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Is Incentive-Based Compensation A Scapegoat?

Scapegoat

Everyday, real business people interact with real foreign officials in the context of real business conditions.

The vast majority of these interactions do not result in Foreign Corrupt Practices Act violations.

It is only when these real people are ethically compromised that FCPA violations occur.

Examining how and why these real people were ethically compromised is interesting to ponder.

In recent months Richard Bistrong (an individual who pleaded guilty to one count of conspiracy to violate the FCPA and spent fourteen months in federal prison) has suggested that incentive-based compensation for international sales, marketing, and business development teams “create[] incentives that foster corruption.”  

Bistrong further wrote:

“There will be no shortage of sales, marketing and business development employees, with lucrative incentive compensation packages, who are going to want to push the envelope on finding a way to deliver sales success over compliance to a sales manager.  In an unstable procurement environment, where purchases are sporadic, unpredictable, yet financially significant, a sales person knows that if he or she misses a major procurement, it may or may not come back in the sales and bonus cycle.

Thus, when confronted with a corrupt transaction, the sales person may think, “I have a lot on the line here personally, this purchase won’t happen again for another year, at least, so what does my sales manager want, compliance or sales?”

Bistrong has a perspective on FCPA violations that many people do not have.

However, I find the suggestion that incentive-based compensation is to blame, at least in part, for FCPA violations to be a scapegoat.

Such a suggestion fails to recognize that millions of individuals are working today subject to incentive-based compensation structures yet will not be ethically compromised to violate their employers compliance policies or engage in criminal activity.

That a few will does not mean that the incentive-based compensation in which they work is to blame.

*****

As a courtesy, I reached out to Bistrong to comment on the above post.

He writes:

“Compensation should never be used as a scapegoat, attempt to blame, or in any way to deflect the responsibility for unethical and illegal conduct onto other individuals or business components.  The question I ask, is if compliance professionals are focusing upon incentive structures as an “unspoken” organizational message and to insure that they do not conflict with the promotion of anti-bribery compliance programs.  If perhaps they do, especially where they are indexed to personal performance in low integrity regions, then perhaps a realignment  provides an opportunity to demonstrate to front-line teams that compensation and compliance all point to the promotion and fostering of ethical conduct. Incentive compensation is a proven positive driver for business development. In the context of anti-bribery compliance, from my perspective, it requires an additional level of scrutiny to insure that it does not send a conflicting message (as opposed to a scapegoat) to front-line teams.”

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