Deadly Outcomes Can Result From E&C Failures: The E&C Pulse - April 8, 2020

April 8, 2020 Ben DiPietro

April 8, 2020

Deadly Outcomes Can Result From E&C Failures

 

Before the COVID-19 virus exploded into a worldwide pandemic, LRN’s 2020 Ethics & Compliance Program Effectiveness Report was focusing on how ethics and compliance failures can sometimes have fatal consequences.

 

This year’s report, released last week, looks to three real-life examples--the Vale dam collapse, the Pacific Gas & Electric wildfires in California, and the Boeing 737 MAX aircraft crashes--to illustrate what happens when companies have E&C programs in name only, and why it’s so vital to create a strong culture based on ethics, values, and transparency.

 

In each case, the problems leading to catastrophes were known, regulators were deceived, or not fully informed. The companies ignored concerns raised by their employees that pointed to weaknesses that led to disasters. Vale’s dam collapse resulted in more than 250 people losing their lives, PGE’s fires killed 85 people, and destroyed more than 18,000 buildings, while two Boeing crashes killed nearly 350 people.

 

All this took place despite extensive sets of rules, processes and procedures put in place presumably to prevent these specific behaviors.

 

“Those are very stark and tragic examples of what can happen when people say one thing or focus overly on procedures, but neglect and don't focus enough on what's actually happening, and whether the procedures are in fact being followed,” LRN’s Susan Divers, who helped to author the report, told Tom Fox in a podcast.

 

“Whether, in fact, the underlying culture is telling people informally, ‘You don't really need to do this, and it's not going to matter because we're going to get the airplane into production by this date anyway,’” said Divers. “Or, ‘We know there are cracks in the dam, but we'll deal with it at some point.’ Or, in the case of PG&E, ‘We're going to mislead regulators about the fact that our towers need maintenance and are sparking.’”

 

Time and again, companies rely on processes but neglected to address how they work in practice. Failure to identify and address the critical issues that determine the health of an organization’s ethical culture leaves the door open for misconduct, no matter how well organized or funded the E&C program may be. 

 

“These scandals and others, including many that have come to light as a result of the #MeToo movement, occurred in organizations that had staff, training, policies and the other standard elements of E&C programs,” said Divers. “But they did not deter significant misconduct.”

 

One common element to these scandals is top leaders in the companies knew of the problems. Internal emails revealed concerns among those working on the 737 MAX aircraft, that Vale promised to improve safety after an earlier dam collapse but did nothing. They showed PG&E knew 48 of its towers needed immediate replacing, retaliated against workers who raised concerns, promoted a manager who was falsifying reports, and lied to regulators.

 

“That makes a mockery out of any process or any ethics and compliance program that they had in place at the time,” she said.

 

The overarching theme in the report is, you must address culture if you really want to prevent misconduct. One of the shifts in the E&C profession has been a recognition culture is what determines whether misconduct occurs. And regulators now understand this, she said.

 

“It's been a while and coming, but they recognize you can pay us a little the laws you want, you can have as many procedures as you can invent, but in the end, it's the culture of the organization that determines whether they're followed and how they're followed,” said Divers.

 

                                                                                                            BEN DIPIETRO
                                                                                                       @BENDIPIETRO1
                                                                                       BEN.DIPIETRO@LRN.COM

 


THE ELEVEN

Medical staff across the country are being warned against speaking out about problems at their facilities, Bloomberg reports.

 

COVID-19 is causing a moral crisis for the military, New York Times reports.

 

Business integrity during COVID-19 is the topic of a piece Alison Taylor of Ethical Systems wrote for the FCPA Blog.

 

Norway's sovereign wealth fund is reaping the benefits of an ethical bounce.

 

Psychology Today has a piece on how to change behavior for good.

 

The pandemic is creating a labor crisis, Vice reports.


Culture Amp looks at handling performance evaluations during a pandemic.

 

Two from Axios: One about how the developing world will be hardest hit by COVID-19, and one about how brands should talk about the pandemic.

 

Law360 expects a decline in DOJ white-collar corruption prosecutions during COVID-19, but a rebound in cases once the pandemic ends.

 

Radical Compliance looks into a $450,000 whistleblower award given to a compliance officer by the Securities and Exchange Commission. 

 

The toilet paper shortage is less about hoarding, and more about supply chains.

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