Vice President and Chief Risk & Compliance Officer, FTI CONSULTING INC
Independent Ethics Officers | Matt Pachman
Matt Pachman, J.D., is the Chief Risk and Compliance Officer at FTI Consulting. Mr. Pachman is responsible for overseeing the ...
About Matthew Pachman
Matthew Pachman, Vice President and Chief Risk & Compliance Officer at FTI Consulting, discussed his career and views on ethics and compliance in a September 2024 interview with the University of Illinois Gies College of Business. Pachman described entering the field after the WorldCom scandal, where he was asked to start an ethics program at MCI as the company emerged from bankruptcy. He later held similar roles at Freddie Mac and Altegrity before joining FTI Consulting. Pachman characterized the role of a chief ethics officer as akin to a "burglar alarm" salesperson, working with management to identify and mitigate risks, while maintaining the ability to report issues to the board if necessary. In the interview, Pachman identified privacy issues as a major current risk, citing rapidly changing laws in Europe and the United States. He also discussed corporate social responsibility (CSR), stating that while it may not always fall under the ethics officer's purview, a strong CSR program can positively influence corporate culture. Pachman emphasized the importance of learning from the history of the ethics profession and cautioned against its "commoditization," noting that the role requires a shift from a lawyer's mindset to a programmatic, problem-solving approach.
Transcript (13 segments)
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Interviewer0:08
How did you get involved in ethics and compliance?
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Matthew Pachman0:11
My name is Matt Pachman. I am the Chief Risk and Compliance Officer at FTI Consulting. We are a global consulting firm. I started my career after graduating from the University of Virginia Law School in 1991 and went from there to a federal appellate clerkship and then on to work for a large international law firm, O'Melveny & Myers. I left O'Melveny to go in-house to practice law at a company called MCI, which is a telecommunications firm. MCI was later purchased by a company called WorldCom, and WorldCom was owned by a man named Bernie Ebbers, who later went to prison for ethical violations. It was at that point that the company came to me and asked me if I could start an ethics program at the company as it emerged and tried to reform itself. I was in that role at MCI for a couple of years and then transitioned on to another company that had had some issues, and that was Freddie Mac. I helped build Freddie Mac's ethics program and I spent about six or seven years there. Then I got a phone call about becoming the Chief Ethics and Compliance Officer at a pre-IPO, privately held company called Altegrity. I went and I worked with them for a couple of years setting up their program and ultimately transitioned to where I am now at FTI.
It was interesting moving from a law firm in-house to begin with. There's a certain culture shock that goes along with that because the politics are different, the way you are judged on the quality of your work is entirely different, how you respond to superiors is different, and that was an adjustment in and of itself. But when I was asked to be the Chief Ethics Officer, that was a real change because while ethics and compliance absolutely have a legal element, and I think a legal background can be extremely helpful, it is a different way of looking at the world. And to be a strong ethics and compliance officer, you need to be able to make that shift from thinking like a lawyer to thinking like someone who is responsible for a program, someone who is trying to achieve something from a programmatic perspective. And it is a big shift and I've seen a lot of people have trouble with it. And it's something, quite frankly, that you can't teach so much as you have to experience it over time and take counsel from people who have been through that process.
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Interviewer3:00
What were the challenges that came with that change?
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Matthew Pachman3:04
I think the biggest challenge in shifting from being a more traditional practicing lawyer to being a practicing ethics and compliance officer is how you view risk. That is, the typical lawyer is like the policeman on South Park who says, hey, nothing to see here, everybody go away, there's nothing here. Whereas the compliance officer and the ethics officer have to say, okay, let's find the problems, let's shine light on the problems, let's let everybody know what those problems are so that they don't do them again. It is a very different way of approaching the world and it's a hard shift to make. It's like jumping off a very tall diving board. And then once you do it, you can get more comfortable with it, but it's not the way you were trained as a lawyer.
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Interviewer3:56
How important is independence in the role of chief ethics and compliance officer?
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Matthew Pachman4:00
In some ways, I think people misunderstand what independence means. You absolutely need to be in a position to stand up and say, I see something that's wrong here that needs to be fixed. And if you have to, take that all the way up to the top of the organization. But that's not how I really view my role on a day-to-day basis. The way I tend to explain it is, I'm like the guy who sells you burglar alarm services for your house. I'm going to go into your house, I'm going to look around, I'm going to see all the places where things can go wrong. I'm going to look at the windows, I'm going to look at the doors, I'm going to look at fire risks, I'm going to look at all kinds of things and look at where things can go wrong. And then I'm going to tell you how you can minimize the risks of those things going wrong. And I'm going to show you how you can do it, and in many cases, I'm going to do it for you when it comes to drafting policies and other things. In other places, I'm going to talk to you about how you can make your house more safe. And the point of that analogy is, I'm working with you. I'm independent, but I'm not an outside regulator. I am not the vice principal. I'm succeeding if my entity is succeeding. I just believe the entity is going to succeed better if we operate in an ethical and compliant manner.
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Interviewer5:26
What challenges will ethics officers be dealing with in the future?
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Matthew Pachman5:29
Right now, as I sit here in 2020, I think many of us are consumed with privacy-type issues. The privacy laws are changing so dramatically in Europe and in the United States and elsewhere that the chances of someone violating something there and there being a significant fallout from that are tremendous. So that does seem to be the biggest risk right now. Having said that, again, sitting here in 2020, we just heard about the Houston Astros baseball scandal and the players who were cheating and calling out pitches. And that's just traditional bad ethical behavior. It's famous because of who did it, but it's traditional bad ethical behavior. So I cannot sit here and say we should only be looking forward to see what the next thing is because unfortunately, the old stuff is going to stay with us too. And that is the real challenge is that nothing ever seems to fall off the table. We may get a better hold on it. We develop better controls to keep things in line, but all the old problems tend to find a way to resurface and you can never, you know, you have to keep your head on a swivel all the time because you have to be looking forward and looking backwards.
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Interviewer6:51
What role do corporations play in social responsibility and is it something that should be influenced or managed by ethics and compliance officers?
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Matthew Pachman6:57
CSR or corporate social responsibility is an issue that raises its head a lot now. It's an incredibly important thing for corporations and other businesses. The question of whether it should apply to or be in the realm of the ethics and compliance officer is an interesting one. On the one hand, I might say no. It really is about people and it is closer to a human resources issue or an issue that's just dealt with by management generally. But a good CSR program can be really important in influencing culture overall. How do we, the employees of our enterprises, think of what the role of our enterprise is in the community? That makes a big deal for purposes of culture and that, of course, can affect ethics and compliance. So the concept of an ethics and compliance officer simply saying CSR isn't mine, I think is short-sighted. Whether CSR should report to the ethics and compliance officer, I think that's a more complex question.
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Interviewer8:03
What advice would you give to ethics officers early in their career?
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Matthew Pachman8:06
One of the important things about this profession are the people that developed it. I owe an incredible debt of gratitude to the people who started this profession back in, I'll call it the early 90s. They were the ones who taught me and my generation how to do this. And I think we've tried to pass that on. But I think it's harder for people to look backwards a little bit at the profession because it's become more commoditized. And I think it would behoove everybody to resist that. This is an area where some of our professional associations and others can help us. Understanding where we came from and hearing stories that people tell are really important because there is no internet article that can really convey to you all of the things you need to understand or that you're going to face in this role. It's a unique and challenging role and it's a really human role. And it's only other humans that can explain to you and help you work through it.