David Gebler was named to Trust Across America’s 2012 list of Top Thought Leaders in Trustworthy Business Behavior. See the full list

The Ethics Resource Center, a Washington DC based ethics research organization, released its 2011 National Business Ethics Survey. The NBES is regarded as the premier survey of ethics issues in the American workplace. This year’s survey identified some interesting trends: On the one hand, misconduct has reached an historic low and observers of wrongdoing are…

[read more]

The unfolding sage at Penn State will continue to provide critical lessons on how the pressure to meet financial goals can cloud our judgment.

As was reported today on Bloomberg:

“There is so much money tied into big-time college athletics that it forces some people to make bad decisions,” Harris said in a telephone interview. “They may be people affiliated with a program, or coaches and administrators who do things purposely wrong, or turn a blind eye, because they are focused on generating revenue and not necessarily the integrity of the enterprise.”

We don’t yet know whether Joe Paterno was cynically rationalizing his inaction because of the business pressures of running the football program, or whether he deceived himself into inaction. But the key question is whether is really matters.

Read what people in the know are saying about The 3 Power Values

From an organizational perspective the questions raised by the scandal at Penn State relate to the culture, at the university and within the football program. Bad things may always happen, but it should be unacceptable to permit a culture to exist that both does not permit questionable behavior to be reported, as well as potentially permit good people to wear blinders so opaque that they cannot see what is clearly right in front of them.

NY Times columnist David Brooks raised the possibility that our human nature may keep us from seeing things that are truly right in front of us. He recently wrote, “some people simply can’t process the horror in front of them. Some people suffer from what the psychologists call Normalcy Bias. When they find themselves in some unsettling circumstance, they shut down and pretend everything is normal.”

Highlighting provocative research that I refer to in The 3 Power Values, Brooks also acknowledges that people are really good at self-deception. “We attend to the facts we like and suppress the ones we don’t. We inflate our own virtues and predict we will behave more nobly than we actually do. As Max H. Bazerman and Ann E. Tenbrunsel write in their book, Blind Spots, ‘When it comes time to make a decision, our thoughts are dominated by thoughts of how we want to behave; thoughts of how we should behave disappear.’”

However, the environment where these kind of  actions take place have a major influence on behavior as well. Football itself may contribute to a culture where brutality is accepted. As NPR commentator Frank Deford writes, “Football is our proud American throwback showcase of men being at their best, most primitive masculine. Indeed, the question of whether the sport is too brutal has always been an issue, and nowadays, of course, the subject is as prominent as ever.”

Or perhaps the culture at Penn State was unique in the intensity of these values, coupled with the imperiousness of the football program at Penn State.

Matt Paknis, a former graduate assistant coach working with Penn State’s offensive linemen, was recently interviewed by Sports Illustrated. Paknis writes, that “Culture is made up of three things: values, beliefs and behaviors. It’s going to take a while. Paterno’s power went way beyond Penn State. Clearly, somebody delayed this whole thing until Paterno could get his record. Using people from the same pool they pretty much know is repeating the dangers of what they had. I don’t see how there can be really effective change unless others come in and set the groundwork, or you bring in new blood completely.”

Adding to this culture was the fact that the players and coaches isolated themselves from the rest of the Penn State community. This created an insular and elitist culture, one where it would not be unusual to feel that regular rules do not apply.

Paknis continues, “You have to look at how this happened. It obviously happened because Joe’s been given so much free reign. No one would ever approach him because he keeps the graduation rate so high, and they steered clear of every major NCAA violation, though now they’d probably be willing to trade every major violation in the book for this one. I think they were looking at their metrics and measures, the end result being that maybe the ends justify the means.”

A football program as dominant as Penn State’s must display a high degree of transparency. Yes, active and concerted efforts must be made to ensure that policies, procedures, and decisions, are subject to review by outside parties that do not have a vested interest in protecting the program above all else.  But beyond this, there must be tighter integration of the football program and football players and personnel with the broader campus community. Words alone are not enough. Individuals without the same vested interests as the football organization must have access to players and coaches so as to be able to hold them accountable for their actions. Football can be respected without being imperial. Penn State must set up systems so truth can be spoken to power. In spite of the intensity of the competition, the football program needs balance to remind its personnel that there are obligations outside of the hallowed halls of the athletic facilities.

Recently in the Wall Street Journal Robert Sutton highlighted the destructive influence of a few bad characters on an organization’s entire corporate culture. According to Sutton, “Leaders who let a few bad apples in the door—perhaps in exchange for political favors—or look the other way when employees are rude or incompetent are setting the stage for even their most skilled people to fail.” Studies have shown that having even one slacker in a group can bring down the entire group’s performance 30% to 40%.

While it is of course best to screen for jerks in the hiring process, it is critical to ensure that the culture knows how to isolate the bad apples. Like a healthy immune system, a healthy culture can surround the bad actor and generate clear messages that the “bad apple” behavior is the exception, and not the rule.

The challenge for organizations is to be able to articulate just what is positive behavior. Organizations that are not self-aware cannot take the specific steps needed to isolate the unacceptable behavior.

David Gebler, an expert in corporate culture, ethics and values, recently lead a 75-minute discussion at Bentley University on what are the root causes of why good employees do bad things. In a program sponsored by the Design and Usability Center and the Center for Business Ethics, Gebler showed how key fundamentals of social psychology and behavioral economics get lost in corporate culture, unnecessarily creating risks for organizations.

David Gebler quoted in CFO Magazine article on Creating a Culture of Compliance

The Wall St. Journal reported today that Western companies including Cisco Systems Inc. have been contracted to build an ambitious new surveillance project in China —a citywide network of as many as 500,000 cameras that officials say will prevent crime but that human- rights advocates warn could target political dissent.

US law is generally fairly restrictive on use of certain technologies by foreign governments. For example, Since the Tiananmen Square riots of 1989, the US has restricted the export of “crime-control” products. However the camera and surveillance products Cisco is providing seems to fall within a loophole.

This news reasserts an interesting question that gets raised every few years: Should companies be held accountable if foreign governments use their products for political suppression?

When looking at the progress in fair labor practices in Asia, for example, it seems that we have come a long way from the early legal maneuverings when Nike and others said they had no legal obligation to the employees of sub-contractors. And yet in today’s news, when asked about concerns about political use of the system, Todd Bradley, an executive vice president who oversees H-P’s China strategy, said in an interview last week in China, “We take them at their word as to the usage.” He added, “It’s not my job to really understand what they’re going to use it for. Our job is to respond to the bid that they’ve made.”

Western business leaders are certainly torn between not wanting their products to be misused versus missing an opportunity to sell in a growing market.

What should be the criteria by which a company determines whether it is in its best interests to engage in legal, but controversial transactions with foreign governments?

Before the company engages in controversial contracts, it should assess the impact of the decision on a variety of its stakeholders. There is more at stake than the value of a contract or market share in one country or region. The company must clearly account for and measure any potential downside risks. However, instead of just determining which stakeholders will be happy (shareholders) and which will be upset (NGO’s and human rights advocates), the company should first determine whether the actions are in fact consistent with their values. If so, then managing the flak will be much easier.

Weak denials (akin to “guns don’t kill people, people do”) create confusion, among employees and other stakeholders. The company needs to be clear about what it stands for. If how a customer uses the product is not an issue for the company, so long as no laws are broken, then the company needs to be able to state that clearly. Be transparent that these are the company’s values. Don’t expect to win human rights awards but don’t be apologetic either.

But if the leadership feels queasy about the actions, then some introspection is needed. Why is there a conflict? Are there stated or unstated values that are at risk? Will the actions impact employee engagement or commitment because the actions go against principles the employees thought the company stood for? Does the company even know what it stands for?

Has the company been transparent in its actions? In this era of no secrets, it is far wiser to take the lead and be fully open with its transactions. Otherwise, the organization and its leaders will lose the trust it needs from employees, suppliers and other stakeholders. Don’t give people grounds to start thinking, “If they are cagy about this, what else haven’t they told me?”

Companies shouldn’t shy away from controversial transactions. But they should enter into them with their eyes open and with the courage to say how this transaction is consistent with their values, whatever they may be.

The Society of Corporate Compliance and Ethics has just updated The Complete Compliance and Ethics Manual. I was honored to have been given the opportunity to write the opening chapter on Defining Ethics and Compliance and The Role of Culture.