The saying “Who will watch the watchman?” grew out of a time when castles posted a watchman in a high tower to give alert to approaching enemies.

If the sentry gave the alarm in time, there was a good chance the castle would repulse its would-be conquerors. But if the watchman didn’t, the outcome could be catastrophic.

In one of the most famous stories in world literature, Trojan sentries got drunk and fell asleep while celebrating Troy’s “victory” over the “departed” Greek Army. And they kept on sleeping even as the Greeks stormed the city and slaughtered almost all its inhabitants.

Something very similar happened at the Securities and Exchange Commission(SEC) in 2007-8.

“High-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse,” said California Congressman Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, in April, 2010.

A report written by SEC Inspector General David Kotz cited the following violations of SEC and government-wide ethics rules:

• Thirty-three employees and/or contractors used their computers while on government time to access pornography, sexually explicit and sexually suggestive images.
• More than half the accused workers earned $99,000 to $223,000 annually.
• A regional staff accountant tried to access pornographic websites nearly 1,800 times in a two-week period.
• A senior attorney at the SEC’s Washington headquarters spent up to eight hours a day looking at and downloading pornography.
• An accountant was blocked more than 16,000 times in a month from visiting sexually-explicit websites.

The cracks in the financial system emerged in mid-2007 and spread into full-blown panic by the fall of 2008.

Bureaucracies have always struggled to police the improper actions of their employees. Their options have generally consisted of rewards and punishments.

Rewards usually come in the form of increased salary and/or promotion. Punishments usually consist of reduction in rank and/or salary or dismissal.

For decades, the FBI was notorious for transferring agents who displeased its tyrannical director, J. Edgar Hoover, to Butte, Montana, the Bureau’s version of Siberia. The FBI also used surprise inspections to try to catch agents violating its vast array of rules–such as forbidding them to drink coffee at their desks or wear any color of shirt other than white.

A traditional problem for organizations is their inability to objectively investigate complaints directed at themselves. The FBI has tried to address this by having complaints made against a particular field office investigated by a different one. The hope is that this will ensure a measure of impartiality, since the investigating agents will presumably not know the agents whose behavior they are investigating.

According to Sociologist Theodore Caplow’s brilliant book, How to Run Any Organization there are twelve rules to follow for effective supervision:

1. Set unmistakable goals.

2. Supervise the work more than the worker: “The chef who sits at the kitchen door and tastes every dish as it passes…[will] find it easy to communicate with [his] workers.”

3. Distinguish between essential and non-essential rules: “With respect to those few norms that express the organization’s moral commitment and do call for perfect compliance, the supervisor’s best course is to treat every violation as harshly as his powers allow.”

4. Reward sparingly, punish even more sparingly.

5. Give credit where credit is due.

6. Listen to complaints sympathetically; never complain in return.

7. Defend the faith: “The supervisor must take the group and its work more seriously than anyone else and must know how to assume a ceremonial stance for great occasions.”

8. Develop an inner circle: “An inner circle of lieutenants provides additional eyes, ears and hands to do his supervising.”

9. Protect the status of subordinates.

10. Retain final control.

11. Innovate democratically.

12. Take infinite pains.

The need for supervising the professional behavior of employees poses genuine problems for the organizations trying to do so. Too little supervision results in widespread violations of the agency’s/company’s most important rules and even of the criminal law. But too much supervision creates hostility between employees and managers and destroys company morale.

Even law enforcement agents who spend their lives cultivating informants among criminals despise their members who inform on officers who violate the law.

Without doubt the most-hated part of any law enforcement agency is its Internal Affairs Department. “Finks, “rats,” “the shoofly” are among the insults hurled at those who are charged with policing their fellow officers.

In extreme cases, those who have dared to inform on the corrupt actions of fellow officers have been forced to retire from law enforcement and/or assume a new identity via the Federal Witness Security Program.

As our society becomes more centralized and the Federal Government assumes greater regulatory powers, the agencies charged with this will have to find ways to effectively police their employees without sapping their morale–and the efficiency that accompanies it.