Organizational Justice: Two important issues

An interesting article in a prior issue of Compliance & Ethics Professional Magazine (SCCE) explored one aspect of the area of organizational justice.  Emeka Nwankpah, in “Ensuring Organizational Justice for All” (Jan. 2021), reminded us that employees are watching what we do as well as what we say. This is especially so in investigations and disciplinary decisions.  We are judged by whether the process is fair, the treatment of those involved is fair, and the discipline is fair.  

You can have all the values statements and positive messages you want, but if your treatment of people is perceived as unfair and unjust, you create a culture that can breed misconduct.  While some lawyers may resist having written standards for investigations and discipline and to have a set of guides to ensure that the processes  are consistent, participants are respected and protected, and the results match your company’s values and are not influenced by favoritism or bias. While you need to protect privacy as appropriate, there should be transparency in how this important process operates and why the results of this process are fair. While the process for investigations features largely in the sense of organizational justice, there is, among the panoply of compliance risks, one that can also particularly undermine this organizational sense. This is also one of the most pervasive compliance risk areas, conflicts of interest. Perhaps more so than with most other types of violations addressed by compliance programs, when conflicts that are harmful to a company are permitted to exist that can undermine the larger sense of justice within the organization. While not unique to the realm of conflicts, this factor is sufficiently distinct and important to warrant attention in its capacity to undermine that sense of justice.

The special harm that conflicts can cause to organizational justice arises, in part, from their frequently personal nature. That is, because they often involve a personal benefit being received by an individual employee that is denied to others, the effect on other employees is feeling personally harmed (from a relative perspective) by the conflict in a way that they would not feel, for example, with an antitrust offense or violation of export regulations. 

Given the outsized impact that conflicts can have on the overall legitimacy of a company’s compliance program, it is risky to devalue this area as more of a minor risk area because there may be no risk of federal prosecution.  That is, the danger of poor conflicts mitigation is not only the immediate impact from individual conflicts (e.g., distorted procurement or hiring decisions) but a broader risk to the entire program.

In this regard, we note that while talk about corporate culture is common everywhere, signs that companies are truly paying meaningful attention to this factor are much less. It is not enough to be issuing virtue-signaling messages to employees.  It is not enough to focus on preventing lawbreaking in companies.  If there is not a real sense of organizational justice then this invites employees to rationalize a broad range of improper conduct, including the very crimes the company is most worried about. 

Thus, besides obeying the law it is essential that management come across as acting in a way that is fair and just.  Being unclear about how investigations work, and not addressing the fairness aspect of conflicts can undermine the cultural core of any organization.