The role of the compliance and ethics office in mitigating undue pressure

One of the most important business ethics experiments ever took place in the early 1970s in Princeton NJ.  In it, interview subjects were asked to travel from one place to another, but some were told that they had to hurry, and others were not told this. Along the way, all saw an individual in apparent distress. Individuals put under time pressure were about six times more likely to engage in unethical conduct (not helping the individual in distress) than were those not under such pressure.

This was an astounding result. It – along with other subsequent behavioral ethics experiments – has led to an understanding of wrongdoing that places greater emphasis on the situation facing an individual and less on that individual’s character.  This, in turn, helps make the case for strong C&E efforts.

Turning from the world of research to that of the courtroom and prosecutors’ offices, the corrupting influence of high-pressure is an oft-told tale. In recent years, the most prominent case of this sort involved Wells Fargo, where a toxic corporate culture pressured many employees to engage in serious legal and ethical transgressions.

So, what is to be done about this potentially perilous risk?

A focus on undue risk

At the outset, I note that C&E programs are not expected to eliminate all pressure to perform. That would be impossible and indeed undesirable.  But what a C&E officer can and should do is to mitigate undue pressure.

One part of such an effort is risk assessment. Based on a variety of factors – both internal (e.g., employee surveys) and external market conditions (e.g., hyper competitiveness) – the risks of undue pressure can often be identified.

Of course, the fact that risky conditions exist at one company does not necessarily mean that they also exist at a competitor. But it can suggest a line of inquiry both as to risk and to the efficacy of types of mitigation that should be explored.

Beyond the code

Another approach is having the managers’ duties section of the code of conduct address the issue of avoiding undue pressure. That is, the code and related documents (policies, charters, among other things) should spell out that a manager is responsible for addressing pressure that might lead their subordinates to cross a legal or ethical line.

Yet another available measure is having the CEO speak at an all-company or other major event about the need to avoid undue pressure – particularly at key times (such as near the end of a financial reporting period). One should also cascade the message down through the ranks of management (both operations and staff).

In a related vein, one might develop pressure-related scenarios for use in training and other communications.  This would seem to be an obvious compliance measure, but my belief is that too few companies go this route.

Auditing pressure

Less obvious still, one should consider including undue pressure in audits.  By this I mean that some audit interviews should seek to determine whether pressure at the company is unduly risky. Note that I am not suggesting that this be an extensive effort.  A single question asked of individuals in risky positions (e.g., sales) and locations should be sufficient in many audits.

Investigations and discipline also have a key role in this aspect of compliance.  Both in how one conducts an investigation and in related discipline, one should make sure that those responsible for undue pressure are held accountable. One practical measure to ensure that this happens is to speak to this issue in the company’s investigations manual.

Incentives and pressure

One should, as well, consider addressing the issue in performance evaluations. By this I mean including in evaluations the extent to which a manager projects undue pressure onto their subordinates – or shields them from it.  One should ensure the board of directors (typically via the audit committee) is alert to undue pressure risks. They have the ultimate power in a company to mitigate those risks.

Of course, not every company needs to do all of these. And some will address the issue of undue pressure in other ways.  But all should be actively engaged in this risky area.