Business

After Penn State: What Should Businesses Learn?

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The Penn State child sexual abuse scandal, investigation, and the subsequent trial and conviction of Jerry Sandusky have raised many questions about the role of ethics in corporate decision-making. Two years after the headlines first hit, academics and lay people alike are still trying to figure out what went wrong. In writing this blog post, I decided the best way to evaluate the situation as a cautionary tale would be to look at the decision-making dynamics of the situation. This required that I read the “Report of the Special Investigative Counsel Regarding the Actions  of the Penn State University Related to the Child Sexual Abuse Committed by Gerald A. Sandusky,” written by former FBI Director, Louis Freeh.

Main entrance of Old Main, at Penn State Unive...

Main entrance of Old Main, at Penn State University, University Park, Pennsylvania. (Photo credit: Wikipedia)

After carefully scrutinizing reams of information that included interviews, internal records, police records and court documents, the Freeh Report concluded that Penn State had experienced a systemic breakdown in communications, from the highest to the lowest levels of its operations. PSU failed to act comply with its own rules and regulations as a corporation, educational institution, and agent of the state. Failure to comply with the demands of the law about exploitation and rape of children also occurred. Culpability is rightfully attributed to all levels of PSU, from the Trustees of the University, to executive management, and lower level employees.

What Went Wrong

After reading the Freeh report, I observed that there was a common train of thought, shared behaviors and belief system that were unethical, illegal and contrary to PSU’s fiduciary and social responsibilities as a corporation. I also noticed that the most basic levels of business functioning were ignored by PSU Trustees and executive management. The shared belief system and assumptions allowed former defensive coördinator for the PSU football team, Jerry Sandusky, Penn State’s athletic director, Timothy Curley, senior vice president for finance and business, Gary Schultz, former president, Graham Spanier, and the now deceased, head football coach, Joe Paterno, to make decisions contrary to the laws of the University and the United States were rooted in the assumption that their personal interpretation of the role of PSU and its football team superseded written rules and regulations of the University and the laws of the land. The basic fault lines of the PSU operational system  reveal numerous red flags which every business should avoid. These red flags are:

Disregard for the Mission Statement

Mission statements exist for a reason: They help to remind us of what we are in the business of doing, and why. Absence of clarity about and failure to follow PSU’s Mission and Public Character statement allowed those acting on behalf of the University to lose sight of what the University is about. PSU’s mission statement says: “Penn State is a multicampus public research university that educates students from Pennsylvania, the nation and the world, and improves the well being and health of individuals and communities through integrated programs of teaching, research, and service.” (Emphasis, mine).

In addition, “The Pennsylvania State University Guide To NCAA Rules for Alumni, Faculty & Friends” says: “Consistent with the institutional mission of The Pennsylvania State University, Intercollegiate Athletics strives for excellence by offering all students model programs to develop meaningful standards of scholarship, athletic performance, leadership, community service, ethics and sportsmanship within the institution’s educational and social environments.” (Emphasis, mine).

By comparison, the mission statement for the Office of University Relations says: “The mission of the Office of University Relations is to protect and manage the University’s reputation, strengthen Penn State’s brand image, and increase brand awareness.” (Emphasis, mine).The mission of the University was essentially replaced by the mission statement of the Office of University Relations, creating a major shift in purpose.

Failure to Consult or Report to Human Resources and Risk Management Departments

PSU employees never alerted their Human Resources Department about the eye-witness reports of Sandusky’s engagement in criminal activity against children. The report states: “no  referral  of  the Sandusky incident was made  to  the  Penn  State  Office  of  Human  Resources (“OHR”). Schreffler  said  such  referrals  routinely  were  made  in  other cases. A senior  OHR  official  recalled  no  report  of  the  Sandusky incident in 1998, and the OHR files contained no such report. The official thought the Sandusky  case  was  so  “sensitive”  that  it  was  handled by  Schultz alone.” (Freeh, 2012, p. 49)

By sidestepping the function and input of Penn State’s Office of Human Resources and risk management, the institution had summarily reassigned the duties of the HR department and risk management to Schultz. In doing this, PSU redefined Schultz’s job responsibilities which engendered role confusion between the two departments. This move also ignored the obvious conflict of interest in having the senior vice president for finance and business in charge of risk management and human resources. Page 51 on the Freeh eport states: “A  risk  management review  might  have  resulted  in  the  University  providing  contractual notice to its insurers about the incident, imposition of a general ban on the presence of  children in the Lasch Building, or other limitations on Sandusky’s activities.”

Negation of PSU’s Fiduciary and Social Responsibilities

PSU’s mission statement asserts a commitment to the “wellbeing and health of individuals and communities.” PSU has a legal obligation to protect their students and minors on campus. The report shows repeatedly that although Sandusky had been investigated for child molestation, nothing was done to stop his access to PSU. The Freeh Report states clearly: “Nothing  in  the  record  indicates  that  Spanier, Schultz,  Paterno  or  Curley  spoke  directly  with  Sandusky  about  the allegation,  monitored his activities, contacted the Office of Human Resources for guidance, or took,  or documented, any personnel actions concerning this incident in any official University  file.  Spanier  told  the Special  Investigative  Counsel  that  no  effort  was  made  to  limit Sandusky’s  access  to  Penn  State.” Sandusky “continued to run camps at Penn State and have access to children sleeping in Penn State  dormitories.” (Freeh, 2012, p. 52)

Absence of Institutional and Departmental Oversight

The Board of Trustees failed to stay abreast of activities occurring on the campus, and PSU executive management did not alert them to the dangers that the institution was facing.

Absence of oversight and failure to use written protocols to encourage the reporting and punishment of aberrant behavior created an environment that fostered a willingness to break the law. The failure to take prompt action and report known child abuse is against the law.

Rogue Culture and Groupthink

In the eyes of the law, a corporation is a person. Like people, corporations or businesses have distinct personalities and cultures. The culture of a workplace is an amalgam of beliefs held and behaviors executed by executive management, departments, etc. Executive management determines corporate culture and concepts of privilege and permissions. Executive management sets the tone for tolerable behavior. Tolerated behaviors may never be overtly declared. Witnessed behaviors within the corporate family signal what is tolerated, and who has permission and privilege to act a certain way.

Ideally, checks and balances within the culture place limits on the range of privileges and permissions. Abuse of power can be prevented by checks and balances. Corporations have a fiduciary responsibility to obey the laws of the land and act in the best interest of its stakeholders. Whistleblower protection is a type of provision that can stop aberrant attitudes, deviant behaviors, and lawlessness in its early stages.

PSU failed because it ceased to “take care of business.” The school’s mission, fiduciary and social responsibilities, myopic role assignments and confusion, exclusion of risk management and human resources, created a toxic mixture that functionally decapitated the institution. There was no process in place that would allow employees to have an effective voice to report something as severely wrong as child rape. A rogue culture had been born and nurtured to the point where it had usurped the role of the Board of Trustees, HR and risk management. Corporate governance was replaced by groupthink, where the objectives of a few had become the foundation for all decision-making relating to the Sandusky investigation.

Precautions

In Communication Lessons Learned from the Penn State Scandal, author L. Dulye recommends that businesses create a culture of personal responsibility and establish rules and regulations that will engender openness of communication and a willingness to come forward (and be protected) when wrong doing is encountered. Departments and employees should be examined on a regular basis to see if they are functioning healthily. No one should be free of being checked to see if they are doing their job properly and well.

References

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