“We had the best code of conduct of the US, compliance officers from all over the world came to us for advice,” Andrew Fastow said recently at the ‘Fraud Investigators Day’ of the Dutch Institute for Financial Crime.
Fastow is the former CFO of Enron and co-responsible for the largest financial fraud scandal in the history of the United States. He served seven years in prison for his involvement in the scandal. Of those seven years, the first years were the hardest. Not only because he had his freedom taken away, but especially because he did not understand what he had done wrong. After all, he had never broken the rules.
Strictly speaking, Fastow never broke the rules, but he failed to act in line with the principles behind the rules. It was because of the latter that he was ruled to be culpable by the court. As the CFO, Fastow was responsible not only for his own actions but also for the actions of his staff members, and he should as a role model have set the right example. An organisation can have a sound code of conduct, a whistleblower hotline and frequently organize dilemma sessions, but all this will not lead to the desired effect if the senior management is visibly looking for loopholes in the law. Enron had a remuneration policy based on 25 KPIs, most of which were not focused on financial performance, but everyone in the organisation knew that in reality there was only one KPI that really mattered: making money. If you made a lot of money for the company, you were not held accountable for unethical behaviour to any meaningful extent.
This series of blogs discusses eight cultural dimensions, one of which is role modelling. Role modelling or management setting a good example for its employees, is one of the spokes of the wheel, and an organisation needs all the spokes to go in the right direction. One of our clients approached us because they had noticed, after a number of incidents, that ‘the wheel was jamming up’. To get to the core of this, we sent out a scientifically based survey and then held interviews and organized focus group sessions with the staff members of this company. The management was shocked by the findings. Staff members felt unsafe and did not take the company’s mission, vision and values seriously, because they saw managers doing the opposite of what they said.
Our team has given this client insight into the culture that is experienced on the work floor, but which was not being discussed in their internal dialogue. We are now working with this client on the next step: creating a culture in which (renewed) values are promoted, with the management taking the lead.
Would you like to know how your staff members feel about the example you set? Please feel free to contact us if you have any questions; we are happy to discuss them with you.
This is the second blog in a series of 9. You can find the other blogs here: