November 9, 2016

Senior Council Calls for Ethical Company Leadership

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Brackett Denniston, senior council for Goodwin Procter LLP, stressed that “ethics and right behavior are at the core of leadership” in global companies, saying company leaders must set an example for their workers at a lecture Tuesday.

Denniston said ethics have a quantitative effect on companies, emphasizing that a company’s value is highly correlated with its ethical reputation.

He explained that companies under investigation for both bribery and financial fraud tend to experience significant decreases in market value.

According to Denniston, corporate commitment to law and order has greatly contributed to the success of the U.S. economy, noting the number of corporate bribery cases prosecuted by various countries from 1999 to today. The United States, with 128 cases, was the world leader studied in a report by the Searle Civil Justice Institute, by a wide margin.

However, Denniston said the responsibility for fighting corruption does not lie solely in the hands of the government. He proposed that companies themselves must create corporate cultures that promote regulation compliance and honesty.

Denniston said company leaders must be held accountable for unethical conduct, in order to set an example for the rest of the company. During his time at General Electric, Denniston said company leaders were held responsible for any alleged fraudulent conduct.

“You’re responsible if you participated in the [unethical] conduct,” he said. “But you’re also responsible if you didn’t create a culture of compliance in the affected area. So if you were the leader and this happened, you were disciplined.”

Denniston claimed that prevention, detection and response are key to corporate due diligence in any fraud allegation.

“It’s not … just good enough to talk,” he said. “You also have to enforce. You also have to have systems, you have to perform, you have to execute.”

Denniston concluded by saying that company culture is established from the top down, with the ramifications of companies’ ethical conduct influencing society as a whole.

“We as a society must take our stand to demand that our leaders of companies in this nation meet the high test of character — of honesty, civility, courage, candor and behavior,” Denniston said.