These are parts of an article that was published December 20, 2011 in Knowledge@Wharton. My comments follow in red.
"After everything falls apart, the failures to act become obvious: Why didn't somebody at Penn State do more to pursue allegations that former assistant football coach Jerry Sandusky was sexually abusing young boys? Didn't anybody at MF Global Holdings notice that something was wrong before $1.2 billion in customer cash disappeared? Why, decade after decade, didn't anyone at Olympus protest $1.7 billion in accounting irregularities?
"Why was there almost a conspiracy of silence?".......
Most experts agree that leaders must set the tone for the entire organization, work to elicit discussion about taboo topics and maintain transparency about how they respond to any concerns........Companies should also establish metrics, routines, audits and incentives to help identify problems and suggest areas of change, says Wharton management professor Lawrence G. Hrebiniak, who has acted as a consultant to dozens of companies such as General Electric, AT&T, Microsoft and DuPont. When top management diligently works to measure performance, elicit feedback and respond openly to problems when raised, it can usually make progress, Hrebiniak has found. "Control systems are important to implementing strategy and identifying problems," he says.
The caveat, of course, is that leaders need to pay attention to the facts. "In two cases, I've reported data to top management and they disinvited me from a strategic session," Hrebiniak recalls. "Some of the problems that were identified seemed to suggest poor leadership from the top.... They didn't want it to come out on their watch."
When companies have a culture in which managers are "more interested in hiding things than solving problems," there is little anyone can do to help, Hrebiniak says. "You need top management to react strongly. If they bury the stuff, they're dead.""
It is unfortunate that management usually discusses the undiscussables too late. It is evident that it will always be true that tone prevailing at the top is what sets other tones across each layer in any entity.
Top management will always be responsible and accountable about the culture and ethical values in their entities. I would like to reiterate the fact that controls in general and internal control systems in specific will be of no value when top management does not support such control systems. Mere compliance with all kinds of polices, rules, and regulations is not enough. Great leadership is an ethical leadership that has no taboos when it comes to group politics and internal politics. Group loyalty may sometimes be a sort of collusion rather than any thing else.
I do believe that unless top management leads by example at the highest ethical standards and supports each member their staff to speak up about each and any suspected immoral, unethical or corrupted acts, the collapse of such entities will be devastating and a matter of time.
