Accountability: a Culture or Process

If a company does not consider bribery, corruption or other ethical issues as unacceptable, having value statements or processes is not meaningful. The same way if people are not held accountable for compliance issues a company cannot promote an ethical culture. Therefore, having a written corporate value also becomes meaningless.

Some companies punish and reprimand mid level to junior level staff for non compliance but do not do the same for senior or board level staff. This will lead to a dysfunctional culture and corporate morale also will be affected. In the global investment bank scandals it was commonly known that they had a culture that ceased to punish people for a lack of integrity in a meaningful way. Instead, they promoted people who pushed the boundaries. It was a culture of make money and don’t worry about the details.

At UBS, the rogue trader Adoboli found himself in a place where recklessness seemed the norm and following rules appeared to be optional, he testified in November. He and other traders often blew through their risk limits with little interference from supervisors. In October 2011, Sergio Ermotti, the interim CEO of UBS, admitted that the computer system at UBS had detected the unauthorized trading activities of Adoboli beforehand and had issued a warning, but the bank had failed to act on the warning.

The danger of unaccountable officers was also demonstrated with the GM fiasco. GM’s General Counsel claims he did not know about the faulty ignition switch issue, even though several senior attorneys were intimately involved in the day-to-day management of the issue. Whether or not GM’s General Counsel knew about the issue or not, he should have been held accountable by the CEO and fired under either rationale.

Therefore, the concept of accountability should start at the top. If corporate boards are required to exercise proper governance functions and oversight responsibilities, the buck should stop with the corporate board itself. It is not enough to argue that a corporate board was kept in the dark only when there is a compliance issue. If the board was not aware of an issue, the question has to be asked why they did not know about the issue?

Compliance and accountability has to be inculcated into the culture of the company. Senior managers should not be allowed to duck and cover scandals in order to survive allegations of wrongdoing within the company. The board should be held responsible for ethical or compliance issues, that will force them to ensure a culture of compliance through meaningful processes.

About surenraj

“Views expressed are my own”
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