An advisor once told us about a charity golf tournament he organized. He wanted to put the name of his firm and the name of his broker-dealer on the golf balls he was planning to give each player. He approached his broker-dealer who dutifully ran it through their compliance department. The compliance department approved the tournament with one caveat; the golf balls needed to include the required disclaimer—all of the required disclaimer.

“It would have completely covered the ball and looked ridiculous,” the advisor recalled. “But they said if we hit it into the woods and someone found it, even if it was 10 years later, it would constitute an offer to sell.”

We wish it were the only time we heard of such a thing, but another advisor at a different broker-dealer had a similar story. His annual client appreciation dinner was to feature a minor celebrity who would give a speech and take questions afterwards. The advisor wanted his name and the name of his broker-dealer on the pens they handed out so people could write down their questions beforehand. The broker-dealer wanted a disclaimer on the pens, which once again would have covered them entirely, with little or no room for anything else.

Of course, both advisors opted against using their name or the name of the broker-dealer, and for good reason. Doing so would have needlessly raised questions that needn’t be raised. And that’s the point. Each bit of added paper makes the client wonder what they’re signing, why they’re signing it and what prompted regulators to require it in the first place. As much as the advisor might explain, it eventually becomes white noise, and clients’ eyes glaze over as they robotically sign and initial where instructed. It was a common complaint when The Patriot Act first passed. If every client transaction has to be accompanied by reassurances that the advisor won’t launder money to fund insurgent activities—well, the terrorists have won.

In other words, it gets clients wondering, and engenders less trust, not more; which is the exact opposite of what it was intended to do. It is said that the road to hell is paved with good intentions, which relates to “The Folly of Accountabalism,” one of the breakthrough ideas in 2007 that was featured in Harvard Business Review. This is a critically important concept.

Every ethical person wants to be held accountable for doing the right thing, but how do you successfully institutionalize something so opaque? It’s a question regulators, legislators and corporate America seems unable to answer. As a result, they go overboard, and the outcome is the hyper-regulated and litigated environment in which we now find ourselves. It gives rise to what marketing consultant David Weinberger coined as accountabalism, examples of which are the golf balls and client appreciation pens with which we opened.

Accountabalism manifests itself in four interrelated beliefs and practices. They are: 

1). Accountabalism assumes perfection—if anything goes wrong, it’s a sign that the system is broken. But as Weinberger rightly notes, “Social systems are incapable of anything close to perfection, so if something goes wrong in one, it need not mean the system is broken. If an employee cheats on expenses by filling in taxi receipts for himself, the organization doesn’t have to ‘fix’ the expense-reporting system by requiring that everyone travel with a notary public.

2). Accountabalism is blind to human nature. For example, “it assumes that if we know we’re being watched, we won’t do wrong—which seriously underestimates the twistiness of human minds and motivations. We are capable of astounding degrees of self-delusion regarding the likelihood of our being caught.”

3). Accountabalism bureaucratizes and atomizes responsibility. “While claiming to increase individual responsibility, it drives out human judgment. When a sign-off is required for every step in the work flow, those closest to a process lack the leeway to optimize or rectify it.”

4). Accountabalism tries to squeeze centuries of thought about how to entice people toward good behavior and dissuade them from bad into simple rules by which individuals can be measured and disciplined. It would react to a car crash by putting stop signs at every corner.

In other words, accountabalism claims to increase accountably while in actuality decreasing it. Any efficiencies sacrificed in the process are therefore all for naught. Common sense practices and documentation measures should be a core practice of any ethical business, advisors included. Just be sure it serves its purpose, and that accountability doesn’t become accountabalism.