Golf and Ethics

I think I am in a good position to comment on the much hypothesized link between golf and ethics. There is no such link. It is total poppycock. Shivas Irons - nice try and you did sell some books. You are as likely to meet a cheating scumbag on the golf course as you are in your the investment banking interest group of the Young Presidents Organization. In fact, you will meet many of the same folks. That does not mean that young people can not learn something about ethics from golf; they just can not learn to BE ethical. I have played golf for more than 50 years and practiced ethics for 36 years. I learned the most about ethics from golf between the ages of 12 and 16. At this age, I weighed 90 pounds max and grew to the startling height of 5 feet, five inches. I played a muni called Sylvan Heights that was run by the city and populated by blue collar golfers, my dad (a certifiable golf nut), hoods, my high school golf team, professional gamblers - amongst others. I played golf everyday of the short summer with anyone who would play with me. I was a very good golfer and a fantastic golfer for my munchkin-like size. And I gambled with everyone because that is what golfers do to add fun to the game. Once I had a guy named "Beak" Mirani down $3,000 and I learned fast that winning too much can be dangerous- especially if you take advantage of someone else's gullibility - Beak did not believe that such a little spud could be so good and so mean at the same time. I learned a lot of other things. I played golf with a guy who married vulnerable women for their money. I played with a woman who sought rich men for the same reason. I learned how adults think and act and I have carried the lessons with me to this day. Did I learn to be ethical? No. I learned to be tougher than anyone who thinks I treated them unethically. Now to my golfer friends, I do not wish to offend thee. But to pretend you are engaged in a mystical activity when you are really only contributing to chiropractic is silly business. I did learn about ethics at some point I hope but not from golf.

Of Mice and Lawyers

One puzzle of current attempts to defang the compliance function is why it seems to some, particularly members of the Legal Department, a good idea to have the Chief Compliance Officer report to the Legal Department. The idea would be laughable except for the fact that it is carrying the day. This is one of the few things in compliance that can be made perfectly clear.

Go back to the beginning which is the Federal Sentencing Commission in the mid-1980s. The country had survived the scandals in the defense industry but was in the throws of economic collapse at the hands of a sick financial system run by scoundrels. Some folks refer to this as “the S&L Crisis” which was thought to be the financial crisis to end all financial crises. Maybe not.

In response to this perceived increase in corporate misconduct, the Federal Sentencing Commission decided to develop guidelines for sentencing companies convicted of criminal conduct. It was intended that such companies be assured of suitable and consistent punishment.

But the Commission conceded the obvious fact that even the best corporations may have individual members who do reprehensible things in the name of the corporation. Thus, the Sentencing Guidelines specified a model of what counts as a good citizen corporation even in cases in which an individual or individuals have committed crimes in the name of the corporation.

The idea is that good citizen corporations will have ethics or compliance programs designed to detect, prevent and correct misconduct by individuals prone to wrong doing even at the highest levels of the corporation. The Commission defined an effective ethics or compliance program as including seven elements which are now the recognized building blocks of all reputable ethics and compliance programs.

The Sentencing Commission was not under the delusion that savings and loans, banks, and brokerages had committed wrong doing because their legal departments were understaffed. In fact, they had armies of loophole seeking, regulation side stepping attorneys. It was obvious to all that legal departments had failed to detect, prevent and correct the wrong doing that resulted in the economic crimes of the late 1980s and early 1990s. An additional system of checks and balances was to be instituted to allow members of the organization to point out wrong doing at even the highest levels of the organization and without fear or retaliation from those high levels – even if those high levels include members of the legal department. The Commission was not trying to add staff to the legal function but instead was trying to add a separate element to a system of check and balances.

This is not to say that lawyers can not or do not make good compliance officers. Some do and some don’t. Former Naval Commanders, former CEOs, the theologically or philosophically trained, CPAs, internal auditors, social workers and many others sometimes make good compliance officers. But none can succeed if they are thwarted by an ill-conceived organizational structure that places them in the executive team’s harem.

The Dog That Didn't Bark

More on gifts and such. If you want to train a dog to do anything, you first train it to sit and stay. Trust me on this as I have three little beauties. Why? If the dog doesn't respect your authority in this matter, you are unlikely to train him/her to do really difficult things like not eating the other dog's food. Now the job of a compliance officer is to train the members of his/her organization not to cross certain lines. You are in the invisible fence business. Now if you can not convince the organization to accept a specific dollar limit on the value of gifts, you are unlikely to get key managers to avoid hair brained schemes that promise to make them rich. You have to win one battle to show that you have the authority to set some boundaries. When I see codes and policies that talk about gifts being limited to what is usual and customary or reasonable given the circumstances, I take that as a sign that the organization may be beyond hope. If I get hired to help, we may well start with a gift policy.

Once upon a time, a senior executive of a publicly traded healthcare company was sent a St. Andrews putter - gold plated with his name on it - by a vendor, the company's law firm no less. He wanted to keep it so badly he teared up. He then told his admin to send it back to the vendor who had given it to him. The admin immediately told the other admins what happened - "They have gone completely crazy over this ethics stuff; Mr. X actually sent back a St. Andrews putter." And the organization was changed.

I, however, can accept the putter. So be kind!