Editor’s note: An earlier version of this article was written for the 2010 edition of the Manual. For the 2020 edition, SCCE asked the Ethics & Compliance Department at 3M to provide an update on their compliance training program.
Introduction
When a company faces an ethics and compliance failure, what’s the best strategy—a communications blackout or getting the issue out in the open? With the support of their ethics and compliance officers, most companies traditionally have resisted publicizing business failures. Many companies, however, have shifted strategy and started openly communicating about difficult issues. Even though openness in this area challenges the prevailing wisdom of past decades, most companies who have made the change report positive results from such transparency.
What caused the change? In the past, few companies were willing to talk—even internally— about employee misconduct. A number of factors converged to change the status quo. When the U.S. Sentencing Guidelines for Organizations amended Chapter 8, “Sentencing for Organizations,” in 2004, it established that companies must create and deliver to all employees effective compliance and ethics training.[2] Public interest groups and shareholder activists focusing on corporate social responsibility have used their influence to demand greater transparency in ethics and compliance issues.
In the United States, perhaps the greatest push for transparency has come from prosecutors and government regulators. Hundreds of companies have negotiated deferred prosecution agreements, signed corporate integrity agreements, and entered into guilty pleas. Prosecutors have insisted that many of these deals include commitments from wayward companies to embrace public transparency in their new-and-improved compliance programs.
In many recent corporate scandals, it has made little sense for the offending company to resist public transparency. Thanks to 24-hour news coverage, the public quickly hears the bad facts, along with a large dose of editorial scorn directed at the company. Indeed, once a company’s name finds its way into a front-page headline containing the word “scandal” and has been subjected to wall-to-wall television news coverage, transparency about how the company plans to address its failings can’t possibly hurt. In fact, the showing of a little public humility is often a necessary start toward restoring the shine to a tarnished corporate reputation.
The decision for a company to be transparent about a scandal that has already been in the news is not particularly difficult. Moreover, it hardly qualifies as a courageous decision when a company embarks on a transparency initiative that has been demanded by a corporate compliance monitor put in place by the U.S. Department of Justice.
Out of such obligatory transparency, however, many companies have come to realize great benefits. Companies find they can use the publicity to gain traction in repositioning their corporate culture. By openly talking about what will be done differently in the future, the company can earn trust from employees and external stakeholders. Justice Louis Brandeis said, “Sunlight is the best disinfectant.” So, too, transparency has proved over and over to be the best and quickest way to repair a broken reputation.
Of course, no ethics and compliance officer would wish for a company scandal simply to have a platform from which to launch a transparency initiative. So what about the thousands of companies that have not had their last, worst act prominently displayed in the headlines? These companies are not pushed by events (or compliance monitors) into the transparency pool and forced to learn to swim. Instead, they have to make a difficult decision whether to jump voluntarily into the water.
Potential Benefits
Why would a company make the leap? Because with risk comes great potential reward. When handled correctly, transparency about compliance failures leads to a number of positive results in the organization. Here are a few:
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Reality Check No. 1. Pollyanna employees realize the company is not immune to problems. They learn they can no longer keep their heads in the sand and assume misconduct does not happen at their company.
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Reality Check No. 2. Cynical employees learn the company is committed to enforcing its business conduct policies and holding employees accountable for misconduct. They discover the company really wants to root out misconduct and take disciplinary action against rogue employees who do not uphold company values.
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Trust. All employees come to appreciate that the company is committed to organizational justice and takes appropriate action when violations are substantiated. Employees feel more confident reporting concerns once they are convinced that the company will take the report seriously.
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Training. All employees learn their role in being vigilant and helping the company find and fix problems. And no lesson holds the attention of employees like a frank discussion about real problems within their own company.
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Leadership Development. Management learns how it can do a better job bringing employees into the conversation and engaging them to become part of the solution to address misconduct.
Despite these benefits, many companies have been unwilling to take the plunge and start communicating about ethics and compliance failures, even within the company. This is hardly surprising, as transparency in this area counters several “maxims” learned in business and life:
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Bad news should be kept in the family.
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All disciplinary action should be confidential.
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You will get sued if you talk about an employee’s failings and the disciplinary response.
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Commenting on bad news will only extend the story into another news cycle.
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If you can’t say something nice, don’t say anything at all.
Convincing Corporate Stakeholders
An ethics and compliance officer who pushes a company to break silence and talk about ethics and compliance failures will likely face a number of objections from key departments:
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The human resources department’s principles for the respect and dignity of employees counsel that disciplinary actions be kept confidential. Human resources is rightly concerned about preserving a culture that values and protects the individual, which generates employee trust and loyalty.
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The legal department wants to protect the company from defamation risk if the company says something that might cause a disciplined or fired employee to seek legal redress. Indeed, this risk is very real. Some jurisdictions even recognize a claim for defamation by excessive publication in certain circumstances in which truthful but personally embarrassing information is communicated to people who have no business need to know it.
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The public relations department works to ensure all news about the company is positive and supports the company’s key messages. Rest assured, publicizing that the company has rogue employees who commit bad acts is not among the key messages.
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The investor relations department wishes to avoid any activity that could harm the stock price or trigger a disclosure requirement.
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Company managers simply want to move on and leave the problem in the past. They want to eliminate further distraction in their business team. Some even worry that publicizing a misdeed might backfire and create a road map for other scoundrels to follow.
All of these objections are legitimate, and they all need to be thoughtfully addressed if a company wants to achieve the benefits of transparency. To overcome these concerns, it is important to find a compelling set of facts and demonstrate that the positive benefits outweigh the risks.
Seizing a Teachable Moment at 3M
3M Company, founded as Minnesota Mining and Manufacturing Company in 1902, grew steadily in its first century to employ more than 70,000 employees in 65 countries. To protect its good reputation, 3M built a strong compliance and ethics culture, and the company steered clear of headline-grabbing scandal. When problems with employees did arise, 3M had a practice of keeping disciplinary action confidential, for all the reasons stated above.
The company was presented with an opportunity to re-evaluate its low-key approach in 2003, compliments of a significant fraud case involving an employee. 3M’s internal auditing department uncovered evidence that a manager had set up and used a series of fake vendors. The employee sent himself fake invoices from his fabricated companies, approved them for payment, and essentially paid himself more than $1 million of company funds over several years.
When the plot was discovered, the employee was fired immediately. The company turned the facts over to the FBI, which led to federal criminal charges against the employee. Eventually, he pled guilty to multiple crimes and was sentenced to more than three years in federal prison.
The story attracted mostly local media coverage, but enough to make the employee’s name and some basic facts public knowledge. Understandably, the case generated huge interest among 3M employees at company headquarters, where the fired employee had worked.
Coworkers in the fraudster’s department failed to act on numerous clues that something improper was going on. There were several reasons. They had never heard of such a problem at 3M, so they didn’t think it could happen in their company. They didn’t appreciate that they had a role in helping the company discover fraud. The thief was good at protecting his turf, and he curtly rebuffed anyone who questioned what he was doing.
Making the Case
Post-mortem analysis of how the fraud occurred led to the conclusion that other employees in the embezzler’s department failed to do more to stop this crime, because they simply did not have the tools to perform that role. They neither viewed themselves as needing to be vigilant about finding and reporting misconduct, nor had they been trained to know what to look for.
In addition, recent human resources surveys revealed sentiment among some employees that the company was not doing enough to uncover and address performance deficiencies and misconduct in the workplace. In short, the company practice of meticulously protecting the confidentiality of miscreant employees had been undermining the perception of organizational justice among other employees. In the absence of information, some employees had concluded that the company either was making an insufficient effort to uncover misconduct or—even worse—that the company chose not to do anything about known misconduct.
The company decided the time was right for an unprecedented response—a worldwide fraud training program based on specific facts from this case and several others. A team from the auditing, security, human resources, legal, and ethics and compliance departments produced a two-track presentation. An all-employee edition of awareness training was written for global delivery to employees at every level in the company. A more detailed manager course was created for senior employees. The program was rolled out worldwide using presenters from the human resources, legal, and ethics and compliance departments.
Employees were captivated. The presentation included actual documents from several fraud cases, which riveted the audience. Employees appreciated the frank discussion about how others had exploited their positions to commit fraud. They appreciated learning about the improved controls the company had implemented to prevent recurrence.
Employees were reminded that they play a crucial role in detecting and reporting misconduct. The supervisory version of the training focused on the additional roles of management in providing oversight and preventing fraud.
Next-Generation Initiatives
The tremendous positive reaction to the training program left no doubt that the decision to be transparent about the fraud issue had been correct. 3M had seized the teachable moment, and there was no turning back. Employees emphatically asked for more real-life training examples.
In response, 3M has continued to add new and different transparency initiatives. Here are a few:
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3M publishes periodic “Business Conduct Challenges,” short emails that ask employees to make a business conduct decision after reading a brief set of facts, and then receive instant feedback on their choice. Most of the challenges are based on real-life events.
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3M publishes on its employee business conduct website numerous case studies about good and bad decisions made in the company. Names and other identifying information are sanitized to protect the privacy of the individuals involved.
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3M conducts live leadership development ethics training that uses a series of case studies, many based on real problems the company has faced. The discussion is much richer because the participants know they are debating real situations, not far-fetched hypothetical cases.
3M also looks for ways to encourage collaboration on the web. 3M employees demonstrated their eagerness to use internal social networking when massive traffic crashed the server the day 3M Connections, the company’s online collaboration site, debuted in 2009. Additional server space was added to handle demand, and employees immediately embraced the new social networking tools. Within weeks, thousands of employees had voluntarily posted their photographs in the corporate personnel directory, completed profiles on themselves, and formed hundreds of online communities.
To tap into this energy, 3M’s compliance department has created a blog space where 3M’s internal business conduct web content can be discussed. This interactivity takes business conduct policies and training from their past status as mere pronouncements to being at the center of discussion in the company’s intranet town square. The success of Facebook and other social networking sites suggests this will be a fruitful arena for future development.
10 Years on: 3M’s Transparency Journey
In the spring of 2019, the U.S. Department of Justice Criminal Division published new guidance that highlights the factors that prosecutors consider when evaluating the effectiveness of a compliance program.[3] An analysis of this guidance offers a great springboard for the Ethics & Compliance (E&C) department at 3M to reflect on the journey we have taken over the last 10 years to integrate more transparency into our training and communications.
Why Do Compliance Training?
The updated DOJ guidance offers a framework to help prosecutors determine how to resolve or prosecute particular matters. The guidance directs the prosecutor to ask three fundamental questions:
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Is the corporation’s compliance program well designed?
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Is the program being applied earnestly and in good faith (e.g. has it been effectively implemented)?
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Does the program work in practice?
Where compliance training and communication are concerned, the new guidance provides the following factors to consider:
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Is the training provided online or in-person (or both), and what is the company’s rationale for its choice?
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Has the training addressed lessons learned from prior compliance incidents?
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How does the company measure the effectiveness of the training?
Our Journey to Increase Communication and Transparency
Over the past 10 years, we have been on a journey to improve and increase employee awareness of 3M’s compliance expectations. This effort has been a journey of continual evolution and experimentation of trying new ways to communicate to our employees. This journey starts with how we are organized and has evolved into how we operationalize our training and communication’s program.
Departmental Organization
3M has more than 90,000 employees around the world. The 3M E&C department is a global organization staffed with professionals with diverse backgrounds and subject matter experts in areas such as compliance matters, investigations, finance, human resources, project management, quality, and business operations. The chief ethics & compliance officer reports directly to the audit committee of the 3M board of directors.
We also enlist the help of a network of internal compliance partners around the globe to help us amplify our messages and provide feedback on the deployment of our programs. These individuals are 3M employees who do not work directly for the E&C department but provide valuable time and energy to support our mission.
As our program has evolved, we have leveraged communication professionals who support other functions or groups to assist with specific projects on an ad hoc basis. As communication has become more critical to our operations, the E&C team has hired a full-time dedicated communication professional to create a strategic vision for ethics and compliance communications as well as tailor communication messages to our diverse audiences.
Tactical Steps Taken on Our Journey of Transparency
Training Framework
The foundation for providing general awareness of compliance expectations is our online training platform. We deliver courses throughout the year that are tailored to each audience, so employees are assigned courses relevant to their role and area of responsibility. The courses are mandatory, and an annual risk assessment helps us prioritize the topics that are part of the training plan for each year.
Tone at the Top—Value Model
The DOJ guidance asks what senior management has done to let employees know the company’s position regarding misconduct.
The tone at 3M is set by our CEO. Our CEO uses a one-page infographic to describe 3M’s value model when explaining the uniqueness of 3M and how we deliver value to our stakeholders, including shareholders, customers, and employees. One of the messages illustrated in the value model is our code of conduct. Our CEO emphasizes that our foundation as a company is built on trust, and our code is the guide for making ethical decisions.
To further elevate our tone at the top, we created a series of videos that highlight senior leaders and their commitment to doing the right thing. The series was based on feedback we received from employees, who wanted to hear about real-life ethical situations that happen at 3M. The videos are approximately two- to three-minutes long and are translated into multiple languages. The stories shared by leaders highlight common ethical dilemmas that could be faced by any employee, and highlight the decisions and resources the executives used to address the dilemma. The takeaway message from these videos are:
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Lessons learned
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The importance of being transparent, and
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To seek assistance when facing an ethical dilemma.
The videos complement training topics covered during that time period—for example, accepting gifts during the holidays.
Middle Management—Supervisor Toolkit
As we evolved our messages to include more personal stories from senior leaders, we also conducted focus group discussions with middle management. We learned that some members of middle management are confused about their role with compliance, and they lacked content or material to help convey messages about ethics and compliance. To help them, we developed a supervisor toolkit, which includes key messages, videos, frequently asked questions, case studies, and standardized presentations for managers to share with their teams. The toolkit is part of an overall training and communication plan and is one tactic used to reinforce ethical decision-making. Each toolkit offers a guide for leaders to better understand the topic and help them feel more comfortable talking to their teams about ethics.
Including short case studies in the toolkit emphasizes the importance and benefits of transparency in our messages. The case studies come from actual 3M investigations or from recipients of the Living the Code award, which recognizes employees each quarter who go above and beyond to make the right ethical decision. The case studies spotlight ethical situations where employees have reached a crossroads and have either taken the road with negative ethical implications or the road that highlights positive ethical choices.
Regardless of the source, the stories are edited so identifying information is removed, but the spirit of the issue and the results remain the same. Each case study is presented in a simple one-page format with a factual situation, questions to consider, and a conclusion. Providing case studies in this format follows the approach of the executive video series of short and concise relatable content and has been well received.
My Moment of Truth
Employees want to see real employees, just like them, and how they had the courage to speak up and do the right thing. To increase transparency into investigations and to help employees understand what it takes to speak up, we developed a series of videos called My Moment of Truth. The production approach with these videos is to give them a less polished look, which has been a point of endearment for our employees. As such, each video was filmed by employees around the world, using their phones or other available resources.
This is the most recent initiative in our journey to improve and increase transparency. The number of views to this video series has been favorable and exceeded our expectations. The videos are translated with subtitles and are sent to all employees, as well as posted on our internal intranet site.
Metrics
As part of our journey of transparency, metrics have become a greater part of our operations. We have moved from reporting data to utilizing data to assess effectiveness and to proactively identify risk. Over time, we have expanded the audience who receives metrics in order to be more transparent in our operations and performance. The reporting is customized to what is relevant to the audience.
Historically, reporting was sent to the audit committee of the board of directors, and other stakeholders would receive ad hoc or on-demand reports. Today, on a quarterly basis, a series of metric reporting packages are created and shared with different stakeholders. Senior managers of different geographic regions and business operations receive metrics on measures of compliance program effectiveness. The package includes an executive summary and a color-coded scorecard that compares the performance of different operations against each other.
In addition to metrics provided to leaders, all employees receive a quarterly update containing high-level investigation metrics. This report demystifies the investigation process and subsequent remedial actions and discipline. Transparency in our investigation process helps to address questions about organizational justice. This level of transparency is an indicator to employees that we have an active speak-up program, formal investigation processes, and, when an investigation is completed, discipline and remediation steps.
What’s Next
Our journey of communication transparency is constantly evolving. We have made more information available to employees and supervisors than ever before. In addition, we have shared more personal stories about what it means to make an ethical decision based on feedback from employee focus groups.
We know that employees learn information in various ways—whether an online course or a story about ethics. To that point, we will continue to analyze the tools we use and the effectiveness of the methods we use to raise employee awareness.
Going forward, we will continue experimenting with new methods and tools to increase transparency for our employees so they can better relate to risks, understand processes, and feel comfortable raising a concern or asking questions. We are already testing new technology that allows employees to ask questions and get immediate feedback, thus increasing transparency into doing the right thing.
Ultimately, our goal is to have every employee living by our code and feeling comfortable asking a question or raising a concern.