Perfection is not possible … imperfection is not an excuse
The recently updated guidelines to the United States Foreign Corrupt Practices entitled A Resource Guide to the U.S. Foreign Corrupt Practices Act (November 2012) offers myriad helpful principles, case studies, and clarifications to facilitate compliance and proactive engagement with the authorities on various issues potentially covered by the FCPA. However, perhaps the most useful and reassuring guiding principle appears late in the document in Chapter 5 “Guiding Principles of Enforcement”: neither the Securities and Exchange Commission (SEC) nor the Department of Justice (DOJ) seek perfection. Nor should you.A key comment in the Resource Guide is as follows:
“The DOJ and SEC understand that ‘no compliance program can ever prevent all criminal activity by a corporation’s employees, and they do not hold companies to a standard of perfection.’ They focus on a “common sense” “pragmatic” program asking whether there is good faith and whether it works.” (Chapter 5, page 56)
With respect to the FCPA, this comment is to be read in the context of the additional guidance in the document. However, the approach is relevant outside the FCPA as well. This understanding of the impossibility of perfection underpins ethics oversight. It is essential to integrate the reality of imperfection into ethics oversight: analyses, policies, practices, outcomes, and evaluation.
First, organizations must function within reality. There are no perfectly ethical organizations or leaders. Nor are there perfectly ethical external environments, whether the recently radical change to the Mongolian foreign direct investment law that threw Rio Tinto and others for a loop, LIBOR, corruption in India, a culture that incentivizes (likely through financial rewards) a guard in a Bangladeshi clothing factory to prevent workers from leaving during a fire with alarms ringing, or uncertainty in how the French government will react to a corporate factory closing such as the ArcelorMittal case. Expecting that your policies and practices will lead to perfect outcomes will result in a dangerously complacent failure to oversee vigilantly potential unexpected problems internally and externally. Ethics oversight hubris.
Second, a focus on, or expectation of, perfection, will skew priorities and allocation of resources on ethics oversight. It will also put undue pressure on the wrong priorities and insufficient attention to the broader aim of high quality decision-making throughout the organization that is the underlying premise of all of my ethics advising work.
Third, thoughtful consideration of the question of perfection underpins thoughtful consideration of compromise. A company might not accept the cost of greater supply chain oversight to prevent petty theft but might do so to prevent loss of life. Sometimes compromise is ethical. I don’t mean cavalierly deciding a smaller bribe is fine under the FCPA or endangering fewer lives in a fire in Bangladesh is better than endangering more. I mean that it would be foolish to believe there will never be ethical challenges with no perfect outcome. Examples include a NGO that must choose between bribing a customs official to import medical supplies and turning away medical humanitarian aid patients or a corporation choosing between paying local civil service officials to assure safe return home of expatriate employees during a crisis or leaving personnel in potential danger. Perfection requires context. No law drafted in Washington, D.C. nor blog drafted in London as this one is, should presume to dictate a perfect outcome in a particular situation. Again, that would be ethics hubris.
Whilst there is no perfection, there are ethically thoughtful, rigorous, honest, and vigilant organizations and leaders – irrespective of the internal or external environment. This means: (i) being honest about how good faith your compliance and ethics efforts are and how well they are working as per the SEC/DOJ advice; (ii) remaining vigilant with respect to evidence of internal (whether input from employees through whistle-blowers or otherwise) or external risk (e.g. sub-prime lending or a change in law or a culture of corruption); and (iii) addressing any evidence of actual or potential unethical incidents quickly, thoroughly, and thoughtfully on the basis of complete factual information, and with a view to enforcement and prevention of future episodes.
Moreover, accepting imperfection does not mean the following:
- This doesn’t mean that small infractions don’t matter or need not be addressed promptly to prevent increases, expansion, or repetition of unethical behaviour (see “Sweat the Small Ethics Stuff to Avoid the Big Ethics Situation”).
- This does not mean that compliance and ethics programs should target imperfection. Imperfection is a realistic outcome not a starting point.
- This does not obviate the need to exceed the law when ethically necessary – anywhere, including to prevent a fire or tragic outcome of a fire in Bangladesh.
- This does not mean that organizations and individuals cannot potentially face serious legal consequences for infraction.
- This does not mean that “zero tolerance” is not appropriate for the most egregious behaviour. The FCPA targets one realm of behaviour, and extrapolation is helpful…but to a limited extent. There should never be a second chance for many kinds of behaviour, some involving human security and dignity and others involving other matters.
In other words, imperfection cannot be an excuse. It cannot be the starting point. It is the ending point after all reasonable efforts at compliance and oversight that is handled in good faith (I would say the best faith), has been shown to work, and even proactive behaviour in excess of legal requirements such as the FCPA are in place – whether for the FCPA or for other matters.
As always, comments and questions welcome.
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