How do We Respond to Government Corruption?

1/20/12

A few weeks ago I raised the issue of Joe Paterno and Jerry Sandusky. While most everyone tends to admire Joe, many were also disappointed with his failure to ensure that allegations against Sandusky's were investigated thoroughly. In essence, Joe was accused of an ethical act of omission. One must note that legally he performed his duty once he reported the act to his superiors. The accusation against him was that what he did was legal, but not ethical.

Over the past 18 months I have had at least two conversations with CHROs who allege clearly unethical and in some cases criminal behavior by government regulators (yes, U.S. regulators, not those in some banana republic) who have power over their businesses. Note that while this happened under the Obama Administration, I do not suggest that it was limited to this Administration; it could be that this has become standard operating procedure within the regulatory apparatus.

In one case the company succumbed to the regulator's request, in the other I only know that the CHRO said that s/he had never seen such unethical behavior in his entire career. I do not seek to point fingers or suggest any specific required actions from the CHROs involved. However, I note this to raise an interesting question and one to which I do not have an easy answer.

When ethical violations occur within our firms where hierarchical control exists, one can easily justify taking whistle-blowing or even punitive action. In addition, if customers demand bribes, our policies clearly forbid them and most firms would clearly fire a salesperson who succumbed to the request. However, what is the proper response when a U.S. regulator requires what we would never consider if it were some corrupt administrator in a third world country? If such corruption exists within our own government, what is the ethical obligation to our firms and to society?