Navigating the political climate is becoming an increasingly difficult task for businesses. While being advised by some to “stay in your lane.” Businesses are like stakeholders, subject to an ever-changing political miasma. This new reality, coupled with a new level of transparency for companies only amplified by social media, means companies may find themselves embroiled in very public controversies with one or more stakeholder groups. . When situations like this arise, Chief Compliance Officers (CCOs) and compliance professionals are called upon to help companies navigate this difficult process.
So a recent Harvard Business Review (HBR) article piqued my interest. Strategy in a Hyperpolitical WorldIn , authors Roger L. Martin and Martin Reeves share their thoughts on how companies can make smart choices when values clash. Some recent examples pointed out by the author include: When Disney spoke out about his LGBTQ+ rights in Florida, Disney lost his special governing status and rights within the state. When H&M raised concerns about cotton sourcing and human rights in China, its earnings in the country plummeted. When the Ukraine crisis erupted, McDonald’s was forced to pull out of his 30-year hard-earned business in Russia. ”
This change to the enterprise has been percolating for some time. Like many changes over the past few years, the company’s politicization accelerated during Covid-19 and the Russian invasion of Ukraine. In addition to the aforementioned increase in social media virality, the authors believe: As employees seek to express their identities and beliefs in the workplace, they increasingly expect their companies to support them on issues of concern. For years, companies have wanted this kind of commitment and engagement with their employees, but with all these changes comes new risks. Furthermore, “Many CEOs who have taken a stance on social issues say their employees have expected it and lobbied for it as a driving force.” In other words, as the authors believe , the playing field for companies has expanded beyond simply justifying strategic decisions from a purely business perspective.
How can compliance help companies survive all this? “To make and execute the best strategic choices in this environment, leaders must (1) develop strong principles to guide strategic choices, (2) address ethical issues early, and (3) You must consistently communicate and execute your choices (4) engage across industries to shape context and (5) learn from your mistakes so you can make better choices in the future. This is a process facilitated by corporate compliance functions, and I have adapted the author’s process to compliance.
formulate firm principles
According to the author, “The first step is to understand the company’s salient social and political issues. The third step is to listen to and understand employees’ views on these issues, because, as we have said, companies have a position on political issues. The reason for stating the is often in the opinion of employees.” They said the principles were broad enough so that they “applied to the main sources of political tensions to which companies are likely to be exposed.” It should be clear and clear. Finally, they should be easily auditable.
address ethical issues early
Admittedly, “anticipating and shaping the ethical agenda requires a delicate balance,” but companies are now being asked to be more agile and agile. “Individual firms may be able to move faster and with greater control, but ultimately the complex problem is often collective action initiated by market leaders. Organizations need to assess where and how they should operate and the “need to anticipate, anticipate, and shape emerging ethical challenges.” I have. It may require a high degree of creative problem-solving, but it often garners enormous public goodwill and strategic advantage for early migrators. When an issue becomes front page news, the political camp becomes entrenched and the company’s room for maneuver is limited. This was most notably seen after Russia’s invasion of Ukraine, where companies were forced to make tough choices from their employees and other stakeholders. Support democracy or suffer the consequences of being pro-Putin. Companies that responded quickly were in a much better position when the inevitable economic and trade sanctions began to be imposed.
Consistent communication and choice execution
It is important that the principles are “communicated and understood by all employees”. They affect the expectations of external stakeholders and should be made publicly transparent. As the Fair Process Doctrine suggests, “principles are only trustworthy if they are applied consistently.” should be part of everyday business decisions, not just However, just as upper-level leaders should not simply “talk and walk”, the principle of “inform communication but not action” has become unreliable over time. It is no longer effective in avoiding risks. CCOs should use their company’s principles to “get as proactive as possible and work collaboratively to tackle and solve problems.” Companies that fight corruption can have a greater impact if they work with other stakeholders to address the problem and make a difference. requirement. “
Engage across industries
If there’s one change in principle, it’s that there are bigger problems than any one company can affect. Some issues go beyond the industry as a whole, and companies “need to work with civil society and governments on the toughest and most entrenched issues to effect change.” Failure to do so may result in “embracing the unpredictability of endless ad-hoc responses, or forcing industry to regulate because the impact of industry’s own efforts is inadequate.” There are important new issues to address.” Perhaps the most obvious examples of this are business trafficking and human slavery, and the passage of the Uyghur Forced Labor Prevention Act (UFLPA). The bill passed the U.S. Congress almost unanimously because many businesses stand up to such abuses that may be embedded somewhere in their supply chains. , now seen in many other areas, including trade and economic sanctions after Russia’s invasion of Ukraine, and the fight against money laundering.
continuous improvement
Your business doesn’t always go all the way. In fact, compliance programs Prevention, detection, remediationThis means fixing problems as they are detected. I was therefore pleased when the author cited Siemens AG as such an example, following a massive corruption scandal involving Foreign Corrupt Practices Act (FCPA) violations. The author states: Down, and 40% of the level below. The company then made serious and long-term commitments to make amends for its past actions. Established the global Siemens Integrity Initiative to support government investigations and fund joint actions to reduce corruption. ”
These steps should prepare your organization for the next big shock.
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