Punishment, Whistle Blowers and Anti-Corruption

Preventing Organizational Corruption

Preventing Organizational Corruption

Punishment as a Behavior Modifier

If you read this blog, you know that I focus heavily on prevention of corruption and decay of organizations over investigation and prosecution. I believe that investigation and prosecution are critically important, but are fundamentally incomplete as anti-corruption tools.

We understand this from our everyday experience. Let’s take the traffic cop. Every day he hands out tickets for driving violations. Day after day. More tickets and more violations.

He knows his presence frightens some people into proper behavior. But mostly it does not. The traffic policeman, from his point of view, comes to believe that nothing can be done about traffic violations. By and large, we share his view.

As children, some of us may have been caught by our parents for some misdeed. Many of us were punished and our parents hoped that the beatings would encourage us to proper behavior.

But when I survey people about their experience as children I find that it did not make them better behaved. It simply made them cleverer at avoiding detection.

Indeed, when I working alongside law enforcement in the U.S., I often heard them say that they weren’t ready to arrest someone because it would merely provide training about how to do it “smarter” next time.

Punishment doesn’t even work on animals. If you’ve had a dog, you know that punishment creates sneaky thinking and distrust. If it doesn’t’ work on animals, why in the world would we think it would work on human beings?

Punishment and fear of getting caught creates some results, but not long term change in people.

We see the same phenomenon with anti-corruption that we see with the traffic cop. We detect, investigate and prosecutor more people, including very high-level people, every year. The list of “heads” taken by anti-corruption investigations rolls out daily from Transparency International. But it’s not really focused on correcting behavior BEFORE things go wrong.

Transparency and accountability is helpful. But lets not kid ourselves. It really means “make it easier to see you, catch you and punish you.” Thus, as an anti-corruption tool, transparency and accountability is fundamentally a punishment based approach to changing behavior, and is fundamentally inadequate without considerably more attention on motivating different behavior BEFORE crimes take place.

Other Pressures Fighting the Improvement of Organizations

Unfortunately, while we are focused on punishment as a means to obtain correct behavior, we typically overlook the pressures inside most organizations that make it very, very difficult to correct misbehavior prior to things going wrong.

These pressure opposing anti-corruption are, ironically, the same pressures that must be in place to build strong organizations.

There are the essential characteristics of groups. I discuss these important characteristics of organizations in a two-minute video What is Anti-Corruption? They are:

  • Group Identity
  • Group Purpose
  • Intention to Extend into the Future
  • Ability to Defend Itself From Internal and External Attacks.

Ironically, these same characteristics of a group that are vitally necessary for its survival also create an enormous blind spot and obstacle to self correction.  In fact, the more serious the issues are that require correction, the more challenging the reaction against all efforts to change the organization.

I am still identifying the gradient steps of organizational reactions to demands to change and resistance to change.  However, the gradient appears to follow the path I’ve laid out below, and includes the general organizational reactions I note here.

Gradients of Self Correction – by Groups. (Including Groups within Groups)

From lowest to highest.

1. Mentoring and guidance.       Result: Peer pressure promotes behavior compliance.

2. Observation by Supervisor.    Result: Peer pressure and immediate supervision promotes compliance.

3.  Misbehavior reported to Supervisor.     Result: Supervisory correction. Possibly discipline.

4.  Internal Report above Supervisor.     Result: Correction/Discipline.

5.  Comments from sources external to the organization.     Result: Self-protection of organization – correction/Discipline/Public Relations.

6.  External investigation due to reported violation of law/policy.     Result: Self Protection of organization and Executives/Public Relations/Denial/Discipline.

7.  External Prosecution.     Result: Self Protection of org/ protection of execs/PR/ Discipline and change of identity.

I encourage you to consider organizations, departments within larger organizations, and nations and test our your observations against this gradient scale.

Let me know how this matches up to your experience and observation.

Brian Pinkowski

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Tales from the Wild: “You give me 30% and I’ll make sure our government partners get their share.”

cimg4154.jpg“You give me the 30% of the deal, and I’ll make sure our government partners get their share.”

Excuse me? You’ll do what?

If you work internationally, you will invariably find that people don’t understand the FCPA, and don’t understand what they are asking. I’ve heard it for matters as small as a “cup of tea” in Kenya and a “cup of coffee” in Albania.

I’ve also heard it in blunt and large terms as I quoted above from an actual conversation.

For cultural or other reasons they really do not see anything wrong with making sure the government officials get a piece of the action.

Equally invariably, strongly worded emails fail to get the idea across – you’ve got to look them in the eye and explain it until they understand.

Or you’ve got to walk away.

But most people will understand, eventually, if you explain the issue in painstaking detail, and they are convinced that you are serious, and not just pretending to be serious.

It may be their actual experience that foreign companies will pay the bribes, but the risks are high, and the evidence trail is fairly easy to follow if law enforcement becomes involved. It’s far better to walk away.

Brian Pinkowski

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Corruption Prevention and the Art of War

Gradients in Anti-Corruption. B. Pinkowski

Gradients in Anti-Corruption. B. Pinkowski

The Highest form of generalship is to balk the enemy’s plan. Sun Tzu

The key idea in corruption prevention is . . . prevention. To stop something from happening before it can occur. Indeed, prevention is the heart of “anti-corruption.” This is discussed further in Gradients of Anti-Corruption and is depicted in the graphic above.

The Gradients are:

  1. Awareness
  2. Prevention
  3. Detection
  4. Correction

Yet many “anti-corruption” programs are focused primarily on criminal investigation, with only the barest nod toward “prevention” and usually only in the simplest forms of Awareness: rallys, t-shirts and banners (with appropriate sponsor identification). Continue reading

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Decay of Social Agreements

Disagreement about the purpose of streets and sidewalks.

Disagreement about the purpose of streets and sidewalks.

Most corruption is well beyond “simple” violations of the law.  Corruption is the action of process of decay of something.  Criminal forms of corruption are violations of the written laws.

Other forms of corruption erode away the foundations of the social agreements we make about how society should function.  For example, in the photo above, there are cars parked all over the sidewalks, and people are forced to walk in the streets.  This happens in many countries and cities around the world and creates a tsunami of small obstacles for pubic policy makers that are trying to build economies.

The basic social agreement in the photo above is that “streets are for cars” and “sidewalks are for people.”

Decay of this agreement occurs when the auto owner chooses to break this agreement and the first policeman chooses to ignore the problem.

This is not a very serous matter.  Mostly a nuisance, actually.  The excuses, all very reasonable, are that there is no place for cars to park.  Of course, then failure to penalize the auto owners for traffic safety matters removes pressure from others in government from doing their jobs – managing traffic flow in the city.

In turn, a hands-off approach to managing traffic flow affects the speed of business flow. On and on it goes slowly eroding people’s expectations that things can and should be . . . better.

Unwillingness to enforce the lower level “rule of law” removes the pressure from others creates a basis for ignoring more serious Rule of Law matters.

In smaller communities and nations its very difficult for compatriots to enforce the “small” laws on each other.  Smaller communities have to rely on each other in more obvious ways for mutual survival. This takes precedence over “traffic violations,” for example.

On the other hand, public policy makers need reliable social agreements as the foundation for their efforts to build societies and nations.  As they address the larger scale issues, sometimes these “little matters” work against their efforts to help a society in subtle ways.  Even the best designed policies may appear to struggle, weighed down by neglect.

These issues require more than the “letter of the law” to resolve, and require a shift in community thinking about the importance of social agreements.

Anti-Corruption is about changing people’s minds to strengthen the foundations upon which their societies are built.

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The Magna Carta and Scrutiny of Your Compliance Program

Brian Pinkowski:

I like this quite a lot. Recognizing that corruption is more than “non-compliance” with the law is the only way beyond chasing crimes after the fact.

Originally posted on FCPA Compliance and Ethics Blog:

Magna CartaYesterday, June 15 was Father’s Day so for all us fathers out there, it was our day and I hope that you enjoyed and cherished it. It was also the anniversary of what I believe was one of the greatest achievements in Anglo jurisprudence, the signing of the Magna Carta, by King John and the Barons who opposed his tyranny. In 1215, the barons rose up in rebellion against the King’s abuse of feudal law and custom. The legal document drafted up for King John, required him to make specific guarantees of the rights and privileges of his barons and the freedom of the church.

On June 15, 1215, King John met the Barons at Runnymede on the Thames and set his seal to the Articles of the Barons, which after minor revision was formally issued as the Magna Carta. I have visited the field at Runnymeade where the Magna…

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Bribes, Compliance and Situational Ethics

Looking for the Path

Looking for the Path

“That’s not a bribe!”

In a developing nation somewhere, an underpaid policemen struggles with a drunk and disorderly citizen. During the arrest, the policeman’s hand is cut.

The next day, the policeman and the formerly drunken citizen reach an agreement. The citizen is charged with drunk and disorderly conduct, and he pays $5 to the policeman to compensate for the injury to his hand.

This is situation actually happened somewhere. Neither the leadership in the police department or the prosecutors’ office saw any problem with the situation.

Police Lieutenant: “It doesn’t matter that the injured party was a policemen, he was injured do to the drunken man’s actions. The result would have been the same (in our culture) if it had been two private citizens. So, there was no bribe.”

Response: “But this happened during the arrest, while the policeman was carrying out his government responsibilities. There were not charges laid for resisting arrest or assault of a police officer. This looks like a $5 bribe to avoid the extra charges.”

Answer: “Things happen in life. Not everything needs to be handled by official police activity. And the officer was satisfied and could pay for his medical expenses. This is a good result.”

While we may object to aspects of the story above, there are a few things that should catch the attention of international business people and their compliance officers.

Firstly, Neither the policeman or the police Lieutenant, or the first line prosecutors immediately saw this as a bribe.

They had all been trained by “Western” police schools, and “Commonwealth” law schools, and many, many western advisors. Indeed, when asked questions about identifying bribery or assaulting an officer in the abstract, they were able to spot the issues and identify the result accurately and quickly.

The result was different for these individuals when the “facts” were applied within a familiar cultural context. When in that cultural context, the traditional laws and rules for resolving problems took precedence, without anyone becoming aware that they had made a shift in evaluation criteria.  They had undercut their own laws.

Is this corruption? or an ordinary, and natural attempt by people to harmonize long-standing traditional law practices with the modern legal environment?

The answer to this question, while important, does not provide a clear and rapid pathway to companies faced with developing compliance programs.

Eyes Wide Open

I recently had the chance to discuss the impacts of traditional law with a large mining company. “How do you handle these problems? And how do you identify the specific cultural conflicts that might slip unnoticed past your FCPA, ethics and other compliance programs?”

Answer: “We engage a local partner. We know that we can’t really learn enough about the local culture in our due diligence to identify all of these problems.” (Translation: “We hire local attorneys, engineers, and others who have [presumably] been trained in western law and practices and can help make sure that we don’t run into those sorts of cultural conflicts.”)

That’s a rational response.  Except that it translates further as: “We hire those same kind of people that you described in the policeman story. Western trained, fully fluent in the English language, but unaware when they switch to application of the traditional laws.”

Having seen first hand the sometimes vast disconnect between behavior in the face of training for FCPA and government contracting that takes place in international settings, (e.g., rampant nepotism, interference with contracts, extortion and rent seeking), I can tell you that there’s a whole lot happening that executives and compliance officers would be unhappy to hear about.

In truth, these are not simple matters. But they are matters that local partners may not characterize in the same way as compliance officers in the U.S., U.K., or the E.U.

Due diligence can seem like an endless task. Indeed, there is no end to the list of things a company must be mindful of when operating in a foreign environment. Cultural studies on the potential conflicts between the formal and traditional law systems may not be available, or on point, at the time of purchase or operation start-up activities, for many countries.

That being said, once operations are underway, information can be obtained by compliance officers that can enhance corporate awareness of corruption risks. By formal or informal surveys, compliance officers, and other executives, can begin asking questions about the traditional law systems, and the cultural practices for transactions and dispute resolution. This information can help compliance officers “get the picture” of the potential “blindspots” that may exist within the operations of a country.

Brian J. Pinkowski

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Fear, Social Media and Anti-Corruption

Corruption Complaint form

Can’t I Just Complain About it on Twitter?

When I write about the role of social media and anti-corruption I typically get a couple of types of responses.

Group 1.   Social Media is Chaos

This group contains people who are concerned about the undisciplined and seemingly ungovernable nature of social media.  It is, in the view of some of my colleagues, a dangerous environment where lies and mean spirited comments can take on a life of their own and the originators of the comments are not accountable for the damage they may cause. Continue reading

Posted in Anti-Corruption, Anti-Corruption Expert, Brian Pinkowski, Bribery and corruption, Corruption, Corruption prevention, Destruction of Organizations and Nations, How to Fight Corruption, Journalist Training, Media, Social Media | Tagged , , , , , , , | 1 Comment