Is your ethics program working? A business with strong ethical behavior enhances and preserves its reputation, inspires loyalty and advertises that it has its ethics message right. It also fosters an ethical culture within the organization.Ethical behavior, honesty and integrity are issues that senior executives routinely identify as top priorities on their companies' agendas. But the mere presence of codes of conduct, compliance training and publicized pub·li·cize
tr.v. pub·li·cized, pub·li·ciz·ing, pub·li·ciz·es
To give publicity to.
Adj. 1. publicized - made known; especially made widely known
publicised reporting systems does not ensure a company has eliminated an environment that allows or encourages unethical unethical
said of conduct not conforming with professional ethics. misconduct. This is particularly true when constant pressure to perform and meet targets for short-term objectives drive employee behavior.
Culture is the leading risk factor comprising integrity and compliance in companies today, says David Gebler, president of Working Values Ltd., a business ethics business ethics, the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company's obligation to be honest with its customers, to broader social and training agency in Sharon, Mass. Yet, he adds, "Companies do not fully understand how their culture creates risks and how to mitigate them to stay out of trouble."
Indeed, he says, "Unethical conduct Behavior that falls below or violates the professional standards in a particular field. In law, this can include Attorney Misconduct or ethics violations. The standards for conduct to be observed by attorneys can be found in the Code of Professional Responsibility; members of doesn't happen in a vacuum. Good people may crack when their breaking point is reached. Or they feel entitled en·ti·tle
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.
2. To furnish with a right or claim to something: to slip because standards are not applied consistently throughout the organization."
Gebler, a former corporate attorney and a fellow at the Center for Business Ethics at Bentley College Bentley College is located at 175 Forest Street in Waltham, Massachusetts, 10 miles west of Boston. Founded as a school of accounting and finance in Boston's Back Bay neighborhood, Bentley moved to Waltham in 1968 and today is ranked 31 on Business Week's top 100 undergrad , founded Working Values in 1993 (it's now a wholly-owned subsidiary of Smart-Pros, a professional education firm). One of his firm's missions is to assist companies in designing compliance programs that recognize the links between an organization's values and employee behaviors necessary to implement those values. Formal programs are guides to shape culture, not vice versa VICE VERSA. On the contrary; on opposite sides. , he says.
"Corporate culture has a great influence on outcomes," says Gebler. For example, he explains, if employees are not surprised when misconduct occurs, or there's a discrepancy between how employees view top executives' adherence to ethical behavior and how managers perceive themselves, then the company is not moving towards a positive outcome. "What is key for a successful ethics program is the reduction of observed misconduct in the workplace."
Ethics Scandals Fuel Training
Employees are weary of managers who measure success by tallying how many individuals certify they've read the ethics code and have completed mandatory training courses. Such a "one-and-done," checklist mentality for ethics training simply doesn't work, argues Rick Keller, an organizational psychologist and president of The Healthy Business Doctor, in Summerfield, Fla.
"Despite what many people believe, very few companies are doing enough education to foster and maintain an ethical culture Ethical Culture is a nontheistic religion established by Felix Adler in 1876. The Ethical Culture Movement is a non-sectarian, ethico-religious and educational movement. . Yet, education can be easy when effective leaders communicate a consistent ethical message," says Keller
The great majority of leading corporations take their ethical and legal responsibilities very seriously, as evidenced by a comprehensive study in 2006 of millions of employee compliance training records, conducted by Integrity Interactive Corp., a Waltham, Mass., provider of Web-based ethics training.
Depending on a company's size, it faces different compliance risks. The study revealed that in any given year, it is possible to identify which compliance risks are of greatest concern by reviewing the training courses employees are most frequently required to complete. Certain staple topics are applicable to the broadest cross-section of employees at all job levels, among those: mutual respect, financial integrity and proper use of computers.
Integrity Interactive's findings demonstrate the most popular compliance training topics last year corresponded closely to problems dominating business headlines. New top courses, appearing for the first time, were on subjects such as Sarbanes-Oxley internal controls, data safeguarding, privacy and human rights.
Ethics Officer Oversight Needed
Generally, good ethical decision-making requires the ability to explore all the aspects of a decision and then to weigh the options surrounding a course of action. Consider these tests once a decision is reached and implemented: If you had to explain your decision on television, would you be comfortable doing so? If you had to do the same thing over again, would you do anything differently?
This is the world of the chief ethics officer, who acts as the point person to steer all levels of employees toward integrating ethics into decision-making processes Presented below is a list of topics on decision-making and decision-making processes:
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1. To consume and incorporate nutrients into the body after digestion.
2. To transform food into living tissue by the process of anabolism. information quickly and maintain credibility by displaying objectivity and discretion.
"Culture is not a six-month rollout or the fad du jour du jour
1. Prepared for a given day: The soup du jour is cream of potato.
2. Most recent; current: the trend du jour. ," comments Keith Darcy, executive director of the Ethics and Compliance Officer Association (ECOA ECOA Equal Credit Opportunity Act (US)
ECOA E-Mail Change of Address
ECOA Enemy Courses of Action
ECOA Economic Competitive Opportunity Analysis ). The 1,400-member ECOA is an international, multiindustry association for ethics and compliance practitioners that was started 15 years ago. There's no place to hide today, says Darcy, warning, "The scandals haven't stopped, and companies that treat ethics officers as window-dressing are destined des·tine
tr.v. des·tined, des·tin·ing, des·tines
1. To determine beforehand; preordain: a foolish scheme destined to fail; a film destined to become a classic.
2. for unfortunate consequences."
Ideally, the chief ethics officer should report directly to the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. or the board's audit committee. What is typical, though, is to have the ethics officer report to the general counsel, although there is an emerging recognition that this is not the optimal reporting relationship. If the position is established in response to a regulatory problem, the ethics officer will first report to the general counsel, but that will change over time. What does not, and should not, happen is for the ethics officer to report to the CFO See Chief Financial Officer. .
"The ethics officer must be strategically relevant and independent in order to be effective," says Darcy. It can be wise to appoint someone to the role from within the company, who has varied line experience and the ability to foster strong relationships with other senior executives. A critical protection for the ethics officer, notes Darcy, is to insist that he or she cannot be terminated without a review by the audit committee.
Darcy held the first ethics officer position on Wall Street--a role he created when working for Prudential Securities. He's currently a faculty member in the executive education program at the Wharton School of the University of Pennsylvania The Wharton School is the business school of University of Pennsylvania in Philadelphia, Pennsylvania. It was established in 1881 through a donation of Joseph Wharton, making it the world’s oldest business school. .
So, what, from Darcy's perspective, is different in the way companies embrace ethics training and compliance now as opposed to 10 years ago? He acknowledges the tremendous impact on the ethics industry generated by the passage of Sarbanes-Oxley in 2002 and an amendment made to the Federal Sentencing Guidelines The Federal Sentencing Guidelines are rules that set out a uniform sentencing policy for convicted defendants in the United States federal court system. The Guidelines are the product of the United States Sentencing Commission and are part of an overall federal sentencing reform in 2004, requiring all organizations to not only have ethical standards, but a culture that promotes ethical conduct--language embraced by all the federal regulators.
Is There Too Much Emphasis?
It's apparent that over the past five years, businesses have become more proactive in seeking to protect themselves from future scandals. This has led some employees to believe that many companies are obsessed ob·sess
v. ob·sessed, ob·sess·ing, ob·sess·es
To preoccupy the mind of excessively.
v.intr. with ethics programs and compliance. Certainly the increased awareness of and need for ethical behavior, the establishment of hotlines to report misconduct and greater use of ethics officers and written codes of conduct are making a difference.
But besides the costs, there is another downside Downside
The dollar amount by which the market or a stock has the potential to fall.
You might hear someone say that the downside on stock XYZ is $10. What that means is that the stock could fall by this amount if things got bad. to implementing all these specific controls. Gebler finds some companies are exhausted from integrating all the requirements and are unable to follow through on measuring the effectiveness of their programs. "If companies are uncertain about their integrity goals and how to define success, they will ultimately fail in achieving changes in behavior," he opines Opines are low molecular weight compounds found in plant crown gall tumors produced by the parasitic bacterium Agrobacterium. Opine biosynthesis is catalyzed by specific enzymes encoded by genes contained in a small segment of DNA (known as the T-DNA, for 'transfer DNA') .
The American Management Association concluded in a study, The Ethical Enterprise: A Global Study of Business Ethics 2005, that any approach to improving business ethics must incorporate the ethical framework as a strategy and system. As one of the study's co-authors, Keller, who has been involved in ethics training for 10 years, also stresses accountability.
"Business leaders who support and model ethical behaviors and communicate values are critical to a company's ethics," notes Keller. "If a company's underlying values do not reward ethical behaviors, then an opportunity has been missed which sets the company up for future problems," he adds.
Conversely con·verse 1
intr.v. con·versed, con·vers·ing, con·vers·es
1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak.
2. , he says, employees should understand they will be accountable for their performance, and not just as it impacts their career advancement. Indeed, he says managers should understand they can be held responsible for their subordinates' actions. A way to drive home this message "is to let people know if their unethical behavior sabotages the business, they will be fired."
How frequently do employees cite "communication" as a significant source of trouble in the workplace? Sometimes a culture issue has a simple solution. Gebler says managers with poor communication skills become bad listeners who don't always respect and value employee opinions. Eventually, they may turn smart subordinates into bureaucrats without enthusiasm. Where good communication is lacking, management training that is geared to the ethical framework can sensitize sen·si·tize
To make hypersensitive or reactive to an antigen, such as pollen, especially by repeated exposure. individuals to recognize risk areas and learn how to make people comfortable in reporting problems.
Ultimate Good Business Strategy
It's clear that companies that emphasize ethics throughout the cultural framework aren't just "doing the right thing" but ultimately find they are protecting the company's reputation and brand.
When scandals erupt, the damage to reputation can create a ripple effect ripple effect Epidemiology See Signal event. , starting with an employee exodus, notes Keller. "The inability to attract and retain talented employees is very expensive, and can affect loyalty, quality control and deadlines for completing initiatives. Add to the mix customer dissatisfaction, impact on stock price and loss of market share, and you have all four wheels falling off," warns Keller.
"Reputational risk is much more serious than financial risk, and all boards of directors should know that," Darcy says. And Gebler adds that while boards are still coming to terms with their increased oversight responsibilities, this does not allow them to ignore ethical issues.
How does a company build its culture to show its actions speak louder than words? Ethical culture cannot be separate from the rest of the organization, and top management must recognize and insist that all stakeholders Stakeholders
All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. adopt the same vision. "Starting with the board of directors, everyone needs training to learn how to identify risks and develop strategies that promote ethical conduct and trust," says Gebler. "If employees believe reporting bad news equates to failure, that organization is building a toxic culture."
CYNTHIA WALLER VALLARIO, J.D., (email@example.com) is a freelance business writer based in Livingston, N.J., who specializes in corporate governance Corporate Governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. . She's a frequent contributor to Financial Executive.
RELATED ARTICLE: Select Ethics Resources
There are any number of resources available to help businesses navigate through governance and regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . A few are offered here:
* Financial Executives International (FEI FEI
Fédération Équestre Internationale. ) requires all of its members to sign a code of ethics Code of Ethics can refer to:
World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. requirements. It's available on the website at www.fei.org.
* OCEG OCEG Open Compliance and Ethics Group (Phoenix, Arizona) Foundation Red Book, published by the Open Compliance and Ethics Group. It's a best practices guide that integrates governance, compliance, ethics and risk management frameworks through all organizational levels. (The book can be downloaded at oceg.org.)
* The Institute of Business Ethics in London says a code of ethics should begin with a preface, signed by the CEO, identifying which values are important to top management in conducting the business. It should then cover such critical areas as:
** the purpose of the business and its values;
** customer relations guidelines;
** employee relations, including working conditions, training, recruitment, discrimination and use of company assets;
** the importance of protecting the shareholders' investment; and
** an outline for implementing the code.
RELATED ARTICLE: TAKE AWAYS
*** Senior executives routinely identify ethical behavior, honesty and integrity as top issues on their companies' agendas.
*** Employees grow tired of managers who measure success by tallying how many individuals certify they've read the ethics code and have completed mandatory training courses. A checklist mentality for ethics training doesn't work.
*** Both Sarbanes-Oxley and an amendment to Federal Sentencing Guidelines in 2004, requiring all organizations to not only have ethical standards but a culture that promotes ethical conduct, have had tremendous impact on corporate ethics.