Advise Your CEO ToTake Charge Of Integrity

Friday, August 1, 2008 - 01:00

Al Driver, Editor

America seems to be sliding into a deteriorating economic scenario - with the public searching to find those responsible. CEOs continue to be confronted by compliance failures which had not been identified notwithstanding sophisticated (and expensive) compliance systems, which include the usual apparatus of hotlines, training programs, etc. A compliance failure can destroy a company and lead to the termination of its top executives. Even an internal investigation of an alleged compliance failure can be tremendously disruptive.

As the CEO's persuasive counselors, general counsel have a duty to advise their CEOs that compliance failures will continue unless the CEO takes charge of the effort and drives integrity deep down into the corporation. High performance must be fused by your CEO with high integrity if integrity is going to be treated seriously. Your employees may feel that they have "voice" by reason of your company's hotline, but all the compliance training in the world will not cause them to use that voice unless they are confident that they will not suffer a disadvantage if they speak up.

The most important characteristic of the GE legal group is that it is largely made up of what Ben Heineman, GE's former general counsel, calls "A Players," former law firm partners of leading firms and high ranking government lawyers (see July cover). Brackett Denniston, GE's general counsel, states in his cover interview that one of the three main reasons for bringing such people in house, is that "the people who are doing the work are closer to the business and the issues in the business." If the most highly skilled lawyers remain outside the corporation, how can it be expected to pick up sophisticated issues that can only be brought to light as a result of day-to-day working contact with the business people?

Within the GE legal group, there are none of the silos that one would expect to find in such a large organization. All 1,300 GE lawyers operate in practice groups and other groups as if they were members of a very large international law firm. And, inside and outside counsel are so closely integrated through meetings and telephone conferences that outside counsel feel that they too are part of that firm.

Other important characteristics of the GE legal group are reflected in the interviews in this issue and in our July coverage of GE legal. For an outside counsel perspective see our Roundtable on page 35.

Suspicions about the integrity of some of the institutions caught up in the subprime mess and other risk management failures may carry over to corporations generally which can affect the regulatory climate for all corporations. It may timely for CEOs of the vast number of corporations that are committed to integrity and good citizenship to speak out.

In my interview question to Bracket, I suggested that we could spur our readers to encourage their own CEOs to speak out if we interviewed CEOs of companies with an outstanding record of high performance with high integrity (page 55).Brackett responded "I think that's a good idea. I think there's a tremendous amount of cynicism about business and always has been. That cynicism goes up or down over time, and in stressful times it's always worse. In the nineties it was probably somewhat less, now it's somewhat more. In all of those contexts there is rarely much attention and analysis given to the socially useful benefits of companies, and I think that's a shame; I think there are a number of ways to change that, including, as you suggested, getting the viewpoints of prominent CEOs, but what people sometimes miss in all the cynicism is that companies create real jobs, and they're great jobs. We have 320,000 employees. Those are good jobs all over the world and in the United States. We're one of the top five hiring companies in the U.S. We spend a lot of time on change that we think is positive, not just for us but for all people - things like anticorruption, things like the rule of law, things like alternative dispute resolution - that story is not often told, and it deserves a voice, it deserves more attention than it gets, and it deserves a more balanced presentation than is seen."

In future issues, we hope to present interviews of leading CEOs so that they can tell about their companies' dedication to integrity and how they drive a culture of integrity down deep into their organizations.

Al Driver, Editor