The Weakest Links

The Weakest Links

We communicate frequently about the ethics and compliance risks employees and managers face, and what can be done to reduce those risks. Most of our emphasis is on our own actions.

However, some of the greatest risks we face are caused by the actions of those who are not company employees. Suppliers, agents, consultants and contract employees can all expose companies to risk.  In the last few years, for example, the following has been alleged:

  • The recent horsemeat scandal in Europe occurred as a result of decisions made by suppliers.
  • A Mattel supplier changed subcontractors without Mattel’s knowledge. The new subcontractor changed a production process to use paint with lead in it.
  • Agents hired by a joint venture between a Halliburton subsidiary and a local company in Nigeria paid bribes. Halliburton faced penalties of more than $500M USD.
  • Allegations of child labor and poor working conditions have increased scrutiny on dozens of companies sourcing apparel and electronics in Asia.

Examples don’t have to be so dramatic, either.  Shoddy and shady practices of all kinds can come back and haunt us. One thing is clear: no one ever remembers the name of the supplier, agent or subcontractor who got the big-name company into trouble. It is always the big company—us—who is negatively identified with these events.

What can you do about this?

  1. First, of course, is to follow any review or due diligence policies that apply to your relationships with third parties.
  2. Make sure the third parties you deal with are under contract, have been trained and otherwise know our expectations of ethical conduct.
  3. Continue to exercise oversight toward our third parties. Know the third parties you work with. Look for signs of change, and let the appropriate people know if changes in process, quality, ownership or anything else raise questions in your mind.
  4. Be aware of specific requests or actions that could suggest problems. For example, if you are asked for payment outside of normal channels, or if you sense nervousness or antagonism toward our auditing or quality processes, these could be red flags.