You walk into the room, With your pencil in your hand;
You see somebody naked, And you say, “Who is that man?”;
You try so hard, But you don’t understand;
Just what you’ll say, When you get home.
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?
The Ballad of the Thin Man revolves around one very square man who keeps blundering into situations that he does not understand. The further he gets into the song, the less he seems to understand. Rock critic Andy Gill has called the song, “one of Dylan’s most unrelenting inquisitions, a furious, sneering, dressing-down of a hapless bourgeois intruder into the hipster world”.
Of course this song currently stands in for the hapless National Football League (NFL) Commissioner Roger Goodell and his worse than laughable attempt to sanction New England Patriots quarterback Tom Brady (AKA the ‘Golden Boy’) over Deflategate. After suspending Brady seemingly because Brady ‘more probably than not’ knew about some nefarious behavior and for not cooperating at level the Commish deemed acceptable; Goodell made the inane choice to run into federal district court to have his judgment blessed. Oops.
Last Thursday US District Judge Richard Berman slammed the Commish and the NFL about as hard as he could in not only denying the NFL’s requested blessing but also granting the Golden Boy’s request that the suspension be revoked. Anyone with a basic understanding of labor law, the arbitration process in a collective bargaining agreement and heard the comments during the court hearings leading to his ruling saw this one coming a mile away. Berman’s Decision & Order, running to 40 pages, harshly criticized Goodell and the NFL’s handling of the entire disciplinary process. Berman found there was inadequate notice of the alleged misconduct and of the discipline delivered to Brady because: (1) There was no notice of any “discernible infraction”; (2) There was no notice of a suspension would be delivered as opposed to a fine; (3) There was no opportunity for Brady to fully test the allegations against him through cross-examination at the Goodell presiding NFL hearing; and (4) Brady was not allowed equal access to the underlying investigative files.
Michael Powell, writing in the New York Times (NYT), in a piece entitled “Found to Overstep, Goodell Pays the Price”, said, “Rodger Goodell, who is fond of acting as judge and jury, cannot make up legal procedure as he goes along.” Kevin Belson, also writing in the NYT, in an article entitled “Belichick’s Loss in 1990s Set Up Win in 2015”, said that the Golden One “had not been given notice of potential penalties” for his alleged conduct and was not even provided with the most basic information of just how much his “four-game suspension was related to a suspected scheme to deflate footballs and how much was related to what the N.F.L. called his noncooperation with the inquiry.” Belson also added that the penalty did not seem to match the crime as Brady was given a suspension that “seemed to match that of a player found to have used performance enhancing drugs” rather than someone who tampered with equipment. Finally, the NFL took the report of the independent investigator, had the Leagues General Counsel (GC) edit it down and then use the edited un-independent report as the basis for its discipline of Brady.
Deflategate has been the gift that keeps on giving for lessons learned in the ethics and compliance space. Today I want to focus on two significant areas of compliance for the Chief Compliance Officer (CCO) and compliance practitioner. The first is the Fair Process Doctrine and the second is how a company sets its expectations on behavior.
The Fair Process Doctrine
My father, before his retirement, was a Labor Arbitrator for over 35 years. Union-management relations are about the clearest example of the Fair Process Doctrine at work as I can imagine. Bargaining unit members give up their most powerful economic weapon, the strike, and in return they have the right to have an impartial umpire, an arbitrator, ultimately hear unresolved grievances. Under the common law of the workplace, workers must be given fair notice of their obligations before they are disciplined for violating their responsibilities.
The Fair Process Doctrine recognizes that there are fair procedures, not arbitrary ones, in a process involving individual rights. Considerable research has shown that people are more willing to accept negative, unfavorable, and non-preferred outcomes when they are arrived at by processes and procedures that are perceived as fair. Adhering to the Fair Process Doctrine in two areas of your Compliance Program is critical for you, as a compliance specialist, or for your Compliance Department to have credibility with the rest of the workforce.
This is particularly true in the realm of discipline in your compliance program. If you define a process that is to be followed by all employees when an event occurs, then the company must also follow its procedures in the investigation and administration of discipline. Discipline must not only be administered fairly but it must be administered uniformly across the company for the violation of any compliance policy. Simply put if you are going to fire employees in South America for lying on their expense reports, you have to fire them in North America for the same offense. It cannot matter that the North American employee is a friend of yours or worse yet a ‘high producer’. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.
Setting Expectations
Just as your process around compliance must be seen to be fair, it is equally important that your company clearly set out the expectations it has for employee behavior in this area. In a best practices Foreign Corrupt Practices Act (FCPA) compliance program, this starts with senior management setting the appropriate tone at the top. But I want to focus on the written documents that set the standard by which your company will do business going forward. It all begins with your Code of Conduct.
In an article in the Society for Corporate Compliance and Ethics (SCCE) Complete Compliance and Ethics Manual, 4th Ed., entitled “Essential Elements of an Effective Ethics and Compliance Program”, authors Debbie Troklus, Greg Warner and Emma Wollschlager Schwartz, state that your company’s Code of Conduct “should demonstrate a complete ethical attitude and your organization’s “system-wide” emphasis on compliance and ethics with all applicable laws and regulations.” Your Code of Conduct must be aimed at all employees and all representatives of the organization, not just those most actively involved in known compliance and ethics issues. From the board of directors to volunteers, the authors believe that “everyone must receive, read, understand, and agree to abide by the standards of the Code of Conduct.”
There are several purposes identified by the authors that should be communicated in your Code of Conduct. Of course the overriding goal is for all employees to follow what is required of them under the Code of Conduct. You can do this by communicating what is required of them, to provide a process for proper decision-making and then to require that all persons subject to the Code of Conduct put these standards into everyday business practice. Such actions are some of the best evidence that your company “upholds and supports proper compliance conduct.”
In his opinion Judge Berman wrote, “The court finds that Brady had no notice that he could receive a four-game suspension for general awareness of ball deflation by others or participation in any scheme to deflate footballs, and noncooperation with the ensuing investigation.” The Judge later added, “No N.F.L. policy or precedent notifies players that they may be disciplined (much less suspended) for general awareness of misconduct by others.” These are both alternative ways of saying the NFL did not set any expectations for the behavior of its players in these areas.
The NFL finds itself in this imbroglio because it neither fairly set expectations nor had a fair process to address any deficiencies in its unsaid expectations. For the CCO or compliance practitioners, the lessons are clear. There must be fairness in your procedures, in how you treat employees and set expectations so that all employees may understand how they should act going forward.
To listen to Ballad of a Thin Man, click here.
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