What Compliance can, and must, learn from Psychology, Philosophy and other knowledge domains

By Alexandre Serpa

So you are, or want to become, a compliance professional and, as it has to be the case, you want to be a successful one. You then start off by learning about the profession, take a course on compliance programs, study all the pillars, or components, of an effective compliance program as laid out by the US Federal Sentencing Guidelines, read books on compliance programs (if you want to read a direct and simple to understand book you can try my book “Compliance Descomplicado“) and, finally, you get a compliance job.

You take your first steps and implement all you learned by studying and reading. Your compliance program is as properly implemented, methodologically speaking, as it can be, but nonetheless the company is neither accepting, nor adapting, nor enjoying it.

Well, let me be the one to break the good news to you (and I am not being sarcastic here, I believe this is indeed good news). Compliance programs, business processes, policies and procedures, internal controls and hotlines do nothing. They do not talk to clients or customers, they do not manage people, they do not create marketing campaigns, they do not process accounts payables, they don´t do anything. Human beings do everything. And human beings are “somewhat” complex and complicated things.

So, at the end of the day, the effectiveness and success of compliance programs depend mainly on human beings, on persons. It is a person who decides, multiple times a day, to do the right or wrong thing. Therefore our job as a compliance professional can only be a successful, and satisfying one once we realize that we need to understand human beings (i have already written about this here).

To understand human beings is not at all an easy job. Some may say it is an impossible one and I tend to agree with this view. But even if we, at the end, do not fully understand human beings, we have a duty to at least try and learn as much as possible about them. And who best to teach us about human beings, and their minds — which are the one key aspect of human beings that are of compliance professionals interest — than Philosophy and Psychology?

We do not need to become master at those two fields of study, but during my professional life I have come around some articles, ideas, theories and books from those two fields that DO provide really helpful and I would like to share some of those with you below, and provide a quick explanation of how they may related to compliance.

I — The Sorites Paradox

The sorites paradox simply put deals with “limits” that would cause a definition to become invalid. The usual example is to take a ‘pile’ of rocks that is formed by, let´s say, 12 rocks. If you remove one rock is it still a ‘pile’? What if you remove two, is it still a ‘pile’? … Question becomes, when is a pile of rocks not a pile anymore?

How does it relate to compliance? Please let me first introduce the second concept.

II — The Broken Windows Theory

The broken windows theory talks about how the prevention of small crimes will ensure that violence levels do not escalate. The analogy used is that of an abandoned building that, at first, has just some broken windows which are not replaced, after a while more windows are broken, garbage accumulates, drug users start to roam around the building. Given enough time the surrounding area will start to experiment higher and higher levels of violence.

What have concepts I and II above to do with compliance?

In my opinion they help us understand that our response to ‘petty’ non-compliance cases, or ‘minor’ misconducts can NEVER be that of acceptance or that we do not sanction those persons who committed the acts.

If we allow the minor cases to go unpunished, they will eventually escalate, or the company (and its employees) will always try and push the definition of ‘minor’ or ‘petty’ to their benefit.

Therefore, do ALWAYS sanction/ punish those individuals who commit such acts. If someone did not follow a law, regulation, policy, procedure or rule within your compliance program, the person HAS TO be sanctioned. That is not to say that you shouldn´t take into account all the information you may have on the specific instances of non-compliance and escalate the sanction according to the specific act. But the message is that every single case of non-compliance has to be sanctioned.

As an example, if your internal policy states that the cap for a meal with a public official is $100 and an employee ends up spending $105, this employee does need to be sanctioned, but you will probably not terminate the him or her. But if in another case an employee spent $200 on such meal this may be a case in which the sanction is termination. Important is that BOTH cases will require some sanctioning.

III — The Stanford Prison Experiment

The Stanford prison experiment was a classic study on the psychology of imprisonment led by Philip Zimbardo (author of the book The Lucifer Effect, you have to watch Zimbardo talk about the book during this TED Talk). During the experiment conducted in the basements of Stanford University some volunteers played the role of prison guards while others played the role of prison inmates. After just a few days the behavior of the ‘guards’ and ‘inmates’ was such that the experiment had to be stopped, for it started to resemble the more recent case of the Abu Ghraibi prison.

In summary, it was verified that the situation or environment in which a person finds herself, rather than her individual personality will casue someone´s behavior.

Again, please bear with me and get acquainted with the next concept before we can talk about their relation with compliance programs.

IV — Milgran Experiment

The Milgran experiment was conducted by Stanley Milgran to study how ordinary people will obey an authority figure who would instruct them to perform a series of actions that would conflict with their moral, or ethical, beliefs.

To put it simply, the experiment had a volunteer who would be in position of applying electrical shocks to another volunteer (who was in reality an actor) in case the second volunteer (the actor) answered incorrectly some questions asked by the conductor of the experiment (the figure of authority). The electrical shocks ranged from tickling to ‘risk of death’ voltages. Differently from what Milgran´s fellow psychologists predicted almost 100% of the volunteers ended up applying life threathening electrical shocks to fellow volunteers (actors) who screamed and begged for them to stop the experiment. The reason for such a behavior was that we tend to obey figures of authority for we rationalize things such as “I am just obeying orders”, and we also tend to distance ourselves from the act believing that “if it weren´t me, someone else would do it anyway.”

Why then are concepts III and IV above reelvant to us compliance professionals?

I believe that you have already figured the answer to this question. Hate it as we may but we, as human beings, are extremely flawed and will behave in [at hindsight] shameful, inhuman and unethical manners if we are immersed in the wrong environment and directed by unscrupulous leaders.

Thus, we DO NEED to ensure our company’s leader, the top, are the right persons, have the right behaviors and the correct tone. If the leaders do not support, believe, live and require others to do the same regarding your company’s values and compliance program requirements the compliance program is doomed from its inception.

I do not want to transform this post into a book but there is one more topic that I would like to present before we can call it a day,

V — Behavioral Economics

Let me try and make it quick let’s make it simple: READ Dan Ariely’s works. Dan Ariely is a professor of psychology and behavioral economics at Duke Univeristy and his work, among other things, deals with the reasons that lead all of us to ‘cheat’. There are two findings from his work that I believe are very interesting for our day-to-day work on compliance.

The first has to do with the fact that invoking a moral code (such as the bible, or the code of conduct from a company, or even a statement of commitment to the truth) will reduce the likelihood of someone cheating and/ or will reduce the `size` of the cheating. This may teach us that sometimes — let´s say during the discussion of a borderline commercial agreement — all we need to do to ensure people are less inclined to do something unlawful is to ask people to remember that our Code of Conduct requires us to obey all laws.

The second is that if you remove the person from the actual commission of an act of corruption the person’s inclination to cheating increases. For example: Imagine you are given the chance to answer a test of 10 questions, for which any correct answer is worth one Dollar and you do not have to show the test results, but only state how many questions you got right to get the payment. In the cases in which the person could grab actual cash from a desk the level of cheating was lower than for the cases in which the person grabbed a token that was later on exchanged from money. This teaches us that sometimes those huge annual performance bonuses may be too removed from the non-compliant behavior that caused it in the first place.

For more details on Dan Ariely´s work, make sure you watch his TED Talk, and read his books.

I hope I was able to get you feeling thirsty for some more non-conventional Compliance Programs knowledge that will be an asset for you during your life as a compliance professional.

As we know, and as SCCE´s CEO Roy Snell wrote here, we do have to know a lot of things to be a good compliance professional, philoshopy and psychology may as well be added to the list.

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