Part II: Award-Winning Author Benjamin van Rooij Offers a Practical Framework for How Organizations and Lawmakers Can Improve Human Conduct

On this episode of There Has to Be a Better Way?, the second in a two-part series, co-hosts Zach Coseglia and Hui Chen return to their conversation with author and researcher Benjamin van Rooij about the six questions in the book he co-authored with Adam Fine, The Behavioral Code, which can guide organizations and lawmakers in creating a better compliance culture. They also discuss how an organization’s toxic culture can be changed and interrogate the oft-cited argument that compliant companies cannot be innovative.

Transcript:

Zach Coseglia: Hi, everyone, and welcome back to the Better Way? podcast brought to you by R&G Insights Lab. This is a curiosity podcast, where we often ask: “There has to be a Better Way, right? There just has to be.” I’m Zach Coseglia, the co-founder of R&G Insights Lab, and I’m here, as always, with my co-host and senior advisor at the Lab, Hui Chen. Today, we are continuing our discussion with Benjamin van Rooij, a professor of law and society and the director of research at the school of law at the University of Amsterdam. We’re going to talk more about Benjamin’s book, The Behavioral Code, which was published in 2021. Let’s jump right back in.

We’ve talked a bit about some of the ways in which we can reject more reductionist approaches to measuring culture and doing a scan of an organization, developing better data to help us understand what the culture is, but I guess this may be a very simplistic question: Can we actually change the culture?

Benjamin van Rooij: It’s really hard. What we know in the literature is you need a major shock, so you need an unfreezing of what is—that’s one part. The other part is you may need to let a bunch of people go, but that’s a much harder thing. I’m not sure we understand how to go from toxic or negative (or whatever we want to call it) to positive, because one of the hardest things about a negative culture is that people don’t believe leaders, they have little trust in rules, they have little trust in each other, and they don’t dare to speak out. Trying to change all of that is a lot, because even getting people to own up that something is amiss and feeling safe that this is now changing—those conversations only start, I think, if prosecutors start forcing them.

Hui Chen: Benjamin, let me catch you there about having prosecutors force corporate changes. These are the things that make me crazy—that I do not believe, as a former prosecutor, it’s the prosecutor’s job to tell companies how to run businesses. And it also drives me crazy when people who claim that they’re doing ethics, meaning that they’re supposed to be driven by a certain a set of values, are in fact driven by what law enforcement wants, which are two different things. To me, if you’re ethics-driven, it’s intrinsic, but if you’re always looking to the prosecutors, it’s externality that’s driving you. Are there studies that link the toxic culture to lack of productivity and efficiency, or other outcomes that corporations and shareholders care about?

Benjamin van Rooij: Here’s the problem: the three cases we discussed in the book (and I won’t go into names), they’ve all been major cases, major liability, major fines, major deferred prosecution agreements. I think some people went to jail. If you look at the aftermath of these three cases—one was a bank, one was an automobile company, and the other was an oil company—they all were fine, and some came out ahead. The reason I talk about prosecutors is that I could see that if they put a little bit of pressure towards really addressing issues that are deeper in organizations, that may be an extra start of this intrinsic change. But it will never be a real intrinsic—so you’re right in that—and the best companies and organizations would do so regardless of the liability aspect. One of the things that has influenced me is that my dad was the second lawyer in a large international oil company. He used to do trainings with the board on long-term view, which he did in the 1990s, and he did that from a compliance perspective, which I thought was pretty smart already at the time. So, I do think once you bring in this longer-term view, a lot of issues with ethics and compliance that are externalities become more easily seen as part of benefits and costs—not all of them, but more easily. The shorter time frame you have, the more external they are. So, I think making it intrinsic starts with that conversation. Unfortunately, I don’t think there’s an easy win-win where having a more compliant organization automatically means that we have evidence that it will become a more profitable organization. To have a more ethical organization, you need to have realistic targets. Most successful organizations have unrealistic targets—that makes them successful.

Hui Chen: Absolutely. I would say this is one of many peoples’ argument that a compliant company is not necessarily an innovative company, because a lot of companies precisely have become successful because they pursue the impossible.

Benjamin van Rooij: Exactly. The conversation I would have with those companies is, “Great that you have ambitious targets, but do you realize the risk of having them? Because the second step is if you have unrealistic targets, do you have enough space for people lower in the organization to talk back about them?” So, if you have unrealistic targets, but people don’t feel safe to speak out when things go wrong, you have a recipe for disaster.

Hui Chen: On that first point, I’m really thinking about the first trait that you identified in terms of toxic culture, the “just get it done” culture. I recently heard a relatively small financial services firm’s CEO—and this was shocking to me because I’ve always been looking for business leaders who would say things like this, and this came to me completely out of the blue—somebody else was on a business discussion panel with him, and he apparently started his remarks by saying he was not there to talk about compliance as it was a business forum. The first thing he said was, “Would you drive a Ferrari if it had no brakes?” And he said, “To me, regulations and compliance allow me to take more risks, because if I know they exist, I know they would stop me when I have to be stopped.” Which I thought was fascinating—I was thrilled to hear a business leader talk about that. So, on the one hand, I’m looking at your list of the traits of the toxic organization—some of them, I think, can exist so long as we’re looking at them from this complexity view that they did, but alongside other things that may be able to contain them. But other elements that you talk about, I have to say, from a common-sense perspective, I’ve got to think they have to also produce better organizations. So, for example, the ability to speak up, because you want people to speak up not just when there’s misconduct. You want them to speak up when something is not working well with the business, right?

Benjamin van Rooij: 100%. I’ve done quite a lot of research about empowerment and legal empowerment. I’ve done a paper with Garry Gray from the University of Victoria where we looked at all kinds of situations where citizens, either as neighbors or as employees, played regulatory roles in oversight over companies. We looked at if you give people rights to speak out, but they are not empowered to speak out, that that doubly undermines their ability to speak out and makes them often co-liable for when things go wrong. And to really get people to be able to speak out often means something that most businesses don’t like—it means a form of employee empowerment that, at least what I’ve seen in the U.S., for instance, if you look at worker representation and other things, it’s just a big no-no. I think without that, so even if you could make the argument that it would make your organization better—we all know governments that don’t allow for anybody to speak against them, how bad their policies become—at some point, that can happen in organizations, as well.

Zach Coseglia: I challenge the idea that you can’t be both an innovative organization and a compliant one—I don’t think that those things are fundamentally at odds. I think it really underscores the complexity of these realities, which is that an organization can be many things, is multifaceted, and sometimes the things that define the organization can be seemingly at odds. There’s a lot of talk about what it means to be an innovative culture, and there’s some really great thinking out there around how innovative cultures have a tolerance for failure, but they also have an intolerance for incompetence. It’s okay to be willing to fail, but it’s not okay to be incompetent—and those two things might seem like they’re at odds, but they’re not. I think it’s the same when it comes to compliance. You can be, as you said, ambitious—you can shoot for the moon, and at the same time, choose integrity, and there’s tension.

All right, the last thing I want us to talk about is the Behavioral Code itself. The book is incredible, but it ends with this very practical framework that folks can take away, and so, I’d like to talk about that, if we can just walk through the six steps of The Behavior Code. Step one is to ask: What variation is there in the unwanted behavior? Tell us a little bit more about what a practitioner can do to start this analysis.

Benjamin van Rooij: The simplest analogy would be, let’s say you are a practitioner and you’re supposed to produce murder (this is not something that most people in corporate practice do). Then, you have to realize there’s such a massive difference between a passion killing and a hired hit man. This is the analogy that any negative conduct that has maybe one legal category may have very large differences, and you first need to group them. For instance, what I mentioned earlier about bribery, they made really big differences in the type and reasons bribery occurred, and you want to group them differently. So, step one is just understanding what your problem is. And as I mentioned earlier, there may be a step zero—just first of all defining what are the problems that you’re going to focus on, because you can’t focus on all the problems.

Zach Coseglia: Once we’ve done that, step two is: How does the behavior work?

Benjamin van Rooij: That’s a really important step because it is about understanding: What are the necessary elements for the bad behavior? Once you understand the “how” of that behavior, you can develop a really different type of intervention, one that doesn’t try to influence the motivation, but that tries to reduce the opportunity for something. We have many examples in the book, ranging from how in England they reduced stabbings using beer glasses once they found out people actually stabbed each other because they could break a glass and stab each other, so they changed the glasses to become unbreakable—to how money laundering or use of cash funds to pay for criminal activity has been reduced by getting rid of big denomination bills. There’s so many of these simple interventions that start by understanding: What is the full chain that made the behavior possible? And then, which part of this chain can we take out at the lowest cost to make the behavior more difficult or even impossible? That’s where we say we should start, because it’s the most effective way. Of course, the book does describe that in some instances where this may not be desirable, because people want to have freedom to make decisions.

Zach Coseglia: We start by defining the behavior and the variations. We then move on to understanding how it works in an effort to ultimately make it more difficult for that behavior to materialize. And then, step three is: What do people need in order to refrain from the behavior? What do people need?

Benjamin van Rooij: This all is what we call the “capacity approach.” Here, a basic thing that organizations should do is understand: Has the behavior been enshrined in rules? Do people need to understand these rules in order to refrain from the behavior? And do they actually understand these rules? Then, once you find out they may not understand these rules, are there ways in which we can still get the rules to be brought to them without them having to memorize or understand them, sometimes, for instance, in software packages? You may install the rules already so that they don’t need to know the rules themselves. There may be certain technical abilities people need to follow the rule—you need to understand: Do people have them? So, this is typically the types of things where you say, “How can they support people?” Sometimes it may be through training. Sometimes it may be more through factual things, to getting people the necessary funds or other things that they need. Here, you may also find some of these rules may not be practicable at all, and you may find, “I cannot make it impossible for people to do the bad behavior, but I also cannot make it possible to refrain from it.” Then, you can at least see that you have a higher risk there. We have this step first, because it doesn’t make sense, for instance, to start threatening or punishing people who are unable to follow the rules anyway. You first need them to be able to follow them before you try and incentivize it.

Zach Coseglia: Absolutely. That then leads into step four, which is a question that I think many of us who have been practitioners often ask, which is: Do people think the rules, the rule makers, and the rule enforcers are legitimate?

Benjamin van Rooij: This comes out of this whole work we discuss about procedural justice. If people think the rules are not legitimate, they’re less likely to follow them. The intervention here is to really think about: Can we involve people more in the making and enforcing of rules? Are they treated with respect? Do they have input? Do they have accountability? And are the people who make and enforce the rules themselves acting in a way that’s neutral? So, these are the broader things. The reason we put this here in the middle is that this really shapes voluntary compliance, or it can undermine it. If you don’t have that basic trust in the rules, it’s going to be very hard to force people in it—and if you force people into compliance then, that doesn’t mean that they’re going to stick to it. So, it stays very extrinsic. This is where you can keep it intrinsic—this is just the sort of thing that you want to address and prevent as much as you can. The problem is, of course, for organizations, a lot of these rules come from outside, and the legitimacy of these rules is not something that the organization internally controls.

Zach Coseglia: This leads us to step five, which I think isn’t asked enough, but bringing us into the world of, really, the complexity of it all and the culture—step five is: What role do morals and social norms play?

Benjamin van Rooij: This is an important one. It shows you, on the one hand, what you’re stacked up against, and also, what you may have in your corner. To give a simple example, five cities in the Netherlands this past New Year’s had banned the personal use of fireworks, but people could still buy them everywhere. So, what happens? The social norm and the moral norm with a large amount of the population, including in these cities, was still, “Fireworks are fine.” So, everybody fired fireworks, which is a really negative thing, not just for compliance with those rules, but compliance with any governmental rules. Everybody can hear the violations in those cities—it’s one of those violations that’s so clear for everybody. You have the social norm that is stacked against it. You have a moral norm that’s stacked against it. If you then bring a rule into that environment, you have to first of all really wonder, “Should I bring that rule now and do it in a partial way where we’re not decreasing the opportunity?” Because very likely, you’re going to keep having violations. Second, if it’s stacked against you, you need a completely different type of communication about it. The Dutch news, the police, and everybody said, “Everybody was breaking the rules in those cities,” afterwards. By saying that, they’ve actually strengthened this negative norm. What they could’ve done, and we described this in the book, they could’ve focused on the few people in those cities who complied. They could’ve also said, “There’s a growing amount of people who are complying with the new rules and that were happy with it.” I’m not saying that will be a game changer, but at least it doesn’t make things worse—and we have a lot of examples in the chapter in the book about how to do this. The other way around this is if you have a situation where a lot of people are already following the rules, try not to undermine those people by bringing in extrinsic motivations. There’s quite some research that shows that you may be eroding the existing power that supports the rules. So, you need to know this context—moral and social context—because it may aid you, but it may also come against you, and the way you can harness it better is through having good forms of communication.

Zach Coseglia: This leads us to step six, which we’ve already talked quite a bit about—step six is: How do incentives and extrinsic motivations factor in?

Benjamin van Rooij: We’ve symbolically put this last, because most lawyers start here. First of all, it says these things do matter. It’s not that they don’t matter—they do matter—but you only get to them once you know all these other things, and then you really understand the real incentives. Then you understand how these incentives are linked to the opportunities, capacities people have, how they’re linked to the legitimacy, the social norms and the morals. So, that’s why we’ve put them last, but they’re not least.

Zach Coseglia: One of the things that I love about “the code” is it seems, to me, really difficult to answer these questions if you are a practitioner or a compliance officer without actually engaging with the people who are going to be subject to these rules, and I feel like that’s often a step in the process that’s missed. We’ve got well-meaning, really smart compliance officers and lawyers who sit in a room and come up with the rules and design the program, and you talk about this in the book: What is the value of actually reaching out and engaging with people or with employees more broadly?

Benjamin van Rooij: That’s exactly it. I’ve been in those rooms in my own organization, where I’m also a compliance officer—I’m in charge of the ethics of research. We talk so much about people, and this is one of the things I learned really early on in my research in China. When I moved from studying the enforcement officials, to going to the companies and then going to the farmers next to the companies and learning from the farmers next to companies what was happening in the companies, I changed my perception completely. I remember when I traveled back to Beijing to the national rule makers and the national-level enforcement officials, I found, this bottom-up view, they had none of that. That meant they also didn’t really know how their rules played out or didn’t play out. And I think that’s the core thing that I do in my work, and also in my current teaching—I tell these first-year law students, “You’ve learned a little bit about law now. When you study law, you get these blinders on, and that’s also the power. My job is for you to take them off a little bit and to see humans again.” Because everybody was born as a human, raised as a human. Everybody’s gone through behavioral modification. Everybody’s been socialized. We all understand this stuff, even if we don’t know the science. It’s just that once we get these legal glasses on, we filter all that out. So, what I’m really saying is that we need to combine the legal analysis—which is not going to go anywhere, we need it—with the human analysis. I think that’s the core of it.

Zach Coseglia: I think that’s such a great place for us to actually pause and to begin to wrap up, so that we can take our own glasses or goggles off and not just see you, Benjamin, as a lawyer and author and legal scholar, but to see you as a person. And so, at the end of each of our podcast episodes, we have a Proust questionnaire inspired by James Lipton and Inside the Actors Studio, Vanity Fair and a whole bunch of others. We have some questions for you, just to get to know you a little bit better. Hui, I’m going to hand it over to you to get us kicked off.

Hui Chen: I do want to say, Benjamin, we could be talking for the next 25 hours. You don’t know how many times, as we talked, the tangents that my mind certainly has gone, like, “Pick up this question here and we could go down this way.” We so appreciate your joining us, and I hope this is certainly the first of many of our collaborations and your appearances. So, let’s get to know you a little more. Here, the first question is to choose one of two, so you can answer one of two questions. The first of the two options is: If you could wake up tomorrow having gained any one quality or ability, what would it be? Or, you could answer: Is there a quality about yourself you’re currently working to improve? If so, what?

Benjamin van Rooij: My first gut reaction is to pick the first question, and to say I would love to wake up tomorrow and to be able to play jazz piano. I’ve been studying that, but it’s so very hard. But I guess the deeper answer would be patience, and if I could improve one thing in myself it’s just to be much more patient with myself and with others. I think a lot of good comes out of being patient.

Hui Chen: Patience certainly is one of those qualities that I wish I had, too.

Zach Coseglia: My answer to that question, Benjamin, is the ability to manipulate time, which then solves the patience problem.

Benjamin van Rooij: I kept my answer in the realm of reality, even though me being able to play jazz piano very well is like you wanting to be able to stretch time.

Hui Chen: My answer to that, Benjamin, was more like your jazz piano question—I wanted to be an opera singer.

Benjamin van Rooij: See? So, we could do jazz opera.

Hui Chen: There we go. All right, the next one is also to choose one of two. Who is your favorite mentor? Or, whom do you wish you could be mentored by?

Benjamin van Rooij: I would pick my favorite mentor, and I’d probably have to mention two. One is Professor Jerome Cohen at NYU—I think he’s turning 92 this year. Jerome is somebody who studied law, clerked for two Supreme Court justices in, I think, the late ‘50s – early ‘60s, and then took this really weird decision to become a specialist on Chinese law in the 1960s, where nobody was studying this. He has been a pillar in the field, but what really has been amazing about him is that he’s always been open and welcoming to young scholars. He’s meant the world to me. When I started out, I didn’t come from his group, but we ended up teaching together in 2011 when he was 80. It was just wonderful being together with someone who’s so knowledgeable, fun, and inspiring to so many people, both in Taiwan and the mainland. And the other is Professor Robert Kagan, who used to teach at UC Berkeley and Harvard. He is just one of the pillars in regulatory studies, somebody who really inspired me early on on my road towards understanding regulation and compliance. He, again, was somebody I emailed out of the blue when my Ph.D. was nearly finished, and he was just so welcoming. We met at Berkeley, and ever since, he’s been somebody who’s shaped my mind. For instance, he’s shown me the difference between lumpers and splitters. A lumper is somebody who takes a complex problem and throws it on top of another and finds the answer is two, and the splitter—I’m clearly a splitter—takes something that looks simple, opens it up and finds that the answer is actually very complex. So, they’re both really good mentors.

Hui Chen: Thank you for sharing those—hearing that the reasons why you chose to name them here was also just very special to hear. What is the best job, paid or unpaid, that you have ever had?

Benjamin van Rooij: My current job. I just love my job. I love being able to teach in the field that I do, and train young researchers but also have all these interactions with people and practice. I enjoy now being back also in the Netherlands—Amsterdam is, of course, the nicest city to work in.

Hui Chen: What a blessing. Next question is: What is your favorite thing to do?

Benjamin van Rooij: There’s so many favorite things, but I would just say, and you’re going to find it really weird, I like running at the moment, but especially running out in nature. I go running a lot in the dunes, where you can go off the path and there’s just a lot of deer and other animals, and we go there really early. That’s just been one of the things I’ve really enjoyed since COVID.

Hui Chen: Nice. What is your favorite place?

Benjamin van Rooij: That’s a tough one—there’s so many favorite places. It may be because I haven’t been in China for a long time that I’m going to answer right now with Kunming, which is a city I’ve spent a lot of time in. I could also answer my current home, which I love, as well. I love Amsterdam and New York, but I’m just going to say Kunming for now, just because of the food, the people that I know there, and the people that I like and that I miss.

Hui Chen: Next question is: What makes you proud?

Benjamin van Rooij: I think my family makes me proud—I think that’s the thing, my kids and my wife. Going through this journey together where the kids are growing up and seeing that they’re landing, I think that’s the pride that is so different from work-related pride or other things.

Hui Chen: Now, the next question takes us from the profound to the more mundane. What email sign off do you use most frequently?

Benjamin van Rooij: I’m really boring with my email sign offs—I normally say, “Best regards.”

Hui Chen: What trend in your field is most overrated?

Benjamin van Rooij: I would have to say “nudge” if I’m honest, and I say that because the word itself has so many different meanings. I don’t think there is something that you can call “nudge.” So, if somebody says, “We’re going to use a nudge,” I’m immediately thinking: Is that a prime? Is that a social norm intervention? Is that situational? Is it a choice architecture intervention? Those are completely different things. And I think it’s also in line with what I said earlier that the simplistic thinking that comes out of the promise of an idea like “nudge,” a lot of the things that are in that book are really inspirational and really great, but I don’t know how to apply them to the problems that I’m focused on, like industrial pollution, major corruption, major misconduct, violence. I don’t know really how to use the really soft touch only and win-win, “If we do A, everything becomes better.” So, that’s why I would mention “nudge.”

Hui Chen: Completely agree. Last question: What word would you use to describe your day so far?

Benjamin van Rooij: Inspiring, mostly because of the podcast.

Hui Chen: That’s wonderful. We feel the same way.

Zach Coseglia: We do. Benjamin, thank you so much for joining us. Hopefully you will come back, because there is so much more to talk about. For those listening, again, the book is The Behavioral Code: The Hidden Ways the Law Makes Us Better or Worse, by Benjamin van Rooij and Adam Fine. You’ve given us so many Better Ways and so much to think about, Benjamin—thank you very much. Thank you all for tuning in to the Better Way? podcast and exploring all of these better ways with us. For more information about this or anything else that’s happening with R&G Insights Lab, please visit our website at www.ropesgray.com/rginsightslab. You can also subscribe to the series wherever you regularly listen to podcasts, including on Apple and Spotify. And, if you have thoughts about what we talked about today, the work the Lab does, or just have ideas for better ways we should explore, please don’t hesitate to reach out —we’d love to hear from you. Thanks again for listening.