{"id":3344,"date":"2022-06-21T10:03:35","date_gmt":"2022-06-21T14:03:35","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=3344"},"modified":"2022-06-21T10:03:35","modified_gmt":"2022-06-21T14:03:35","slug":"is-government-better-at-corporate-reform-than-corporations","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/is-government-better-at-corporate-reform-than-corporations\/","title":{"rendered":"Is Government Better at Corporate Reform Than Corporations?"},"content":{"rendered":"

Is \u201ccorporate reform\u201d different in kind than social, educational, or political reform?<\/p>\n

Not all corporations are alike\u2014in structure or culture. In the U.S., non-profit and privately held corporations are generally not included in the vernacular of \u201ccorporate reform\u201d. When we refer to \u201ccorporate reform\u201d, we are presumably talking about publicly held corporations. To a great extent, public opinion mistrusts placing corporate reform in the hands of corporations.  Is that mistrust misplaced?<\/p>\n

Corporate reform often arises in the context of \u201csocial problems\u201d which, in turn, are often urged as matters separate from the goings-on of corporations past and present.  It is as if corporations, despite their ability to control who works within them, could exist apart from \u201csocial problems\u201d.<\/p>\n

In a thoughtful article on corporate reform featured in Temple Law\u2019s Compliance & Risk Management eJournal<\/strong> of March 28, 2022, Professor Aneil Kovvali notes that opponents of corporations addressing social problems have suggested that \u201cinternal corporate governance reforms could interfere with the adoption of external governmental regulations that would be more effective<\/em>\u201d.  (emphasis mine)<\/p>\n

I take issue with such opponents.  Compliance and Ethics professionals have taken it as gospel that building and sustaining a culture of integrity is fundamental to maintaining an organization that is both compliant with law and high performing. With such a culture, addressing misconduct from within the corporation early is far more efficient and cost-effective than awaiting government action.<\/p>\n

Take the 2022 $1.1 billion settlement of Glencore International A.G. for violations of the Foreign Corrupt Practices Act and market manipulation conspiracies. In addition to the huge fine, Glencore is required to appoint an independent compliance monitor (at their own expense) and bear the attendant periodic reporting, disruption of management, untold legal, accounting, and other expert fees, and reputational damage. I am not suggesting that the government action is unwarranted. But there can be no doubt that the leadership of Glencore now understands that they would have been better served addressing the misconduct internally on a timely basis.<\/p>\n

There is, of course, an important role for independent review. But compliance professionals know that no matter how thorough a government investigation and ultimate remedy may be, it is impossible for any outside organization to ascertain the institutional knowledge, culture, and nuances as well as can critical observers within the organization. If pursued rigorously, that internal knowledge can help address root causes and avoid the excess costs of superficial and ineffective \u201cband-aids\u201d.<\/p>\n

But more than just addressing internal misconduct, some corporations have long engaged in addressing \u201csocial problems\u201d ahead of government. For example, some corporations prohibited racial discrimination in hiring prior to the enactment of the Civil Rights Act of 1964. Corporate Codes of Conduct often prohibited discrimination based on sexual orientation or marital status before legally required. More recently, some corporations have embraced policies against hair discrimination to avoid disproportionate bias against Black employees, ahead of emerging laws in the states or federal level.<\/p>\n

Alongside the longstanding corporate dogma of avoiding social controversy, is the similarly longstanding position that failure to take an explicit stance on the most pressing social issues (\u201cspiral of silence\u201d) can be interpreted as a political stance. Complicity with the status quo can be seen as the equivalent of plainly expressed indifference. This is particularly true where the status quo conflicts harshly with the stated fundamental values of the corporation, as with the many corporations who chose to stay silent about the brutal 1948-1991 apartheid regime in South Africa. Or, in today\u2019s politically polarized U.S., taking no position on wearing masks to prevent spreading coronavirus.<\/p>\n

Ultimately, employees want their organization to engage in pressing social issues\u2014employees will engage more deeply with organizations that do. Studies over the years have shown more engaged employees are more productive and their companies more profitable.<\/p>\n

People within corporations are as much a part of the social fabric as people outside of corporations. Corporate reform informed by people within corporations, including their Compliance & Ethics professionals, attorneys, and others, is often motivated as much by profitability as doing the right thing. With the caveat, of course, that not all corporations are alike.<\/p>\n

Michael Donnella is a Practice Professor of Law and the Director of Temple\u2019s Center for Compliance and Ethics.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Professor Donnella discusses the role of corporations in reforming their internal compliance and ethical guidelines<\/p>\n","protected":false},"author":33,"featured_media":2798,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,52,22,8],"tags":[106,316,166,1216,2199,1661,2463],"coauthors":[2314],"class_list":["post-3344","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-law-practice","category-compliance","category-corporate-responsibility","category-faculty-authored","tag-compliance","tag-corporations","tag-ethics","tag-good-governance","tag-reform","tag-risk-management","tag-social-problems","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nIs Government Better at Corporate Reform Than Corporations? - The Temple 10-Q<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/law.temple.edu\/10q\/is-government-better-at-corporate-reform-than-corporations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is Government Better at Corporate Reform Than Corporations? 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