Thursday, May 3, 2012

Branding Socially Responsible Behavior

The United Nations Global Compact has a great mission - "The Global Compact strives to be the world’s most inclusive voluntary initiative to promote responsible corporate citizenship", and a "sustainable and equitable global economy." This organization is one of the few at the United Nations for whom the private sector is critical. It's mission is to create an "inclusive voluntary initiative" that promotes ten specific principlesTo achieve this goal the organization is now working to reinforce it's principles via strategy and operations - to ingrain incentives into the organizational processes.

One strategy that must be explored is greater consumer participation in the selection process of goods and services. For the global citizen to realize her full purchasing power, pertinent information must be available. There is a participant search function gives the public access to a database of organizations from around the globe, and information about their participation status.

The data is good, but the interface is clumsy - the search parameter selection is time consuming, and the participant search page itself is deeply buried among other websites. The average consumer has no idea it exists - this is a wasted resource. 

Creating a palatable interface for this data will put greater power of selection into the hands of the consumer. This will enable the consumer to 'vote with her wallet', based on her own ethical standard. Markets have seen the increased demand for organic goods, and responded to the push for "green" transportation and safer cleaning product. When the consumer has a choice, it is often made with consideration for personal ethics and principles.

An implementation of this concept might look like the Fair Trade, or Certified Organic stamp on a variety of products. These are certified logos that indicate to the consumer the company's commitment to ethical business practices. The same mechanism can be used to promote a business' good standing with the Global Compact. In a growing online market, distributers have access to consumers in all corners of the globe - conversely, consumers have access to producers and distributers at every corner as well. This is why branding the Global Compact's principles would be an effective way to encourage producers to embrace them. 

Another operationalization of this concept can take the form of a bar-code scan system that links the consumer to a rating site for participating organizations. A smartphone application barcode reader is the most effective way to link to the world's consumers - organizational status information can be easy to access, and easy to understand - providing the consumer the information she needs to make a more informed decision. It will encourage the consumer to ask herself, is this company or website, based out of Argentina, China, India, Jordan, Malaysia or Thailand, certified Socially Responsible? Software currently exists that maps publicly funded data and graphs in a way that is palatable to the global public. Creating a search feature for this data is the next step. 

As economies around the globe evolve, organizational issues will arise. Empowering the consumer to participate in a selection process that includes the Global Compact principles is an important step. NGO involvement in the certification of the diamond trade took time and an incredible amount of effort - but it has changed the lives of millionsThe United Nations does not have the time or resources to monitor participants' performance, but the consumer has time to look for a label that supports a cause that she agrees with. The Global Compact, "reserves the right to publish the names of companies that have been expelled for failure to communicate on their progress." This is an incredible social power that should be utilized through public access - creating a palatable format is key to making a difference. 

Sunday, April 22, 2012

What is Corruption?

The past few months I have been talking with Ethics professors, business school students, not-for-profit executives, and NGO workers about corruption. While we all agree on many things, one issue has really popped out - what constitutes corruption.

Our economic system is clearly badly broken - growing social problems like random shootings, robbery, and drug crime are all symptom of this fact. It is hard to explain to fiscal conservatives that poor people commit crimes that cost all of society much more money than it would cost to just pay them a living wage. Intermittent employment, and unemployment cause mental illness. This has been known since the Hollingshead study in the 50's. Left untreated, neuroses spirals into psychosis. Psychosis manifests itself in very costly, and horrific ways. Keeping people employed full time, and paying them enough to raise a financially secure family is necessary for a psychologically sound society. Tinker with this, and you've got a high prison rate, erratic violent crime, and host of other social disorders.

But, you may ask, how does this have anything to do with corruption. It's not illegal in any way to use minimum wage, part-time workers. If you ask any MBA, they will describe corruption as a very narrow and limited number of illegal behaviors. It is illegal to steal, lie, cheat, take bribes, offer bribes, and so on. Corruption does not deal with ethics, and does not concern itself with corporate social responsibility beyond what the law requires.

I posit it is time to speak of ethics - or lack thereof - as a type of systemic corruption, and posit further that it is the responsibility of our lawmakers to force business to handle workers in a way that promotes a healthy society. Business needs a hippocratic oath to do no harm.

Taken from wikipedia - one of my favorite sources because it actually sites information, and can easily be cross referenced via the original source - unlike most opinion pieces I come across. Corruption is, "iphilosophicaltheological, or moral discussions, is spiritual or moral impurity or deviation from an ideal. In economy, corruption is payment for services or material which the recipient is not due, under law. This may be called briberykickback, or, in the Middle East, baksheesh. In government it is when an elected representative makes decisions that are influenced by vested interest rather than their own personal or party ideological beliefs."

We see there is a clear separation of how the word corruption is used, depending on the discipline it is used in. I suggest there is a hybrid definition that must be applied to any organization that takes part in shaping society through it's effect on the lives of workers. Our workforce is dependent on a healthy economy for mental health - both at a national, and familial level. Because of this fact, any organization taking up employees has a responsibility to conduct itself in such a way that promotes the financial security of those dependent upon it. The recent global economic collapse is the ultimate proof of how dependent all people are on organizational decisions. 

Business is too important to the welfare of all people to be left in the hands of businessmen. When it comes to policy creation governing organizational behavior, laws and regulations often do not manifest themselves as intended because of loopholes, exceptions, and exemptions. While legal, I see this as very highly corrupt practice. 

I would like to propose speaking of organizational, and regulatory corruption as a deviation from an ideal - a deviation from an intended purpose. Specifically, this concept should be applied to our government policy making process. There is the intended purpose of a policy - providing incentive to grow profits, and employ more workers, and there is a perversion of an intended policy - slashing pay and benefits for workers to allocate more money to profits to create the appearance of a healthier 'leaner' organization to grow a stock price and entice investing. 

While legal, many practices like this are a perversion of the intended function of an organization, and have disastrous social consequences. Without addressing these deviations from the intended purpose of any given policy, our economic system - and society as a whole - is going to continue to suffer greatly. Mental illness is extremely expensive and difficult to treat, and is paid for by insurance companies and governments. This amounts to essentially a subsidizing of poor organizational choices, and subsidizing of perverted regulations. To talk solutions, we have to begin a conversation that talks about corruption of our system in greater terms then legal/illegal. 

Thursday, July 7, 2011

Establishing a Career in Anti-Corruption and Fraud Prevention

Looking through websites for information can be tedious - why force others to waste time finding something you have? Here is a quick look at several sites with career info for anti-corruption and fraud prevention.  

A great place to learn about anti-corruption initiatives is the Global Impact site affiliated with the Unites Nations. This organization is setting behavioral standards for powerful entities with principles such as number 10, 
"Businesses should work against corruption in all its forms, including extortion and bribery."
"Corruption is now recognized to be one of the world's greatest challenges. It is a major hindrance to sustainable development, with a disproportionate impact on poor communities and is corrosive on the very fabric of society. The impact on the private sector is also considerable - it impedes economic growth, distorts competition and represents serious legal and reputational risks. Corruption is also very costly for business, with the extra financial burden estimated to add 10% or more to the costs of doing business in many parts of the world. The World Bank has stated that "bribery has become a $1 trillion industry."

Another good site to review is the International Bar Association where industry insiders discuss the fact that,
"[t]he global anti-corruption movement is making headway." And that "[t]he United States is often said to lead the world in this area." 
Skip Kaltenheuser
"[i]t’s now been a decade since the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions entered into force."
Although this work is still in it's early stages, the more brilliant minds working to develop a solution the faster one will be realized. 

If you are looking for positions that require an MA in Organizational Psychology, the United Nations has a lot to offer. Try a job search through any of these departments for career opportunities - and look closely for those with special emphasis on anti-corruption and fraud prevention.

For those who are interested in fraud within our health care system, NHCAA offers a career search page that allows a search of available positions.

There are numerous agencies that deal with Ethics, such as the United States Office of Government Ethics that is searching for Agency Ethics Officials.

A good site to get involved with is POGO, a Project On Government Oversight that functions as a

"nonpartisan independent watchdog that champions good government reforms". POGO’s investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.  Founded in 1981, POGO (which was then known as Project on Military Procurement) originally worked to expose outrageously overpriced military spending on items such as a $7,600 coffee maker and a $436 hammer."
And there is the United Nations exam center, where one can certify her skills in foreign language to greater increase her effectiveness abroad.

Transparency International is building a powerful team, and has a page that can answer questions like 

Also, check out the page that lists career opportunities!

USAID also has career opportunities! Look over the types of anti-corruption programs listed under the Democracy and Governance page for an introduction to their reach. 

The International Chamber of Congress also has a force dedicated to anti-corruption in business. 

There are numerous organizations that are in need of professionals in our field and a degree in organizational psychology is a perfect fit for behavior change that reduces fraud and corruption within organizations and governments.

    Monday, June 27, 2011

    Corporate culture

    When discussing scientific methods for controlling for fraud the conversation will naturally drift to corporate culture at some point. At this juncture one may question the types of behaviors the "unwritten rules" of an office or company is encouraging - without intent. A good example of how this happens is illustrated in the Enron story, The Smartest Guys in the Room. Here you see how rewards can out-weigh the consequence of misbehavior and how personal gain can cause ethical blind spots. No company must literally write out a policy on defrauding consumers, they simply reward that particular behavior in their employes, and turn a blind eye to the rest.

    It's almost like magic, how well incentive works.

    Tuesday, June 14, 2011

    SEC Incentive vs. Corporate Incentive

    There exists a huge problem with market regulation and the poor quality thereof - this has become painfully apparent. What has also become quite apparent is that individuals committing business crime are far better compensated than those who's responsibility it is to control them. Here's the deal - The SEC pay is regulated by the federal government. Although this is not inherently problematic, in and of itself, it causes a serious issue with the decision to vote in pay increases for the employees of the SEC. Allow me to break down my logic.

    A pay raise for any government official (including the SEC) is voted in - here's where things get ugly.
    Corrupt politician 'Y' is taking illegitimate dollars from corporation 'X' to draft/vote in/sign legislation that directly benefits company X's operations. This has been found to be rather common as of late. (Think commingling of ratings boroughs and lenders) The mess we have now was something that was voted in and thought to be a good idea. The SEC should have taken a closer look at this and asked some questions. No one did, now everyone wants to know why. Here's what I think might have contributed to the lax behavior of our SEC - if we want quality performance, we better dish out quality pay. People are motivated by many things, and although money has turned out to be less significant than intrinsic rewards, brilliant minds do not work for peanuts.

    Large Corporations commonly pay out hundreds of thousands of dollars for an executive salary, plus millions in bonuses. Why? Because that's what attracts top talent. This is not disputable. These men and women really are brilliant, and demand to be compensated accordingly. Of course, brilliant does not correlate to moral, but that's a different article all together. A Securities Compliance Examiner is paid just about $130,000 a year -not a bad salary by any average joe's standard. However, this guy or gal is up against a sociopathic, money motivated, think-tank that is paid millions to find ways around regulation.

    Top talent wins -billionaires bank on it. Now here's the trouble with the SEC - if politicians are collecting cash to make decisions that are beneficial to corporate profits, the last thing they are looking at is pay raises for the individuals responsible for watching over them. In fact, many politicians like Senator David Vitter purposely use pay raises to manipulate the behaviors of government officials. To me, the danger here is clearly a rampant abuse of this power. I don't like the slippery slope argument as much as the next, but it's easy to see how this carrot on a stick can - and is - abused.

    To give a quick insight into the controversy and complication swirling around SEC pay raises read the 2001 article by Jason Peckenpaugh. In his article, Jason explains that, although the SEC bill introduced would require the agency to keep it's pay rate comparable to that of the FDIC, CC, and OTS - all of which are already allowed to ignore Title 5 - the OMB contends the bill would "adversely affec[t] the portability of federal employees and fragmen[t] personnel systems". There is an extreme knee-jerk opposition coming out of the white house to squash any additional spending on this part of government.

    Another article written in 2008 discusses the pay problems with the SEC, and states that "[t]he SEC’s current merit pay system is not working. It lacks transparency, it has no objective performance appraisal standards, and it is insufficiently funded in a fashion that forces unfair distributions each year." This does not sound like an organization that is designed to function well at all.

    As usual, I have a steaming heap of problem with no clear solution. On the bright side, there is a clear problem, and problems can be solved. The individuals responsible for keeping our financial system on the straight and narrow are being mismanaged, neglected, and under compensated. I personally think we should send the federal government through a court mandated re-org - or at least start with the SEC and see if we can create a better system through the science of organizational change and behavior modification.

    Any other ideas?