Are your executives telling the truth when they say "ethics matter"? Senior executives are involved in 53% of bribery cases. And they know about 86% of corporate fraud cases. If management lies about ethics, what message does that send? What is the true "tone from the top"?
3. FIFA protects the integrity of football and is
fighting corruption in football.
-FIFA Football Governance “The guardians of
the game” 20 November 2014
4. We stand for respectable, honest actions in
everyday business that are in accordance with
rules...
- The Volkswagen Group Code of Conduct
Source:
http://www.volkswagenag.com/content/vwcor
p/content/en/the_group/compliance.html
5. The “Tone from the Top” at FIFA and
Volkswagen share a common element
What is it?
12. Companies that bribe have greater sales
growth compared to control firms for 3 years
before and 3 years after winning a major
contract through bribery
15. Companies that bribe have poorer net profit
margin (net income divided by sales revenue)
for the same 6 year period
16. Companies that bribe have poorer cumulative
abnormal returns (difference between the sum
of the monthly returns for bribing firms versus
control firms) for the same 6 year period
17. Companies that bribe perform poorer on
nearly every corporate metric used to measure
success
18. If you endorse corruption to achieve a goal,
you endorse corruption (full stop)
44. About the Author
Background
Eric Pesik is currently the Associate General Counsel and Compliance Officer for Seagate
Singapore International Headquarters Pte Ltd.
He also serves as an Adjunct Assistant Professor with the University at Buffalo, State University
of New York, in the School of Management.
He has been a lawyer since 1997 and is a member of the State Bar of California, USA. He is also
admitted to the US Court of International Trade in New York and the US Supreme Court in
Washington, DC.
Many of Mr. Pesik’s presentations are available on SlideShare at:
http://www.slideshare.net/ericpesik
Disclaimer
This work represents the opinions of the author alone, and is not the opinion his employer.
Creative Commons Attribution License
You are free to share, copy, distribute, and transmit this work; to remix or adapt this work; and
to make commercial use of this work, under the condition that you must attribute this work to
Eric Pesik (but not in any way that suggests that I endorse you or your use of this work). Each
slide contains source attributions and URL; before reusing, you must obtain the original images
from the original sources, and you must comply with any applicable license restrictions imposed
by the original source. http://creativecommons.org/licenses/by/3.0/
Notas do Editor
The truth about “Tone from the Top”
Image: Speaker by Björn Andersson from the Noun Project
https://thenounproject.com/search/?q=announcement&i=76611
FIFA protects the integrity of football and is fighting corruption in football.
-FIFA Football Governance “The guardians of the game” 20 November 2014
Source: http://www.fifa.com/governance/videos/y=2014/m=11/video=the-guardians-of-the-game-2477119.html
We stand for respectable, honest actions in everyday business that are in accordance with rules...
- The Volkswagen Group Code of Conduct
Source: http://www.volkswagenag.com/content/vwcorp/content/en/the_group/compliance.html
The “Tone from the Top” at FIFA and Volkswagen share a common element
What is it?
Image: Speaker by Björn Andersson from the Noun Project
https://thenounproject.com/search/?q=announcement&i=76611
They are lying.
Image: Lie By Iconathon, US
https://thenounproject.com/search/?q=false&i=15281
They are not alone.
Image: Lie By Iconathon, US
https://thenounproject.com/search/?q=false&i=15281
Management or the CEO is involved in 53% of bribery cases; Senior executives know about 86% of corporate fraud cases
Source: Corporate Executive Board, 2006, quoted in RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html
Source: OECD Foreign Bribery Report: http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm
If you wanted to design an incubator for generating misconduct, it would look a lot like the C-Suite
Quote: RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html
Image:: Team designed by Wilson Joseph from the Noun Project http://thenounproject.com/term/team/35432/
What makes the C-Suite so susceptible to corruption?
Image: Dark Money By Iconathon
https://thenounproject.com/search/?q=corrupt&i=15301
Management readily sees cause and effect between bribery and sales
Image: Linear Interaction By Attilio Baghino, IT
https://thenounproject.com/search/?q=linear&i=24519
Companies that bribe have greater sales growth compared to control firms for 3 years before and 3 years after winning a major contract through bribery
Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
But...
But there are negative side effects of corruption
Images: Linear Interaction By Attilio Baghino, IT,
https://thenounproject.com/search/?q=linear&i=24520https://thenounproject.com/search/?q=linear&i=24519
Companies that bribe have poorer net profit margin (net income divided by sales revenue) for the same 6 year period
Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
Companies that bribe have poorer cumulative abnormal returns (difference between the sum of the monthly returns for bribing firms versus control firms) for the same 6 year period
Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
Companies that bribe perform poorer on nearly every corporate metric used to measure success
Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
If you endorse corruption to achieve a goal, you endorse corruption (full stop)
Image: Speaker by Björn Andersson from the Noun Project
https://thenounproject.com/search/?q=announcement&i=76611
If you lie, your employees will lie
Image: Lie By Iconathon, US
https://thenounproject.com/search/?q=false&i=15281
If you cheat, your employees will cheat
Image: Deep Web By Matt Brooks, US
https://thenounproject.com/search/?q=fraud&i=62765
If you give bribes, your employees will take bribes
Image: Bribe By Luis Prado, US
https://thenounproject.com/search/?q=bribe&i=26816
Tone from the top is not what you say, it’s what you do
Image: Speaker by Björn Andersson : https://thenounproject.com/term/presenter/76611/
Bribe By Luis Prado, US: https://thenounproject.com/search/?q=bribe&i=26816
81% of all frauds are perpetrated by at least one insider
Image: Deep Web By Matt Brooks, US, https://thenounproject.com/search/?q=fraud&i=62765
Source: Kroll Global Fraud Report 2015/16 http://www.kroll.com/global-fraud-report
5% of all revenues are lost due to occupational frauds
Image:Grab By Iris Sun, GA, https://thenounproject.com/search/?q=theft&i=121228
Source: ACFE Report to the Nations on Occupational Fraud and Abuse, http://www.acfe.com/rttn.aspx
Companies are more often victims of corruption than beneficiaries
External Fraud Source: OECD Foreign Bribery Report (2014)
Internal Fraud Source: ACFE Report to the Nations on Occupational Fraud and Abuse, http://www.acfe.com/rttn.aspx
Image: Fraud By Iconathon, US https://thenounproject.com/search/?q=fraud&i=15213
How can you change a culture of corruption?
Image: businessmen by tsv from the Noun Projecthttps://thenounproject.com/search/?q=team&i=48054
Start changing traditional ethics training
Image: Education designed by Chris Matthews: http://thenounproject.com/term/education/3012/
When the big people get in trouble, the little people get ethics training.
Quote: RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html
Image: Education designed by Chris Matthews: http://thenounproject.com/term/education/3012/
Target the “big people” about how corruption causes internal fraud
Images: Linear Interaction By Attilio Baghino, IT
https://thenounproject.com/search/?q=linear&i=24520https://thenounproject.com/search/?q=linear&i=24519
CEOs are prone to viewing the company’s success as indistinguishable from their own.
Quote: Scott Killingswroth, Partner Bryan Cave LLP, “C” is for Crucible: http://compliancestrategists.com/pro/wp-content/uploads/2013/10/%E2%80%9CC%E2%80%9D-Is-for-Crucible.pdfImage: Superhero designed by Juan Pablo Bravo from the Noun Project: http://thenounproject.com/term/superhero/23556/
When bribery hurts shareholder value it hurts the CEO
Image: Graph By Simple Icons https://thenounproject.com/search/?q=decline&i=30986
Use targeted motivators in your ethics training
Image: Education by Travis Yunis
https://thenounproject.com/search/?q=lecture&i=25971
Motivation: Shareholder Value & Exec. Mgmt; Career Opportunity & Middle Mgmt; Job Security & General Employee Base
How do whistleblowers help?
Image: Alert by Phil Laver from the Noun Project
https://thenounproject.com/search/?q=shout&i=22814
Whistleblowers are effective at discovering external fraud, and even more effective at discovering internal fraud
Bribery Source: OECD Foreign Bribery Report (2014) http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm
Fraud Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
Image: Whistleblower By Lorie Shaull, US, https://thenounproject.com/search/?q=whistleblower&i=89125
Discovering Internal Frauds.
Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
Median Losses After Discovery
Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
Reduction in Median Losses with Effective Internal Controls
Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
Whistleblowers are one of many internal controls that support an ethical culture that reduces internal corruption
Image: Linear Interaction By Attilio Baghino, IT, https://thenounproject.com/search/?q=linear&i=24519
An ethical culture that reduces internal corruption sustains a profitable culture
Image: Linear Interaction By Attilio Baghino, IT, https://thenounproject.com/search/?q=linear&i=24519
Sustained profits make your CEO a superhero
Image: Superhero designed by Juan Pablo Bravo from the Noun Project: http://thenounproject.com/term/superhero/23556/
So your executives can tell the truth when they say “ethics matter”
Image: Speaker by Björn Andersson from the Noun Project
https://thenounproject.com/search/?q=announcement&i=76611
About the Author
Background
Eric Pesik is currently the Associate General Counsel and Compliance Officer for Seagate Singapore International Headquarters Pte Ltd.
He also serves as an Adjunct Assistant Professor with the University at Buffalo, State University of New York, in the School of Management.
He has been a lawyer since 1997 and is a member of the State Bar of California, USA. He is also admitted to the US Court of International Trade in New York and the US Supreme Court in Washington, DC.
Many of Mr. Pesik’s presentations are available on SlideShare at: http://www.slideshare.net/ericpesik
Disclaimer
This work represents the opinions of the author alone, and is not the opinion his employer.
Creative Commons Attribution License
You are free to share, copy, distribute, and transmit this work; to remix or adapt this work; and to make commercial use of this work, under the condition that you must attribute this work to Eric Pesik (but not in any way that suggests that I endorse you or your use of this work). Each slide contains source attributions and URL; before reusing, you must obtain the original images from the original sources, and you must comply with any applicable license restrictions imposed by the original source. http://creativecommons.org/licenses/by/3.0/