What do you do if you personally view, experience, or even strongly suspect that your company has undertaken an activity or endorses behaviour that is counter to the moral high ground, breaks a regulation (or two), or could even be illegal?
“Determining where to draw the line and evaluating when to tattle can be a lifelong moral dilemma,” concedes Janaya P. Moscony, CFA, president of SEC Compliance Consultants. “However, the risk comes in when you don’t have all of the facts and you could harm yourself or another person.” She suggests gathering as much information as possible and cautions that if you don’t have all of the facts, it’s wise not to jump to conclusions.
Sizing It Up
Where you are seeing or sensing a breach, you likely need to make some early determinations.
“The most important thing is to be able to first determine what is an ethical issue versus something that you just do not like,” says Maureen O’Brien, owner and managing member of DynaMo Consulting. “You need to document the who, what, when, and where details whenever possible.” Taking concise notes can prove critical.
If you are working for a regulated entity, such as an investment management firm, there should be written policies, stipulations, and procedures to follow if you suspect an illegal or ethical breach has occurred. These are found in a firm’s compliance manual, which should be available to refer to.
But tread cautiously. “Consider what to do before you light the place on fire,” counsels Todd Cipperman, attorney and founding principal of Cipperman Compliance Services. “There may be lots of facts that, as an employee, you don’t know about.”
If you suspect some type of a breach has taken place should you report your suspicion to your direct supervisor or take it to the chief compliance officer?
“You can start by reporting the next level up, unless you believe that your superior is implicated,” says Ronald M. Feiman, attorney and partner with Kramer Levin Naftalis & Frankel. “It’s always okay to go to the firm’s chief compliance officer or a compliance staff member. They can investigate and report on the issue without bringing you into the mix and will usually mask the names of sources.”
Even if you suspect that the top executive may in some way be implicated, it’s highly unusual to find that the chief compliance officer is also compromised, so reaching out to him or her is wise, according to Cipperman. He suggests that you put your concerns in writing and that you very carefully word your communication to express your concerns and say that you saw something that may need to be looked at.
Employees are most effective when they begin with an open stance and enquire about what they are seeing under the presumption that there may very well be a reasonable explanation for what appears to be misconduct, suggests Ann Skeet, director of Leadership Ethics at the Markkula Center for Applied Ethics at Santa Clara University
If reassurances can’t be convincingly provided, she recommends that employees refer back to the company’s mission statement or expressed set of values and enquire as to how the practice they’ve identified supports a specific value, such as transparency.
Should I Stay or Should I Go?
If you have reported what you believe to be a significant breach or problematic activity, you must then decide whether to stay or leave the company. This is particularly important if management or the company fails to address significant identified infractions, elects to ignore or dismiss them, or excuses them away.
“If you are in a supervisory or compliance position and you know something is a serious violation but your company refuses to do anything to stop it, I believe you have an obligation to ‘report and run,’” says O’Brien.
There is always the option of elevating your concerns externally by contacting the appropriate regulator. However, there can be severe and longer-term career consequences to this approach that you must first carefully consider. Reporting problems to a regulator is an option that can be utilised “where there is fear of reprisal or the problems perceived appear systemic rather than one-off ethical/compliance breaches,” notes Harvey Pitt, founder and CEO of Kalorama Partners.
If you do properly report a suspected problem internally and are subsequently fired — especially if you believe your employer is retaliating against you — your best action is to hire an employment lawyer.
How can you assess the ethical culture at a prospective new employer?
When a prospective employer asks you why you’re seeking to move, Feiman recommends being honest and testing the new waters. “Mention that you are seeking a new perch because you were not comfortable with the thoroughness of compliance at your previous/current firm, and then gauge the reaction,” he says. Is that met with shock and dismay or with open arms and approval?
It’s often difficult to truly assess a firm’s moral compass until you are working at the firm, Pitt acknowledges. But during a discussion with a potential employer’s chief compliance officer, remember to carefully assess not only answers to your questions but also their body language, which can provide definite clues.
Tap social media resources, such as LinkedIn to connect with current and former employees and ask about a firm’s ethical culture and reputation. Do your own research to determine whether there’s been a great deal of senior leadership turnover at a firm or whether company leaders have been there for 30 years and may be stuck in their ways. Either can be a red flag.
Conventional wisdom dictates that a truly ethical and compliance-sensitive corporate culture most often starts at the top, with a company’s top executive. Experts suggest sniffing out the reputation of a top executive.
“No single person creates culture, but a founder or CEO can certainly influence culture,” says Skeet. These top executives can help mould a positive and purposeful ethical culture.
Skeet suggests watching for four ethical red flags: (1) Employees make disparaging remarks about colleagues in the interview process. (2) The company emphasises perks and compensation. (3) An emphasis is placed on secrecy, as opposed to confidentiality. (4) References are made to poor or conflicting communication practices.
“If you work for an organization that does not match with your culture, it can be soul crushing,” concedes Cipperman.
This article originally ran in CFA Institute Magazine.
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