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Companies are judged by how they act in difficult times, such as the current coronavirus crisis. Making a charitable contribution is a positive action that some companies are in a position to take during a crisis, but such gestures can draw negative scrutiny for the givers. In a high-pressure environment when the chance of losing perspective is high, it’s worth remembering that while times of urgency and crisis call for unusual measures, breaches of compliance and ethical standards can expose an organization to serious risks.
As COVID-19 first swept the globe, Michael, a senior sales representative for a small but growing biotech company in health care, was alarmed to hear about a personal protective equipment (PPE) shortage at the hospital that was his key account. Concerned to hear that staff members were forced to reuse masks and wear flimsy plastic aprons rather than proper PPE, he wrote an email to his company’s medical affairs department to ask for a meeting to discuss ways to help.
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However, he soon had second thoughts when he realized the donation process involved the approval of five senior managers from different functional areas. Sensing the absolute urgency, and without waiting for a reply, he quickly packed up 20 boxes of masks — part of a supply given to the sales team by his own company — and sent them to the hospital’s head of operations for immediate use. Given the crisis conditions and with lives quite literally at stake, he figured there was no time for lengthy discussions or bureaucracy. Feeling that his company’s good deed and the agile response deserved some attention and recognition, he contacted the communications manager to publish the donation story on LinkedIn.
Michael’s actions were in many respects a very human, even commendable, response to the ongoing COVID-19 catastrophe. Nonetheless, his response raises alarm bells at many levels, including from a legal, reputational, and ethical perspective. Like many industries dealing with public money, the health care sector has developed sophisticated control processes and procedures regarding charitable giving by suppliers to ensure that employees and companies act ethically and lawfully.
Many in this industry would argue that Michael’s actions were inconsistent with standard compliance requirements. Nonetheless, in his mind, the situation was so dire that he was justified in taking a shortcut and disregarding well-established procedures to do something positive.
Was he right from a compliance perspective? Was he right from an ethical perspective? Was this a case of choosing ethics versus choosing compliance?
There are sound reasons for restrictions on charitable behavior — which can encompass donations of money, equipment such as PPE and ventilators, or time volunteered by staff members. These constraints ensure that any actions taken are in the interest of philanthropy and are not used, or even perceived to be used, to advance the commercial interests of the donor. Indeed, Michael’s initial idea of writing to the medical affairs department — a function focused primarily on scientific criteria and patient needs, not on commercial interests — to discuss ways of providing help was more consistent with standard industry compliance requirements than his later actions.
While acknowledging the positive intent of some companies’ pandemic responses, and indeed the pressing need for such responses in many cases, senior leaders have raised concerns about cavalier approaches to philanthropy and about the resulting risk of future regulatory or legal action. It’s therefore less a question of whether companies should contribute than about how.
Organizations may wish to rethink their charitable approaches amid the current crisis. How far should they adjust the stringent processes that are in place to ensure that they routinely meet high standards of ethics and integrity? These questions are of critical importance to health care companies in particular, but they have broader application too. Organizations in many fields must consider the extent to which compliance rules and procedures should be modified — albeit temporarily — during a crisis response.
Based on our research, including discussions of crisis response with business and compliance leaders, we have developed some key recommendations for all companies wrestling with how to provide help to those affected by a crisis while keeping the business going and sustaining ethical standards.
1. “Why are we doing this?” This is the fundamental question a company needs to ask before it undertakes any charitable action. What underpins the urge to offer help? Is the offer intended to be altruistic — or are there sales, networking, or communications opportunities that could stem from the offer? The altruistic vision must prevail over commercial and image interests.
Doubts about why Michael was so keen to send the PPE to his key account hospital might be heightened by his apparent eagerness to also communicate his company’s donation via LinkedIn. One is left to wonder about his true motivations and whether altruism did indeed prevail over commercial and image interests.
2. Identify “crisis mode” processes. It is up to senior management to consult with cross-functional teams in order to gain an understanding of a crisis’s exceptional circumstances and determine a response plan. If this means, for example, relaxing or shortening the approval process, relevant senior leadership must be more involved in the decision-making. Systematically reviewing existing processes and inserting crisis mechanisms will alleviate the perception that a policy is inadequate or too difficult to follow — or the risk it may be ignored altogether — in times of crisis. Companies should also consider creating an exception document that outlines changes to compliance during the crisis and communicate it effectively to the entire staff.
Michael did not have the benefit of crisis mechanisms in place to address his urgent situation. If there had been an exception document succinctly describing a simplified process for donations during a crisis — such as seeking approval from two instead of five senior managers — he may have acted on the basis of this process instead of his own initiative.
However, when temporarily relaxing a stringent procedure, it is crucial to ensure that a company’s ethical standards are still rigorously applied. A company’s code of conduct is an appropriate starting point for understanding the relevant ethical standards, but senior leaders must also have a much deeper knowledge reflective of their good judgment and experience as well as a rich appreciation of the company culture.
3. Be careful who you donate to. The COVID-19 pandemic has seen companies take a more proactive approach to monetary and product donations, and in loans of products and staff hours. However, some lines should not be crossed. Companies must ensure that donations cannot be construed as inducements or rewards for sales, so it’s essential to keep sales and marketing concerns separate from the decision-making process. Decision makers must also confirm that any organization assisted has been identified on the basis of need — not as an organization their company may wish to please or engage with.
Every donation should be assessed and approved by individuals who are able to ensure that altruistic vision prevails over commercial and image interests. Importantly, donations should be made to entities, not individuals. In most cases, this will guarantee that more people will benefit from the company’s help and reduce the risk of the donation being interpreted as a gift. In Michael’s case, it would be hard for his company to justify his donation, originating as it did from a sales representative and, worse, not vetted by any senior manager.
4. Review and adjust your sales targets and reassure your staff. The perspective of the sales staff and ethical decision-making processes can be affected by the mounting uncertainties and financial pressures of a global pandemic. For example, staff members may be tempted to push donations toward recipients that are commercially attractive rather than those truly in need. We’ve already seen that Michael’s actions raise concerns about the intent behind the donation because regulators might well question whether it was a way of winning business as opposed to an altruistic gesture. But another question also arises: What should managers do to ensure that employees stop and consider the ramifications of altruistic gestures and avoid overtones of self-interest?
There are corruption risks if your sales force feels that the company is focused on maintaining aggressive pre-crisis commercial objectives. Companies can address this by ensuring that their objectives, while ambitious, are adjusted to the reality of the crisis. It is also important that senior managers reassure their sales forces that doing business with the highest integrity is part of the corporate culture. The message should be, “This is the time to be remembered as an ethical company” rather than “We are under too much pressure to make compliance a priority.” The right tone at the top has never been more important.
Michael might have been under pressure to meet sales targets, which could have influenced his judgment. Nonetheless, messages from senior leadership about maintaining an ethical reputation during the crisis may have added an important perspective. With a clear message from leadership, Michael may have questioned whether his idea of helping his key account was ethical or if it exposed the company to risk.
5. Document everything. Having transparent documentation of any assistance granted is critical. Correspondence on the topic must be clear and unequivocal. While it may not be possible to complete all of the paperwork up front, it should not be forgotten after the fact. Documentation should clearly show how the proffered help is directly linked to the circumstance, and the responsible executive should ensure that any donation is traced and tracked. This is especially true for donation contracts. Although you may not be able to sign your contract in advance of the donation, as per normal practice, it is crucial that this is done within a reasonable period.
Michael could have continued with his initial plan to involve medical affairs and trigger the expedited donation approval process. The company might well have felt the need to respond very rapidly, but there would still be a requirement for some documentation at the time and more detailed documentation subsequently. This would have helped the company demonstrate the good faith of the donation.
To conclude, a crisis such as the COVID-19 pandemic is not a time to lose your company’s moral compass — quite the opposite. A crisis will eventually end, but unethical behavior could have serious long-term effects on your company’s sustainability and credibility. It could also result in significant costs, including potential financial penalties, legal expenses, and the opportunity cost of lost management time, not to mention a possible negative impact on the share price. It is vital to get the actions and messaging right.
Although Michael’s intentions were good, his actions could easily be interpreted differently, with harmful consequences for his company and the public interest. His actions might have also led to significant consequences for his own career, such as an internal investigation, disciplinary measures, or even the possibility of dismissal.
In times of crisis, both ethics and compliance are required — albeit with compliance procedures potentially adapted to the circumstances of the crisis — and they demand not just a swift response but a careful one.