The SEC’s case against former Countrywide executives demonstrates that effective GRC is all about people.

Not process. Not technology. People.

This reality is depressing and/or hopeful, depending on your view of human nature. (I’m firmly in the “and” camp.)

For those of you involved in your organization’s GRC efforts, the key question is: Do you behave more like (a) Eric Sieracki or (b) John McMurray?

Hopefully (for you, your family, your colleagues, and your shareholders), the answer is (b).

Sieracki is the former CFO at Countrywide (now integrated into Bank of America), who has been named along with former Countrywide CEO and cofounder Angelo Mozilo and former Countrywide president David Sambol in the SEC’s complaint against Countrywide. The complaint involves the questionably timed sales of stock as the mortgage giant’s share price plummeted.

Here’s how Sieracki portrayed Countrywide’s health to analysts and investors as the subprime crisis blossomed: “We’re a top-conditioned athlete, and I would suggest the future present value of this pain felt today is greater than stumbling along at the status quo. … This is the pain phase of a healthy cycle. … We need to see supply leave the system. We’ve been through these kinds of cycles before and we’ve seen another day.”

McMurray is Countrywide’s former chief risk officer, who warned Sieracki, Sambol, and Mozilo numerous times about the unhealthy risks in the company’s subprime lending practices. The SEC has e-mails, containing these warnings, that McMurray sent.

McMurray, based in large part on how he is portrayed in the SEC complaint, recently received whistleblower kudos from some business writers. McMurray left Countrywide in August 2007 and appears uninterested (at this point) in talking about his experience as Countrywide’s CRO.

However, if the portrayal of McMurray as an honest executive whose warnings went unheeded by higher-ups is indeed accurate, his experience is hardly unique. I’ve had too many off-the-record conversations with chief accounting officers, CROs, and CFOs who confided that they left previous companies when they discovered that the people or person above them – almost always the CEO – cared more about manipulating the numbers than telling the truth. They left because they had no option; there were no sweet book deals waiting for them, and it wasn’t easy uprooting their families.

In most cases, these individuals didn’t formally blow the whistle (at least not that we know of); they did their jobs and then left when they realized that they could not continue to do their jobs without violating their ethical code.

Usually, there’s no short-term prize for being a McMurray (if the portrayals of him are accurate). Yet, there are definitely short-term material riches associated with being a Sieracki (if the SEC’s complaint is proved out).

Over time, however, the costs (hefty fines, prison) and benefits (peace of mind, pride) connected to each GRC personality type become quite clear.

Hmmm … Imagine if more of us could make more decisions based on long-term costs and benefits … ###