Ethics Whisperer

Amateur Hour In Compliance?

councile@aol.com (Mark Pastin) — Wed, 28 Apr 2010 14:26:00 +0000

I am often asked whether corporate compliance is a profession. Since my organization has been certifying compliance professionals for almost 30 years, my bias is clear. But there are good arguments on both sides of this question. One thinks of the scene in “My Cousin Vinny” in which Joe “Vinny” Pesci describes himself to the judge as a “para-lawyer”! Along these lines, I have heard it said that compliance officers are simply a large group of people practicing law without a license. Is this really the bottom line?

To answer this question fairly, we need to ask what makes law, accounting and medicine professions, while sailing, cooking and painting are not professions, at least for most of us. Theologian William F. May is often considered the authority on profession. He argues that the root of the term “profession” is “to profess” so that a professional is someone who has a core, specialized knowledge base which she or he is expected to profess authoritatively. Thus, doctors are trained in medical science, lawyers in the law, and accountants in standards of financial reporting. Chefs, on the other hand, have skills and a body of practical knowledge but, one might argue, no body of special knowledge not accessible to anyone who tries to make the donuts.

This is a real bone of contention in a society in which everyone wants to be a professional something or other. There is no question that the word “profession” is being generously applied to activities as varied as being a politician and being a cab driver. To be called a craftsman, skilled amateur or, even worse, layperson to invite low pay and less respect. One is inclined to ask what is so bad about being an amateur, someone who engages in activity for the sheer love of it. Social bias aside, there is a difference between a craftsman, such as a carpenter or shoemaker, and a professional. And part of that difference is a body of knowledge as opposed to a set of skills.

But that is not all the difference.

In addition to having a specialized body of knowledge, a professional adheres to a set of standards dictated by the domain of his or her knowledge, without exception and beyond the pressures of practical advantage and job. A lawyer who works for a company is still an officer of the court and is obliged to observe basic standards, such as not advising his/her client on how to break the law (and get away with it). Similarly, accountants are allowed to tell you how to best report financials and fill out your tax form, but they can not assist you in falsifying your financials or avoiding taxes you actually owe. I am not saying that lawyers and accountants always observe these standards; I am saying that we expect them to if they are to be regarded as professionals.

Where does that leave corporate compliance?

When one thinks of a body of compliance knowledge, the Corporate Sentencing Guidelines for Organizational Crime are the initial reference. The Guidelines became effective in November of 1991, and, although slightly modified subsequently, remain essentially unchanged. The Guidelines outline the elements of an “effective compliance program” that organizations should have in place if they expect leniency when sentenced for a crime. It is fair to say that no compliance officer can be considered competent if he/she is not familiar with the Guidelines and the extensive body of knowledge that has grown up around them. The Guidelines are now recognized across industries and agencies as the baseline standard for compliance programs.

But there is more to the body of compliance knowledge than the Guidelines. The Guidelines themselves codified a body of knowledge that had developed concerning corporate compliance in the decade prior to issuance of the Guidelines. Corporate compliance programs, which are more often called corporate ethics or integrity programs outside of healthcare, had assumed a specific form over years of experience mainly earned by government contractors partnering with the federal government in fighting fraud. Just as the Treadway Commission (Committee of Sponsoring Organizations of the Treadway Commission) was more of a codification of financial reporting standards than a creation, the Sentencing Guidelines did little more than sanctify a stable body of knowledge, a body of knowledge that continues to develop at a rapid pace.

So the argument that there is a body of knowledge underlying compliance seems safe. Even though there are many specializations within this body of knowledge, such as research compliance, health plan compliance and even VHA compliance, the core requirements of compliance as part of a system of internal controls constitute a stable body of knowledge capable of on-going growth and refinement.

But is there a related set of behavioral standards? It is in this area that compliance truly distinguishes itself as a professional endeavor. Let’s start with a simple question: Since both the legal profession and compliance concern themselves with laws and regulations, how are these endeavors different? And is this relevant to the status of compliance as a profession?

The behavioral standards for a lawyer derive from the lawyer’s primary role as an advocate for the interests of the client in the legal system. The lawyer is to put these interests ahead even of the personal interests of the lawyer (e.g., in getting paid) but only up to the point of not leading to violations of the law beyond those already committed by the client. In a corporation or other organization, the lawyer’s client is the abstract entity which is the corporation itself. The lawyer is an advocate for the corporation in legal matters.

By analogy, the behavior of a physician or other medical professional is to be guided by what is in the best interests of their patient from a health viewpoint. The patient’s health interests are to take precedence over any other interests that the medical professional may have and should always be paramount in the medical professional’s mind.

The behavioral standards for a compliance officer derive from compliance officer’s commitment to being an advocate for the integrity of the organization’s conduct with respect to all of its constituents. Specifically, the compliance officer is expected to advocate that the organization keep its word, including its promise to observe laws and regulations, or accept responsibility for those cases in which it does not or can not keep its word. Since organizations are composed of people, there will always be an error rate even in basic integrity. While the lawyer advocates the client’s interests, the compliance professional advocates the interests of integrity, even if this interest is disadvantageous to the organization in the short run.

That is why our certification program for compliance professionals tests for more than a core body of knowledge. For example, we ask those who seek certification as VHA compliance professionals how they will handle a situation in which they raise a compliance issue with their management and do not believe there has been adequate follow through. While there are many correct answers to the question, the common denominator is that all involve advocating an honest outcome.

This is also why the US Department of Justice and US Department of Health and Human Services have been adamant in their belief that the compliance function should not report to the legal function. In the face of a violation of law by an organization, an attorney’s guidance system shifts to defense while a compliance officer’s inner compass says “own it” by disclosing and correcting. These are both valid professional instincts but they are in fundamental conflict in some cases.

One of the reasons that the professional status of compliance is questioned is that so many of its practitioners bring the passion of the amateur to their work. But this should be viewed as the commitment of those fighting for standards that are not yet universally recognized rather than as the enthusiasm of the untrained. There is no reasonable question as to the professional status of compliance professionals, no matter how much those who are members of professions advocating narrower interests may complain.

Mark Pastin, Ph.D.
President, Health Ethics Trust
Council of Ethical Organizations

copyrighted to Mark Pastin

Mysteries of Healthcare Reform

councile@aol.com (Mark Pastin) — Mon, 01 Mar 2010 14:41:00 +0000

1. Why are health insurance premiums going up?

All companies raise prices to insure against future uncertainty. With healthcare reform targeting health plans, the plans are trying to position themselves to withstand a shit storm of legislative stupidity.

2. Why do health insurance companies have (limited) anti-trust exemptions?

These exemptions were intended to lower the price of health insurance and force companies to cover remote groups. For example, in rural areas where people are dispersed and may not form natural groups, it was unappealing to write health insurance. The anti-trust exemptions are intended to make it more appealing to write these groups by giving the companies a larger pool over which to spread the cost.

3. Why do drugs cost more in the US than elsewhere?

Drug companies are forced to sell at low and below market prices in Canada and Europe by their government-run healthcare entities. The costs of developing and marketing new drugs is pushed back on US consumers. Our government is supposed to impose tariffs and trade restrictions on foreign countries who control the prices of our products in this way, but refuses to do so. So your grandmother is buying inhalers for German skiers. Nice. Why won’t our government address this issue? The emperor does not enjoy standing naked.

Wouldn’t it be nice if we could talk about what really needs to happen in healthcare instead of engaging in a political shadow dance?

copyright Mark Pastin, 2010

Compliance Tea Party - Hold the Sweatener

councile@aol.com (Mark Pastin) — Tue, 16 Feb 2010 14:59:00 +0000

HealthCARE reform is dead. Even the administration no longer uses the term. Did you notice the unexplained shift from healthCARE reform to health PLAN reform? The public does not want government run healthcare. The Obama administration thought it could pull off what the Clinton administration couldn't. Wrong.

Why switch to PLANS? Well, who ever met an insurance plan that they could love? So let’s demonize the plans now. That’s the ticket. Health plan compliance professionals take note: You get busy once your industry is put on the 10 Most Wanted list. Ask your friends in pharma.

This is tragic, as there are things that need to get done in healthcare. We have to do something about those in the 55 to 65 age group who can not afford health insurance – often $25K a year and up - should they retire or lose their jobs. We have to quit driving drug prices up by forcing the pharmaceutical industry to massively subsidize European and Canadian healthcare. We have to simplify the rules of existing government sponsored programs such as Medicare and Medicaid so the funds in these program actually go to healthcare. And could we have some fraud enforcement in government programs targeting uninsured kids?

Defeat is not readily accepted here in DC. So expect to see additional evidence that you are a bunch of fraud committing, patient abusing, white collar criminals. I was amazed to learn that a bunch of compliance officers paid real money to have the government read them month old press releases saying what naughty boys and girls they were at the Intergalactic, Hear-It-To-Believe-It Fraud Hoe Down - or whatever it was called.

Those of us in compliance will not rest until fraud is reduced to as close to ZERO as is humanly possible. But we will never achieve that goal unless we are given some credit for what has been accomplished to date in fraud fighting – and we have accomplished quite a lot. I think I individually contribute to global warming when I hear that we have accomplished nothing and that the government needs an even bigger stick just to keep us in line. My message on this is that the compliance community and the government should be on the same page on this one. Could we please just get along?

copyright Mark Pastin

Medical Ethics - Kid's Rights?

councile@aol.com (Mark Pastin) — Wed, 22 Jul 2009 14:29:00 +0000

From time to time I create medical ethics cases, which are copyrighted, on which I would like comments. The deal is that I will post a "solution" in a later blog update. I would like your comments and will publish or not according to your wishes. Give me you comments on this one.

Whose Witness?

You are working in the ER when a minor comes in who has been seriously injured in a car accident. The child, who is accompanied by his parents, shouts repeatedly, “I don’t want to die.” Immediate surgery is required and you explain the situation to the parents. They advise you that they belong to a religious group which does not permit transfusions and would rather you didn’t perform surgery if a transfusion is necessary. The mother begins to cry and shout at her husband who removes her to a waiting area. The father returns and tells the physician that they would like the surgery but can not permit a transfusion. He returns to the waiting room. There is no time for an ethics consult or any other type of consult for that matter, so the decision is yours. You see no prospect of success with the surgery absent a transfusion and the child will certainly die without the surgical intervention. What is the best course of action?

This is an actual case presented to me for advice and is not uncommon. Of course, there could be any number of extenuating circumstances and additional details. But please address the case on the basis of the information provided. There will be an analysis of this case in a later blog entry.

Golf and Ethics

councile@aol.com (Mark Pastin) — Wed, 13 May 2009 13:58:00 +0000

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.

HR's Evil Empire

councile@aol.com (Mark Pastin) — Fri, 06 Feb 2009 22:27:00 +0000

Human Resources is often the bane of employees and compliance professionals alike – the HR Catberts and squids of corporate life. Although HR professionals don’t like to hear this, their domain is often called Fortress HR, the Evil Empire and The Avengers. These titles are often well earned. Well, it isn’t entirely their fault.

Many HR professionals start out trying to make the organization a better place to work – a place with a culture that attracts high performing employees. But HR professionals soon learn what is truly expected of them. The first blow is that many organizations make no distinction between Personnel and HR. So the HR professional spends an inordinate amount of time dealing with benefits issues. And then the HR professional get her/his first real HR question when a manager asks how to go about firing an employee with slim evidence of non-performance. HR becomes the hangman’s apologist. An HR professional who handles all of this may be allowed to participate in mass firings, benefit cuts, demotions – everything short of genocide.

After years of never getting to do their job, many HR professionals become bitter and petty. And then along comes big-stick corporate compliance.

The first battle is the hotline. It quickly becomes evident that HR is concerned about compliance learning about all of HR’s malfunctions via the hotline. Since compliance relies on HR to handle many investigations, it often becomes clear that HR couldn’t care less about anonymity promises made by compliance. And then you have to deal with the fact that HR does not want to punish the supervisors and managers for retaliating against reporting employees. This is war.

I can not tell you that I know of a way to avoid this sort of situation.

But there are things you can do to improve the situation. The first is to let the HR professional know that you understand what he/she really wants to be doing. One part of every compliance officer’s job is culture change – and this is like music to HR’s ears. You can also try to get HR involved in the process of incorporating compliance related measures in the performance appraisal system. If you first raise this issue at a committee meeting, HR is sure to swat you with alleged impossibility of measuring compliant conduct. So let HR have the bright idea in the first place.

Of course, there are HR professionals who are too far gone to be redeemed. You can always check their travel vouchers, expense reports and contracts with vendors. Ah, Fortress Compliance!

Of Mice and Lawyers

councile@aol.com (Mark Pastin) — Fri, 23 Jan 2009 16:24:00 +0000

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 Zen of Then

councile@aol.com (Mark Pastin) — Tue, 20 Jan 2009 14:14:00 +0000

While I am as dedicated a golf nut as anyone, even I can not believe the idiocy that passes for advice among pros and hackers alike. In terms of mental gurus, we have gone from a name dropping “boy toy” to a platitude machine with hair by Devo. All of this mental coaching comes down to one thing: Be in the present. Professional golfers pay mental coach quacks tens of thousands of dollars to tell them: Be in the present. I am going to tell you the whole truth about this.

At any given time, such as now, you can only BE in one time – the time that it actually is. You can not BE in the future and you can not BE in the past. That is how time works. On the other hand, there are three ways to be in the present. 1) You can presently be reflecting on the past; 2) You can presently be anticipating the future; or 3) You can presently be concentrating on what you are doing. Here is the punch line. You do most athletic things better if you concentrate on what you are doing.

There it is. The whole tamale. The zen of golf in one cracked egg shell.

Now will you please pay me to tell you to concentrate on what you are doing?

In fact, the only endeavor with more quacks than golf and herbology is ethics. Darn it now. Would you just do the right thing: ask what your mother would think; ask how you would feel if you read in the morning paper; explain it to your kids. How about:

Get a brain

Billionaires I Have Known Pt. I

councile@aol.com (Mark Pastin) — Fri, 16 Jan 2009 15:24:00 +0000

I have worked directly for two billionaires and against another. Let me tell you the "against" story. When I lived in Arizona a lot of my consulting business focused on real estate developers, mortgage lendors and crooked politicians - the bread and butter of the AZ economy at the time. One of the real estate firms - mid-sized and successful - hired me for whatever reason - I am not sure. One day the head of the firm is off to sell about $20M in land to a famous and infamous AZ billionaire and asks me (!) to go along. So we are sitting down with me and Mr. Land across from Mr. Big and Mr. Big's CFO. Mr. Big offers Mr. Land $20 M in cash for the land or $40M in his company's AAA rated bonds. I am talking to Mr. Big's CFO on the side to figure out if the cash or the bonds are worth more given the maturity of the bonds. I have always been a boob at operating calculators and have never been able to make the compounding function work on those old TI machines. So I am compounding the interest manually!!! And then I realize that the CFO is making big mistakes - in my client's favor no less - on this simple task. So I go back to my client and say, "Take the cash or I'll kick your ass." He thinks I have flipped. My reasoning is that if Mr. Big's CFO is worse than I am at compounding interest, the bonds are worthless - AAA rating or not. I made such an insane fuss, worthy of Tom Cruise, that Mr. Land took the cash, left the meeting and fired me two days later. One year lart, Mr. Big was at the center of the savings and loan crisis and the bonds were worthless. Two years later he was in a pink jumpsuit. But Mr. Land never hired me back. In hindsight, he was the one who saw through Mr. Big. Well, I got paid so that is fair enough I guess.

Healthcare Execs Cry Wolf

councile@aol.com (Mark Pastin) — Thu, 15 Jan 2009 13:35:00 +0000

The morning paper brings this news: Obama Seen Signing SCHIP Bill quickly. This means $35 billion more for healthcare in 2009. I opined on the company's (Health Ethics Trust) list serve that healthcare organizations are using the general economic downturn as an excuse to get rid of perceived dead wood - and to cut back on ethics and compliance efforts that were never near to the hearts of healthcare executives. This $35 billion is one example of what I was talking about. This is not emergency funding. It makes federally backed healthcare available to children in families with up $84K in taxable income. I can remember when that was much more than a full, tenured professor of business (Me!) earned - and I never considered myself a welfare case. Healthcare is not only not banking or retail; it has something to gain from the suffering in these other sectors - cheap money. So let's not make a bad situation worse by faking a headache when we just want to kick ethics and compliance out of bed. The federal government is in fact pouring money into healthcare at unpredented rates, taking actions that dramatically lower the cost of debt, and driving salaries downward. Does this sound unequivocally bad for healthcare? On the other hand, there is much less good news for health plans at this point as their role in further socializing medicine is so far unclear.

Anatomy of Evil - Fun

councile@aol.com (Mark Pastin) — Wed, 14 Jan 2009 13:58:00 +0000

Every once in while I read a book that sticks with me. It can be anything. One book I enjoyed immensely is The Gold Coast by Nelson DeMille, the purest anatomy of delicious evil in my recollection. DeMille is not a writer of "great literature." He writes for people and not professors. The central character is a very straight, very upright tax attorney who personifies the compliance officer. Both he and his Brahmin wife are swayed off their moral centers by a lovable, persuasive mafia capo. DeMille has a sharp sense of ethics and corruption. His old book, Word of Honor, is a terrific read and quite moving. It teaches so much about young people used to wage war. It too has the power to change your thinking. I could teach everything I know about ethics and compliance from these two books and it would be a lot more interesting and effective than teaching the code of conduct!

The Dog That Didn't Bark

councile@aol.com (Mark Pastin) — Wed, 14 Jan 2009 13:35:00 +0000

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!

Incense, Peppermint, Crooked Mankind

councile@aol.com (Mark Pastin) — Mon, 12 Jan 2009 21:29:00 +0000

The first question is: Why do this?

It is certainly not because I need things to do. It does seem to me that there cannot be many people who have spent more than 35 years providing what is variably called “ethics” or “compliance” advice. I have had the chance to see organizations and executives in serious trouble, in denial about the possibility of being in trouble, and, sometimes, doing the right thing. One thing I have learned is the endeavor of giving ethics-compliance advice is seldom about content. It is mostly about psychology. Specifically, it is mostly about getting people to do what they already think they should do in an environment that punishes correct conduct. So I hope to tell folks a little bit about ethical influence in the coming days and weeks.

Which brings me to topic A. Why all the blather about gifts, meals, entertainment, tickets, flowers, cookies, meals, drawings, free rides and the other dross of corporate life? Surely this stuff is not all that important! Why then do compliance officers spend a good part of their lives answering questions and picking nits about this crap? After a while, compliance officers are actually pummeled into debating dollar limits (per event, per month, per year ……..) and the fine differences between tickets and chocolates. From the viewpoint of corporate conduct, this is all nonsense.

And yet there is absolutely, positively no topic of more importance in compliance. More on this next time.

Welcome to our new blog!

councile@aol.com (Mark Pastin) — Fri, 09 Jan 2009 00:26:00 +0000

The Ethics Whisperer is under construction and will be live in the coming days.