‘Not lack of rules but loss of values let them down’

Report from LINE Zurich Lunch Forum

One immediate effect of the credit crunch as it bit last autumn was a call throughout the global community for stronger regulation of business. But are rules alone enough to prevent the corporate wrong doing that has beset companies like Siemens, MAN and Deutsche Bank both in Europe and the US?

At a round table discussion on transforming learning in the 21st Century held as part of the recent LINE Lunch Forum event, interesting lessons were drawn from the scandals that have rocked these businesses.

Siemens, for instance, was a rule-heavy, compliance-driven organisation, and yet it became the subject of one of the largest corporate corruption scandals of recent years. German society is a fierce defender of data protection and the right to privacy, yet Deutsche Bank, Deutsche Telekom and Deutsche Bahn have all been embroiled in spying scandals.

Clearly it takes more than extra rules to tackle these issues. In all these cases, it was clear that there was a cultural element to the scandals. The problem at these companies, according to Urs Hofmann, founder of the Credit Suisse Business School, who chaired the Zurich event, was not that they lacked rules, but that employees had lost touch with the companies’ values. Attendees to the roundtable, drawn from multi-national companies including Syngenta, UBS, Schindler and Ford of Europe, all agreed that today’s business culture is more heavily regulated than ever before. Perhaps it is not just the rules, but behaviours and attitudes around those rules, that organisations need to focus on in order to prevent the growth of ‘toxic’ business cultures.

Siemens’s response to its problems has been admirably thorough, involving a major change management programme of communication and training. In a recent interview, Andreas Pohlmann, Chief Compliance Officer of Siemens said that his organisation “already had a system of values, rules and guidelines governing matters of compliance” in place well before the scandal was uncovered; “however, not enough had been done to embed these existing values into company practice. Siemens lacked a corresponding leadership culture and leadership structure; communication was inconsistent and the company did not always take adequate steps to punish conduct in breach of the defined compliance principles”.

(Delivered at DSW’s Sixth International Investors’ Conference 2008)

The result has been a complete reinterpretation of compliance, giving it a more central role linked to company values. In Pohlmann’s words: “[compliance] must be integrated actively into our corporate culture, forming a natural and solid basis for our conduct at the highest ethical level and thus the conditio sine qua non for all our business transactions”.

From these examples, as well as LINE’s work with numerous clients, it is clear that it’s not enough for employees to know what they are supposed to do or supposed not to do. In addition, positive engagement with the organisation’s values is needed in order for scandals like these, which can afflict even the most rule-bound, box-ticking companies, to be prevented.

by Ian Leader

Managing Director Central Europe