FCPA & Ethics highlighted at latest Risk Series

Ethics is more relevant than ever before; In public and private entities, ethical decision making seems to have taken a back seat to short-term profitability be it monetary gain or popular opinion. Companies like Volkswagen, Wells Fargo and Equifax are seeing share prices in freefall while simultaneously dealing with a public relations nightmare.

The Risk Institute hosted its first continuing professional development session of the academic year on October 11, 2017, on the Foreign Corrupt Practices Act (FCPA) and ethical decision making. Speakers included David Freel, a professor at The Ohio State University; Eric Lebson, a vice president at the Crumpton Group; Vlad Kapustin from New York Life; and Bill Foale, an investigator from EY.

Globally, corruption accounts for more than 5 percent of the global GDP — more than $2.6 trillion. Most of that corruption occurs in developed countries with approval from senior management. Which leads us to think that the tone at the top and organizational culture need work.

Organizational culture is the shared beliefs or expectations that influence thinking and behavior; it’s the glue that holds the company together. According to Prof. Freel local companies Nationwide, Cardinal Health are best-practice examples of excellent, ethical organizational culture.

And ethics is important to consumers too. The data currently says that consumers are more likely to do business with companies they perceive to be of a high moral fiber.

Since a company’s ethics is a priority to consumers, it could be assumed that strides have been made across industries to clearly define ethical behavior for its employees, provide training, improve whistleblower policies, etc.

Unfortunately, that’s not the case.

Over the last 30 years, there’s virtually been no change in anti-corruption policies. According to Eric Lebson, “It’s difficult to get a company that has never experienced a FCPA incident to take action.”

An FCPA investigation can be crippling. On average, an FCPA investigation lasts 3.7 years, 92.42% of defendants who settle with SEC, and 76.44% of defendants who settle with DOJ.

Bill Foale encouraged executives to empower their audience to make compliance second nature. Many anti-corruption policies are dense and jargony and therefore difficult for even a native English speaker to comprehend. Foale suggests asking the following questions about your anti-corruption policies:

  • Is the material understandable?
  • Is it written in a way that the information is relatable to the audience responsibilities? As in, not just a list of “do nots” and includes examples of practical tips
  • Language? Keep in mind that many of your employees may be native English speakers.
  • Is there a resource available for questions/assistance?

Many ethical challenges like transparency, privacy, self-interest, and data protection lie ahead. But with proper prior preparation, any organization can avoid ethical conflicts.

For more on this topic and many others, visit fisher.osu.edu/risk. Risk Series V continues on November 14 with a conversation on Mergers & Acquisition Risk. M&A is a high stakes game and getting it right matters. Join The Risk Institute and our experts from academia and industry for a lively discussion about the delicate balance of risk and reward in M&A. To register, visit go.osu.edu/marisk.