Many Companies Should ‘Drill Down’ into Corporate Cultures

By Pamela Babcock Jul 1, 2010
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NEW YORK—As the fallout continues from the Deepwater Horizon oil spill in the Gulf of Mexico that began April 20, 2010, a panel of thought leaders attending The New York Forum here June 22-23 discussed the ramifications of the spill and its aftermath on energy policy, the U.S. economic situation and the interaction between government and the private sector.

The crisis offers a new opportunity, one said, to shift the conversation from whether we should keep drilling to whether we should find a new place to drill—deep inside organizations to look at the fundamentals of how we should govern, lead and behave.

“We need to drill so deeply that we get honest about the values—are they situational or are they sustainable—and ask what kind of values are guiding and inspiring our behaviors, ” said Dov Seidman, chairman and CEO of Los Angeles-based compliance, ethics and governance firm LRN. He spoke to attendees during a June 23 plenary session.

Crises Coming Faster

Because crises seem to occur more frequently than decades ago—Goldman Sachs, Toyota, BP and Greece’s debt crisis, to name a few—drilling into the soul of corporations and organizations is even more critical, Seidman said.

“We live in a connected and interconnected world,” he said. “What if we have a crisis not every 20 years but every 20 weeks, maybe every 20 days? Should that not tell us that to go down the straight and narrow road, you need to get in touch with something new?”

Organizations should embrace the idea that interconnectedness entails moral and ethical interdependence, Seidman said.

“Business cannot extract itself from society; it is part of it,” he said. “More people can cause more harm, but the good news is that more people can cause more good, [too].”

Seidman said he believes the biggest irony is that BP “seems to be the first company to understand” this notion of interconnectedness, since it went beyond petroleum to pursue “clean affordable energy,” a step that companies like Chevron have since emulated.

Learning from Disaster

“Good Morning America” news anchor Juju Chang, who moderated the panel, said she was surprised to hear Seidman praise BP despite numerous reports “that they had cut corners and there was ham-handedness.”

Seidman said that sometimes organizations need to learn a lesson the hard way, like the National Aeronautics and Space Administration (NASA) did after the Space Shuttle Challenger disaster in 1986. Internal controls were lacking, so they were put into place; but in 2003, the Space Shuttle Columbia was destroyed on re-entry.

“We went back into NASA and said all the controls were there, but the culture was broken,” Seidman said. “It surprised them, but these are human failures. These are failures of having a human operating system that either embraces or rejects the right thing and doing the right things the right way.

“If BP does go bankrupt, it won’t be because it doesn’t have enough reserves or enough money on its balance sheet,” Seidman said. It will be because it couldn’t maintain “enough reputational capital to keep going.”

Top Performers vs. Ethical Leaders

Seidman asked for a show of hands from those who can easily identify top performers based on metrics or performance. He asked them to keep their hands up if they could identify with the same “clarity, confidence and alacrity” who their top ethical leaders are.”

Very few hands remained raised.

Until companies and their leaders can get an answer to the second question that’s as clear as the answer to the first—and the lists of top performers and ethical leaders overlap—such crises will continue, he said.

“Ask not how are we governing our institutions, but how are we tapping into sustainable values to lead them,” Seidman said.

Other Takeaways

Panel member Marc Lipschultz, global head of energy and infrastructure at private equity firm Kohlberg Kravis Roberts & Co. in New York, talked about the need to transition away from petroleum dependence and to pursue alternative forms of energy—from developing natural gas produced from shales in North America to electric cars.

Some solutions “are very real and tangible,” while others will “take a lot more vision and a lot more time,” he said.

Regarding whistle-blowing, Seidman said companies can advertise help lines and encourage employees to report anything untoward, but if the culture has too much fear and not enough trust, no one will pick up the phone.

“If the company is in the grip of a strategy [that’s] too big to fail”—and it sees itself as too good for society or too principled to fail—“[employees] will not pick up the phone because it simply requires too much courage,” he said.

Companies should ask themselves whether, in an interconnected world, they have healthy relationships with stakeholders so that “when others want to turn us into their scapegoat, we can survive that,” Seidman said.

The New York Times was the forum’s media sponsor.

Pamela Babcock is a freelance writer based in the New York City area.

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