How to Keep Ethics Intact When Companies Merge

Different companies, different approaches, one cohesive corporate culture

Posted by Dawn Lomer in Ethics & Compliance on January 3rd, 2012

When the MGM Grand Inc and Mirage Resorts Inc merged in the mid-2000s, executives on both sides had some significant ethics and compliance challenges on their hands. The companies were from different markets, each with a history of doing things a certain way.

It’s tough enough to ensure a consistent corporate culture within one large company. Some organizations never get it right. But when two different companies with different cultures need to become cohesive, there’s a mammoth task ahead.

Robert Rudloff, vice president of internal audit for the MGM Mirage, talked to me about how the organization overcame significant obstacles to become the sort of company used as an example at the SCCE Compliance and Ethics Institute, where he was a featured speaker.

“We had challenges, and that was because we’re a company that came together as a merger of different companies, coming in with different corporate cultures,” he said. “So it was the melding of those cultures that put any challenges on us originally. Now we’re pretty well set, it’s just maintaining that in light of the financial issues that we’ve had, the competitive issues, trying to be profitable and trying to keep our guests happy, all those different things.”

Making the Transition

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When the MGM Grand began acquiring properties 12 years ago, there was bound to be some upheaval in corporate culture. Aside from the Mirage Resorts Group, the company also acquired other properties, including the other half of its New York property and a stake in Mandalay Bay.

“They all came from companies that had different types of leadership styles, different expectations of management behavior,” says Rudloff. “Even the top leadership in the company; one of them came from the gaming side of the business, the other came from the financial side of the business,” he says.

“So they had different attitudes about how to run and manage the business and that created conflicts in how we did business, how people got evaluated for performance, what their expectations were, what drove business decisions,” says Rudloff. “And all those fit into the different cultures of the business which also drives different types of ethical behavior.”

Becoming One

Getting everyone on the same page was something that had to happen, explains Rudloff, and the new company took steps to make sure it did.

“The former CEO retired and the current CEO stepped in and took over the company and at that time decided that we had to be one company,” he says. “The former CEO was doing it that way but the current CEO took more aggressive steps in bringing us all together, so that we saw each other as members of the same company as opposed to properties that had to compete against each other.”

Tone at the Top

Rudloff credits the CEO with setting an effective tone at the top, communicating a firm view of what was expected from the ethical environment and the compliance environment within the industries in which the new company operated.

“He also forced the companies together by bringing the companies under one chief operating officer for the daily operations, a single corporate function for so many different areas,” he says.

It may take time, but a strong tone at the top eventually makes it to the bottom. “My department, internal audit, runs the company’s ethics hotline. And we would see calls coming through the ethics hotline three, four and five years ago, that would talk about the ‘us versus them’ type of attitude. ‘Why do we have to act this way when our counterparts at the other company don’t have to act this way?’ And we now don’t see those calls coming through. So it’s filtered all the way down to the bottom of the company,” he says. “We’re operating in a consistent manner and we’re not having those ethical issues.”

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.