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School’s Expertise in Compliance on Stage at Financial Times Health Care and Life Sciences Summit

October 31, 2016
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As the government demands personal accountability from corporate executives, pressure to maintain proper behavior while delivering high profit margins sets up a clash that has played out in several recent scandals. There really is no option: businesses must get serious about enforcing compliance. That was the take-home message from Anita Cava, professor of business law, director of the School’s Business Ethics Program, and co-director of UM Ethics Programs, speaking at the Financial Times Latin America Healthcare & Life Sciences Summit in October.

“Sometimes it seems that business simply factors fines and penalties for improper behavior into the cost of doing business. But in this era of increased transparency and accountability, that cost has become exponential and unsustainable.” She used the day’s breaking news as an example: just an hour before her talk, a federal judge approved a whopping $15 billion settlement against Volkswagen over its emissions-cheating engineering.

Cava also highlighted the ongoing scandal enveloping Wells Fargo, which is reeling from the disclosure that employees opened as many as two million unauthorized bank and credit card accounts to meet sales goals, and made two predictions. First, prompted by the revelation that a 2011 whistleblower complaint about the cross-selling tactics never was acted on by the Department of Labor, she believes there will be changes to the way whistleblower cases are handled. Next, Cava suggests the Justice Department may well try to use this case to demonstrate what it means by individual accountability.

“Their new attitude, announced last year in the Yates Memo, is if we can’t get you to do it because it’s the right thing to do or by fining you, let’s get your attention by trying to impose personal liability.” Cava noted that the fall of Wells Fargo CEO John Stumpf is particularly regrettable because he was one of the few banking industry CEOs to emerge relatively unscathed from the financial crisis. “We all know the value of a good reputation. And we all saw Senator Warren calling his decisions into question and saying that he should be ‘criminally investigated’.” 

Those operating in Latin America, Cava says, face specific challenges in compliance. The Foreign Corrupt Practices Act prohibits offering ‘anything of value’ to a public official to ‘obtain or retain business.’ Cava is “not sure that Congress intended to affect every single medical professional in Latin America, but it did because health care is a government endeavor there...and almost everywhere in the world.”  Accordingly, every gift or other incentive offered to health care professionals has become a source of possible liability.

When the pharmaceutical industry first noticed the government’s scrutiny of its sales policies, it looked to third-party suppliers to step into their shoes in the local markets. Needless to say, regulators have closed the loophole. “For those of you trying to start new businesses and penetrate markets, especially where markets have cultural differences of a vast degree, it's a real challenge. How do you incentivize your employees and customers and ultimately shift the business environment to make it possible to actually do business in a way that reflects a willingness to choose transparency and accountability? One way is to be very mindful of the evil effects of sales goals.”

Cava also points to the FIFA corruption scandal as a turning point and said the millennials have a particular interest in working for ethical and transparent companies. “People are sick of it,” she says. “Millennials are willing to leave if a company doesn’t have values that match their own.”

The pervasiveness of technology captures everything people say and do, leaving little room for secrets. “Public accountability is what it is,” Cava says. “You either do it right, say what you mean and be accountable, or there are consequences. We do not have to look far to see examples of that in the recent news cycle.” 

Among those in the audience: Nicholas Osorio, regional managing director, Latin America at Walgreens Boots Alliance, a former UM Executive MBA  student who remembers Professor Cava’s class fondly. “I deal a lot with what she talked about today because we acquire family-owned companies and integrate them, teach them how to be a part of a global enterprise,” Osorio says. “We grab them by the hand and teach them what is right, and I’m the ultimate guy responsible if anything goes wrong. This is a hot topic in corporate America right now.”

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