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Another Compliance Lesson From Michigan State

One of the most painful failures to watch in corporate compliance this year has been the tragedy at Michigan State University: a culture of sloppy procedures and aimless oversight that allowed Larry Nassar, a doctor affiliated with the school, to assault hundreds of girls and young women for nearly 20 years.

Nassar is spending the rest of his life in prison, and good riddance to him. The ordeal for MSU now is to rebuild its leadership, reputation, and culture — and that’s something compliance officers should observe closely. A dispatch from the Detroit Free Press this week shows just how difficult MSU’s recovery is going to be. Take note, since it offers valuable lessons should your organization ever find itself in the awful place MSU is now.

Some background: As the Nassar case exploded in 2016 and 2017, so did reports of poor oversight at MSU that allowed his predations to continue for years. In January of this year, MSU president Lou Anna Simon resigned. She was replaced on an interim basis by John Engler, former governor of Michigan.

Engler

Engler hasn’t done a stellar job since then. In April he speculated (in an email, no less) that one of Nassar’s first accusers was accepting kickbacks from trial lawyers suing MSU. He later apologized for that smear, although various lawmakers and other critics called for him to resign anyway.

Last week Engler announced that MSU is creating a new Office of Ethics, Risk Management, and Compliance. In describing what that office will do, Engler told a reporter at the Detroit Free Press that MSU’s new head of compliance “will be in charge of seeing red flags.”

That led to a blistering article this week from Freep columnist Rochelle Riley. For compliance officers, the key passage is this:

[Engler] told the Free Press that “there were flags that should have caught Nassar,” including not having records for what Nassar said were medical treatments, sessions that a court labeled sexual abuse.

“That could have come up,” he said. “You’re checking to make sure the checkers are doing their jobs.”

That’s the problem right there. Flags don’t catch people. People catch people. And had people listened to people, dozens of girls might have been spared what the first ones endured.

If you ever want to understand the challenge of rebuilding an organization shattered by poor culture and oversight, this passage says it all.

Two Halves of Challenge

What struck me most about Riley’s column is that she and Engler are both right; they’re just talking about different issues within one complex problem. That’s a powerful point about the different constituencies that exist within large organizations, which ethical leaders must appreciate and respect if they want to avoid the godawful mess that befell MSU.

In compliance jargon, we would say Riley is frustrated about escalation and tone at the top. She wants the victims to be heard. She wants awareness from the senior executives at MSU. Her words are a primal scream at corporate inertia — and they are an entirely legitimate scream, that deserves to pierce its way into executives’ skulls.

The first girls abused by Nassar were victims of horrible circumstance. Hundreds more, however, were victims of an institution that didn’t listen and respond to them. That is the worse crime because it’s really two crimes: the abuse itself, and the deaf ear leaders offered up when victims asked for justice.

Engler, meanwhile, is focusing on institutional repair through procedure and transparency: strengthening documentation processes so much that the next time someone raises a complaint, or some miscreant tries to hide an illicit act, it sticks out like a sore thumb.

Engler isn’t wrong to propose those steps. MSU won’t be able to prevent future misconduct without them. He’s simply addressing one half of the problem in the bloodless, bureaucratic way corporate leaders often do; while fumbling the visceral, human other half that so many people consider the more important of the two.

In compliance jargon, we would say Riley is frustrated about escalation and tone at the top. She wants the victims to be heard. Engler, meanwhile, is focusing on institutional repair through procedure and transparency.

Compliance, Empathy, and Redemption

In a perfect world, compliance officers could derive some equation to calculate the proper balance between procedural steps and human empathy to repair a damaged organization. We don’t have one, although the path to repair exists in that concept somewhere. I’m not even sure how corporate compliance officers could put such a tool to good use, since telling the CEO “you need to be more empathetic” seems like a difficult message to convey.

Still, Riley’s column puts its finger on an irrefutable point: organizations have many constituencies. Those groups need different types of attention, at different points in time, if you want to right a badly listing ship.

The crisis at MSU is, foremost, a crisis of mistrust. People tried raising alarm about Nassar for years, MSU leaders didn’t listen, and today everyone is skeptical that the university will start listening now. Considering the smear Engler made against a victim only a few months ago, the skepticism isn’t unfounded.

Will procedures to identify and escalate allegations help? Absolutely. But those steps don’t address the audience Riley represents. They don’t just need mechanisms to report wrongdoing; they need to feel that they’re being heard. That’s how an organization starts down the long road to erasing mistrust.

Procedures don’t solve that problem. Leadership does. I don’t know whether Engler has the skill and awareness to deliver it — but it’s a debate worth having in your own boardroom, should the worst ever happen to your organization, too.

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