A Sorry Tale
: Peter Sandman’s approach to risk communication—which includes maximum transparency coupled with extreme humility—is not appropriate for every company. It was not appropriate, obviously, for the Australian Wheat Board, which was recently forced to acknowledge that it paid $290 million in kickbacks to the corrupt Saddam Hussein regime.
As The Age reports
(in great depth), Sandman was brought in at considerable expense to help the company craft an apology, which he did—apparently too well. Sandman took what had been a fairly bland apology and made it sound real. His apology explained that AWB employees who suspected wrongdoing should have stepped forward sooner, and that AWB, all the way up to the former chairman, Trevor Flugge, apparently lacked a culture that encouraged such actions.
He wanted chief executive Andrew Lindberg to concede that AWB’s responses had been “legalistic and ethically obtuse,” and to admit that “it was my job to create a corporate culture where my employees would identify suspicious circumstances and bring them to my attention. My ignorance of these details until far too late demonstrates how thoroughly I mishandled this part of my job.
“Although we ourselves violated no Australian laws or UN regulations, we were a party to transactions in which others undermined the fundamental purpose of the UN sanctions. We should have seen this and made an effort to stop it. We did not … This represents a serious failure of the AWB ethical culture, and of the company's systems and processes.”
That was apparently all too much for AWB’s management and public relations advisers, who felt it went too far. As The Age points out, AWB seemed genuinely convinced that Sandman’s advice did not reflect the reality of the company’s situation.
Sandman responded to the changes with a withering memo: “This whole list of facts reads to me like a one-sided effort to look as innocent as you can without actually lying. You are entitled to do that. It is a lawyerly thing to do. It might be the right thing to do if you think you are in legal trouble and need to argue your way out. Or it might be the right thing to do if you think you are being ethically criticised unfairly and are preparing to say you did nothing unethical and are the long-suffering, innocent victim of an unfair report from Volcker and unfair media coverage in Australia.
But “It’s a terrible way to begin if you are seeking forgiveness for ethical misconduct that everyone pretty much knows wasn't illegal … It makes the reader want to find something illegal to get you for.”
He went on to ask: “On what basis do you say your distress… is ‘shared by all at AWB’? You told me many at AWB thought and still think it was no big deal that Iraq’s money got back to Saddam. Have they changed their mind? Do you mean that they are distressed that these arrangements got AWB into trouble? Or is this the only statement that I have found that goes beyond half-truths and is actually a lie?”
Sandman seems to me to be right on every point, and the publication of his memo—which was entered into evidence as an exhibit in a government inquiry into AWB’s behavior—simply exposes a debate that goes on in every company accused of illegal or unethical behavior. Certainly, taking Sandman’s advice would have spared AWB much of the embarrassment it is now suffering for the mealy-mouthed pseudo apology it eventually issued.