Corporate Accountability: Broken Windows in the Boardroom

It's the CSO's job to clearly articulate expectations about corporate behavior and establish accountability.

By Anonymous

June 01, 2003 — CSO — I've long heard it said in public-safety circles that if a broken window in a building is left unrepaired, the rest of the windows will soon be broken as well. In other words, neglect is a signal that no one cares and will ultimately only invite more disorder.

Case in point: Remember during the early '90s when Rudy Giuliani was able to celebrate a significant reduction in crime in New York City? Putting to the test a theory of "order maintenance" that had driven scores of smaller community policing efforts for nearly two decades, Giuliani sent a message loud and clear that even seemingly innocuous misdeeds would not go unpunished. He showed New York that its police force was never too busy fighting "real crime" to ignore toll jumpers, pickpockets or graffiti artists.

I'm sure the notion of order maintenance could apply to the way we police our businesses. But instead of broken glass or graffiti, our private-sector indicators are unclear expectations, a lack of accountability and a willingness to simply look the other way. Yet shareholder and employee "residents" have the right to expect a safe, predictable environment that malfeasance and poor ethical hygiene sometimes threaten.

Imagine, if you will, a particularly talented software engineer engaged in a high-visibility project that has CEO interest and strong financial support. A routine audit of his travel reveals several months of false expense claims involving entertaining fellow employees at bars and adult clubs. For fear of derailing the project, his manager tells audit, "it has been taken care of," and merely scolds the employee. Or what if an investigation confirms a clear case of embezzlement by a high-level finance employee who eventually admits to years of theft involving a half million dollars. Management declines to prosecute to avoid adverse press and merely fires the employee after partial restitution. The employee is hired by another company in a similar position shortly thereafter.

What's the big deal, you ask? These aren't instances of great corporate crime or front-page scandal. Neither the shareholders nor the company's standing in the market has been damaged much. In larger companies especially, the damage is lost in the rounding. Has anyone really been hurt?

How many names do you want? How 'bout we start with the savings-and-loan fiasco? I could get specific and remind you about Adelphia, Barings Bank, Drexel-Burnham Lambert, Enron, Global Crossing, Tyco and WorldCom. In the past two decades, U.S. businesses have been involved in numerous scandals and high-level wrongdoings. And those are only the most recent examples. At first glance, you might think they were fat cats playing it fast and furious with the booksthat their problems weren't caused by trivial matters. Kind of like comparing a bank robbery with stealing books from the library, right?

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