Dangerous Dust Collectors



From PLI’s Course Handbook

Corporate Compliance and Ethics Institute 2009

#18176

11

Dangerous dust collectors

Jim Nortz

Bausch & Lomb

Dangerous Dust Collectors

An essay by Jim Nortz

December 2008

Biographical Summary

Jim. Nortz

Compliance Director, Bausch & Lomb

Jim Nortz is a leader in the field of corporate compliance and ethics with extensive experience in developing and implementing compliance and ethics programs for multinational corporations. Jim is currently serving as Compliance Director at Bausch & Lomb, where he has responsibility for developing, evaluating and supporting all aspects of the company’s global compliance and ethics programs. Prior to joining Bausch & Lomb, Mr. Nortz served Chief Compliance Officer at Kraton Polymers, Vice President of Business Ethics and Compliance for Adecco and Vice President of Business Ethics and Compliance for Crompton Corporation. Mr. Nortz also served as a senior advisor to the Ethics Resource Center (“ERC”) providing the ERC with assistance in formulating effective strategies for seeking corporate support for programs designed combat governmental corruption around the world and in preparing the question set for the ERC’s 2007 National Business Ethics Survey.

Mr. Nortz served as an officer in the Army’s Judge Advocate General’s Corps, first as a criminal defense counsel in Europe and then for four years as a litigation attorney in the Army’s Environmental Law Division in Arlington, Virginia. Upon leaving military service in 1994, Mr. Nortz joined Witco Corporation as a Senior Attorney in which he was a safety, health and environmental affairs and litigation counsel.

Mr. Nortz has published numerous professional articles on compliance, ethics and corporate governance issues. Mr. Nortz writes the monthly business ethics columns for the Association of Corporate Counsel Docket and the Rochester Business Journal. Mr. Nortz has also published articles in Ethikos and the Ethics and Compliance Officer Association News Letter. Jim was the first author to be published on Corporate Compliance Insights – a web site () that is specifically designed to provide a forum for knowledge exchange between compliance experts on important and timely topics in the areas of ethics, compliance, risk, and governance.

Mr. Nortz has lectured extensively in the field of business ethics and compliance to business, professional and academic groups including the Ethics and Compliance Officers Association, the Westchester/Fairfield County Corporate Counsel Bar Association, the Conference Board, the MAPI Manufacturers Alliance, St. John Fisher’s School of Pharmacy, Geneseo University, and Bentley College.

Mr. Nortz serves on the board of directors of the Ethics and Compliance Officers Association and is the current chair of ECOA’s Healthcare Industry Group roundtable. Mr. Nortz founded and chaired a business ethics roundtable in the Westchester, New York/Fairfield, Connecticut area and serves on the steering committee of the Rochester Area Business Ethics Foundation. Mr. Nortz also participated on the Open Compliance and Ethics Group’s (“OCEG’s”) steering committee and assisted in the development of OCEG’s first “Red Book” Framework document.

Mr. Nortz has a Mechanical Engineering degree from the Rochester Institute of Technology and a law degree from the Dickinson School of Law in Carlisle, Pennsylvania.

Introduction

If your company is like most, you don’t purposefully hire dishonest employees. Of course, this may happen on occasion, but generally the people you employ are honest, dedicated and hardworking – that is until your code of conduct and corporate policy regime makes scoff laws out of all of them.

Think for a moment about your company’s code of conduct. If your code is like most, it mandates that all employees read, understand and comply with the provisions of the code and all company policies and procedures that apply to their work. Notwithstanding the generally high moral character of your workforce, my bet is that there is not one employee in your company who has ever satisfied this fundamental requirement – including your general counsel and chief compliance officer.

If you doubt this claim, stop reading this article after you finish this paragraph, note the time, and see how long it takes you to just locate the corporate policies, standards, procedures, guidance documents and forms (hereinafter, also referred to as “company mandates”) that apply your job. If it takes you longer than two minutes to identify or put your hands on them, you can be assured that no one in your company has ever bothered to try – notwithstanding the fact that many of them likely sign a compliance certification every year indicating that they have read, understood and followed them.

The likely reason that you probably did not even make the attempt is that you know it would take days of careful research for you to reliably assemble the complete collection. In addition, you might also appreciate the futility of the exercise. Once you got your hands on them all, it is unlikely that you would ever be able to find the time at work to read them all – even if you had some abnormal compulsion to do so.

Face it, your company mandates are an over blown, expensive, incomprehensible tangle of “dust collectors” – unloved, unread and dangerous. They are dangerous because they create an expectation of compliance with their mandates that is unlikely to ever be realized. Unread company mandates stand no chance of assisting employees to satisfy mandatory ethical or legal norms. Moreover, the fact that your company mandates are impenetrable may seriously jeopardize the success of otherwise justifiable employee disciplinary actions, or the company’s ability to effectively defend against law suits or government enforcement actions.

Fortunately there are seven practical steps you can take to help your company address this problem by creating and maintaining something that few, if any companies, have ever had – a sensibly designed, accessible and effective regime of company mandates.

Step 1. Understand the Problem – Human Nature

In 1994, James Reason, Dianne Parker and Rebecca Free from the Department of Psychology in the University of Manchester, England, published a paper entitled “Bending the Rules: The Varieties, Origins and Management of Safety Violations.” The research in support of the paper focused, in part, on the behavior and accident rate of a certain class of British railway workers called “shunters.” Shunters are responsible for directing trains through rail yards and performing the physical labor necessary to link cars together to assemble the trains. As a consequence of many serious accidents associated with this hazardous work, strict policies and procedures were established with the intent of reducing the number of injuries and fatalities in the rail yards. Even though shunters faced disciplinary action, not to mention grave risks of serious injury or death, for failure to abide by safety policies, many shunters routinely violated them. What the researchers discovered was that this hazardous behavior sprang, in part, from necessity rather than just recalcitrance or bravado.

One of the primary reasons the shunters in the study routinely violated safety rules was because “the demands of the immediate situation often required the commission of a violation in order to get the job done on time.” Bending the Rules: The Varieties, Origins and Management of Safety Violations, p.25.

In their paper, the researchers explained that employers virtually guarantee violations of sound company policies and procedures if their constraints on behavior make it difficult or impossible for employees to get their jobs done.

Ironically, then, one of the effects of continually tightening up procedures in order to improve system safety is to increase the likelihood of violations being committed. The scope of permitted action shrinks to such an extent that the procedures are either violated routinely or on those occasions when operational necessity demands it. In either case, they are often regarded as unworkable by those whose behaviour they are supposed to govern. Id. at 4.

This condition in the work place leads to a significant dichotomy between the “written” rules and the “real” rules that are implemented in practice.

The same phenomenon is at play in companies where the “real” rule is that no one – not even the general counsel or CEO - is really expected to read and understand company mandates regardless of what the compliance office and the code of conduct might say. This “real” rule takes hold because the volume and complexity of company mandates is such that it has become unreasonable to actually find and read them all - let alone abide by them. Moreover, if given a choice, most employees would rather take their chances between two rail cars than spend countless hours hunting for and studying company policies and procedures.

In order to make your company mandates relevant in governing employee behavior, you must change this dynamic by first taking steps necessary to make it easier for your employees to get their hands on, read and understand company mandates that apply to them. Then you will have to do some additional work to change the corporate culture to make the “real” rule conform to the “written” rule.

Step 2. Get Your Senior Management Engaged

To obtain the resources and commitment needed to effect a change of the magnitude necessary to untangle the typical collection of company mandates, you will require significant support from your senior management. Unless your senior management is particularly enlightened, this is not likely to be an easy task. The reality is that they don’t like company mandates any more than the average person and the pressures on them to focus on business performance make it particularly difficult for them to find the time necessary to read company mandates and get their jobs done – let alone actively participate in their overhaul.

To overcome this hurdle, you should take the time to carefully explain the significant legal and ethical risks associated with your current company mandates. You might explain that, as senior managers, they have a major personal stake in the company’s policy regime. By virtue of their position in the company, they can and will be held accountable (by the company and/or prosecutors) for not just their own actions but also those of their subordinates. The only sensible way to manage this legal jeopardy is to invest in the establishment of an effective compliance and ethics program as is currently mandated by Chapter 8 of the Federal Sentencing Guidelines. The cornerstone of any such program is an effective collection of company mandates that can be easily accessed and understood by the average employee.

In the event your management appreciates the risks but is not convinced that the company mandates need any work, you might consider gathering data to help them better appreciate how bad things really are. One way to do this is to circulate a survey to a cross section of employees – including senior management – asking basic questions about the company’s policy regime such as:

• Have you ever made the attempt to find and read all the company policies and procedures that apply to your job? If yes, were you successful? And, if the answer is “yes” to the second question, how long did it take you?

• Have you ever had difficulty understanding company policies or procedures that you have read?

• How many, if any, company policies or procedures have you been trained on?

• Does your manager really care whether you know or understand company policies and procedures?

• Have you ever been given the time necessary to find and read company policies and procedures that apply to your job?

• When you first began with the company, did anyone tell you where you could find company policies or procedures and offer to explain them to you?

• How would you rate the effectiveness of our company’s policies and procedures and procedures in assisting employees to understand and abide by the law?

If you decide to take this approach, you should first ensure that you have your management’s support for implementing corrective measures necessary to respond to the findings. It would be counterproductive and risky to conduct such a survey, identify compliance management system deficiencies and not implement a meaningful response.

If this technique fails, as a last resort, you might consider printing out all of the company mandates that apply to the senior management team, stack them up in front of them and ask them if they really want to be held accountable for reading, understanding and maintaining all of this stuff, or – worse yet – paying all of their employees to do the same rather than getting their jobs done. If the management team is still not interested in supporting such an effort, pack it in and move on to another project with the satisfaction that you tried your best.

Step 3. Go on a Hunt and Kill as Many as You Can

In the event you succeed in getting sufficient senior management support to undertake the work, it’s time to hunt for all of the company mandates that have accumulated on shelves, in filing cabinets or on your company’s internal Web site over the years. Having done this on a number of occasions for different companies, I can report that this is no trivial task. Generally it takes days, and sometimes weeks, to locate all of them – and that’s just at the corporate level. If you were to broaden the scope of your project to include the company mandates at all your company’s offices and manufacturing locations, you may be in for a very long haul indeed.

Once you have confidence that you have assembled them, it is time to work with their various owners to kill as many of them as possible. In the world of company mandates, less is more. Company mandates will never be effective until their collective benefit outweighs the considerable costs of maintaining, translating, training on and auditing against them.

Although it is tedious, thankless work, killing policies is much easier than you may think. First, once you start to read your company mandates – for the first time - you will find that many of them are outdated, redundant, contradictory, poorly written, unnecessary or just plain junk that is easy to part with.

Secondly, often policies are written in cases where other strategies for helping employees understand and abide by the law would be more effective. For example, despite the significant risks associated with violating antitrust laws, do you really need a policy that says you will comply with such laws? This is a typical example of a worthless document. Your code already mandates compliance with the law – and likely antitrust laws in particular. Another document that says the same thing is a waste of paper. Similarly, except in the handful of cases in which a law requires a specific policy be issued or posted, you don’t need a policy for every law on the books. Instead, it is far more effective to have a well written set of guidance documents or training materials to help employees understand the law and what they need to watch out for on the job to avoid making costly mistakes.

Thirdly, many documents labeled as “policies” are really procedures or guidance documents. If the nomenclature for such company mandates has not been carefully managed in the past, it is likely that you may have the opportunity to eliminate some of the “policies” by re-labeling them, thereby establishing more coherence in the collection.

Finally, remember, you have gone to a lot of trouble to hire decent, honest people. The reason you likely have not had wide spread anarchy, despite the fact that no one has read company mandates, is because you really don’t need most of them to assure compliance with the law. Ninety nine percent of compliant and ethical behavior is achieved through the unremarkable application of common sense and conformance to basic standards of honesty and professional courtesy. Provided you have set forth the company’s commitment to living by fundamental values in your code of conduct, and you have truly engaged your employees in the process, you don’t need a policy regime that covers all possible contingencies to achieve the behaviors you desire. Said another way, much of your company’s policy thicket can be safely eliminated if the company takes the time to invest in a “values based” rather than a “rules based” corporate culture.

Step 4. Close the Gate

Once you have successfully eliminated as many company mandates as possible, unless you want to go through this painful exercise again, you must take steps necessary to control the creation of new ones. The best way to do this is to establish and enforce basic protocols for policy creation with clear lines of authority for policy approval and amendment. However, take care to make sure that such protocols are not so burdensome that the company cannot effectively respond to changes in the law or in the marketplace. Another significant advantage to this gate keeping role is that, if it is designed properly, it will ensure uniform formatting, coordination between various mangers and department heads and that implementation plans are developed and executed for every new policy or policy amendment to effectively apprise employees of such changes. It should also assist in ensuring that all company mandates are well written and as brief as possible.

Step 5. Get Them Organized

Even after you eliminate as many policies as possible, if you are a part of a complex organization, subject to legal requirements around the world, there is no avoiding a significant level of complexity. However, this fact can be significantly mitigated by adopting a common nomenclature for the various kinds of company mandates you have and adopting a sensible numbering and formatting scheme. You should also carefully evaluate who each of your company mandates apply to and organize them in a way that helps employees figure out which ones actually apply to them. One way to achieve this is to organize your company mandates as follows:

a. Company mandates that apply to all employees. (Note, there should be very few of these and they must be translated into all languages necessary for your employees to understand them.)

1. Policies

2. Standards

3. Procedures

4. Forms

5. Guidance Documents and Training Materials

b. Company mandates that apply only to employees in a particular region

1. [Country, Region of Location]

i. Policies

ii. Standards

iii. Procedures

iv. Forms

v. Guidance Documents and Training Materials

c. Company mandates that apply only to employees in a particular department

1. [Department or Function]

i. Policies

ii. Standards

iii. Procedures

iv. Forms

v. Guidance Documents and Training Materials

d. Company mandates that apply globally but only to employees engaged in certain activities

i. Policies

ii. Standards

iii. Procedures

iv. Forms

v. Guidance Documents and Training Materials

By organizing your company mandates by this or some other scheme, you accomplish two very important objectives: You help your employees understand which policies apply to them and, if you list them like this on your internal web site, you can use hyperlinked text to make them easy to find.

Ideally, your company mandates could be organized in a system that would permit any employee to perform effective searches for ones they may be interested in reviewing and to identify which ones apply to them directly by typing in some basic information like their work location and department. If you are successful in creating a system in which anyone in your company can create a manual of company mandates that applies to them by taking a few easy steps, you will have made a giant leap forward in bringing your company mandates to life.

Step 6. Engage the Employees

Remember, the purpose of this painful exercise is to create a set of company mandates that actually reduces your company’s legal and ethical risks by influencing employee behavior in the workplace. In the end, what is most important is what your company mandates do rather than what they say or how they are organized and maintained. Even the best written, best organized set of company mandates won’t “do” anything unless you are successful in engaging the employees. The way you can best achieve this engagement will vary substantially based upon the number of employees, their location and many other such factors. However, one fundamental requirement for true engagement in any setting is helping employees understand not just “what” the policies say but “why” abiding by them is good for them individually and for the company as a whole.

This objective can only be achieved with careful planning and a real investment in training across the enterprise. Consideration should be given to getting employees started their first day on the job. Instead of just getting the necessary papers signed and showing them their new desk or work space, design and implement an employee induction program that requires all new employees to read, understand and have a meaningful opportunity to discuss all company mandates that apply to them within a reasonable timeframe. There is no better time to reach employees with this vital information – before they get busy with their new jobs. If you don’t think this is worth the trouble for many of the mandates your company maintains, then you have just identified another bunch that you should kill.

Step 7. Audit

History has shown that in any human endeavor, where there is no accountability, there is failure. Once you have an accessible and sensibly organized regime of company mandates and have provided sufficient notice, training and opportunity for employees to become acquainted with it, it’s time for you to audit. If yours is like most companies, company internal or external audits only relate to compliance with rules related to accounting procedures, financial controls, quality or health, safety and environmental issues. To induce employees to really take your company mandates seriously, you must develop and execute audits and surveys at every level of the company and compel remedial action when deficiencies in understanding or compliance are discovered.

Conclusion

Having done this kind of policy cleanup work myself, I can guarantee that getting your company’s “dangerous dust collectors” under control will be a time consuming, frustrating and thankless exercise. But if your company management team is really serious about having an effective compliance and ethics program, you have no choice. Written company mandates are the penultimate tool in articulating and implementing critical aspects of corporate compliance and ethics programs. If they are routinely ignored you only have a “paper” program that is little better than having no program at all. But, if you take the steps necessary to make them living documents, relevant to employees’ daily work lives, you have succeeded in taking a critical step in effectively managing your company’s legal and ethical risks

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