Risk Management Reports

Should our business and personal lives be controlled by general principles of behavior or by specific rules and laws that address most areas of activity? While most of us will opt for the former, we live in a world constrained by the latter. Most religions began with simple statements of ethical behavior but, over the centuries, theocratic and selfappointed interpreters enveloped these ideas in reams of rules, rituals and regulations. Libertarians in many countries rail against the regulatory minutiae that, they argue, corrupt our freedoms, while contrarians point out the inherent fallibility of the human species, preferring numerous laws that control almost every aspect of our lives. I believe that the answer is that delicate balance between the two extremes.

In the United States, an accounting system built on specific rules for every transaction led, in part, to the recent financial scandals and the dissolution of trust in reported financial figures. These events were the catalysts for the current international effort to develop global “generally accepted accounting” principles, instead of multitudinous and detailed rules, in an attempt to avoid future problems like those experienced in the US. Simplicity over complexity and principles over rules are the new mantras.

Yet we move in the wrong direction almost every day. While lecturing in Canada in May, I read about another example of trying to right presumed wrongs by over-controlling organizational and individual behavior. The Province of Quebec has enacted a new law that took effect on June 1, 2004, one that purports to prevent “hostile behavior and intimidation” in the workplace. This amendment to Quebec’s Labour Standards Act, (Le harcèlement psychologique au travail) prohibits “psychological harassment”, defined as “any vexatious behaviour in the form of repeated and hostile or unwanted conduct, verbal comments, actions or gestures that affect an employee’s dignity or psychological or physical integrity and that results in a harmful work environment for the employee.”

The law says that this activity can come from a manager, fellow-employee, customer or supplier. It can manifest itself “in the form of conduct, verbal comments, actions or gestures characterized by the following criteria: they are repetitive; they are hostile and unwanted; they affect the person’s dignity or psychological integrity; and they result in a harmful work environment. It includes humiliating or abusive behaviour that lowers a person’s self-esteem or causes his torment.”

I support the idea of eliminating reprehensible behavior. In my career I’ve experienced it several times. But is it so pervasive that we need another law to prohibit it, supported by a fine of C$10,000 and the threat of damages paid to the victim? And, despite the length of this law, aren’t its phrases so vague as to be easily misinterpreted? What is “self-esteem”? What is “psychological integrity”? What is “vexatious behaviour”? Here’s a field-day for plaintiffs’ lawyers.

Of course, the counter-argument is that real (and imagined) slights have occurred, and will continue to occur. Should we try and alter behavior with new laws and their resulting litigaton, or with publicity and transparency? I know of three other countries that have similar legislation or regulations: Sweden (1994), France (2002) and Belgium (2002). A bill is also pending to extend this mandate to all of Canada.

I queried one European risk manager who reported that his firm had already addressed these problems: “As a truly multinational and multicultural company, we pay attention to all kinds of social mores, behavioral codes and employment regulations in different countries around the world.” To me, this is the best response: increasing stakeholder (employee, customer and supplier) awareness of potential problems through clear and explicit policies, supported by an effective complaint procedure and internal enforcement. Yes, harassment is a continuing problem, but, no, I don’t think it requires legislation, as Quebec has done, to improve the situation. Let principles, not rules, prevail. (For more detail on this new Quebec law, go to www.cnt.gouv.qc.ca.)

As a last resort, as I suggested to my European correspondent, we could return to the solution of past years: if your “honor” is impugned, simply call out the offender to the dueling fields! It’s cleaner, neater and involves no extravagant legal fees!