Never Mind The Courts. Public Opinion Is Driving Companies Now
History books will look back on 2017 as the beginning of a transformation: We saw a massive movement emerge as people stepped forward and the speak-up culture took hold at a global level. Fueled by social media and celebrity involvement, the press brought story after story to our attention.
Arguably, this started with the Women’s march on January 21st, and continuing in the ensuing news cycles that included the ongoing Wells Fargo story, the #metoo movement, the Weinstein scandal and the Kalanick resignation, amongst many others. We saw people speaking up and holding public officials and senior executives accountable for their actions and their companies’ actions at an unprecedented rate.
Take for example the fate of John Stumpf, former CEO of Wells Fargo, who in 2016 was called before congress and lambasted for the failures within the organization. “You haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive, instead your definition of accountable is to push the blame to your low-level employees who don’t have the money for a PR firm to defend themselves. Its gutless leadership.” said Senator Elizabeth Warren during the senate hearing. If you missed it, it’s worth watching again here. And now the Federal Reserve has issued an unprecedented order limiting Wells Fargo’s ability to grow assets, and requires the dismissal of four board members.
However, government intervention was not the most visible or impactful reaction to the transgressions. Rather it was the prevalence of social media and the court of public opinion that took center stage. No longer can people or organizations hide behind great PR agencies, and run defensive integrity programs geared to placate the regulators and prosecutors should they come knocking.
Unacceptable and acceptable are often separated by a fine line of perception
The public are far quicker to try, condemn, and punish than any government agency. Some may say, too quick, but irrespective, social media is now a very real part of all our lives, whether we accept it or not.
As you read the headlines, the normal human reaction is to delude ourselves, “That would never happen here.”
We tell ourselves stories, creating logical links between events where none exist – called the narrative fallacy (see here for a quick overview). As people, we are wired to rationalize and justify, we attempt to make sense of a complex world, and as a result we oversimplify at best, falsify at worst. The reality is that this is a complicated world with complicated problems; a world of grays, not of black and white; a world where unacceptable and acceptable are often separated by a fine line of perception.
And, unfortunately, yes, that can happen here.
The Courage of the few has encouraged the many to step forward
If you believe that the only people crossing the line are the executives that have been called to account, then you are deceiving yourself. As Lord Acton said in 1887, “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.” As you look at your organizations, and the layers of management and power that exist, you can see that the opportunity for abuse of that power is everywhere.
From this it is clear that the courage of the few has encouraged the many to step forward. I am firmly of the opinion that this is just the beginning and this speak-up movement will continue to flourish.
So, what does this mean for Ethics & Compliance in the world of business?
You can now rest assured that the transgressions that are occurring in your organization, and don’t for a minute think they are not, are going to come out. Best case, through your speak-up program, worst case, through social media. What is to be done in this new world where managing an effective compliance program can no longer be driven with the sole imperative to create an affirmative defense just in case the regulators drop by?
Your integrity program can no longer focus on activity, it has to be focused on outcomes, and you have to measure success by your ability to guide and modify the behavior of the people in your organization.
If you do not, the ramifications are swift and severe: Suppressed share price, lost revenue, loss of customers, inability to retain or to attract high quality staff, loss of investors, and loss of partners.
Wells Fargo’s share price continues to suffer when compared to their peers, and is now being further punished by the Federal Reserve’s recent order. The damage from this action goes to the very core of the company and I believe the damage will prove to be significant and hard to recover from.
This chart compares Wells Fargo (WFC) against Bank of America (BAC) and a pool of financial services entities (XLF).
Here in the second of the three posts that make up this article, we will explore what you can start doing differently. Specifically, we will look at the emergence of technology in integrity programs, what is now possible, and how you can use this technology to instantiate a visionary program that brings real value to your organization. You can find the next post here!