gain from crisis management as the big boys. Bad press, damaged relationships, investor confidence, employee morale, supplier cut-offs, civil and criminal liability – none of these things happen only to giant institutions.

 

How to start. It’s easy. Brainstorm. No one can anticipate an exact crisis but we can all speculate as to what our organizations may be vulnerable. List these vulnerabilities and what you can do about them. Example: you are a farmer and need to protect yourself against weather-related events. Insurance coverage, smudge pots, protective coverings etc. may be your answer. Example: your supplier of critical components has had problems. Begin identifying and ordering from alternative sources of supply, vertical integration, overseas sources etc. may be your answer. Example: you produce or distribute products for human consumption. Check your sources for utmost reliability, third party liability insurance, random quality checks.

 

Other potential solutions to problems: alternate transportation sources, duplicate bookkeeping and records backup, key man insurance, family succession planning. All these actions, if circumstances warrant, can be extremely helpful in avoiding you being caught unaware.

 

Next, assemble a team, a core group made up of the CEO, your PR people and legal counsel. Identify those managers or employees who have the best in-depth knowledge and are capable of attacking a problem in their respective areas. Identify those managers and employees who are capable of succinctly explaining issues to top management and/or to the public. Assemble this team and assign roles. Ensure that you have an organized document management system in place that preserves data and information and be ready for fact finding. Develop a communications strategy which includes assigning responsibility for communication content and approval, and assigning the role of spokesperson. Recognize the need for different messages for different stakeholders. develop responses for different media, from press releases, on air responses and social media.

 

Don’t think you can handle everything in-house. Your attorney, your public relations consultant or those who you rely on for sage advice will come in handy. Outsiders have a broader perspective than you may have and can assist to anticipate problems, develop a plan, assist in investigations and document management, assess any legal exposure and help prepare public statements.

 

One observation I personally believe to be of utmost importance.  If you look at some of the highly publicized crises of the day, many stem from lax ethics. Enhancing the bottom line has many times replaced the goal of doing the right thing, often at the expense of customers. Increasing short term profits may make a hero out of someone today but the actions taken to accomplish this may have severe repercussions to an organization tomorrow. A CEO can pressure everyone to redouble their efforts to increase revenues and profits and let employees find their own path or a CEO can communicate the need for high ethical standards which in the long run, will bear more fruit and allow everyone to come to work the next day. Crisis management especially crisis planning is a crucial effort to manage those events that have slipped by you. The worst and the best that can happen is that you will never have to implement your plan.

 

 

 

 

 

 

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FAILURE TO ANTICIPATE: THE WALMART EXAMPLE

Posted in Anticipating A Crisis, Anticipation, Business Crisis Management, corporate integrity, Crisis Communication Strategy, Crisis Management, Crisis Management Planning, Doing the right thing, Ethics and Crisis Management, Honesty and directness in dealing with a crisis, Wal-Mart on May 3rd, 2012 by mnayor

On April 22nd, 2012 The New York Times broke a huge story on Wal-Mart’s Walmex subsidiary. The subsidiary is alleged to have systematically engaged in bribery in order to grease the wheels of  its store expansion program in Mexico. Two of its most senior executives have been directly implicated in the scheme and the subsequent cover-up. The fallout has been dramatic including upcoming Congressional and Justice Department investigations and investigations within Mexico, a precipitous drop in Wal-Mart’s stock price, and perhaps worst of all, a huge black eye to WalMart’s reputation for integrity.

 This is a story that will not go away soon, even with the short collective memory for which the U.S.public is noted, and even with the perception we have, mistaken or not, about how business is done inMexico. The investigations and potential lawsuits will wend their way forward but Wal-Mart has an immediate problem: how to revive its reputation which was essentially snuffed out by one newspaper story. Unless there are very clear explanations that go beyond mere flim-flam, cut your losses Wal-Mart. Cooperate with investigations to ensure that they are completed rapidly. Develop your best explanations. Negotiate your fines for violating the Federal Corrupt Practices Act. Make restitution wherever it is required. Terminate those who were complicit. Get your house in order as quickly as you can.

 But this article is not about what to do now. It is about what should have been done. Wal-Mart’s story is as old as the hills. It is the same story as Richard Nixon and Watergate, Bill Clinton and Monica Lewinsky, Enron, Goldman-Sachs. And on and on and on. It is the story of hubris. It is the story of deceit. It is the story of the ostrich.

 Faced with a calamitous issue, a powerful person, a powerful company, a powerful country is most likely still to believe that there is a good chance of getting away with something. Lie low and time will make the issue recede into history. Put a band aid on and no one will dare to pierce your impenetrable shell. What would have happened if Wal-Mart had entertained a genuine independent internal investigation when it had the opportunity, and made those findings known to the Justice Department and toMexico? There would have been a much smaller story. Wal-Mart would at least have been accused of being honorable. Its reputation for integrity would have been burnished. It would have paid a price but perhaps not as steep a price as it will now pay.

 Why don’t people get it? Because there is a gambler in all of us, even when the odds are poor. Is there a chance we can get away with something? Let’s give it a try. What do we have to lose? Ask Richard Nixon. Ask Bill Clinton. Ask all those who have tried to wheedle their way out of messes only to get caught. Ah but then again there is always that other guy, the guy who got away with it. We should follow him. He’s a smart guy. He knew the angles. If he could do it, we can too.  Right now things are calm. Let’s not rock the boat. But in the long run the straight-shooter almost always wins.

Crisis management is not only activated when a cris occurs. It begins prior to a crisis in order to avoid a crisis or lessen its severity. Preparation and right-thinking separate those companies and organizations from those that merely kick the can or determine to ignore or purposefully hide a potentially serious issue.

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J&J: IT’S ABOUT TIME OR MORE OF THE SAME

Posted in a ggod reputation guarantees long term profits, Business Crises We Create, cheating the public, Corporate Crisis Management, corporate integrity, Crisis Management, Crisis Management Response, Doing the right thing, Ethics and Crisis Management, Hurting customers, J&J, Johnson & Johnson, Respect your customers, Taking Responsibility for actions of an organization or its employees, when the bottom line is more important than your customers, William Weldon on February 22nd, 2012 by mnayor

 In October of 2010 I highlighted many of the difficulties Johnson & Johnson had been going through since the early part of the decade, from tens of millions of dollars to settle claims against its product Ortho Evra, to product recalls including children’s Tylenol and contact lenses. Other telling issues involved a wrongful termination suit by a whistle blower and a resignation by a senior executive whose conscience would not allow him to remain at J&J knowing what he knew about Ortho Evra.

My conclusion was simply that J&J’s management had veered way off course and had sullied the reputation of one ofAmerica’s greatest corporations, one that was known and respected for its integrity and honesty. I ended with an expression of hope that the lessons learned would set management on the right course once again.

 This was not to be. Just this past week the press reported that J&J took a year to recall a version of its artificial hip after the FDA refused in 2009 to approve it because of its high rate of failures. The device was recalled in 2010, and J&J maintained until that time that the device was safe and its own studies refuted the allegations of professionals. J&J continued to market the hip in Europe and other overseas countries until the recall and sold another version of its hip that didn’t need safety approval in theU.S., even though the hip socket cup, which the FDA found to be flawed, was the same in both products.

 It is interesting to track the timeline of most of J&J’s recent woes to the timeline of William C. Weldon’s tenure as chief executive. Whether directly attributable to Weldon’s misfeasance or malfeasance is not the issue. The torrent of missteps, mistakes,  dishonesty, deception and manipulation has occurred on his watch. The least that can be said without pointing a finger directly at him is that he failed miserably to instill a sense of integrity within the company, a sense of integrity that transcends the needs of the short-term bottom line. So many executives foolishly sit at their desks with blinders on. Weldon and his followers allowed a culture to fester within their walls that calls for the good of the company to transcend the good of the public.

 No executive worth his title would allow the disintegration that has taken place at J&J. Thankfully, William Weldon will step down in April of this year although he will remain as chairman. Alex Gorsky will be the new CEO. Has the Board done the Company, its shareholders and the public a major disservice? Gorsky is cut from the same cloth as Weldon. They both cut their teeth in sales and both are sensitive to the bottom line and enhancing it above all else.  Hopefully Gorsky will recognize the need to build trust, and instill honor from which J&J can once again earn the widespread respect of the public. Build it and they will come. With that will come the financial success that Weldon’s crew tried to obtain on the cheap. If Gorsky has not learned from past mistakes, expect more of the same from J&J. We will all be witness to the transformation of a great American company into just another self-serving medical conglomerate that feeds off the public.

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GO FOR THE LOW MAN ON THE TOTEM POLE

Posted in Doing the right thing, Ethics and Crisis Management, Honesty and directness in dealing with a crisis, Penn State, Protecting the organization at any cost?, Sacrifice the Little Guy, Throw an employee under the bus, Uncategorized on November 19th, 2011 by mnayor

(Or What I learned from Abu Ghraib)

Watching TV commentary and reading newspaper and internet accounts of the awful Penn State story, I am puzzled. Yes, there has been some effort to uncover what occurred, but very little in the way of reporting why the sexual abuse lasted so long, with so many people in authority knowing about it. And yes, Joe Paterno was fired and two other officials at the University indicted for perjury. But very little has been made of the responsibilities these people had, except for one person.

I’m not anti Joe Paterno. He’s probably a great guy and obviously a great coach. However, I have seen comments in defense of Joe that he had done what he was legally required to do. Not a very high bar for sure. What I am against is shining a spotlight on the low man on the totem pole. Throw him or her under the bus. The reputations of the organization itself and its various chiefs are much more important to preserve than that of the little guy who nobody ever heard of. Among reputable high-minded individuals, it puzzles me indeed that reputation preservation always trumps honesty – especially when honesty would do more to preserve reputations than buck passing.

So, who is that one person who is getting all the attention? Mike McQueary, who witnessed Jerry Sandusky in the showers with a boy, was a 28 years old graduate assistant at the University. Granted he wasn’t a youngster but he certainly wasn’t a seasoned member of the staff. There were certainly older and more entrenched members of the Penn State coaching staff. In fact, everyone else must have been an authority figure to him. Not easy to tell someone older and more powerful than you to cease and desist. In a perfect world yes Mike McQuaery might have stopped the actions of Sandusky and called the police. In a more realistic world Mike McQueary was brave enough to report the incident to Joe Paterno. A lesser human being might have forgotten what he had seen. Instead we read headlines like McQueary Action Drags Penn State to Shame. Every accusation that has been leveled at McQueary can be leveled at Joe and everyone else on up the line. What we have is clearly an attempt to scapegoat a very important matter instead of confronting and dealing with it head on.

You can hear on the sidelines of any Penn State game coaches yelling frantically to players to MAN UP. Penn State, heed your own advice.

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PENN STATE AND OLYMPUS CORP.: WHAT THEY HAVE IN COMMON

Posted in Crisis Communication Response, Doing the right thing, Ethics and Crisis Management, Olympus Corp., Penn State, reputation management, Sacrifice the Little Guy, Taking Responsibility for actions of an organization or its employees on November 19th, 2011 by mnayor

Two scandals this week couldn’t seem more different. One involves allegations of pedophilia sex at a university, Penn State and the other financial shenanigans at a large Japanese corporation, Olympus Corp. Most in the public relations field would exclaim that both matters require “crisis management”, but there is a closer commonality than that. We have to look at the underlying cause of these scandals to see what they share in common.

In many crisis situations the crisis comes about by an outside force or a factor beyond an organization’s control or ability to anticipate. There are, of course, natural disasters. There can be strikes, new legislation, unexpected competition, employee dishonesty, product contamination and the list goes on. Most organizations are “forgiven” or the matter is soon forgotten if the issue is dealt with promptly. Even the BP Gulf oil spill has receded from our memories because the company dealt with the calamity, no matter how ineptly.

But certain “crises” are either created or exacerbated by an organization itself. There are many participants, willing or scared or just amoral who put the organization first. These types of issues should not be looked upon as crises but as severe ethical failures. Oftentimes the principal players either feel they have no choice, or stick their collective heads in the sand or worst of all, feel they won’t be caught and therefore have no compunction about doing what they see as best for the organization. This is what Penn State and Olympus have in common –people have done something unconscionable and others who know about it do nothing or as little as possible. No one wants to be a whistle blower. Willingly or unwillingly, everyone wants to be a loyal team player.

From politicians to entertainers to corporate CEO’s, there is an ever-growing tendency to believe “I can get away with it”, or “it’s not my problem”, or “let’s not rock the boat” or “I’m not going to stick my neck out”.

These days the words “ethics” and “morals” are used interchangeably Elijah Weber described the difference this way:

“Morals, quite simply, are beliefs about right and wrong conduct….They do not require reason, consistency, or thorough analysis in their initial shaping or practical application…. I can believe that lying is wrong because my grandmother told me it was, and that is what I believe. No further justification is required. Ethics, on the other hand, is a reason based cumulative system of moral decision making. It is built upon one or a few basic principles and requires that we be thorough, honest, and comprehensive in making statements about right and wrong. Ethics is about building the kind of world we want to live in, and developing a consistent process by which to achieve this. Ethics is an advanced expression of morality.”

I like this analysis of ethics: a few basic principles that require that we be thorough, honest, and comprehensive in making statements about right and wrong. It is about building the kind of world we want to live in…Do we wish to live in a world where we turn a blind eye to child sexual abuse? Do we want to turn a blind eye to Ponzi schemes and product failings and financial manipulations built on sand that will have severe consequences to investors, employees, and consumers? I think not.
No one is naive enough to think that every company, every charitable organization, every university will adhere to the straight and narrow but wouldn’t it be refreshing if we could count on ethical behavior most of the time. Wouldn’t it also be nice if every honest whistle blower who performed a public service wasn’t maligned and attacked as a weasel or turn-coat? Wouldn’t it be interesting if every organization that breached ethical norms, faced its predicament responsibly Since it is not possible to have a perfect world, shouldn’t we at least shine a spotlight on those who perpetuate bad conduct no matter how revered, competent and respected they may have been?

I fear that the opposite usually occurs. The whistleblower is a turncoat. The person who tried to do the right thing didn’t do enough. The head honcho and the organization are protected as best as possible. The little guy gets thrown under the bus.

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