Podcast | S2E2 Ethics of Compliance: Ruth Steinholtz

Podcast | S2E2 Ethics of Compliance: Ruth Steinholtz

Podcast | S2E2 Ethics of Compliance: Ruth Steinholtz 1400 787 Risky Women

Once described as, “the grit in the oyster that creates the pearl,” Ruth Steinholtz wishes to make a difference in the world by changing attitudes and practices relating to ethics and compliance. Ruth joined the Risky Women event at the Refinitiv Regulatory Summit in Singapore. In this podcast, you will join the event to learn more on the Ethics of Compliance.

Following a varied and exciting international legal career, Ruth Steinholtz founded AretéWork in 2011. The firm assists organisations globally in managing risk and improving results by fostering strong ethical cultures based upon values. Previously, as General Counsel and Head of Ethics at Borealis AG, Ruth developed a values based approach to ethics and compliance – employing ethics ambassadors throughout the company. Organisations around the world have adopted this approach; publicised through Ruth’s Good Practice Guide to Ethics Ambassadors written for the IBE and her many speaking engagements.  Ruth continues to push for change through her co-authorship, with Professor Chris Hodges, of the book Ethical Business Practice and Regulation: A Behavioural and Values-Based Approach to Compliance and Enforcement.

Points of Interest
  • 01:42 Sherry Madera @ Risky Women Singapore live event
  • 06:06 Career
  • 11:03 Biggest things going wrong in compliance
  • 13:51 Who is responisble for compliance
  • 16:30 Why people break rules
  • 18:38 Factors for behaviour and leadership
  • 28:31 Culture, approach, and measurement
  • 35:12 Discovering an organisation’s values
  • 37:33 When organisations don’t want to change their values
  • 39:45 Industries that finance can learn from
  • 42:07 Incentives
  • 43:23 Rapid Fire Round

I saw my career as one big black ski run! I don’t need to prove myself as a risk taker…Risk was the theme of my career.

I have one mantra that I’ve had for many years, which is that everyone, everyone is a leader when it comes to ethics.


Kimberley Cole 0:01
This is Risky Women Radio a show to connect, celebrate and champion women in risk regulation and compliance Sharing insight and perspective from the most influential members of our global Risky Women network. On the latest developments we need to think about, the challenges we should all talk more about and the innovation we are most excited about governance risk and compliance. Bringing together the hundreds of senior women professionals already connected with a new emerging group of leading women and men. I’m Kimberley Cole, your Chief Risky Woman.

Kimberley Cole 0:38
This episode is brought to you by our founding sponsor Refinitiv. Refinitiv serves more than 40,000 institutions in over 190 countries. Refinitiv provides information insights and technology that drive innovation and performance in global financial markets. Refinitiv enables the financial community to trade smarter and faster, overcome regulatory challenges and scale intelligently.

Kimberley Cole 1:03
Welcome to Risky Women Radio. Today’s risky woman is Ruth Steinholtz from AretéWork. She is an advisor on business ethics with expertise in culture risk measurement and management, ethical business regulation and value driven leadership. Ruth joined us at two Refinitiv Regulatory Summits in Sydney and in Singapore. And today we’re going to share with you the live event from Singapore. It was great also to be joined by Sherry Madera, the Global Head of Industry and Government Affairs at Refinitiv. So let’s go to the live events and hear Sherry Madera welcoming all our Risky Women to the room.

Sherry Madera 1:42
Good afternoon, everyone. Welcome to the Risky Women lunch. My name is Sherry Madera. I am the Chief Government and Industry Officer at Refinitiv. Delighted to be here and delighted to meet all these new faces that are here for the same sort of purpose. So Risky Women is new to me. But as a global network for thinking about and connecting risk centric regulation and compliance people in the industry, this sounds like a great place for us to really share and start learning from each other. So not only events, but podcasts and thinking about ways that we can connect virtually as well as physically in person is a great way for us to start thinking about how we can continue today forward. So as a woman who spent 20 years in various businesses, ranging from investment banking, to entrepreneurship, to telecoms, to diplomacy, a diplomat, and now here at Refinitiv looking at the government relations piece, I think that I have a you know, a bit to learn as well, and a bit to share about how it is to be a professional woman in a very, very changing landscape. And I think we can all agree that regulation and financial services is one of the most rapidly changing over the course of the last decade. And it’s not set to slow down. It’s set to continue to accelerate, it’s set to continue to challenge us. And I think today’s topic is going to be particularly interesting for us to think about how it all impacts each and every one of us and how it is that we conduct our business going forward. So today’s a fantastic session brings together our Chief Risky Woman, Kimberley Cole, with Ruth Steinholtz the managing partner at AretéWork. And the debate is around the ethics of compliance. So I think that regulation, compliance privacy, you know, these are all things, buzzwords, that we know a bit about. But when we start thinking about how those big buzzwords that are affecting us today are going to be completely disintermediated with the use of financial technology, AI, machine learning the sophistication of perpetrators when they’re putting together some financial prime plans, thinking about how regulators and need to deal with fragmentation and bringing things together. Certainly there’s a lot to talk about. In which case, we only have now less than an hour. So I will welcome our fireside chat to the stage Kimberley and Ruth, and let you take it over from here. I’m delighted to be here. Delighted to learn with you. And looking forward to keeping in touch. Kimberley and Ruth, thank you.

Kimberley Cole 4:28
Welcome everyone to the Risky Women lunch. I am thrilled to have Ruth here with us today and I think this is a really fascinating topic as Sherry introduced ethics and compliance. I think it’s going to be a very interesting one for us today. So hopefully, we will have enough time to have a few questions from the audience. But I think it’s going to be a fast session today. And we welcome you all to you know, it’s a working lunch. So your food will be served and we’ll just eat and talk over the period that we have together. So welcome, Ruth. It’s been fascinating, just the conversations that we’ve managed to have initially. And, and besides all of the wonderful things that Sherry already shared with you, we were talking about being bike riders in London. So we have other common interests, which was fantastic.

Ruth Steinholtz 5:26
Yes, always brings one together with other cyclists.

Kimberley Cole 5:29
So you can see on the on the table as well, Ruth’s book there as well, which I think at the end of this, you are probably not going to have received all the information that you want but she is a published author so there’s going to be many opportunities that you can take to get some more information from that. Now, to start with, as we always like to do, because I think it’s one of the most inspiring things is to hear about our Risky Women’s careers journey. So can you sort of tell us how have you ended up where you have?

Ruth Steinholtz 6:06
Well, thank you. Thank you very much, Kimberley, I wish I could say that there was a plan from the beginning. But there is, there wasn’t, I studied cultural anthropology university and became a lawyer because I wanted to change the world, which may sound strange now, but when I became a lawyer, actually, originally in the US, that was a thing. And in a way, I feel like my career has come full circle, because I immediately became a corporate lawyer. So I got totally in a way off the track. But the reason for that was that there were a couple of things that I wanted to do the main one of which was I wanted to have an international career. And having being an international corporate lawyer was the easiest way of doing that. And I think that along the way, so I worked in, started out in San Francisco, got sent to Italy for three months and never went back to the United States again, other than for a visit. And in fact, I spent six weeks in Singapore at the beginning of my career and was offered a job here, but Europe was really where I wanted to be. So I went back there. And I worked in Italy, I worked in Egypt, and then in Spain for a year and ultimately got sent to the UK by the company I was working for at the time. And but little by little in my career, I got more and more involved with ethics. And eventually, in my last role as general counsel in a petrochemical company, really had an opportunity to live that passion of ethics, leadership and values. And in a way that’s brought me to, to where I am now. So it’s a very circuitous, totally unplanned route. But the one thing that I think I did always try to do was constantly enlarge my interests and my skill set.

Kimberley Cole 8:00
Excellent. Was was there a particular turning point in your career where you decided to sort of take this more focus on ethics and accountability?

Ruth Steinholtz 8:11
Well, I think, I don’t think there was any one eureka moment. But having spent years and years as a lawyer, it became clear to me that the rules weren’t the only answer. And the leadership and culture of the organisation was really, in a way almost more important. And so I think it was a gradual dawning rather than all of a sudden, just this is what I have to do. And this is what’s important.

Kimberley Cole 8:41
And did you see it as taking a risk in your career? Or, you know, what, what thing would you say is maybe the biggest risk that you’ve taken in your career?

Ruth Steinholtz 8:52
Well, I saw my career, in some ways is one big black ski run, because, in fact, once I was criticized, I was skiing with some friends. And I said, Why don’t you want to go down this black run? And I said, well, because my whole life is a black run, I don’t need to prove myself as a risk taker by going on a ski slope that I can’t handle personally. Because here I was, so when I started working internationally, really, there were very few lawyers who were working outside of their own jurisdiction, often in another language. And I have to say that I was pretty much frequently the only woman or one of very few women in the room. And I did most of my moves, I didn’t do this within a sort of comfortable expat being transferred around the world. So risk was pretty much the theme of my of my career.

Kimberley Cole 9:44
I like the the black run analogy. That’s fantastic. And what what would you call out then as, as your, you know, most important achievement? I guess to date.

Ruth Steinholtz 9:58
I think, I mean, I’ve always said previously, the answer to that was learning to speak Italian fluently when I moved there. Because it was if somebody had opened up a door in my brain, and all this language came out but it’s probably because I’d studied Spanish since I was about seven years old. They’re obviously similar. But the other thing I have to say now is that having a co-authored this book, because I always wanted to write a book. And I discovered that it’s a lot better to co-author a book with someone else, because it doesn’t feel quite so, so risky, in a way, and my co-author is an experienced author. So that was a fantastic experience.

Kimberley Cole 10:39
Great. So let’s get on to a bit more about the the book and the topic at hand. And you mentioned that the usual compliance focused approaches have really failed to create ethical companies that are committed to doing the right thing. So what are the biggest things that you see going wrong in compliance? And what can we do about it?

Ruth Steinholtz 11:03
Well, I could write a book about the subject, did write a book about the subject. So I think the first the first thing I would say is “tick the box.” As soon as you have a tick the box approach to something, it’s uninspiring. It’s not, people aren’t interested in it, and that isn’t really going to work. And I think, so there are a lot of other reasons, compliance, just sort of pure compliance, let’s say, that relies on procedures and policies, and rules, it’s too externally focused. So you’re trying to motivate people with extrinsic motivation, which is never as strong as intrinsic motivation. So what matters to them personally, and that’s why values are is so much more motivating and inspiring. So you need a balance. I’m not here to say forget compliance, obviously. But what I’m saying is that, you need a balance, and also that the way you do compliance can be values driven. There are a lot of other reasons, and that is that compliance can have unintended consequences, it can actually make things more risky, because people think, “Well, we’ve got this big compliance department, they’re taking care of the risk. So why should I worry.” And that’s one of the reasons I think, for example, that you see, in many reports, this idea that we need to make sure that the risk and the responsibility are put back together where they belong, and that we support them. And then there are things like, things seems safe, because you have a lot of rules and regulations, and so it attracts more people into that place and it therefore becomes not only more risky, but the consequences are more devastating when something happens. And I just discovered about two weeks ago, that that’s called the “fence paradox.” Because you build a fence at the edge of a cliff, before there was no fence, nobody would go near the edge. Now there’s a fence, everybody thinks it’s safe and then a whole lot of people end up on the cliff and the whole cliff collapses. So that’s not what we want. So there are a lot of other reasons. But I think the biggest thing that we fail to do mostly so far is consider human behavior, and behavioral ethics, behavioral psychology and how we design our compliance approaches.

Kimberley Cole 13:26
Yeah, I mean, that’s interesting. And I think we could probably dig into each of those areas there, and maybe come back to some of those or get some questions from the audience. But given the audience and the expertise that we have here, what do you what do you think that we can all do about it and, and, you know, there’s a lot of compliance people in the room, but what are each of us sort of responsible for?

Ruth Steinholtz 13:51
So I have one mantra that I’ve had for many years, which is that everyone, everyone is a leader when it comes to ethics. And I think if you remember that when you’re doing your work, so that literally means everyone. One of the things which I’m also quite proud of, actually, is that I created the concept of ethics ambassadors, which are people throughout the organisation, so these are just normal employees, from all different functions in an organisation who have a bit of an extra responsibility for helping you to engage people with your code of ethics and some of your, and really facilitate some training and ethical decision making and, and help you understand what people are concerned about. And that means that you’re more, that it really response makes everyone feel that they’re responsible. And they’re hearing about some of these things from their peers, rather than from either a legal department or a compliance department that’s somewhere off in the distance that they can’t really relate to. So I think that’s one of the big, the big things. And the other one, which is more about senior management is that organisations really have to connect with their social purpose, why do they exist, because no organisation really should think that they only exist to make money for their shareholders. And that also means that the system in a way has to change a bit. But I think, you know, those are some of the big outlines of areas that we need to be thinking about. And then one other thing, which is there we go into in the book quite a bit is that a lot of the assumptions that we’ve built our regulatory regimes upon and are, therefore compliance, are based on some faulty assumptions, one of which is that deterrence and punishment are effective ways of changing future behavior. And I have to tell you, that generally, they’re not. And that means that, and they can be counter productive. People feel you don’t trust them. Again, it becomes we’re just doing this because it’s the law, because it’s really important or good for our business. So questioning some of the assumptions, which is one of the things I’m really good at is important, you know, be a rebel, ask, Is this the right thing to do?

Kimberley Cole 16:13
That’s very interesting. Once again, I think there’s a lot more that we could dig into there. What are the factors that you know, cause people to either observe rules, or break them?

Ruth Steinholtz 16:30
Well, so I think there’s, it’s not about people being sociopaths, or a psychopaths generally, it’s a very small percentage of people in the world, who are actually psychopaths or sociopaths. It’s really about the fact that there’s, that people will, in order to gain an advantage for themselves, all of us, every all of us, in order to get an advantage, we will break the rules, just enough to still be able to feel good about ourselves. We want to feel good about ourselves. On the other hand, we want to gain advantages for ourselves and our family. There’s a behavioral psychologist called Dan Ariely, whose work I commend to you, because it’s both informative, and very funny, and he calls that the fudge factor. So that’s the extent to which we can cheat and still feel good about ourselves. So that means that means, and it has really important implications for us in our work, because it means that you need to create organisations which people can’t rationalize cheating, because they feel that they’ve been treated unfairly or because they, you know, they don’t like the company or for all kinds of reasons. And context, so people with perfectly good values, will engage in misconduct because of all sorts of things in the in the context. And that’s why the culture of our organisations is so important, basically. So it’s often external factors that cause people to kind of take a step in the wrong direction and once they’ve taken one step, it kind of gets easy to take another one and another one. So it’s often the context and this natural tendency that we have to, you know, we want to get an get ahead.

Kimberley Cole 18:20
Wow, the fudge factor. And obviously, there’s been a whole lot of examples that we could go into around that. And, you know, hopefully, we’ll have time to talk a bit more. So what, what what sort of factors encouraged as well as discourage that behavior?

Ruth Steinholtz 18:38
So if you think about it, if you work for an organisation that you are proud of where you have a sense of shared vision and shared values with the leaders, and that you care about your first of all, you’re much less likely to cheat in that situation. Because you don’t, you think you value the organisation, and you’re also more likely to speak up, or to work with someone who you think is sort of moving in the wrong direction. If you couldn’t care less about the company, then you’re a) you’re not going to bother. And secondly, you’re going to be able to rationalize not doing the right thing. But there are some other things for example, you know, we all have this innate desire to belong, which leads us into a tendency to conform. So not to stick our head up against, over the parapet and speak up. If we think that dissent isn’t appreciated, or that nobody’s going to do anything about it, we’re just going to keep our mouths shut. And the other, there’s interesting research that shows, if you’re in a hurry, you’re more likely not to notice the ethical dimension, there’s a thing called the Princeton theological seminar, seminary sorry, experiment where they took students who are studying to be priests and divide them up into two groups. One was supposed to give a talk about the Good Samaritan and other about job opportunities for people after studying in the seminary. And then they set them different time to get to their where they were going to talk. And the only people who stopped were the ones that had to help, and then sorry, they had a person along the way, who was obviously in trouble and needed help. And the only ones that stopped to help were the ones that had time to stop, even the ones who were, in their mind had this idea of the Good Samaritan. So somebody who stops and helps a stranger along the way, they just walk right by this person, because they were in a hurry. So there’s a lot of really interesting experiments that have been done that kind of show why people behave in certain ways. And the other classic one is about authority. So if someone in authority tells you to do something, people tend to have a natural respect for authority. So they may do it. One of the reasons for that is it kind of absolves them of any responsibility. Well, they told me to do it, so it must be okay. And that’s why our leaders have to be careful what they say, and what they do. And sometimes it’s even things that sound kind of innocent that they say, but they forgot to say, by the way, it’s also how you get your results, not just make the numbers, hit your targets. So sometimes it’s committed, it’s an error of omission. A lot of leaders don’t realize just how often they must keep communicating continue to, to talk about the values and why doing the right thing and how you achieve your results is important. So those are some of them. And the one, which we talked about quite a bit in the book and in which in a way I think is the most important thing is that if you have a blame culture, in your organisation, and I haven’t come across too many organisations that didn’t have some extent of blame culture. On the one hand, you have a blame culture. So something goes wrong, you punish people you discipline. On the other hand, you say to them, please speak up. If something goes wrong, well, I’m sorry, but people won’t speak up when they think that the consequences of speaking up is punishment, if they think that the consequences speaking up is, let’s learn from our mistakes and figure out what are all the 20 complicated factors that brought us to this point, then you have that climate of psychological safety, which people, where people will speak up. And also you have a positive feedback system whereby you fix problems before they become major issues. So really, we’ve got to get rid of these blame cultures. And aviation safety is the industry that’s cracked that the most, and generally speaking safety. So when I worked in a petrochemical company, for example, I was able to say to people, you know, you think having a safety culture is really important. Well guess what ethics is analogous. It’s the same thing. So in safety, they you know, you often have a scratched on the mirror in the in the bathroom, saying, you’re looking at the person responsible for your safety. Well, you’re looking at the person responsible for your ethics, it’s the same thing.

Kimberley Cole 23:13
Gosh, we’re getting leadership and all sorts of hints and tips here. So that’s fantastic. That’s really interesting, very interesting examples. And I guess it also flows into the whole kind of whistleblower programs, and all those things where you almost need to have this, I guess, celebrate failure, almost so that people feel able to come forward with issues.

Ruth Steinholtz 23:37
Yes, it’s, how your leaders react when something goes wrong, makes a huge difference. I mean, I was really privileged in the petrochemical company, we really did have a this huge push on safety. And you know, in petrochemicals, if something goes wrong, you can blow things up and kill people. So of course, it was something people paid attention to. But what really struck me was when something did go wrong, and luckily, we didn’t kill, I think we had one fatality, which was actually a car accident. But whenever something went wrong, the people who were involved in that area would come into our management team meetings with a full root cause analysis, naming all of the factors that had gone wrong, including often things that they were personally responsible for, discuss how they had interacted, what went wrong, what they were planning to do about them, and who was responsible for it, and the conversation was all very calm. And just okay, that’s fine. Understand that. And, you know, make sure you do what you say you’re going to do. And so people were fine to come in and tell the CEO and the CFO and General Counsel myself, because they were fixing it.

Kimberley Cole 24:51
So I mean, obviously a lot of culture, a lot of, you know, tone at the top requirements, and one of the one of the biggest roadblocks to really ensuring that you have ethical business practice, and that you have got the leadership that’s required.

Ruth Steinholtz 25:10
Well, I think mediocre leadership is probably one of the biggest problems, and and again, without blame. So think about it, most people get into leadership positions, professionals in particular, because they were good technically, at whatever they were doing. So they might have been good lawyers, they become General Counsel, they were good accountants, they become CFOs, etc. But they don’t get the kind of coaching and leadership development training that they should get in order to make them good leaders. And some people frankly, just shouldn’t be leaders. But that’s another story altogether. So that’s one thing. And then the other thing is that until senior leaders really understand that a strong ethical culture and a culture of innovation, and a sustainable culture are the same thing. It’s not like we designed one culture, you know, for innovation, another culture for ethics, and a third culture for sustainability. They’re all the same. And the same sorts of dynamics that operate in each one of those cultures make the company or the organisation more successful. So if they got that they’d spend more and invest more in their culture. And I think that’s where we need to be also talking about the return on investment for culture, and conduct, basically.

Kimberley Cole 26:33
Yeah, I was gonna say, do you think people and certainly companies and even the investors are making that leap, in terms of how that can help with the return on investment?

Ruth Steinholtz 26:43
More and more, certainly in Europe, that link is being made. Now, I’m not going to say that everything is wonderful, but I do think that there’s much more of a recognition that this is, you know, that it’s this is the case. It’s also related to impact investing, and ESG and that sort of thing. But also, it’s because there have been so many failures, where you had perfectly reasonable compliance structures and codes and all the rest of it and yet you still have these failures. So it’s clear that compliance alone can’t solve this problem. So So yeah, I think…

Kimberley Cole 27:21
And is, do you think the momentum is building in the right way?

Ruth Steinholtz 27:26
Certainly, it is, when I started talking on the subject of values driven ethics and compliance, which was in 2004 or 2005, I never had any trouble getting onto the program of conferences in Europe about, you know, compliance conferences in Europe. Now, there’s a lot of people talking about this. Now, some of them, I have to say, are really still talking about compliance, but calling it culture. So for example, if somebody says to you need to develop a, you know, a more ethical culture, let’s do more training. That’s not, I mean, yes, it’s important to do training. But that isn’t just, that’s not the answer, really, one has to dig down and understand the culture of the organisation and figure out what are the drivers and what are the true values in the organisation.

Kimberley Cole 28:19
And so what then most excites you about the opportunities and ideas that you sort of see around how things are developing and for compliance? And I guess specifically in in financial services?

Ruth Steinholtz 28:31
Yeah, I think the most interesting sort of regulatory developments that are leading the way in terms of culture are the Dutch. So don’t know how many of you heard about the approach of the Dutch National, the Dutch National Bank, the DNB, they’ve written a book about this about five or six years ago, or maybe more, they started supervising culture. Now I have mixed feelings about their approach, because basically, they’re sending an organisational psychologist into witness the senior management of like, they go to board meetings and things like that, they’re only focusing on the senior management. And also, to me, this is still a parent child approach. So this is the regulator going into the company and, and telling them what’s wrong with their culture. Now, first of all, I think it’s the financial institutions themselves that need to be telling the regulator, what their issues are in their culture, using cultural measuring tools, which by the way, do exist. And if you ever hear anybody say, you can’t measure culture, tell them to call me because that’s rubbish. You can measure culture. And there’s a wonderful instrument for doing it. So I think, really, it should be the the financial institutions being able to increase their level of trust with the regulators by being able to talk about the forces in their culture that they’re working on trying to improve in order to, but the good news about the DNB is that it is focusing everyone’s attention and in Holland and some of on the fact that culture and conduct and how the board functions and whether you have people who are too, who dominate the conversation, whether the chairman doesn’t listen, all of these things are important. The second thing, in my opinion, is really this room, which is that the more women who are getting into this area, I think it’s just really exciting, because I do believe that women bring a slightly different perspective, and the more diversity that we have, the more likely we are going to succeed. So that’s really exciting.

Kimberley Cole 30:42
That’s interesting. I was told, I was also told that by another compliance executive who said that she felt that by even just sitting on the trading floor, and being a woman, that some people felt it was easier to come and tell her that something was wrong than they had with other male counterparts.

Ruth Steinholtz 31:00
Yeah, less competitive potentially.

Kimberley Cole 31:02
Yeah. So um, you’re offering so many areas that we could go down, and I’m fascinated about the cultural measuring tools as well. But that’s another area to come back to. So once again, we’ve got a lot of compliance professionals here. How do you think that ethics and compliance functions, you know, operate and can they operate as part of the same function? Or how should that sort of best practice work?

Ruth Steinholtz 31:33
Okay, so I think I have a relatively, possibly, controversial view on this. So as I say, I think ethics is everyone’s responsibility. And compliance is an outcome of a strong ethical culture and not an approach. I don’t think you should separate ethics and compliance. On the other hand, I don’t think that you should make the compliance function responsible for culture, because the CEO and the senior management is responsible for culture, what I do think is that all of the functions across the board need to be working together. And the more siloed you become, the worse it is, because it means that you’re not talking to and appreciating how all of the different functions can work together. So, you know, I think that ethics and compliance, if there are two steps, there are, if they’re seen as two areas, they should probably be together, in a way. But there’s pros and cons. And, you know, originally, I didn’t really see the need for a separate compliance department outside the legal function. But that was because I was a pretty unusual General Counsel, possibly. But one, one reason for that was that in over the arc of my career, I watched the legal department struggle to get the recognition of the importance that it needed, which took, frankly, about 20 years. And around the time when, when General Counsels were getting see that the top table compliance, split themselves off from that in many cases, and then had to start climbing the ladder themselves again. But it does depend entirely, I think, on the organisation of the company, what’s the best way to look at it. But I think you really, ethics is the responsibility of management. And it needs to be supported in a variety of ways, I hate to see it be seen as something that’s not the responsibility of management.

Kimberley Cole 33:28
So I’m just going to ask one more question. And then if anyone else, we’ll open the floor to questions, but so given that, you know, what, what is that leadership mindset that’s really required to both build the culture and build this, I guess, an ethics function, but also just the way the company operates in an ethical way.

Ruth Steinholtz 33:49
So I think the leadership mindset needs to be first of all, that this is good for business. So so one of the things I would caution you about is, if you do a lot of presentations, telling people that if they don’t follow the rules, they’re going to go to jail, or pay large fines, you’re going to be telegraphing the message, that we’re only doing this because it’s the law. One and two, nobody thinks they’re going to go to jail or pay large fines even when they have, I mean, even when other people have. So I think you have to be careful to really your business case, is this, a strong ethical culture is good for business. So that’s the first mindset that needs to get into the heads of the senior leaders. And then the other one, I think, is it a values driven, that understanding, if they understand the value of values, so really having shared vision, shared values, and using that as a way of understanding how are we going to get where we need to go, then all of the other functions, including compliance, ethics, HR, OD, whatever, should kind of all be moving in the same direction to try to accomplish that. So it’s kind of a servant leadership, rather than a narcissistic type of leadership – understanding that everybody has a role in this and that everybody’s contribution is important.

Kimberley Cole 35:07
So, have we got any questions from the floor?

Audience Member 1 35:12
Thanks very much, Ruth. And I was just wondering if you had a case study that illustrates the working out what the values of the organisation are and they need to be an integral part of business ethical leadership. So you know, there are a lot of what not to do’s out there. But what’s a good case study that illustrates that, and then the cascading of those values in the organisation, that gives the effect that we would like?

Ruth Steinholtz 35:39
So when I talked about cultural measurement, this tool that I was referring to is actually one of the ways you do that. So it’s called a cultural values assessment, it’s a thing called the Barrett Values Centre and if anybody wants, I can provide the link. So this is a way of finding out what’s what are the top values of the people in your organisation? What are the current, What are they experience in terms of the current culture values, behaviors, and what values they think are most important for the success of the company, and those are the sort of desired cultural values, and using, so you get, you get that information, you send a link to everyone in the organisation even if it’s 200,000 people doesn’t matter. And then you you do a series of workshops in the in the organisation understand what people met, when they chose particular words, and what sort of desired culture. And my belief is that by doing a consultation like that, and using the information that you get from that, you can then really understand, because that’s identifying the values, the values are there, the thing is, sometimes they’re potentially limiting or blocking values, or behaviors that are actually stopping you from being effective. But involving everyone in the choice of the core values, in my opinion, is fundamental. Because if, if you if, your board sits in on the 57th floor, and picks up values out of the hat, which they think might be the right values, they have no idea whether those values really connect with people. And then once you know what the core desired values are, and what they mean how, what people meant by them, etc, then you can design a program of constant communication, awareness. And eventually you get to the point where people say, and I’ve experienced this, is this in accordance with our values and others when they make decisions? They’re actually using the values? Yep.

Kimberley Cole 37:31
Okay, one from Jan now please.

Audience Member 2 37:33
Regulators may have various reasons for trying to change the culture of firms within an industry. What if the, those firms don’t actually want to change their culture? How can you make them? How do you convince them to do it?

Ruth Steinholtz 37:48
Well, I guess it depends on why they don’t want to change. In other words, if they, if they’re, if there’s a lot of misconduct in the firm, and clearly they’re, and a lot of issues, yet they’re, they’re blind to this, which is often the case. You know, sometimes regulators have got to the point of saying we need to replace the senior people, because their lack of self awareness of the problem is, is the problem. If, on the other hand, if you’re worried if you’re in a situation where, what let’s put it this way, I don’t think the regulator should be determining what the culture of the organisation should be. And one of the things that I have a problem with is that is a lot of the efforts currently are saying, This is the culture that we should have you need to aim at that. No, you need to understand from within what the culture is, and what the positive aspects of the culture are, that you can emphasize, and how are you going to deal with the negative aspects. But if it’s an extreme case of a toxic culture, you may have to remove the leaders, the current leadership in order to fix it, because the culture is a reflection of the leadership values and behaviors, maybe past leaders, but maybe current leaders. So and some regulars have the power to do that others don’t.

Kimberley Cole 39:10
So you mentioned at the start the sort of tick the box idea causing problems for both ethical behavior, and how you really gave accountability and responsibility to more people and I guess leadership from everybody as well as leaders. If you’re looking at industries where you would say this best practice, where would that be? And how should you know the financial industry take those on board?

Ruth Steinholtz 39:45
Well, I mean, the the pioneer in terms of working through blame to accountability is aviation safety and that whole safety culture. There are financial institutions who have used the cultural measuring tools. Old Mutual, for example, which is now, they de-merged and change their business, but they, over a period of years, really took to heart looking at their culture, and strengthening their risk culture, they use the Barrett tools to understand their risk culture, and one of the inputs into their three lines of defense, etc. And some of this stuff that they did is available publicly. So I think that, but in terms of industry, I would definitely say it’s the aviation industry. Now, Boeing obviously, is in the news. And I what I’m sure is going to come out of this similar to with VW is that they lost their focus on their culture, and that their culture was for whatever reason, damaged, because in aviation safety, if you talk to experts, I’ve met with the head of British Airways, safety and security, and also the head of the British, the CIA. And they all say that if they didn’t have it, this safety culture, in aviation, we’d have planes dropping out of the sky every week. And obviously, that would not be acceptable. So that actually means, for example, that if let’s say an engineer does something that results in an accident, a ground accident or something like that, they do a root cause analysis, they figure out what’s wrong, they fix it, they do not punish or fire that engineer. And in fact, EasyJet, I think it had there was some sort of an accident in Milan, the local contractor fired the person who was involved in it, EasyJet went back to the contractor and said, if you don’t reinstate that person, we’re firing you. Because as soon as you start firing people in that context, they stopped telling you when they made a mistake, or when something’s gone wrong, and that’s when things really go wrong.

Kimberley Cole 41:53
That’s fascinating. What about the impact of incentives? Because often, it’s sort of the way that incentives are designed or implemented, that also causes the wrong behavior.

Ruth Steinholtz 42:07
Yeah, I wrote a little guidebook for the Institute of Business Ethics called Performance Management for an Ethical Culture. And we looked at also at incentives, obviously, incentives are a major issue. And frequently, you end up with perverse incentives, incentives that are designed, apparently, to work but then cause people to do the wrong thing. I think the main response that companies, including financial services companies were basically doing, first of all, reconnecting with their values, but then making sure that performance management and incentives were based on not only what you achieved, but how you achieve them. And in many cases, for example, in pharmaceuticals, GSK for example, they completely disengaged sales from their incentives, because they just couldn’t figure out how you would end up with, you wouldn’t end up with the wrong behavior. So I think that one really has to be careful when, incentives have to be long term, they need to really reflect the reality of the situation. And they need to be focused on what is the real purpose of the organisation, not just let’s make money in the short term, and the system, by the way has to change also in that regard.

Kimberley Cole 43:23
So yeah, that’s all very good, very good learnings. I think we we don’t have much longer left. So if no one has any other questions, I’m going to ask some maybe a bit more general ones, which are some of my my kind of fun ones, which are, you know, if you think you were, you know, Queen Ruth for the day, what’s the one thing that you would change now?

Ruth Steinholtz 43:49
In general you mean, in compliance?

Kimberley Cole 43:52
Yeah. Well, you can have one of each of you like, you’re the queen.

Ruth Steinholtz 43:56
Well, I would stop Brexit, that would be the one thing I would change. Totally sorry, I can’t resist that. That is the most important thing right now, as far as I’m concerned. I think in compliance, I would, I would say, that I would hope that people working in compliance would realize that they need to widen their, their experience and not just focus on “I know the rule, and I know how to apply it,” because that’s the start, but it sure isn’t the finish. And I would, I’m worried that too much, this this sort of singular focus on compliance and rules could be in a way of vested interest that will block a more wide, you know, we’re dealing with human beings here, yeah, so I think I would change the education of people going into compliance and make sure they had a broad abroad RX exposure to all these different areas, basically.

Kimberley Cole 45:02
Fantastic. And we and we love to give a bit of advice to our emerging women and men in risk, regulation and compliance. So what would be your advice to, I guess, your younger self or our emerging talent?

Ruth Steinholtz 45:16
Well, I mean, it wouldn’t have been possible at the time, but I would have done a masters or a PhD in behavioral ethics or behavioral psychology really, first of all, it’s so much fun. I did do a massive open online course that Dan Ariely did, he had written a book called Predictably Irrational and another book called The Honest Truth About Dishonesty. But I think that, yeah, so that’s one thing I would have done is I would have gotten a dual degree, not just a law degree. And the other thing is, which is a bit off the wall, and again, wouldn’t have been possible at the time, but I would have gone for non executive director roles when I was in my 40s. So don’t wait until you start to have a lot of gray hair, before you think about NED roles in you know, even in completely other companies, industries, charities, whatever, it’s a really good way to get executive experience. And I wish I’d done it 20 years ago.

Kimberley Cole 46:14
So what is that one thing then if you that you wish you knew now that you knew, that now you wish you knew then that you don’t? That’s totally confused. But hopefully you understand the question, what is the one thing you wish you knew then that you know now?

Ruth Steinholtz 46:32
That’s a tough one, I think, I guess that I wish I knew just how important your relationship, the relationship with the senior managers was from a from a mid-level. In other words, you need to be influencing the CEO, you need to be influencing the CFO and Chief, you know, all of these different business people in your organisation. So I wished I’d understood just how important my visibility was across the organisation at a much earlier stage than I then I did.

Kimberley Cole 47:15
Thank you. That is absolutely brilliant. I think we’ve got so many hints and tips there from both on ethics, compliance, as well as leadership advice. So, Ruth, I want to thank you and let’s everyone give a round of applause.

Kimberley Cole 47:33
Thank you for listening to this exciting episode of Risky Women Radio to connect, champion and celebrate women in risk regulation and compliance. I’m Kimberley Cole, based in Hong Kong. For more information on the Risky Women global network, head to our website, and the Episode Notes and please be part of the ongoing conversation by subscribing to this podcast, connecting with us at Risky Women on Twitter, or even reaching out to me directly by email.

Risky Women Singapore: The Ethics of Compliance with Ruth Steinholz 1400 787 Risky Women

Risky Women Singapore: The Ethics of Compliance with Ruth Steinholz

The new culture of compliance – from the importance of taking a behavioral and values-based approach to compliance and enforcement to the challenges tightening regulatory frameworks pose.

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