Ethics and Compliance: What’s Trust Got to Do With It?

I believe words matter.  They affect the way we think, therefore the way we perceive, therefore the way we act.  Words are not passive things, acted upon by our blind behaviors; they are cultural repositories of memory.  Ontogeny recapitulates phylogeny in language as well as in biology.

So it has always bothered me to hear “ethics” and “compliance” in the same phrase.

I’m aware I’m in the minority; it is casual usage to combine the two. 

  • There is the Society of Corporate Compliance and Ethics and their Institute
  • Back in 2005, a speech by the SEC talked about the decline in ethics and compliance.
  • Corpedia Corporation “offers a wide variety of innovative and user-friendly compliance and ethics solutions.” 

So, it’s commonly used.  Then again, we also live in a world that obsesses over Britney Spears.

Defining "Ethics" and "Compliance"

Let’s try the dictionary.  First, ethics:

1. (used with a singular or plural verb) a system of moral principles: the ethics of a culture.
2. the rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, etc.: medical ethics; Christian ethics.

Now, compliance:

1. the act of conforming, acquiescing, or yielding.
2. a tendency to yield readily to others, esp. in a weak and subservient way.

These two words don’t live together easily.  In fact, if we try to substitute “Wall Street” for “medical” or “Christian” in the ethics definition, we get what most people would call an oxymoron: Wall Street ethics. 

I would argue this is a serious issue.  Entire industries—financial and pharmaceutical come to mind—have come to conflate the two words, and we are all the worse for it. 

When “ethics” becomes a soul-less matter of ticking the boxes, when we substitute acquiescence for a conscience and subservience for principles, we have lost a great deal.  In particular, any meaningful sense of the word “trust.”

How can a financial planner aspire to being a fiduciary through procedures alone?  How can a company achieve client focus through quarterly behavioral competencies alone?  How can we create trusted regulatory agencies if all they do is enforce processes and paperwork?  How can you give multiple choice ‘tests’ that ‘certify’ people as being ‘ethical?’  But that is generally how "compliance" programs are executed. 

That way lies Bernie Madoff, and a thousand other example of people who have lost track of simple guidelines like be transparent, tell the truth, serve your clients, and work for the long run. 

You Can’t Comply Your Way into Ethical, or Trustworthy, Behavior

A focus on compliance alone can never create ethical behavior.  Perversely, all it does is incent slightly bent people to become more bent by focusing on exploiting the inevitable gray areas that crop up in any set of behavioral rules.   There are plenty of professionals who are 100% compliant with their industries’ lax standards, and are, by many customers’ judgment, highly untrustworthy, selfish sleazeballs.

Law schools can take some blame here; law is the only profession in which the notion of ‘truth’ is non-existent, replaced by ‘evidence.’ 

MBAs are hardly blameless; their mindless pursuit of markets, transactions, and micro-measurements have fueled the replacement of “character” with “observable behaviors that achieve sustainable competitive advantage.”

But that’s too easy.  We’ve all gone along with it.  We’re all infatuated with “science,” neuro-proof, lawsuits and fix-it drugs. Ethics?  Get with it, dude.  

I know this sounds like an old-fart rant, and in part it is.  But there are plenty of businesspeople who behave well, and even prosper because of it.  And they’re also to blame for tolerating the shades of gray. 

We don’t have a crisis of trust and ethics so much as we have moral sloppiness–a willingness to tolerate mediocrity.  Most of us have remarkably similar instincts about what’s right and what isn’t.

What we’ve all got to do is get mad about how far we’ve strayed.

And compliance is not an excuse.