The C-Suite Crucible and International Business: “Motivated Blindness"

by Richard Bistrong, Anti-Bribery Consultant & Speaker
Contact

*COPYRIGHT FOR ILLUSTRATION BELONGS TO RICHARD T. BISTRONG.
In the June 2013 issue of Business Compliance (Baltzer Science Publisher, Anthony Smith-Meyer, Editor), Scott Killingsworth (Partner, Bryan Cave LLP) writes about “Ethics in the Executive Suite: The Best, The Brightest and a Wicked Problem.”* The work is the first part of a two part series, and my focus is on part one “The C-Suite Crucible and Behavioral Ethics.”  In sum, the “wicked problems” of behavioral ethics that this article focuses upon in the C-Suite, in my experience, are also uniquely present in the thinking and behaviors of international business executives who confront corruption on the front lines of international business.
My goal today is to call upon Mr. Killingsworth’s behavioral and organizational paradigm to demonstrate how most of the dynamics that the article describes as existing in the “environment of the C-Suite” are also prevalent with respect to international business executives. I will use Mr. Killingsworth’s piece as an intellectual companion guide to my own perspective of international business misconduct, especially in the context of international bribery.  Finally, before setting out on this journey, when I speak of “international business executives,” I am referring to (from an organizational chart perspective) those at the front line of international business who also have group responsibility; thus, I refer to those who have supervisory authority and direct reports along with associated P and L responsibility.
Mr. Killingsworth isolates a number of elements as testing “the integrity of executives,” and my focus is on those which I have seen elevated in the thinking (including my own) of international business personnel. No single issue  dominants, for as Mr. Killingsworth well states, when it comes to misbehavior “it seldom happens in a single step.” Thus, I share my reflections on this work to expand upon our understanding of how misconduct can so easily be rationalized, whether in the C-Suite or in an overseas office of an intermediary.  So, lets take a look under the hood of an international business team, and see where the dynamics of misconduct might exist.
  • “The lure of large performance-based incentives” which can translate into “outsized temptations to do what it takes to obtain the desired results.”
As I shared at the Dow Jones Global Compliance Symposium, where international business executives have incentive compensation indexed to personal performance in high-risk (corrupt) areas “compliance becomes bonus prevention.” As Mr. Killingsworth states “here the notion of failing to “hit the numbers” or of “losing” a bonus one has come to expect, or failing to close a sale that one has considered likely, has obvious relevance: risk-taking increases and ethical standards may sag.” In a public-company environment, that pressure gets dramatically magnified at every quarter, as those pressures re-set from start. Nonetheless, regardless of company size or public listing, the entire issue of large incentive based compensation can create an inherent conflict of interest when it comes to decision-making, for as Mr. Killingsworth affirms “it is not just difficult, but impossible, to be truly objective about a decision when we have a significant interest in the outcome.”
As to the external setting, international procurements are often far and few between, marked with unstable state institutions (see work by Matteson Ellis), creating a “win big or lose big,” environment, with the obvious consequences upon forecast and bonus.  Where that bonus is tied to personal performance, as Mr. Killingsworth states “escalating commitment” may follow, where one takes greater risk to avoid loss (personal and professional), and that is a process “that seldom ends well.” It is like covering a bad bet with more money and a recipe forever increasing “small bribes” to insure success.
  •  “The ability to operate with great freedom and little supervision.”
In many organizations, supervision of international business leaders can often be “out of sight, out of mind,” where such personnel have more discretionary authority and operational freedom than their domestic counterparts. Having spent the early part of my career in US domestic sales, I can state with great certainty that as a domestic sales Vice President, I was subject to dramatically more oversight and audit in my work, comparative to my subsequent international responsibilities. I don’t think that was a unique experience, especially when a company considers the domestic or home market as the “primary market.”
I have seen many organizations treat international sales as a “secondary-sector” with the resultant impact upon supervision and discretionary authority for international executives. Where managers retain such power, as Mr. Killingsworth describes, it can be “difficult for subordinates or auditors to see the entire process that adds up to a violation.”
  • The impact upon thinking "by early success in high-risk initiatives."
From a personal perspective, this is a significant contributing element to risk taking; thus, it is worthy of great consideration for those who have compliance responsibility. Given the opportunity to get away with “small bribery,” (see post on “Countering Small Bribery”) especially given that when the talk turns to corruption on the front lines of overseas business there are often no witnesses, that dynamic can have an enormous and calamitous impact upon future thinking.  How?  As Mr. Killingsworth states, by “unwittingly increasing risk appetite over time” and creating a “vicious cycle” of overconfidence.
In other words, getting away with prior bad behavior leads to great distortion when thinking about the consequences of future corrupt transactions, as incremental risk “may lead to more serious violations.”  As Mr. Killingsworth describes “where misconduct is justified by rationalization and reinforced by success, small incremental steps can take us a long way.”  In other words, once front line international business personnel “dip their toe in the water” of corruption without getting caught, and with financial success, a rationalization sets into the thought process which starts to build momentum, and which then gets mixed into the normal course of business thinking. It then often results in making “compliance decisions on likelihood of detection.”
That thinking reflects what Mr. Killingsworth describes as the dynamics of “if nothing bad has happened, this is evidence nothing bad will happen.” Furthermore, this can “distort judgments of whether an activity is in fact illegal and, more cynically, judgments of the likelihood that anyone will notice the violation, or the severity of the consequences.” It is not my perfect storm of rationalization, it is intellectual Armageddon.
  • The thinking that a small infraction "does no one harm" and a belief that "the general rule does not apply."
In prior posts, I speak of the illusion that bribery has no victims.  Most front line business personnel do not consider the impact of bribery upon local governance, standards of living, etc. They might even think that they are helping those local public officials who are very poorly paid by supplementing them with “small bribes,” and that the end user still gets the best product and level of service. Sometimes bribery results in the end user paying a lower price of goods and services, which further distorts the illusion a “win-win.” When you add in the thinking that “this is how it is done here” or “it is not even illegal here,” that makes for a volatile mix of rationalization.
As Mr. Killingsworth states “a suitable rationalization protects our positive self-esteem and denies the reality that we have selfishly violated a rule.” Indeed, when the thinking is that no one gets hurt by bribery,  and that it is part of local norms, that rationalization can easily win out over a more reasonable calculus to stay away from a potentially corrupt and liberty threatening decisions.
  • My own journey through self-deception 
As Mr. Killingsworth states, the sum of these factors, (along with others which are in the article), are “like the weight of water against a dike,” and that these variables “exert constant pressure on ethical decision-making at the top of an organization.” Agreed. However, having never made it to the C-Suite, but having described my own “perfect storm of rationalization,” this is a model that has significant relevance to those who supervise and work with international business executives. As Mr. Killingsworth’s describes, “where high stakes combine with temptation, power, pressure, urgency and ambitious people under few external restraints, a high-impact risk exists and must be addressed.”

As for my personal reflection, well, as Mr. Killingsworth states “when we start down the path of misconduct, the first person we deceive is usually ourselves” and the attraction to “money, power, autonomy, recognition, attention and status…may be strong enough to overpower allegiance to ethical or legal rules.”  Well said,  and a difficult chapter in my own life which I now can share with others.

 

Written by:

Richard Bistrong,  Anti-Bribery Consultant & Speaker
Contact
more
less

Richard Bistrong, Anti-Bribery Consultant & Speaker on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!