Integrity is defined as ‘the quality of being honest and having strong moral principles’. It is an attribute universally coveted by companies and senior managers. One that needs constant nurturing because it is fragile.
As Tom Peters said:
“There is no such thing as a minor lapse of integrity.”
The bigger a company gets, the more its corporate integrity is exposed to risk. It achieves scale by automating processes and creating hierarchies, which, in turn put distance between senior management and their staff. Systems start to get taken for granted. They are put in place with the best of practices and intentions but gradually, things begin to slide. Not because the integrity of the system is at fault, but because human beings are operating within the system. It’s like a traffic light system. We take for granted that every road user will stop on red, slow down on amber and go on green. But what happens when someone jumps the red light? We get annoyed, and then outraged, if it becomes more prevalent. Then we start to change our behaviour to compensate. Now every time we reach an intersection, and the light turns green, we pause and check before moving forward. The users within the system have shifted slightly off-kilter to account for the breakdown in the system. And soon, this behaviour becomes the norm: go on red, pause on green, ignore amber. If the “company” (in this case the traffic management authorities) notices and adds extra systems to counteract the slip, then everything gets back on track. If no one notices or acts then the slip just gets worse and corporate integrity is at risk.
Corporate Integrity in the news
History is littered with red light jumpers. Nick Leeson, the futures trader who single handedly brought Barings Bank to its knees in 1995, is a prime example. Although he was blamed as a “rogue trader” and certainly took pains to hide his losses, after investigation it turned out that the Bank had ignored an internal memo sent through two years previously. It warned the London headquarters about the danger of allowing Leeson to be both trader and settlement officer, which meant that he was able to cover up his losses. A second warning came in January 1995, a month before the collapse. In it the Singapore Monetary Exchange (SIMEX) expressed concern to the bank about Leeson’s dealings. Management ignored this concern and wired him $1 billon to continue his trading. Within the month, the Bank that had been trading for over 200 years was declared bankrupt and was subsequently sold for £1. An expensive lapse in corporate integrity.
The next decade, it was the turn of Enron to become the poster child of dubious accounting practices and dodgy dealing. In this case it was the leadership of the company who actually set up a system of deceit by creating “partner” companies in which to conceal their losses. Their collapse resulted in an investigation which led their auditors, Arthur Andersen to be found guilty of obstruction of justice and to close the doors to their auditing business. Arthur Andersen, a company once famed for its straight talking integrity, had succumbed to the lure of profits.
Recently, Tesco has joined the ranks with a “black hole” in their profits currently being investigated. While this recent scandal is still to play out, Tesco has always been rather good at putting a great PR spin on allegations of less than ethical dealings. However, there are some lapses in corporate integrity that are almost impossible to talk your way around.
The leaders all of these businesses either sanctioned or ignored practices that have led them to fail (or in the case of Tesco put them at risk of failure).
Values have to come from the top and then filter down. CEOs and other senior managers at the helm of large organisations need to be able to steer their company and engender a culture of transparency and corporate integrity that inspires trust at all levels. Of course personality, experience and professional credibility play a key role here but training and development are also instrumental. The best “traffic cameras” to install are those that are embedded in training programmes and then measured, year by year as a way of keeping a finger on the company’s ethical pulse. There also has to be a commitment from the top to act on any problems that are flagged. Recognising that there are red light jumpers doesn’t stop the behaviour – action and continued measurement does.
That’s why Tom Peters’ assertion that “There is no such thing as a minor lapse of integrity.” rings so true to me.