J.R. Richard died last week. Not familiar with that name? He is the greatest pitcher in Houston Astros history whose career was tragically ended by a stroke at age 30. How dominant was Richard? In his senior year in high school, he did not allow one earned run. In the majors he struck out nearly 1,500 batters in 9 seasons and had a 100-mph fastball when that speed was almost unheard of.
According to his obituary in the Houston Chronicle, “Richard went 107-71 with a 3.15 ERA and 76 complete games for the Astros. He had a 20-win season in 1976 and won 18 or more games from 1976-79. He became the first Astros pitcher to record 300 strikeouts, with 303 in 1978, leading the majors. He broke that record with an MLB-best 313 in 1979, when he also led the National League in ERA (2.71) and finished third in the Cy Young voting to Cubs reliever Bruce Sutter and teammate Niekro. Among modern-era pitchers, Richard is one of only six with consecutive seasons of 300 strikeouts, and he was the first National League righthander to reach the 300 plateau.”
Richard was also a victim of the same racism which Simone Biles recently experienced. In 1980, he was on the disabled list for what was called at the time a ‘tired arm’. He received withering criticism from the Houston sports media for not playing through this while the Astros were in their first real pennant race. Of course, he was simply blamed as lazy and not tough enough to fight through it. It turned out a blood clot had formed which the Astros doctors discovered but did not operate on because they did not want to disrupt his ability to pitch. They did allow him to practice which led to his collapsing on the field during practice from a stroke.
Biles pulled out of the Team Gymnastics competition because of ‘mental health’ issues or something we have come to know as the “twisties”. It turns out that the twisties is a medical condition, not a mental health issue. Of course, the racists, right wing pundits immediately hounded Biles the same way that Houston sports writers hounded Richard over 40 years ago. For Biles it was abandoning her team at the Olympics. For Richard, it was abandoning his team during a pennant race. Richard nearly died because the Astros did not want to provide the surgery he needed so they could get his arm back in the 1980 pennant race. Richard tried but was never able to pitch well enough to stay in the Astros team again. Biles was able to come back to win a bronze medal on the balance beam.
To say that those who criticized Richard or Biles treated them fairly belies almost any level of humanity. Yet in the corporate setting treating employees fairly is a critical element of any corporate culture. Kyle Welch and Stephen Stubben, in their 2019 paper entitled “Evidence on the Use and Efficacy of Internal Whistleblowing Systems”, noted that a robust whistleblower reporting system speaks to a functioning and ethical corporate culture. Employees who can report issues, in a fair manner, without fear of retaliation are more empowered to make the company run more efficiently and more profitably. Yet an equally interesting finding was where there was robust internal reporting, employees were more likely to speak up to improve overall business processes, thereby making the company more profitable.
The issue of Institutional Justice is most clearly seen in the area of discipline. This can be in the overall application of a compliance program to all employees, Board members and senior managers. As noted in the 2020 FCPA Resource Guide, “A compliance program should apply from the board room to the supply room—no one should be beyond its reach. DOJ and SEC will thus consider whether, when enforcing a compliance program, a company has appropriate and clear disciplinary procedures, whether those procedures are applied reliably and promptly, and whether they are commensurate with the violation.”
This mandate was brought forward in the 2017 FCPA Corporate Enforcement Policy which stated, “Appropriate discipline of employees, including those identified by the company as responsible for the misconduct, either through direct participation or failure in oversight, as well as those with supervisory authority over the area in which the criminal conduct occurred.” [emphasis supplied]
All of these concepts were continued in the 2020 Update to the Evaluation of Corporate Compliance Programs, which stated, “Another hallmark of effective implementation of a compliance program is the establishment of incentives for compliance and disincentives for non-compliance. Prosecutors should assess whether the company has clear disciplinary procedures in place, enforces them consistently across the organization, and ensures that the procedures are commensurate with the violations.”
One of the areas where you can more fully operationalize your compliance program is to ensure that discipline is handed out appropriately and consistently across an organization and to reward those employees who integrate such ethical and compliant behavior into their individual work practices. In addition to providing a financial incentive for ethical behavior, it also provides a sense of institutional justice. Institutional justice comes from procedural fairness and is one area that will bring credibility to your compliance program.
Administration of discipline. One area where Institutional Justice is paramount is in the administration of discipline after any compliance related incident. Discipline must not only be administered fairly but it must be administered consistently across the company for the violation of any compliance policy. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.
Likewise, there must be real consequences for an employee who violates your compliance program. If the regulators come knocking and you have not disciplined employees for Code of Conduct or compliance program violations in multiple years, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) will conclude quickly you are not serious about compliance. This means a Chief Compliance Officer (CCO) must discipline those who engage in compliance violations no matter what their position is within the organization.
Employee promotions. In addition to the area of discipline which may be administered after the completion of any compliance investigation, you must also place compliance firmly as a part of ongoing employee evaluations and promotions. If your company is seen to advance and only reward employees who achieve their numbers by whatever means necessary, other employees will certainly take note and it will be understood what management evaluates and rewards employees on.
Internal investigations. A third area is around internal company investigations. If your employees do not believe that the investigation is fair and impartial, then it is not fair and impartial. Further, those involved must have confidence that any internal investigation is treated seriously and objectively. One of the key reasons that employees will go outside of a company’s internal hotline process is because they do not believe that the investigation process will be fair. (Another finding of the Welch/Stubben study).
An often-overlooked role of any CCO or compliance professional is to help provide employees with institutional justice. If your compliance function is seen to be fair in the way it treats employees, in areas as varied as financial incentives, to promotions, to appropriate and consistent discipline meted out across the globe; employees are more likely to inform the compliance department when something goes array. If employees believe they will be treated fairly, it will go a long way to more fully operationalizing your compliance program.
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