While often overused as a catchphrase by compliance and human resource professionals, the phrase “speak-up” culture has increasing relevance to effective corporate governance. The halcyon days of secrecy and discretion in the corporate environment have given way to newer, more effective governance models that encourage employee contributions to the company’s overall success and afford aggrieved employees a legitimate platform for raising legal and regulatory issues internally, rather than reporting externally first. In so doing, these models ensure that a company has an opportunity to be proactive in remediating the potential violation first, rather than being reactive—and at a distinct disadvantage—when regulators come knocking at the door.
The Case for Transparency
The traditional view of preserving company secrecy at all costs—echoing the popular aphorism that the best way to go along is to get along—is no longer acceptable in the contemporary workplace. Corporate scandals like Enron, Wells Fargo, Volkswagen, Boeing, and others are potent illustrations of what can happen to a company when its employees are complicit in a culture of deceit.
In the Boeing case, for example, both engineers familiar with the now infamous Maneuvering Characteristics Augmentation System (“MCAS”) and Boeing’s own chief technical pilot ignored repeated warnings that the system posed a danger to the crew and passengers of the 737 MAX by essentially overriding pilot commands. But secrecy at Boeing—and immense pressure to deliver a more efficient civilian aircraft to compete with Airbus—essentially prevented internal safety concerns from being elevated and appropriately addressed by company leadership. The Boeing example not only forever tarnished a once sacrosanct name in the field of commercial aviation, but also cost hundreds of people aboard ill-fated flights bound for Indonesia and Kenya their lives. Adding insult to injury, hundreds of emails disclosed in the aftermath of the tragic crashes of Flights 610 and 302 as a result of an inquiry launched by the Transportation Committee of the U.S. House of Representatives revealed a culture of indifference towards safety that is completely inimical to the ethos of the aviation industry. In one such email, Boeing’s chief technical pilot seemingly bragged about convincing a 737 MAX operator not to require additional simulator training, thereby increasing operating costs—crediting his “Jedi mind trick” skills for the supposed ‘success' of his lobbying effort. In the context of a separate email exchange from 2017, another Boeing employee candidly put forth his assessment that the 737 MAX was “designed by clowns, who are in turn supervised by monkeys.”
The 737 MAX scandal is a perfect example of a toxic corporate culture that compromised passenger and crew safety in a misguided effort to keep pace with a foreign counterpart at all costs. Driven by concerns that Boeing had overpromised and would likely under-deliver to major airlines like Southwest, it casually dismissed repeated internal concerns that the MCAS system could cause a catastrophic loss of the aircraft itself—and most importantly, the lives of the crew and passengers aboard planes equipped with the MCAS feature. While the cause of Boeing’s cultural decline has been largely attributed to its merger with the now-defunct McDonnell Douglas in 1997, efforts to transform that culture prior to an incident like the 737 MAX scandal could have saved Boeing billions of dollars and spared the lives of those lost to corporate indifference.
Creating a Speak-Up Culture
A speak-up culture is the product of a company that operates in a fully transparent, ethical, and accountable manner. In such companies, employees are repeatedly encouraged by their immediate supervisors, middle management and company leadership to report safety, legal, regulatory, personnel, and other concerns through appropriately managed and operated third-party hotlines or to company leadership directly. Cultures like these exist only in organizations that are receptive to criticism and willing to listen to its rank-and-file employees about any concern raised in relation to all aspects of the company’s operations. While adopting a clear, plain-language Code of Conduct is an important first step in establishing an ethical culture, it is by no means the only ingredient in the recipe for positive cultural transformation.
Equally important in establishing a speak-up culture are routine opportunities by employees to engage with senior leadership on a small group and individual basis to ensure that specific—and often critical—concerns are addressed. Organizations are increasingly relying on so-called “All Hands” meetings to communicate important information and address employee concerns in an open forum where virtually no topic is off limits. These meetings present a real opportunity for the compliance function of an organization to repeatedly emphasize the importance of employee contributions to the success of the company overall. As such, compliance professionals should avail themselves of these and other opportunities by addressing some aspect of the company’s Code of Conduct, and re-emphasizing the various means by which concerns may be raised.
Similarly, companies interested in creating an open culture must both incentivize compliant behavior and deter deviant behavior. Too often, compliance surveys indicate that assessment of an employee’s conduct in relation to company and regulatory expectations is minimized or disregarded altogether in the context of annual performance reviews. This is a critical misstep that not only undermines the company’s professed commitment to compliance with its ethical and legal obligations, but fails to differentiate and reward employees for acting appropriately, while giving employees accustomed to circumventing the rules a virtual free pass. Invariably, these employees are routinely promoted and put in positions of authority with considerable influence over their subordinates, who are officially encouraged to play by the proverbial rules, but surreptitiously encouraged to bend those rules to their own advantage. Discipline of employees that violate company policies is also part and parcel of the speak-up culture equation. Here too, organizations must tread carefully to ensure that the discipline is consistent and proportional across the board. Senior managers and even members of the executive leadership team must be held to the same high ethical standards as frontline employees. Disparate treatment of management and employees is a recipe for disaster—exposing the company and potentially even its board of directors to liability for employment discrimination, breach of fiduciary duty with respect to appropriate oversight, and other legal claims.
Signs of a Weak Speak-Up Culture
Telltale signs of a weak speak-up culture include, but are not limited to the following:
- In mid to larger sized companies, the compliance team is an afterthought. In such cases, the company may fail to devote sufficient human and/or capital resources to empowering compliance officials to monitor company activity, periodically audit internal compliance controls, and appropriately articulate company expectations to employees. Companies may also pay lip service to the idea of compliance, but fail to designate a single individual as a point of direct contact to senior leadership and the board of directors or afford that person with sufficient autonomy to put the brakes on potentially illegal activity.
- The company has no internal reporting mechanisms or the existing reporting mechanism is underutilized. Whether publicly owned or privately operated, all modern companies should have a reporting mechanism that is accessible to employees and administered by a competently trained external third party. If no reporting mechanism exists, the company is essentially guaranteeing that it will learn of employee concerns from regulators first rather than having a chance to address and remediate any problems on an internal basis. Underutilization of the company’s reporting mechanism is similarly problematic, as employees may be uncomfortable with the current structure or operation of the hotline designed to receive reports.
- Employees generally perceive that their concerns—once expressed—are not addressed. The mere existence of a reporting mechanism and receipt of information by company officials is, in and of itself, insufficient. Legitimate concerns involving company operations must be appropriately investigated and dispositioned, with the reporting employee having the ability to receive periodic updates on the status of each investigation either anonymously through a web reporting system, or on a direct basis from a member of the compliance team. The failure to take action where warranted—and to communicate any results to an employee who raises genuine concerns—is the chief reason such parties often resort to blowing the whistle by cooperating with regulators.
- The tone of the organization is such that employees fear retaliation when expressing concerns. Fear of reprisal is another feature of a toxic workplace environment. No employee should be suspended, terminated, refused promotion, or otherwise retaliated against for his or her cooperation in compliance-related investigations. Aside from the potential legal exposure, workplaces in which fear is the primary characteristic are far less innovative and competitive than their more open counterparts.
- Senior leaders remain siloed and inaccessible to frontline employees. Pre-COVID 19, the idea of creating collaborative work environments where senior leaders sit next to rank-and-file employees in an open space setting dominated the corporate arena. This element of openness and accessibility should be preserved even as companies transition to a more virtual or hybrid model of work. Availability of managers and leadership via an internal messaging system, for instance—along with publication of leadership’s contact information—ensures that management remains attuned to employee concerns. Organizations that rely on separate offices, arbitrary hierarchies, and inaccessible managers are a danger to themselves and potentially their customers as well.
Promoting a Strong Speak-Up Culture is Imperative
Recognizing telltale signs of a weak speak-up culture and taking concrete steps to transform that culture should be the paramount concern of all organizations operating in an increasingly regulated global market. An investment in a cultural assessment, robust remediation efforts, periodic evaluations, and a commitment to transparency by an organization’s board and leadership distinguishes highly-effective and competitive companies from their lackluster counterparts.
Michael Volkov specializes in ethics and compliance, white collar defense, government investigations and internal investigations. Michael devotes a significant portion of his practice to anti-corruption compliance and defense. He regularly assists clients on FCPA, UK Bribery Act, AML, OFAC, Export-Import, Securities Fraud, and other issues. Prior to launching his own law firm, Mr. Volkov was a partner at LeClairRyan (2012-2013); Mayer Brown (2010-2012), Dickinson Wright (2008-2010); Deputy Assistant Attorney General in the Department of Justice (2008); Chief Counsel, Subcommittee on Crime, Terrorism and Homeland Security, House Judiciary Committee (2005-2008); and Counsel, Senate Judiciary Committee (2003-2005); Assistant US Attorney, United States Attorney's Office for the District of Columbia (1989-2005); and a Trial Attorney, Antitrust Division, United States Department of Justice (1985-1989).