1.
The truth about “Tone from the Top”

2.
Are your executives telling
the truth when they say
“ethics matter”?

3.
FIFA protects the integrity of football and is
fighting corruption in football.
-FIFA Football Governance “The guardians of
the game” 20 November 2014

4.
We stand for respectable, honest actions in
everyday business that are in accordance with
rules...
- The Volkswagen Group Code of Conduct
Source:
http://www.volkswagenag.com/content/vwcor
p/content/en/the_group/compliance.html

5.
The “Tone from the Top” at FIFA and
Volkswagen share a common element
What is it?

6.
They are lying.

7.
They are not alone.

8.
Management or the CEO is involved in 53% of
bribery cases; Senior executives know about
86% of corporate fraud cases

9.
If you wanted to design an incubator for
generating misconduct, it would look a lot like
the C-Suite

10.
What makes the C-Suite so susceptible to
corruption?

11.
Management readily sees cause and effect
between bribery and sales

12.
Companies that bribe have greater sales
growth compared to control firms for 3 years
before and 3 years after winning a major
contract through bribery

13.
But...

14.
But there are negative side effects of
corruption

15.
Companies that bribe have poorer net profit
margin (net income divided by sales revenue)
for the same 6 year period

16.
Companies that bribe have poorer cumulative
abnormal returns (difference between the sum
of the monthly returns for bribing firms versus
control firms) for the same 6 year period

17.
Companies that bribe perform poorer on
nearly every corporate metric used to measure
success

18.
If you endorse corruption to achieve a goal,
you endorse corruption (full stop)

19.
If you lie, your employees will lie

20.
If you cheat, your employees will cheat

21.
If you give bribes, your employees will take
bribes

22.
Tone from the top is not what you say, it’s
what you do

23.
81% of all frauds are perpetrated by at least
one insider

24.
5% of all revenues are lost due to occupational
frauds

25.
Companies are more often victims of
corruption than beneficiaries

26.
How can you change a culture of corruption?

27.
Start changing traditional ethics training

28.
When the big people get in trouble, the little
people get ethics training.

29.
Target the “big people” about how corruption
causes internal fraud

30.
CEOs are prone to viewing the company’s
success as indistinguishable from their own.

31.
When bribery hurts shareholder value it hurts
the CEO

32.
Use targeted motivators in your ethics training

33.
Motivation: Shareholder Value & Exec. Mgmt;
Career Opportunity & Middle Mgmt; Job
Security & General Employee Base

34.
How do whistleblowers help?

35.
Whistleblowers are effective at discovering
external fraud, and even more effective at
discovering internal fraud

36.
Discovering Internal Frauds

37.
Median Losses After Discovery

38.
Reduction in Median Losses with Effective
Internal Controls

39.
Whistleblowers are one of many internal
controls that support an ethical culture that
reduces internal corruption

40.
An ethical culture that reduces internal
corruption sustains a profitable culture

41.
Sustained profits make your CEO a superhero

42.
So your executives can tell the truth when they
say “ethics matter”

43.
Please like & share

44.
About the Author
Background
Eric Pesik is currently the Associate General Counsel and Compliance Officer for Seagate
Singapore International Headquarters Pte Ltd.
He also serves as an Adjunct Assistant Professor with the University at Buffalo, State University
of New York, in the School of Management.
He has been a lawyer since 1997 and is a member of the State Bar of California, USA. He is also
admitted to the US Court of International Trade in New York and the US Supreme Court in
Washington, DC.
Many of Mr. Pesik’s presentations are available on SlideShare at:
http://www.slideshare.net/ericpesik
Disclaimer
This work represents the opinions of the author alone, and is not the opinion his employer.
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