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October 12, 2019

Compliance Challenges in the Face of Human Self-Interest, Part 1

I have always been a “big picture” thinker, compulsively envisioning how something fits into patterns and systems. Therefore, when I started to work in compliance, one of the biggest questions I asked was how do compliance and ethics programs fit in the big picture? One of the largest questions I’ve brooded on is why, on the most basic level, do we need compliance and ethics programs?

The historical answer is that in the past, organizations were irresponsible and now we all have to accept a regulatory burden. The financial answer is that compliance programs exist to mitigate risk, ensuring revenue can be used for the organization rather than on fines and litigation. These answers are all correct, but still “small picture” in my view. Only after brooding on the question longer did I come to wonder if the problem stems from an intrinsic quality in all human beings.  

Are human beings naturally bad? Or does our environment, from infancy to adulthood, turn us into bad people?  Do we need laws, police, regulatory agencies, and even compliance programs to keep us civilized and held in check? 

Perhaps “bad” is too subjective a word for this discussion, so I will define bad as “excessive self-interest” instead.  This sort of self-interest is often accompanied by a lack of empathy, or a complete disregard for the rules that apply to others.

Consider retaliation against a whistleblower, off-label marketing of pharmaceuticals, and a physician referring patients to a medical supply company he or she owns. In each instance of non-compliant and illegal behavior, is it what might be deemed excessive self-interest, which motivated them?

  • Retaliation is one of the ultimate expressions of self-interest because it is caused by one who feels their power and authority is vulnerable; therefore, he or she cannot tolerate them being challenged. 
  • Off-label marketing of pharmaceuticals is a willingness to lie for the sake of making a sale with no regard for the impact of a particular drug on users who may be harmed by taking it (i.e., that use has not been reviewed/approved by the FDA, the case of US drugs).  Clearly this is a situation of excessive self-interest in which the offender has no empathy for negative consequences to uninformed consumers.
  • A physician using his or her position as a means of referring patients to his or her medical supply business is an obvious act of financial self-interest with no regard for the obvious conflict of interest. Leveraging the lack of transparency in many healthcare markets and the implicit trust in the patient-physician relationship, the physician may unduly burden the patient with high costs or inferior products.

In these instances, was the self-interest, which caused these major compliance violations the product of human nature? Or is it simply the case of an opportunistic employee believing he or she will not be discovered?  

Evolutionary biologists tell us that self-interest is a necessary component in human beings for survival and this does make logical sense. As a species, we would have gone extinct long ago if we cared nothing for ourselves. Self-interest is an important facet in motivation and ambition, but in excess self-interest can push one to deceive and manipulate others for personal gain. Simply consider the billions of dollars paid in fines, litigation, and reputational damage control because of the unchecked selfishness of a few people with at least partially unchecked power. 

A well-known example of this would be the damage to the reputation of the entire pharmaceutical industry when in 2014, former Turing Pharmaceuticals CEO, Martin Shkreli, increased the price of Daraprim from $13.50 to $750 per pill. In 2016, a group of students in Australia were able to synthesize 3.7 grams of the drug for only $20, and according to Turing’s price, 3.7 grams is worth about $35,000 to $100,000. While this sort of price change is not illegal, the public backlash caused Shkreli to be proclaimed “the most hated man in America.” Turing’s loss of goodwill caused them to change their name to Vyera, but they have continued to lose millions which has much to do with market forces as the taint of Shkreli’s flaunted self-interest. 

If self-interest is a part of being human, why is it that the majority of humans are willing to act with fairness and adhere to laws and regulations? Again, this can be explained by evolutionary biologists as predisposition in human beings to collaborate. Humans tend to do better in groups and although we must sacrifice some of our self-interest to form an orderly society, the benefits of collaboration outweigh the costs of being excluded. In this context, a willingness to collaborate is not just a person-to-person interaction, but also a person-to-society collaboration. For example, not violating traffic laws even when no police are around illustrates a person-to-society collaboration. We will follow those laws because everyone benefits mutually: we are safer and can get where we need to go more easily. 

Returning to my question of whether humans are naturally “bad” and whether this is the reason laws and policies have to be created and enforced, I must conclude: self-interest is an intrinsic part of what makes us human, but it does not by itself make us “bad.” The inherent self-interest does not have to be excessive! Our natural self-interest it is tempered by our natural tendency to collaborate, forming societies and groups, and adhering to codes of conduct and ethics we create for the sake of improving our collaboration. 

Modern civilization possesses myriad social and political mechanisms which decentivize excessive self-interest and incentivize cooperation. Those who allow self-interest to override their willingness to collaborate are reprimanded or expelled from the group, such as being terminated from a company or shut away in a prison.

Now that I have formulated this model of the self-interest/collaboration balance, my next goal will be to translate this abstract thinking into something of more practical use. In Compliance Challenges in the Face of Human Self-Interest, Part 2, I will discuss how a proactive compliance officer or HR generalist might use this model to locate weak points in their organization where compliance misconduct is most likely to occur. 

For those interested in the philosophy on this subject: 

  • The Leviathan (1651) by Thomas Hobbes, addresses questions about the illusion of good and bad in humans is simply a way of describing one’s “appetites” and “desires.” For Hobbes, we form laws and countries to escape what he calls, “continual fear and danger of violent death, and the life of man, solitary, poor, nasty, brutish, and short.
  • The Social Contract (1762) by Jean-Jacques Rousseau, addresses the nature of collaboration in creating an ordered society.

For other related media:

  • “Selfishness is nature,” a TEDx talk by Roy Erkens, a biologist from Maastricht University: https://www.youtube.com/watch?v=wFmYnXxqdj0. He specifically talks about the interaction of selfishness and cooperation.

Citations:

  • https://www.abc.net.au/news/2016-11-30/daraprim-nsw-students-create-drug-martin-shkreli-sold/8078892
  • https://www.telegraph.co.uk/news/2016/09/27/martin-shkreli—americans-most-hated-man—auctioning-off-chanc/
  • https://arstechnica.com/tech-policy/2018/07/shkrelis-former-company-is-now-losing-money-even-with-the-5000-price-hike/
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