Chesapeake Lighthouses and Lighting the Way for Compliance

In the winter 2013 issue of the Colonial Williamsburg magazine is an article by Michael Lombardi, entitled “Lighthouses Marked the Shoals of the Commerce Clause”. In this article, Lombardi wrote about four lighthouses authorized by Congress in the late 18^th and early 19^th century to light the way for sailors in Chesapeake Bay. The four lighthouses were the Cape Henry Lighthouse, the Old and New Point Comfort Lighthouses and the Smith Point Lighthouse. All four still exist today and one, the Old Point Comfort Lighthouse, is still in operation.

I thought about the story of these lighthouses and how they literally lit the way for sailors for over 200 years when I read an article in the Q2 issue of Ethisphere Magazine, entitled “Imagination Working with Integrity: How General Electric Creates a Global Culture of Ethics”, by Michael Price. Price discusses how General Electric (GE) has made “ethics and compliance a benchmark of its operations around the world, and is, in many ways the gold standard that other companies look to when it comes to modeling global compliance and ethics programs.”

I also considered these lighthouses in the context of how GE sets the tone for ethics and compliance and then communicates that commitment throughout its organization. Obviously it all starts at the top and GE is a prime example of this strength. Price noted that GE’s top brass meets annually at a conference where one of the frequent topics was ethics and compliance and the need for integrity in GE. Following this meeting of the GE senior management, they cascade down this commitment to middle management and emphasize the reputational risk to GE should there be a violation of the Foreign Corrupt Practices Act (FCPA) or other anti-corruption statute by the company. The middle managers then further cascade this message down so that it goes through the whole company at regular intervals.

Price made clear that one thing that GE will not tolerate is a manager who fails to take ethics and compliance seriously. This extends to managers who were ignorant of compliance issues in their units. He wrote that GE has “removed people from leadership positions when they didn’t know there was a problem”. GE demands that its management not only be aware of compliance in their units, but to ask “the right questions when they are faced with an uncertain situation”.

As you might expect from a company which has business in over 100 countries, GE has to work with many different cultural norms. It can be that “different cultures have different frameworks for understanding integrity and how to confront unethical conduct.” So, for instance, to overcome some cultural barriers of reporting unethical conduct GE has “five different pathways in which employees around the world can bring their concerns to management’s attention.” These pathways include the following:

• Employees can talk directly to their managers;
• Employees can go to talk to people in the compliance function;
• Employees can go to talk to someone in the legal department;
• Employees can take their concerns to HR; and
• Employees can report anonymously to an ombudsman through a variety of channels.

GE provides several types of training in each of these methods and has “Compliance Days” in “which the company discusses compliance issues and reiterates the importance about employees raising concerns about unethical practices.” The article makes clear not only how seriously GE takes compliance but that it believes its commitment to ethical practices makes it stand out as a market differentiator. I would say that ethics and compliance is even a lighthouse for corporate culture at GE, in many ways, leading the way by which GE does business and conducts itself.

I once worked for a major oilfield service company where it was clear that safety was the Number 1 priority. We started every meeting with a safety moment. Each year, there was one day where the entire company stood down and met on safety on a world-wide basis. Both of these techniques emphasized to me not only the importance of safety but that safety was my responsibility as well, even though I was a lawyer doing international transactional work. This was another lighthouse but it was one for safety.

As a recovering trial lawyer who has handled many personal injury lawsuits and then worked in the energy industry, I will always consider safety as Mission Number 1 but I would like to propose that ethics and compliance is Mission 1A in your company. Try some of the techniques that GE uses to communicate its commitment to ethics and compliance. It does not cost anything to have senior management meet with middle management and tell them about the company’s commitment to integrity. It does not cost anything to allow employees to speak with their immediate managers about concerns over unethical practices, go talk to someone in the compliance department or legal department about such concerns or report their concerns to HR. If you do not have an anonymous reporting line, it is about time you invested in one. I do recognize that many companies do not have an ethics and compliance ombudsman but the key concept there might be that by having such an impartial position, employees believe they will be treated fairly.

How about having a compliance moment before every meeting? By having such a moment before every meeting you can not only provide some teachable moments but also drive home the concept that compliance is everyone’s responsibility not just the responsibility of the compliance or legal department. How about a Compliance Day? If you cannot go that far, I would suggest that you hold a series of brown bag lunches where you talk about doing business with integrity through ethical and compliant business practices. You could hold them throughout the company.

One thing I learned as a lawyer is that you are only limited by your imagination. Try to get the message out because compliance is in many ways, the 21^st century lighthouse for doing business.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013