Julie Kane, former Chief Executive Compliance Officer at Pacific Gas and Electric Company and current board member at Siga Technologies, joins Cindy Moehring for the latest installment of The Business Integrity School. The two thought leaders share ideas on what business ethics and compliance look like in 2021 and what to look for in the future.
Podcast:
Episode Transcript:
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0:00:15.2 Cindy Moehring: Hi, everybody, and welcome back for another episode of The BIS, The Business Integrity School. And this week, I am excited to tell you that I have with me my dear friend, Julie Kane. Hi, Julie.
0:00:26.7 Julie Kane: Hey, Cindy, how are you? I'm so excited to be here with you.
0:00:30.0 Cindy Moehring: Well, thank you, I am super excited to have you here. I wanna tell all of you about Julie's amazing background and what she's up to now, and then we will dive into this conversation about ethics and integrity, and where the future of that whole field is going. So Julie is a seasoned executive and counselor and public company director with decades of experience that span multiple industries, which is, I think, really cool. She spans industries including pharmaceuticals, chemicals, and agribusiness, cosmetics, retail and direct selling, and dual fuel utilities. Wow, Julie, that's just a lot! [chuckle] Excited to hear about similarities and differences, but let me tell you a little bit more about Julie. She served in a range of senior roles throughout her career and has, for many years, reported directly to CEOs, Boards of Directors, and she has a very broad experience in ethics and compliance, of course, which goes hand-in-hand with corporate social responsibility and sustainability, health safety and environment, emergency crisis and risk management investigations, regulatory negotiations, law and diversity inclusion. You name it, it all kinda goes together. Currently, Julie is a member of the Board of Directors of SIGA Technologies. Did I say that right?
0:01:50.1 Julie Kane: Yes, you've got it.
0:01:51.9 Cindy Moehring: A publicly-traded pharmaceutical company that's in the biodefense space, which is quite interesting. There, she's the chair of the nom and gov committee, and she's also a member of the compensation committee. Prior to that, Julie served as SVP, Chief Ethics and Compliance Officer and Deputy General Counsel at Pacific Gas and Electric Corporation for about the past five years, and she oversaw the company-wide compliance program, as well as activities that arose from PG&E's criminal convictions, term of probation, and court-appointed Federal monitorship. Some of you may be wondering a little bit about that, think wildfires in California, but we'll get into that a bit more in the podcast. Julie also has experience, prior to that, working in other companies, including Avon and Novartis, and just a host of other experiences. Julie's always been very focused on giving back and so, in addition to her public company board service right now, she still serves on the board of a non-profit, which is where Julie and I first met for the Ethics Research Center in Washington, DC, and there, she's a member of the nom and gov committee.
0:02:57.0 Cindy Moehring: Julie holds an undergraduate degree in Political Science from the Williams College in Williamstown, Massachusetts, and a Law degree from the University of San Francisco School of Law. Wow! Wonderful background and experience, Julie. We are very fortunate to have you with us today, so thank you.
0:03:13.4 Julie Kane: Thank you.
0:03:15.0 Cindy Moehring: So let's talk about this just vast, wide experience you have in a number of different industries: Healthcare, consumer products, and most recently, oil and gas. And what I would like for you to do is, in your own words, share with the audience what you see as some of the main differences and similarities in the ethics and compliance programs in all of these different industries.
0:03:44.0 Julie Kane: Yeah, absolutely. I love that question because it really, it made me think a little bit when you told me you wanted to talk about this. Where's the common thread? And the reality is there is a thread, and that is that fundamentally, compliance and ethics in organizations, there are just certain things that organizations, companies have to do to get it right. It needs to be systematic. You need to really be sure it's being driven into the business. All the things that we think about when we think about ethics and compliance, in part, arising from DOJ guidance and Federal sentencing guidelines, right? Do you have a code of conduct or senior people leading the program? Are you training folks? All that stuff is common. And that list goes on. What is different is what risk drivers really cause a program to move in one direction or another. So if you're in a pharmaceutical company, there are certain risks and behavioral issues that may require more attention from an ethics and compliance standpoint.
0:04:51.0 Julie Kane: So for example, for many years in the 90s and the early 2000s, pharmaceutical companies had issues related to sales and marketing fraud, whether paying doctors kickbacks or promoting drugs for unapproved uses. And because of that, we had to build programs that were addressing those issues. Whereas, in a utility, gas and electric, in PG&E's case, other kinds of issues arise. And so for example, if you're running a nuclear power plant, the most significant thing you need to worry about, heaven forbid, is a core damaging event, which is commonly thought of as a meltdown. The compliance program has to be deeply focused on managing that risk. I think in part, policy helps manage this risk, right? So there are policy decisions that get made by governments or others, and then regulatory schemes or laws and regulations put into place to help manage these risks. So I think this gets to bigger questions about external forces and how we manage compliance and ethics in our organizations. But I, for one, am a fan of constructive regulatory schemes that help people manage compliance issues in companies. I think it can be constructive. I think it can't be the only answer, for sure, but I think it's an important piece, puzzle piece.
0:06:21.1 Cindy Moehring: Yeah, right, right. Right. What about when you think about the culture of integrity and the ethics side of it? Some people call it, I like the word "integrity" more because I think it speaks to higher values and is more inspiring. But was the integrity program across industries, were they focused on the same issues as well in terms of driving that intrinsic understanding of the values? Was that the same cross industries or different?
0:06:55.5 Julie Kane: Again, a little bit different, but only because these were very, very different businesses, but at the bottom, I think, let's call it "integrity" for purposes of this discussion. The importance of integrity in any successful organization is probably paramount in my mind. You can put systems into place, try to comply with regulatory schemes all day long, but if somehow, the foundational structure of integrity isn't in place, or you can call it the "umbrella", it doesn't really matter, to me, the whole thing cannot work. And so it's a little bit tried at this point, but this notion of tone at top and more is so critically important. In my view, senior management absolutely has to be talking about this stuff, but much more than talking about it, really demonstrating to employee populations that they're gonna live it in significant ways. And most frequently, that means helping sponsor the program, but also then, holding themselves and others accountable when there are lapses.
0:08:00.0 Cindy Moehring: Right, right, yeah, I think you're right. So let's talk about your most recent corporate experience at PG&E and COVID, which I'm sure affected PG&E just like it did many other companies. And you were a member of the C-suite trying to lead that company through that experience. Tell us a little bit about how PG&E was affected by COVID.
0:08:27.7 Julie Kane: Yeah, absolutely. So I am just, for full disclosure, I left PG&E at the end of last August, but I was there for them for a good healthy chunk of the onset of COVID.
0:08:36.6 Cindy Moehring: Yeah. Because unfortunately, it's been going on for a really long time now. [chuckle] It's not over. [chuckle]
0:08:39.8 Julie Kane: Oh, no. We're tired, right? [chuckle] But for us at the outset, it was a very interesting issue because like so many other businesses, we aren't a bunch of people sitting at desks or advising clients. The majority of the population is union-represented, and a large proportion of that is customer-facing. These are people who are digging trenches and fixing natural gas pipelines or securing them. They may be people climbing poles and trimming trees and making sure the wires are as they should be. And so that work couldn't stop. These were essential services.
0:09:21.6 Cindy Moehring: Right, exactly.
0:09:23.7 Julie Kane: And then there was some number of people who could, in fact, just sit at their, not desks, well, desks at home, dining room tables wherever they were siding, once we figured that out. And that was so I think one of the issues at the beginning was sort of, "Do we have some haves and have-nots? People who must still be out in the field dealing with these critical issues and other folks who," I don't wanna say sitting in the luxury of their homes, but it's a very different experience if you can sit at home. So that was one issue. And I think we managed it well, I think we talked about it. We continued to get done the work that had to be done in the field, and that's the most important thing 'cause it's for safety, among other things. Obviously, turning on the lights is important, but nothing's more important than safety and making sure the system is safe. So that work just had to be done.
0:10:12.4 Julie Kane: The other piece of it that I'll mention, which is completely separate, and I've talked to so many people who've had this experience, and that is that there's something about this COVID experience, when you get on your Zoom calls or Microsoft Team calls or whatever calls that are starting in the morning, and the calls are stacked up all day and don't stop. And then it's the end of the day, maybe you've had a lunch break, maybe you haven't, frankly, based on how things went. And then you get to start reading emails at the end of the day. Now, we all lived that for a while. But what I heard from a lot of people in the organization and in other organizations is that sometimes, the boundaries around that slipped away. There was no... The natural break that we had, whether getting on a bus or in a car to drive or get to the office, signaled the beginning of it. And then at the end of the day, getting in our car or getting on the bus or train to go home signaled the end. And that helped people sort of cabin their workday.
0:11:15.0 Cindy Moehring: Right.
0:11:17.3 Julie Kane: I think by virtue of the fact that people are working this way, the way you and I are speaking right now, it means that the days are sort of infinite and blend into one another and that, I think, has taken a toll on people. And you know, we've all heard and read a lot about it. But I think it's been very real. I think there's been one upside that I love about all of this, and that is that we suddenly have seen in bold relief that people's lives, business lives are also very complicated. And so there may be a kid in the background making noise, right? There may be a cat jumping onto the screen. We've all seen enough funny little videos of all of it. But I think what it made clear for all of us is that this is complicated, and it was complicated before COVID. You know, people are managing lots of things and it probably got more complicated 'cause of this very dramatic shift in how we work, but I'm wondering if it's gonna force everybody to think a little bit about, "You know, we have to do a better job of accommodating alternate schedules, making sure the people who have the burden of child care can address that." Which I think, in a way, ties to ESG, right?
0:12:32.1 Cindy Moehring: I do, too, yeah, yeah, I do, too. We'll talk a little bit more about that, but you're so right. I mean, when you invite people into your home, basically, and they see what's going on, it's you get a better sense of what everyone's trying to actually manage in their life, and I think it has brought this sense of humanness, even though we're not physically connected, humanness to the corporate world, the business side of it, that when you just see somebody in an office every day, you miss.
0:13:07.3 Julie Kane: Yeah, absolutely, absolutely.
0:13:08.0 Cindy Moehring: So yeah, I agree with you, I think that's probably right. So let's talk about another aspect of PG&E. It's been in the news a lot lately with respect to wildfires in California, and whether or not their lines caused some of the wildfires or not. So can you just help our audience understand really what were some of the issues that PG&E was dealing with that got it subject to the corporate monitorship, and what really does that all about?
0:13:41.3 Julie Kane: Yeah, so let me clarify, and I'm gonna keep this fairly high-level 'cause if you can appreciate, there's ongoing issues in the company.
0:13:44.3 Cindy Moehring: Yeah, absolutely.
0:13:48.3 Julie Kane: But the criminal conviction that gave rise to the monitorship actually rose out of issues related to a pipeline explosion in 2010. And after that conviction, part of the outcome was to have a monitor for five years, and we could probably do a whole other show on monitorships. [chuckle]
0:14:13.6 Cindy Moehring: Yes, we could, on monitorships. But just so the audience understands, what is a Federal monitor? What does that mean?
0:14:19.2 Julie Kane: Right, so a Federal Monitor may accompany either a plea or a sentence, and essentially, it is the court appointing someone to oversee aspects of the business typically related to the issues that gave rise to the conviction or guilty plea.
0:14:42.0 Cindy Moehring: Yeah, so it's not a company employee. It's somebody who is completely independent, sort of like the watchdog for either the regulatory agency like DOJ or SEC or the court.
0:14:54.2 Julie Kane: Yup, exactly.
0:14:55.0 Cindy Moehring: Yeah.
0:14:56.0 Julie Kane: And this person is a... One can think of it as the eyes and ears of the prosecutor and the court in your business. It is a third-party, it's an independent person. Frequently, these are former Federal prosecutors. Often, they are people who have knowledge of the business, but not always. Frequently, they'll hire experts. So if you have a lawyer who's your monitor, he or she may hire experts on the issues related to your business to help understand. You know, I think no business wants a monitorship, but I think our view was, "This exists, let's make the most of it, let's learn from these people. They were extremely competent. Let's help get better because they're here." And that's how we confronted it.
0:15:47.0 Cindy Moehring: Right. Yeah, yeah.
0:15:49.0 Julie Kane: And you know, it's ongoing, I'm gone, it's ongoing. But I think like so many other things that can go wrong in companies, you have to see the upside once it's time to remedy your cure and just make the most of it. And that's, to me, an integrity or ethical issue, too, yeah.
0:16:07.9 Cindy Moehring: I totally agree, it's the way you approach it. But with the right mindset and approaching it with an attitude of integrity and, "We wanna get better," they really can help make a company better. And it can become, handled right, it can be much more of a partnership than any sort of an adversarial relationship.
0:16:25.5 Julie Kane: No question.
0:16:25.8 Cindy Moehring: Yeah, you're right, that's a whole topic in and of itself. So let's go to those larger issues of ESG, which we talked just briefly about a few minutes ago and what you've seen kinda change over the years. So 25 years ago, 20, 25 years ago, even, you weren't really hearing businesses or business schools talk at all about ESG or the environment and social issues and governance issues, or even CSR, corporate social responsibility, which was the buzzword before it became kinda ESG. They're all talking about the same kinda things. And now, it's like that's where everybody is, and including the Business Roundtable, which has recently changed their statements on the purpose of a corporation from Milton Friedman's, it's the shareholder who reigns supreme to a more balanced view of corporations are here to serve all of the stakeholders.
0:17:21.9 Julie Kane: Absolutely.
0:17:22.0 Cindy Moehring: So as you think about that change that you've seen over time, what do you think really caused that change?
0:17:31.9 Julie Kane: I think increasingly, there's a recognition that this profit drive only is probably not making us the best companies we could possibly be. And that there is a need, and stakeholders are demanding it, for companies to think about other things. I do think we can't ignore probably the impact of social media and how quickly information spreads about organizations and what happens when things go wrong.
0:18:01.0 Cindy Moehring: Right, transparency. [chuckle] Yeah.
0:18:03.0 Julie Kane: Absolutely, absolutely. And I also, I think there's a bit of a generational shift. So I have young adult children. They have different expectations about their employers and future employers than I did. You know, this notion that they aren't gonna necessarily be fiercely loyal to an organization for an entire career, that they are expecting companies to do the right thing, they're expecting to... You know, this notion that, "Oh, that's just how it goes, so I have to work all night on a brief," or whatever the issue is. Maybe not, right? And maybe I have the freedom to pick up and go much more easily. And so I think it's a number of events, and then I do think there are a series of other issues, and I have to say, you know, your audience may feel like I'm overstating it. I think, for example, the impact of climate on our world is forcing businesses to think a little bit more broadly at first, fundamentally, about risk, right? So it's drought, but then it's water scarcity and extreme weather. I mean, look what happened in Houston last month or middle of this month, right?
0:19:18.9 Cindy Moehring: Yeah!
0:19:20.3 Julie Kane: Things that no one ever expected. And I think it's forcing organizations to say to themselves, "What is happening here? And maybe I can't just pay attention to the P&L anymore. Maybe I... "
0:19:34.2 Cindy Moehring: Yeah, yeah. So just to be clear, so we were talking about Houston, we're talking about the... We're in a period in time right now where about a month ago, we had this like deep freeze that went all the way down and the whole power grid went down in Texas and so, yeah.
0:19:47.0 Julie Kane: Yes, exactly. And I think, again, I don't know how long ago, five, 10 years ago, I don't know if people anticipated that. I'm not close to that situation at all. But now, there is a need to anticipate new and different things and it's sort of... And that also impacts P&L, for sure.
0:20:06.4 Cindy Moehring: Absolutely.
0:20:07.7 Julie Kane: But again, people died in Houston, some very sad wild stories. And organizations just, I think, have to look more broadly.
0:20:20.7 Cindy Moehring: So let's talk about your role as a board member and how that intersects with ESG. So how does a board get involved in helping a company manage these issues? What's really a board responsibility there, do you think, when it comes to ESG?
0:20:35.9 Julie Kane: Yeah, so this is very interesting because all of a sudden, boards and corporate leaders are talking about ESG in a way that they probably weren't even a year ago, right? And I think part of it is because we are hearing from the SEC and NASDAQ and ratings agencies that they care about these things, and they want the organizations to be thinking about them and talking about them. And it's not gonna be long before we're gonna see expanded discussions and annual reports. And so I think this is a case where it is, to an extent, being forced by external factors, but I view it as a positive.
0:21:24.8 Julie Kane: So I've been doing this work for a very long time at Novartis way back when, when I was leading health safety and environment. We also had what we then called corporate citizenship or corporate social responsibility. And this is an interesting story. I, we shifted our annual report at one point to include these ESG issues, we weren't calling it then. And we were very proud of ourselves. It wasn't my idea, by the way. But, "Let's be sure, when we talk about our financial results, we're also talking about these kinds of things." And we felt like we were pretty early to the table on that, and it was exciting. But when I would talk to the financial folks, the people who were meeting with investors and reporting on the results, what they would say is, "Investors aren't asking any questions about this." You know, every now and then, I'll get a straight question about something 'cause something went wrong, but they're not really inquiring when they inquire about what drugs are gonna be launched, or whatever else it is.
0:22:25.0 Cindy Moehring: Right, right, right.
0:22:26.9 Julie Kane: They weren't going after that. Now, because we're seeing the rating agencies starting to focus on it...
0:22:33.4 Cindy Moehring: A little bit more, yeah.
0:22:35.0 Julie Kane: It's in the conversation. And I do think that it's gonna be a significant driver and probably a very positive one.
0:22:42.1 Cindy Moehring: Yeah, 'cause they're part of it in the past where there were these... They were almost put off to the side, the socially-responsible investors, right? And that was one constituency.
0:22:50.0 Julie Kane: Yes, yes.
0:22:53.0 Cindy Moehring: And what I hear you saying is that's becoming more mainstream, it's not... Which kinda ties right back to integrity and how it should be at the center of a company's strategy, ties right into ESG. It's not like these things are siloed; they all fit together, right?
0:23:07.4 Julie Kane: Right, absolutely. And I, it really does fit together. So I heard, I was on a... I listening to an ESG panel a couple of weeks ago, and I heard one of these corporate social responsibility investment companies talking about how important it is and how it's finally coming to the fore now. But what they said is if you think about things like drought and water scarcity, that actually has a significant business impact. It may change where you can site your facilities in our future, right?
0:23:40.0 Cindy Moehring: Sure, yeah.
0:23:41.8 Julie Kane: If suddenly, some place where you used to be would get 12 inches of rain a year and now, it gets one inch of rain a year, maybe that's not a place we can be doing business.
0:23:50.1 Cindy Moehring: Right, right.
0:23:50.8 Julie Kane: And so there is a real direct business impact that people have to focus on.
0:23:55.6 Cindy Moehring: So we've talked about the shift from focusing on profits and ethics and compliance programs growing up over time and now, we're at the stage where everything's sort of working together and coming together and integrating. What do you think, Julie, if you had a crystal ball, which I know you don't, but pretend you do. [chuckle] What do you think is really going to drive the future of business ethics, business integrity over the next 20 to 25 years? We are where we are right now, but what's next? It's always a journey.
0:24:30.0 Julie Kane: Absolutely. So definitely don't have a crystal ball, but I do think the things we've been talking about are gonna be a significant force in this, which is that there... [chuckle] The cost of corporate crisis is just so high, and when I talk about the cost, I'm not talking just about dollars and cents. That's can be very significant, but management distraction and employee morale, and again, I think generationally, there's been a shift where you know, we've been saying this years. People wanna work in a place they feel good about. That's true, but I do think the folks who are coming into the workplace now really have an expectation that folks are gonna be doing the right thing. This, in a way, is where diversity and inclusion come into organizations, too, right?
0:25:24.0 Cindy Moehring: Right, right.
0:25:25.4 Julie Kane: I mean, the amount of time we're spending appropriately talking about racial injustice in our workplaces, I think things like that are gonna force shifts in our organizations. It's just, it feels like a new and different moment. And I think what it's gonna mean is we're gonna have to dig deep and sometimes, have some very uncomfortable conversations with leadership teams and boards about what it's gonna have to look like and what it will have to change, too, to be right, that we can no longer have a Board of Directors that is a bunch of 50-to-70-year-old white men. That just doesn't reflect our society or people's expectations of how organizations ought to look anymore. And then recognizing in this process that our businesses will probably improve because the extent to which we expand our filter and realize businesses can look really different and probably be more successful, I think the better off we're gonna be.
0:26:27.9 Cindy Moehring: Yeah. Kinda see it as, listening to you makes me think about moving from this moment where it is different, I think, and we're talking a lot about ESG to broad-scale operationalizing, if you will, of that concept, and then probably moving into a level of accountability more specifically for those issues once they're operationalized, you know?
0:26:51.3 Julie Kane: Absolutely.
0:26:53.3 Cindy Moehring: But let me ask you, so having talked about it, if you only have three words to describe what you think the future of business ethics and integrity should be, what do you think those three key words would are?
0:27:07.6 Julie Kane: So I'm gonna cheat a little on this one, which is ironic for an ethics conversation. [chuckle]
0:27:12.0 Cindy Moehring: I love it! [chuckle]
0:27:14.0 Julie Kane: The three words are really a phrase, and it is "nowhere to hide". I just think this notion that a corporation can keep itself buttoned up tight and endure the slings and arrows from wherever they may come is a thing of the past.
0:27:36.3 Cindy Moehring: Yeah.
0:27:38.0 Julie Kane: And so I think the sooner business leaders can take a deep breath, if they haven't already, and realize, "I'm gonna be transparent. I'm gonna talk openly, not just with leaders, but with our employee population about things that are going well and things that aren't going so well, including mistakes that we've made, and how we plan to correct them," and create an environment where they're really listening to the input from not just employees as stakeholders, but communities and governments, and again, you name it, investors, the better off the organizations are gonna be. But it's not an insignificant shift in a lot of organizations.
0:28:20.3 Cindy Moehring: Yes, I would agree with that. I like that, a phrase, "nowhere to hide", that's good. [chuckle] Well, Julie, this has been really enlightening. I've enjoyed this conversation immensely. And what I like to do is always end on a fun note. We are still in COVID, a lot of people have been doing more reading, watching and listening to different things. So what are some one or two, or if you have three, that'd be great, some fun books or movies or podcasts you may have listened to for fun, but that also had this ethical dilemma to it?
0:28:57.0 Julie Kane: Yeah, absolutely. So I love this question, first of all, 'cause it is fun, and like so many others, we have been really digging in, watching out a lot more TV probably than I've ever watched in my whole life.
0:29:06.8 Cindy Moehring: I know!
0:29:08.0 Julie Kane: And my husband and I just finished, earlier this week, The Morning Show with Jennifer Aniston and Reese Witherspoon.
0:29:13.6 Cindy Moehring: I love it! So good! So good.
0:29:15.9 Julie Kane: So good. And shined such an interesting light on the whole Me-Too thing in a complex organization, in this case, media. But it was riveting. I highly recommend it, not that I'm the publicist for Apple Plus or whatever, but it really was riveting, and I think they did a nice job. Obviously, highly dramatized, but in many respects, not so much, right?
0:29:38.4 Cindy Moehring: Yeah.
0:29:39.7 Julie Kane: And so I thought that was a great one, and I do recommend it. I also just finished reading a book that I absolutely loved, which has shown up on a lot of Best of the Year from 2020, I think, list, maybe 2019, and that is The Vanishing Half. I don't know if you know that book.
0:29:57.2 Cindy Moehring: No, I heard of that, no.
0:30:00.2 Julie Kane: But it is a fascinating book, fundamentally, about race. And it, I will not... There will be no need for a spoiler alert here, but it is about a town in Louisiana that is populated by light-skinned black people. And these twin, young twins take very different paths in life, and one of them ends up back in the town living as a black woman with her child, and the other takes a different route and decides she's gonna live her life as a white person, and can. So she's, it's the issue of passing. And it was riveting and interesting, and for me, extremely educational. This is an area, and I know you've done some work in your program on this, on race, in general, where I think so many of us just have so much to learn. So that book really, among many others, has, it was bringing me along. But I would never presume to argue that I have a deep understanding of these issues and how complex they are and their impact on our society and culture, but that's really a great one.
0:31:14.8 Cindy Moehring: Julie, thank you so much. It's been a real treat. It's...
0:31:16.1 Julie Kane: Absolutely, my pleasure. Really great to be here. Thank you for having me. What a great program, Cindy. Thank you.
0:31:23.2 Cindy Moehring: Thanks for joining. Bye-bye.
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