When it comes to limiting exposure from corporate fraud, we can learn from two philosophers, Socrates and Sun Tzu:
With Socrates, we’re taught the importance of introspection. When we reflect upon the connection between our past decisions and our “where we are today,” we see relationships. The decisions we made as children opened opportunities for us. Similarly, decisions we made in early adulthood influenced the careers that we built. As we look forward, we can see the road ahead. Theoretically, that exercise in introspection and contemplation should influence how we think and how we act. Just as the decisions we made yesterday influence where we are today, the decisions that we’re making today will influence what we become in the months, years, and decades ahead.
Sun Tzu, author of The Art of War taught that in addition to knowing ourself, we also must know our enemy. The more we know about how our enemy thinks, the better we can prepare. Rather than defining an “enemy” as a human being, we can use the concept of an “enemy” to serve as a framework; besides being a person, an enemy may include a way of thinking, or an action, or a state of affairs that we want to avoid. If we consider “obesity” as an “enemy” of our goal to fitness, we may want to avoid actions that lead to obesity.
Business leaders want to avoid litigation and government investigations–the enemy. Unless we’re lawyers or professionals that earn a living defending against litigation or government investigations, we want to minimize our exposure to activities that could lead to our being deposed, or standing as an “accused” inside of a courtroom. Litigation can bring excessive risks that threaten to undermine our businesses, our careers, and potentially our liberty.
For these reasons, we need to give a great deal of thought to our businesses, our careers, and how our decisions can put those businesses and careers on the pathway to success—or expose us to risks. We also need to think about how people that earn a living from either litigation or government investigations think. The more we know, the better we prepare ourselves to make good decisions, and the stronger we become at making decisions that can decimate all that we’ve worked to create.
Two political philosophers, John Locke and Thomas Hobbes, offer us more insight that we can use as we consider risk and mitigation. Thomas Hobbes, author of Leviathan, advised on how leaders should govern. At our core, Hobbes believed that as human beings we are basically beasts that fight for survival. To build a society, we need laws to keep people in order. Without strict laws, Hobbes believed that people would act in their own self-interest and to the detriment of the broader society. Enforcement of strict laws keeps people in order.
John Locke, on the other hand, believed that people are rational. We all behave in accordance with what we have learned. At conception, according to Locke, we begin with a blank slate. But every experience makes an impression upon us. Those impressions shape how we think and how we act.
As rational beings, Locke believed that just as we learned, we could also unlearn.
Unlike Hobbes, who believed that it was the threat of punishment that kept us in line, Locke held that our experiences determine who we are, and what we become. As a society, then, according to Locke, we should invest to help people learn how to behave in ways that advance our communities. Some may consider John Locke as the father of liberalism.
These philosophical understandings are all highly informative in assessing a company’s vulnerability to fraud and how to best protect against it.