In my last post, I discussed recent research suggesting that combating corruption in government bureaucracies requires attention to the selection of personnel – trying to recruit not only the most capable, but also the most honest. Might the general principle apply to private corporations? Should corporate compliance programs place more emphasis than they do on assessing candidates’ integrity at the selection stage (initial hiring or subsequent promotion)? And should law enforcement consider a firm’s efforts at integrity screening when assessing the adequacy of a firm’s compliance program? I don’t have the answers to these questions – I simply don’t know enough about human resource management issues – but I want to raise them in the hopes of starting a discussion of the issue.
Most of the material I’ve seen on corporate compliance programs – including the U.S. DOJ’s FCPA Resource Guide and the U.K. SFO’s Guidance on the 2010 Bribery Act – focuses on the importance of (1) “tone at the top” and a general culture of compliance; (2) adequate risk assessment and due diligence systems for projects and partners; (3) training and communication to employees; and (4) appropriate carrots and sticks – the threat of discipline and the promise of rewards – to incentivize employee compliance. I agree that all of this is important. But strikingly absent from the list of features that characterize effective compliance programs is any discussion of a serious effort, at the hiring or promotion stage, to identify individuals with an intrinsic propensity to honest behavior. Usually, the only time these selection issues are mentioned is in the context of incentives: the promise of promotion or the threat of demotion/termination might induce employees to avoid violating the firm’s compliance policy (and the law). But selection practices are important not just for the incentives they create, but for their capacity to place the right people in positions of responsibility. And so it’s striking that the leading discussions of corporate compliance programs have so little to say about what firms can or should do to screen candidates for integrity and ethical sensitivity.
I don’t want to overstate this: there’s some discussion of this issue in the compliance community, and some companies have started to introduce ethics-based questions and exercises into their recruitment process (see here and here). The questions I want to raise – and they really are just questions, as I don’t know enough to have a firm view – are (1) whether firms should do more in this vein, and (2) whether a government enforcement agency, in assessing a firm’s compliance program in the context of an enforcement action (or perhaps in ordering a structural remedy overseen by an outside monitor) should place greater emphasis on selection-stage screening.
I can see a number of objections to trying to push more ethics-based screening as an essential part of an adequate anticorruption compliance program, chief among them concerns about feasibility. As I noted in my last post, it’s a bit challenging to envision reliable screening procedures that could assess personal integrity; integrity very hard to measure, and tests are very easy to game (once people know what’s being tested).
But still, it might be worthwhile for firms, and perhaps government enforcers, to start asking more seriously whether it’s possible to do more on this front. After all, many management experts would say that picking the right people is just as important, perhaps more important, to business success as having the right organizational structure or incentive schemes. Why would this not be true for anticorruption compliance as well?