The next big corporate scandal started earlier this week when stocks tumbled. While the market may have overreacted to slowing growth in China, the economic landscape has clearly changed. The China growth engine is slowing, at least for now.
Somewhere out there a manager is setting a goal that is too aggressive for this new reality. They may be setting the goal to “inspire” the workforce, or to meet analyst expectations, or to curry favor with a superior, or because of honest, but overly optimistic, beliefs.
Whatever the reason the goal will be set. Workers will be told they have to hit the target. And they will do whatever it takes, even if it means bending or breaking a few rules.
If they don’t make it, finance may be asked to help “adjust” or “smooth out” the numbers. And some time in the next few years it will all unravel spectacularly, costing the company far more money than anyone could imagine.
So what do compliance and ethics professionals do? First, make sure management knows that as business gets tougher, employees will be tempted to cheat more to make their numbers. It’s as inevitable as Enron, Worldcom, Toshiba and countless others.
That means leadership has to pay extra attention to corporate goals, both big and small, to make sure that they are truly achievable, and that “stretch” goals don’t lead to broken laws.
The new environment also means that leaders need to turn “tone at the top” into TONE AT THE TOP. They have to shout loud and strong that corners may not be cut and that staying inside the lines doesn’t mean looking for ways to blur those lines.
[bctt tweet=”The new environment means that leaders need to turn ‘tone at the top’ into TONE AT THE TOP @AdamTurteltaub” via=”no”]
Compliance officers need to determine which divisions are most likely to be affected by the changing economy. That’s where the stress will likely be greatest and the temptation to cheat the highest.
Risk assessments will need to be reassessed to see if the changing global economic picture means changes to risk profiles.
And, there are countless other steps to take. Share your suggestions below for what they are. It may help prevent the next mega scandal.