The Truth about Tone from the Top by @EricPesik

Editor's Notes

1. The truth about “Tone from the Top” Image: Speaker by Björn Andersson from the Noun Project https://thenounproject.com/search/?q=announcement&i=76611
2. FIFA protects the integrity of football and is fighting corruption in football. -FIFA Football Governance “The guardians of the game” 20 November 2014 Source: http://www.fifa.com/governance/videos/y=2014/m=11/video=the-guardians-of-the-game-2477119.html
3. We stand for respectable, honest actions in everyday business that are in accordance with rules... - The Volkswagen Group Code of Conduct Source: http://www.volkswagenag.com/content/vwcorp/content/en/the_group/compliance.html
4. The “Tone from the Top” at FIFA and Volkswagen share a common element What is it? Image: Speaker by Björn Andersson from the Noun Project https://thenounproject.com/search/?q=announcement&i=76611
5. They are lying. Image: Lie By Iconathon, US https://thenounproject.com/search/?q=false&i=15281
6. They are not alone. Image: Lie By Iconathon, US https://thenounproject.com/search/?q=false&i=15281
7. Management or the CEO is involved in 53% of bribery cases; Senior executives know about 86% of corporate fraud cases Source: Corporate Executive Board, 2006, quoted in RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html Source: OECD Foreign Bribery Report: http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm
8. If you wanted to design an incubator for generating misconduct, it would look a lot like the C-Suite Quote: RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html Image:: Team designed by Wilson Joseph from the Noun Project http://thenounproject.com/term/team/35432/
9. What makes the C-Suite so susceptible to corruption? Image: Dark Money By Iconathon https://thenounproject.com/search/?q=corrupt&i=15301
10. Management readily sees cause and effect between bribery and sales Image: Linear Interaction By Attilio Baghino, IT https://thenounproject.com/search/?q=linear&i=24519
11. Companies that bribe have greater sales growth compared to control firms for 3 years before and 3 years after winning a major contract through bribery Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246 How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
12. But...
13. But there are negative side effects of corruption Images: Linear Interaction By Attilio Baghino, IT, https://thenounproject.com/search/?q=linear&i=24520https://thenounproject.com/search/?q=linear&i=24519
14. Companies that bribe have poorer net profit margin (net income divided by sales revenue) for the same 6 year period Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
15. Companies that bribe have poorer cumulative abnormal returns (difference between the sum of the monthly returns for bribing firms versus control firms) for the same 6 year period Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246 How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
16. Companies that bribe perform poorer on nearly every corporate metric used to measure success Source: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1772246 How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
17. If you endorse corruption to achieve a goal, you endorse corruption (full stop) Image: Speaker by Björn Andersson from the Noun Project https://thenounproject.com/search/?q=announcement&i=76611
18. If you lie, your employees will lie Image: Lie By Iconathon, US https://thenounproject.com/search/?q=false&i=15281
19. If you cheat, your employees will cheat Image: Deep Web By Matt Brooks, US https://thenounproject.com/search/?q=fraud&i=62765
20. If you give bribes, your employees will take bribes Image: Bribe By Luis Prado, US https://thenounproject.com/search/?q=bribe&i=26816
21. Tone from the top is not what you say, it’s what you do Image: Speaker by Björn Andersson : https://thenounproject.com/term/presenter/76611/ Bribe By Luis Prado, US: https://thenounproject.com/search/?q=bribe&i=26816
22. 81% of all frauds are perpetrated by at least one insider Image: Deep Web By Matt Brooks, US, https://thenounproject.com/search/?q=fraud&i=62765 Source: Kroll Global Fraud Report 2015/16 http://www.kroll.com/global-fraud-report
23. 5% of all revenues are lost due to occupational frauds Image:Grab By Iris Sun, GA, https://thenounproject.com/search/?q=theft&i=121228 Source: ACFE Report to the Nations on Occupational Fraud and Abuse, http://www.acfe.com/rttn.aspx
24. Companies are more often victims of corruption than beneficiaries External Fraud Source: OECD Foreign Bribery Report (2014) Internal Fraud Source: ACFE Report to the Nations on Occupational Fraud and Abuse, http://www.acfe.com/rttn.aspx Image: Fraud By Iconathon, US https://thenounproject.com/search/?q=fraud&i=15213
25. How can you change a culture of corruption? Image: businessmen by tsv from the Noun Projecthttps://thenounproject.com/search/?q=team&i=48054
26. Start changing traditional ethics training Image: Education designed by Chris Matthews: http://thenounproject.com/term/education/3012/
27. When the big people get in trouble, the little people get ethics training. Quote: RAND Symposium, Culture, Compliance and the C-Suite: http://www.rand.org/pubs/conf_proceedings/CF316.html Image: Education designed by Chris Matthews: http://thenounproject.com/term/education/3012/
28. Target the “big people” about how corruption causes internal fraud Images: Linear Interaction By Attilio Baghino, IT https://thenounproject.com/search/?q=linear&i=24520https://thenounproject.com/search/?q=linear&i=24519
29. CEOs are prone to viewing the company’s success as indistinguishable from their own. Quote: Scott Killingswroth, Partner Bryan Cave LLP, “C” is for Crucible: http://compliancestrategists.com/pro/wp-content/uploads/2013/10/%E2%80%9CC%E2%80%9D-Is-for-Crucible.pdfImage: Superhero designed by Juan Pablo Bravo from the Noun Project: http://thenounproject.com/term/superhero/23556/
30. When bribery hurts shareholder value it hurts the CEO Image: Graph By Simple Icons https://thenounproject.com/search/?q=decline&i=30986
31. Use targeted motivators in your ethics training Image: Education by Travis Yunis https://thenounproject.com/search/?q=lecture&i=25971
32. Motivation: Shareholder Value & Exec. Mgmt; Career Opportunity & Middle Mgmt; Job Security & General Employee Base
33. How do whistleblowers help? Image: Alert by Phil Laver from the Noun Project https://thenounproject.com/search/?q=shout&i=22814
34. Whistleblowers are effective at discovering external fraud, and even more effective at discovering internal fraud Bribery Source: OECD Foreign Bribery Report (2014) http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm Fraud Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx Image: Whistleblower By Lorie Shaull, US, https://thenounproject.com/search/?q=whistleblower&i=89125
35. Discovering Internal Frauds. Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
36. Median Losses After Discovery Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
37. Reduction in Median Losses with Effective Internal Controls Source: ACFE Report to the Nations on Occupational Fraud and Abuse http://www.acfe.com/rttn.aspx
38. Whistleblowers are one of many internal controls that support an ethical culture that reduces internal corruption Image: Linear Interaction By Attilio Baghino, IT, https://thenounproject.com/search/?q=linear&i=24519
39. An ethical culture that reduces internal corruption sustains a profitable culture Image: Linear Interaction By Attilio Baghino, IT, https://thenounproject.com/search/?q=linear&i=24519
40. Sustained profits make your CEO a superhero Image: Superhero designed by Juan Pablo Bravo from the Noun Project: http://thenounproject.com/term/superhero/23556/
41. So your executives can tell the truth when they say “ethics matter” Image: Speaker by Björn Andersson from the Noun Project https://thenounproject.com/search/?q=announcement&i=76611
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43. About the Author Background Eric Pesik is currently the Associate General Counsel and Compliance Officer for Seagate Singapore International Headquarters Pte Ltd. He also serves as an Adjunct Assistant Professor with the University at Buffalo, State University of New York, in the School of Management. He has been a lawyer since 1997 and is a member of the State Bar of California, USA. He is also admitted to the US Court of International Trade in New York and the US Supreme Court in Washington, DC. Many of Mr. Pesik’s presentations are available on SlideShare at: http://www.slideshare.net/ericpesik Disclaimer This work represents the opinions of the author alone, and is not the opinion his employer. Creative Commons Attribution License You are free to share, copy, distribute, and transmit this work; to remix or adapt this work; and to make commercial use of this work, under the condition that you must attribute this work to Eric Pesik (but not in any way that suggests that I endorse you or your use of this work). Each slide contains source attributions and URL; before reusing, you must obtain the original images from the original sources, and you must comply with any applicable license restrictions imposed by the original source. http://creativecommons.org/licenses/by/3.0/