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Why good people make bad choices

09 November 2017 by Henry Ker

Why good people make bad choices - read more

Boards should be wary of what they are incentivising their employees to do

There is a different feel to this month’s cover interview. I spoke to Walt Pavlo, Jr, who was convicted of embezzling $6 million and spent two years in federal prison. Pavlo’s story is a cautionary tale of disillusioned and isolated employees put under pressure to achieve impossible results.

‘It did not make sense to me that people could be unethical, with low business standards, and be so rewarded. I felt that I had two choices: one, call everyone out for what they were doing, or two, join in. Regrettably, I chose the latter’, he said.

Since his release, Pavlo has offered his insight to business schools, accountancy firms, and even the FBI. ‘There are three components [to white-collar crime]: the pressure, the opportunity … and how a person rationalises it,’ Pavlo says, ‘There is context to the crime’.

PwC’s Max Klugerman echoes this in his article on corporate culture here: ‘Efforts to prevent the next scandal ... [are] spurred by our growing understanding of how individuals’ environments, and their perception of them, plays a large role in decision-making.’

Pavlo’s story resonated with me on the current debate around inequality – and in particular, the exceptionally high levels of executive pay in comparison to the average worker. If the situation continues to escalate there is a danger organisations will breed cynicism among their employees that means they feel justified in taking drastic action to try to, in their eyes, readdress the balance.

As he says: ‘It is important for the authorities, or the businesses, to be able to understand and recognise why an otherwise good person will make such bad choices.’

You can read the full interview with Pavlo here.

Elsewhere, ICSA has released new guidance on the EU General Data Protection Regulation (GDPR). Data protection is an issue which seems to be surrounded by confusion and apprehension. This extends to an organisation’s own assessment of its own preparedness. According to an August KPMG survey, a mere 6% of the FTSE 350 say they are completely prepared for GDPR, while in our own Boardroom Bellwether, 93% considered themselves ready.

Inevitably, the key is once again culture. ICSA’s Liz Bradley explains: ‘[A positive] culture of data protection, transparency and accountability envisaged by the regulation will be more likely to be considered trustworthy by the public.’

Henry Ker is editor of Governance and Compliance

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