What Drives Misconduct: The EPA Example

The lessons that compliance professionals can learn from embattled EPA administrator Scott Pruitt are many. Some are so obvious we need to step back and deconstruct them to understand why his behavior is so corrosive to the organization he supposedly wants to lead. Other lessons are more subtle, and raise the possibility that Pruitt might not get fired, despite ethical misconduct all over the place.

All these lessons, however, are of the most important sort: about how an executive loses his grip on constituencies he or she needs to run an organization effectively. That’s what your bosses dread the most, so let’s go exploring.

On the surface, Pruitt’s most egregious misconduct looks like wasteful spending on travel, security, and office renovations. There was that $36,000 military flight from Cincinnati to New York, so he could then fly onward to Italy (first class, of course) to attend a meeting of environmental ministers. His now-famous private, soundproof phone booth cost taxpayers $43,000. When you include costs for his 20-person, round-the-clock security detail — a team far larger than anything Pruitt’s predecessors had — Pruitt’s costs to taxpayers are closer to $3 million.

Then we have the conflicts of interest. Most glaring is Pruitt’s rental in 2017 of a Washington townhouse co-owned by the wife of a lobbyist for Cheniere Energy, where Pruitt paid only $50 per night. Only for the nights he stayed there. And apparently not including his daughter, an intern at the White House, who crashed there, too. And Pruitt overstayed his lease anyway, prompting the owners to change the locks when he wasn’t there.

And then there are the twin sins of Pruitt demoting or re-assigning employees who objected to his profligate spending; and the pay raises he gave to favored employees — which he gave by using a bureaucratic trick in the Safe Drinking Water Act, to circumvent White House orders not to grant the salary increases. When confronted with those details last week by Fox News, Pruitt denied any knowledge of the illicit pay raises.

The Theme: Arrogance and Privilege

Any of the above offenses could be enough to get an executive in the private sector fired. Still, they’re all specific examples of misconduct that an ethics and compliance function can address once they arrive — which isn’t what you or your board want, really. Firing an errant executive means something already went wrong.

Let’s step back from the specific examples to understand Pruitt’s larger misconduct. That informs how you can prevent abuses like this from happening in the first place.

Pruitt’s cardinal sin is taking things other people believe he doesn’t deserve. He took taxpayer money to fund an office renovation rooted in paranoia. (Don’t forget the $5,600 spent on biometric locks, which we didn’t discover until recently because Pruitt split the payments in two to evade the EPA’s $3,500 threshold for more documentation.) He spent millions on a bloated security detail and first-class travel. He took punitive action against people he didn’t like, and took liberties with Trump Administration payroll policies for those he did.

This is all about arrogance and privilege. Pruitt believed his judgment was more important than existing policies, procedures, and historical norms. Therefore he could follow his own code of conduct: more money spent, more conflicts of interest allowed, less policy followed.

That’s privilege. It literally comes from the Latin privi and legis, “private law.”

Privilege unto itself isn’t necessarily a bad thing. Sometimes employees deserve a pay raise despite that company-wide freeze, and the executive VP or department head can grant it. The CEO can fly first class if he or she needs rest since CEOs travel all the time. Conflicts of interest can be permissible if they’re clearly disclosed.

This is all about arrogance and privilege. Pruitt believed his judgment was more important than existing policies, procedures, and historical norms. Therefore he could follow his own code of conduct

Arrogance mixed with privilege is where Pruitt lost his constituencies. When Pruitt is on government travel, he goes first class; when he has to pay for his own flights home, suddenly he flies coach. He claims he needs expanded security because of death threats, but even the EPA can’t produce an example of threats received. (Documentation, people! We’ve talked about this.)

Arrogance and privilege are the toxic stew that ruins an executive’s ability to lead. That’s the risk that compliance officers want to assess when they contemplate leadership and corporate culture. That’s the risk they somehow want to inject into the consciousness of HR departments and board nominating and governance committees. That’s what they want to look out for when compiling whistleblower policies and investigation protocols for office bullying.

Because while Pruitt may be abusing his power to pursue political policies — are his arrogance and privilege really much different from executives who grope interns or cook the books? No.

Then Again…

For Pruitt specifically, one important constituency is still standing behind him: President Trump. I wouldn’t be surprised if Trump lets Pruitt remain, despite misconduct galore.

Why? Remember that in large organizations, the chief executive sets the broad objectives and defines the culture. Trusted lieutenants then have broad discretion to pursue whatever tactical goals they think best, so long as they act within that broader framework the chief lays down.

Well, that’s what has happened here. By Trump’s definition — repeal every environmental regulation possible, especially any adopted during the Obama Administration — Pruitt has been working hard. In Trump World, the core value is loyalty to Donald J. Trump; there are no others.

That’s why Trump fired Veterans Affairs Secretary David Shulkin last month: because Shulkin insufficiently embraced the Trump Administration’s ambition to privatize the VA. That’s why Trump sacked former Health & Human Services Secretary Tom Price last year: because Price was unable to deliver Obamacare repeal to Trump’s specifications. The ethical misconduct of both men may have warranted firing, but that was only pretext.

In Pruitt’s case, he is working hard on Trump’s agenda, and that’s all that matters to Trump. Hence the president sent the following tweet the other day. Try telling this to your board when someone racks up $3 million in travel costs:

While Security spending was somewhat more than his predecessor, Scott Pruitt has received death threats because of his bold actions at EPA. Record clean Air & Water while saving USA Billions of Dollars. Rent was about market rate, travel expenses OK. Scott is doing a great job!

— Donald J. Trump (@realDonaldTrump) April 8, 2018

Pruitt may be an ethical disaster no organization should want to tolerate — but in Trump World, that’s no big deal.