Compliance and Ethics: Ideas & Answers. Edition 91
Dear friends,
Welcome to the 91st edition of Compliance and Ethics: Ideas & Answers.
We start this week with Adam Balfour ’s piece, “Golf Courses & Compliance Programs Both Require People and Resources,” inspired by a local golf course. Next, guest contributor Matthew Friedman offers an insightful article on “Modern Slavery and the Private Sector.”?Our third feature is Rebecca Walker ’s “Enhancing Board Oversight of Compliance Programs: A Strategic Guide for Directors,” providing a valuable resource for board members. Finally, we wrap up with our regular feature, Compliance Lite.
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Thank you,
Joe
Golf Courses & Compliance Programs Both Require People And Resources
by Adam Balfour
There are lots of great places in Nashville to run, but one of my favorite routes involves running loops around a golf course - it’s never too busy and you get great views of the well maintained greens. Those greens take a lot of work and effort, and unless you are there early in the morning, you might not realize the number of experienced greenskeepers involved and the amount of equipment they have to keep the course in good shape. These professionals and their equipment/resources add to the operating costs of the golf course, but without them the greens would be a mess and golfers would go elsewhere. The greenskeepers don’t take care of the greens once or twice a month, but are constantly and continuously taking care of the greens to support the short and long term financial success of the golf course.
What do golf courses and compliance programs have in common? They both need adequately staffed teams of experienced professionals who have the necessary resources to be effective and do their jobs. You won’t see a world class golf course (not that I’m running round a world class golf course) that is staffed by only one or two people using a push lawn mower, and you won’t see a world class ethics and compliance program that is only staffed by one or two people with few resources to support them. Compliance programs cost money, but having an adequately resourced and qualified compliance team is not just an expectation of regulators, but it is a way to protect the organization and ensure that customers and others continue to trust in, and want to do business with, your organization.
Maintaining a golf course and an effective compliance program are both expensive, but the costs of not investing are much bigger and only getting bigger (at least when it comes to compliance). Your organization’s C-suite probably don’t want their favorite golf course being under resourced or run by greenskeepers who lack relevant experience, and they certainly shouldn’t want the ethics and compliance program to be under resourced either.
Modern Slavery and the Private Sector
Modern Slavery – the recruitment, transport, receipt and harboring of people to exploit their labor – affects almost every country in the world. Globally, it is estimated that there are over 50 million men, women, and children in modern-day slavery today. According to the United Nations, there are more slaves today than at any other time in history.
Out of this total, 23 million are victims of forced marriage, while the remaining 27 million are in forced labor. These victims, found in sweatshops, on construction sites, on farms, and within fisheries, are forced to work for little or no pay, deprived of their freedom, and often subjected to unimaginable suffering. This also includes in forced prostitution 6.3 million women and girls (with some men/boys).
Here’s what we see in modern slavery: fraud or deception to trick a person into an exploitative labor, debt, violence, or threats to hold the person in place, and the lack of any payment in exchange for their services. While people may believe that modern slavery mainly involves sex trafficking and forced prostitution (which in itself is tragic), in reality, most victims are linked to forced labor in private sector supply chains. This starts with a grower or producer and ends with a finished product bought by consumers.
The international effort to combat modern slavery has been insufficient for over three decades. While there are some successful stories among NGOs, the United Nations, and governments, most victims remain unidentified. For example, the 2024 Trafficking in Persons Report only documented 133,943 victims receiving assistance globally, which is approximately 0.2% of the estimated 50 million modern slavery victims. This means that less than one per cent of the victims are identified and assisted annually. Additionally, during the same period, there were fewer than 7,115 convictions out of the estimated half million criminals. Shockingly, these numbers have remained largely unchanged for over twenty years.
Why are these numbers so low? According to the International Labor Organization (ILO) it is estimated that the profits generated from this illegal trade exceed US$236 billion annually. This means that every 60 seconds, this criminal industry makes more than US$449,010. According to the United Nations, modern slavery is the second most profitable multinational criminal activity after drug trafficking. Despite the significant size of the problem, annual global donor contributions to fight this add up to only around US$350 million – less than one percent of the total profits generated by the criminals. These weak results are from the lack of available resources.
This absence of progress ?is also due to two additional factors. Globally, there are over 500,000 criminals involved, while the number of responders is estimated to be less than one-tenth of this. Those combatting this crime are bound by the rule of law, whereas the criminals are not. Additionally, awareness of this issue within the private sector is very low. Without knowledge of the issue, people are less likely to take action to prevent it. Therefore, raising awareness is a major priority in the private sector.
Enhancing Board Oversight of Compliance Programs: A Strategic Guide for Directors
Boards of directors matter to compliance and ethics (C&E) programs. I have seen a number of situations – usually smaller companies, but not always – where the program would have had very limited value were it not for a director stepping in to champion the effort. Even when senior leadership recognizes the importance of a strong C&E program, board support is necessary to ensure the program’s independence. Additionally, directors bring valuable objectivity and benchmarking insights. However, despite heightened awareness following the Delaware court rulings in Marchand v. Barnhill[1] and Boeing,[2] many boards remain hesitant to dig too deeply into C&E oversight. This reluctance often stems from a fear of crossing the line into management responsibilities – a fear which can create obstacles even for the best-intentioned directors.
Yet, the risks of not engaging deeply in C&E oversight are higher than ever. Regulators, investors, and other stakeholders are increasingly scrutinizing board effectiveness, and many boards struggle to grasp the complexities of C&E programs, align oversight with business strategies, and ask the right questions to ensure accountability.
In October, I had the pleasure of presenting at the National Association of Corporate Directors Summit, alongside the wonderful Steven Gyeszly, on the topic of effective strategies for board oversight of C&E programs. As we prepared for our remarks, and at Steven’s lead, we developed a Strategic Toolkit — a one-page (technically two, front and back!) guide that aims to maximize the board’s impact in this critical area.
I Didn’t Do Anything
by Karen M. Leet
??????????I knew something wasn’t right. I knew it. I’d seen some suspicious figures on the paperwork. Some numbers that didn’t add up right.
??????????? But I didn’t do anything. Didn’t say anything. Didn’t step up in any way.
??????????? I just didn’t do anything. And that was the worst decision I ever made.
??????????? That’s what my wife says. “Jack, why didn’t you do something, say something, anything? Why? You could have cut it all off before it got this bad.”
??????????? She’s right. I know she is. I should have, could have, stopped it all, all of it, way before it blew up in our faces.
??????????? See, that’s the thing. I knew from the very first moment. I knew there was bad news coming. I’d known Drew for years. We’d even been pretty good friends for a while. Up to when he got promoted and I didn’t.
??????????? Drew moved up, and I got left behind. Our friendship just slipped away. Drew was going places. I wasn’t. I was pretty much dead in the water. Left behind for sure. I probably would have been stuck at the bottom the rest of my life.
??????????? Not Drew. He was becoming known as the go-to man. He got things done and done well. Drew might have kept going up, up, up.
??????????? Once, before he left me behind in his dust, Drew told me about his hopes and dreams, his plans, his ideas.
??????????? He was aiming at the top. He planned to move up in the company—right straight to the top. He planned to take our quiet little company into bigger things.
??????????? Oh, yeah, Drew was the guy who got things done. The guy who wouldn’t settle for second best. The guy who would make our company a big deal place.
??????????? He planned to go national. Make us a force to be reckoned with, an up-and-coming kind of place.
??????????? So, Drew was moving up. Leaving those of us at the bottom behind. Forgetting old friends.
??????????? But I knew him when we both first started at the company. We hung out a lot early on. I knew how he thought, what he wanted, where he was heading.
??????????? I knew him well. Which is how I knew when he took a few shortcuts to his future. I saw some iffy numbers and I saw that excitement in Drew’s eyes. He’d found a back door into his future.
??????????? He’d started lying. He’d found a financial trick or two. He’d started cheating. I knew it.
??????????? Because I knew him, it meant I knew when he went wrong.????????
I should have stepped up right away. I should have cornered Drew, told him I knew what he was doing. I should have cut him off right at the start.
??????????? If that didn’t work, talking to Drew himself, then I should have gone to our Compliance Officer and talked with them about Drew’s tricks with the accounting.
??????????? Or I could have gone to the top of the company to turn him in. I could have been a whistleblower right at the start. Before it all blew up like a fire storm.
??????????? But I didn’t. I didn’t do anything. I kept putting it off. Making excuses. Lying to myself. Hoping somebody else would catch on to what Drew was up to.
??????????? And eventually that’s what happened. Now Drew’s in prison, and I almost went, too. My world is shattered. My reputation is done. I should have stepped up. Too late now.
What do you think?
What should Jack have done and when?
What would you do?
How could things have been different?
? 2024 K. Leet?
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