During his eight-year tenure as United States Attorney for the Southern District of New York, which came to an end in March 2017, Preet Bharara saw many insider-trading cases and scandals. Now, he says he is repeatedly asked the same question: “Why does a person with so much property and privilege and power risk his or her reputation and freedom by committing a financial crime?”
When he gave the Fredrikson Law Firm Lecture on Oct. 11 at the University of St. Thomas School of Law, Bharara didn’t offer a specific answer. Instead, he emphasized that organizations and human beings are complex. What differentiates good firms from bad firms? Is it deficient leadership, deficient culture or peer pressure? He believes these are the fundamental questions on the minds of practicing and aspiring attorneys. The answers to these questions shape the approach to the field of compliance.
Bharara said he thinks compliance today has an image problem. The term is not understood. “It is narrow, it is cramped, it is uninspiring. It connotes something reactive and reflective . . . it conveys nothing about any core value. It's all about obedience to something that’s written by other people,” he said. He explained that compliance must be part of a larger purpose, message and value system of the organization, otherwise it is not that helpful or meaningful. It is meant to keep a company on an honest, ethical path by following laws and acting in good faith. It is problematic when a broad compliance function may be alienated from the overall goal and strategy of the company. But, he said, it should not be second to strategy. “You can almost visualize the compliance apparatus at some firms as sitting awkwardly atop the company like some ill-fitting beanie, instead of being part of the lifeblood of the company itself, as it should be.”
Bharara stressed that compliance is the responsibility of all stakeholders and employees in an organization. He said we need to give people from the bottom and middle of the organization the courage to approach higher-ups, and to give the higher-ups the courage to listen. “If we are to expect employees to elevate issues, to seek consultation and to stay on the right path, going to compliance has to be a smidgen more pleasant than a trip to the dentist — not a lot more pleasant, but a little more pleasant,” he said. He stressed that we need to understand what motivates people and what gets people to buy into the programs. He recognizes that good leaders know how to do this and not let the message get lost.
Following Bharara’s keynote, Marianne Short, executive vice president and chief legal officer of UnitedHealth Group, and Ivan Fong, senior vice president and general counsel of 3M, joined him for a panel conversation about ethics and integrity.
5 Observations from the Panel Discussion
- Customers want ethics and integrity. By showing how ethics and integrity add value to the shareholders —that customers want and expect these things — Short said companies can earn employee buy-in on ethics and integrity matters. She said it has to come from all employees, not just officers and upper-management; employees at all levels need to have the courage to speak out, and they need to be able to raise any issues they see. These values also need to be tested and measured, and the results can be used to show problems and raise questions.
- It is possible to acculturate new employees to compliance and ethics. "Unequivocally, yes," Fong said. He said he is fortunate to work for a caring organization with a strong culture of ethics and integrity. Fong noted that a strong message about ethics and integrity is repeated by leaders over and over at his organization: “The big saying is, we do business the right way, everywhere we do business, every day.” At 3M, they don’t just encourage the behavior; they have awards to showcase it and work it into their compensation structures.
- Trust is key to success. Fong stressed that trust between all stakeholders, including employees, management, shareholders and the community, is key to 3M’s success. This trust is important, not just because doing the right thing is the right thing to do. “Compliance, ethics and integrity are a competitive advantage. . . In today’s marketplace, that trust is a huge asset. People want to do business with companies that are good. They want to work for companies that are good. People will stay with companies that are good.” Short agreed and added that everyone needs to feel like an owner – they need to feel like they are encouraged to speak up and are heard.
- Every person lies. Fong said people are surprised to hear him say this, but everyone does, especially when under pressure or when we see someone else lying. It can even involve lying to ourselves about what we have seen or heard. Fong’s point is that we should never assume that people are always good and telling the truth – someone somewhere in the organization may be doing something wrong. Prevention and detection are key, but will not catch everything. Fong said the firm’s response after a problem has been uncovered is equally important.
- Think out loud. Short said that lawyers like to think out loud, and the process of throwing out and sharing ideas is a strength of lawyers. They are able to own things, but also collaborate and fill in the gaps. She believes this skill is extremely important, whether a lawyer is practicing in a firm or within a business, as no one person has the answers. “If you think of law as just a law or just a right or wrong answer, you’ve missed what our profession is about,” she said.
The Fredrikson Law Firm Lecture is presented annually by the University of St. Thomas Holloran Center for Ethical Leadership in the Professions. The lecture series is named for John P. Byron, founder of the Fredrikson & Byron Law Firm.