- National Grid Energized By ‘Ethics Liaisons’. By Andrew Singer
Many corporations now have ethics “helplines,” a toll-free number that employees can call to report wrongdoing or simply ask a question—about the company’s ‘gifts’ policy, say. But some employees still find it daunting to pick up the telephone and call a stranger. Will their call be reported to executives within the company? Will they suffer repercussions? That’s why it’s helpful to have someone on your ‘team’ to go to with such issues—a colleague right on the factory floor, so to speak. [story length: about 1,800 words]
- Ryder Gets Resourceful With Ethics and Compliance Training. By Alexandra Theodore
Many companies today deliver ethics and compliance training to their employees online. They can learn about the company’s rules and policies while sitting at their office desks. This works well—up to a point. But what do you do at a company like Ryder System, Inc. (Miami), the transportation and logistics company—best known for its fleet of rental trucks—whose 25,000-plus work force includes many drivers and warehouse workers who do not have easy access to computers. How do you train them? [story length: about 1,200 words]
January/February 2011 (Vol. 25, No.4)
Susan Frank runs the global ethics and compliance office at AECOM (Los Angeles), the engineering and project development firm with more than 45,000 employees worldwide. She heads a full-time staff of six that includes two certified fraud examiners and an investigations attorney. If that seems heavy on the investigations side, especially for such a small office—it is. But Frank believes it is a “tremendous” advantage to have the ethics investigations function ‘in house,’ as it is at AECOM. [story length: about 1,800 words]
In late November 2011, the European Commission, the agency responsible for EU-wide enforcement of EU competition law, issued its first-ever guidance on compliance programs (“Compliance matters: What companies can do better to respect EU competition rules,” Special first edition, Nov. 2011, http://ec.europa.eu/competition/antitrust/compliance/compliance_matters_en.pdf). In the past the EU had appeared to ignore compliance programs, and was reported to have even sought evidence of internal compliance programs to use against companies (to show that violations were knowing). But through this brochure, it now officially encourages programs and offers suggestions on what they should contain. [story length: about 2,400 words]
You probably can’t find a country in the world where bribery is legal, says Brian Loughman. But anti-bribery laws mean nothing if they are not enforced. That’s why recent developments are encouraging. [story length: about 800 words]
What was one of the biggest corporate responsibility events of 2011? “Porter and Kramer’s piece in the January [2011] issue of the Harvard Business Review on ‘Creating Shared Value’ has probably done more to get corporate responsibility issues into the boardroom than anything else written this year,” writes the Sustainable Business Forum. [story length: about 400 words]
People are more likely to buy products from an organization with a good reputation than one that is financially successful, a recent study shows. More than half of the consumers surveyed admitted they are more confident buying products from a company with a ‘most admired’ standing than one with a positive financial forecast. [story length: about 500 words]
November/December 2011 (Vol. 25, No.3)
When Debra Kuper arrived at AGCO Corporation in early 2008 as its new vice president, general counsel, and corporate secretary, the company was in trouble. [story length: about 2,000 words]
Changing people’s perceptions can often be a ‘hard sell.’ So say compliance officers who have tried to get employees to embrace their company’s ethics and compliance programs. “If you approach it from a marketing standpoint, compliance is one of the biggest challenges because people often see it as a roadblock, an obstacle to what they want to get done,” Susan Romanus, chief ethics and compliance officer at pharmaceutical company Daiichi Sankyo USA (Parsippany, NJ), tells Ethikos.[story length: about 1,100 words]
When it comes to ethics and compliance, CA Technologies (Islandia, NY) prides itself on its strong in-house education program. Still, in the spring of 2009, something was found to be missing, according Joel Katz, chief ethics and compliance officer of the IT management and software company. [story length: about 1,300 words]
If you want to spread the ethics message within a large organization, there’s much to be said for live appearances. At Walgreens (Deerfield, IL), the giant drug store chain, Chief Compliance Officer Laura Merten and staff spend much time conducting “outreach” efforts, fanning out across the country to meet ‘live’ with employees and managers [story length: about 1100 words]
Out of 61 individuals who were the subject of governmentinitiated civil or criminal actions alleging Foreign Corrupt Practices Act (FCPA) violations in the past six years, the majority were president, CEO, or chief operating officer of their respective companies, according to a recent Chadbourne and Parke LLP Compliance Quarterly report.[story length: about 300 words]
When it comes to issues of global fraud, an organization can’t overlook internal risks. “We pay a lot of close attention to protecting the business and enterprise from fraud on the outside, but we let down our guard inside when, in fact, there are things that can be done on the inside,” David Holley, senior managing director at Kroll, tells Ethikos. [story length: about 1800 words]
How is the SEC’s whistleblower program faring? In its first seven weeks of operation—from August 12, 2011 through September 30, 2011—the Commission received 334 whistleblower tips. [story length: about 500 words]
On November 1, 1991, the US Sentencing Commission implemented the Federal Sentencing Guidelines for Organizations (FSGO), which created incentives for companies to self-police organizational wrongdoing. They also sparked an explosion in corporate ethics and compliance programs.[story length: about 500 words]
September/October 2011 (Vol. 25, No.2)
When International Paper Company (Memphis) revised its code of conduct last year, it spoke with the ethics directors of nearly a dozen organizations, both competitors and companies with “best in class” codes—companies like GE, Coca-Cola, Shell, Alcoa, and United Technologies. [story length: about 2,000 words]
Most large companies today have hotlines, but the vast majority of ethics and compliance issues are still reported to a supervisor or an HR officer or another associate within the business organization. There is seldom documentation for these informal reports, but organizations could profit greatly if they could capture the information that comes
in through non-hotline channels. Is there a pattern in complaints? Are similar problems arising at other facilities? Does the company need to review its controls?
It goes to a larger question: “How do you create a speak-up culture?” asks Luis Ramos, chief executive officer, The Network, Inc. (Norcross, GA). That is, how to create an environment where employees or suppliers speak out when they see something wrong.[story length: about 1,800 words]
Many U.S. companies use the Internet to research job candidates, but monitoring firms like Social Intelligence Corp. (Santa Barbara, CA) appear to be taking things to a “new level”—raising disturbing questions about privacy and fairness, according to Diane Swanson, professor of management at Kansas State University. Social Intelligence provides businesses with archived data from social media sites(e.g., Facebook, LinkedIn) for use in the prevention of online damage to their reputations. But such monitoring could create a climate of fear and distrust among employees, explains Swanson. [story length: about 1,300 words]
Although 90 percent of corporate executives say their companies have an anti-corruption policy in place, only 29 percent express confidence in that policy’s ability to prevent or detect corrupt activities, according to a recent survey conducted by Deloitte LLC. [story length: about 800 words]
Female employees often exhibit a stricter ethical standard than men. Indeed, in a survey of 791 British full-time employees, “For seven of 10 workplace behavior practices, women were more likely to consider them unacceptable than men.” This was one of the many observations recounted in the Institute of Business Ethics’ (IBE) September business ethics briefing, “Business Ethics and Board Diversity.”[story length: about 700 words]
Although 90 percent of corporate executives say their companies have an anti-corruption policy in place, only 29 percent express confidence in that policy’s ability to prevent or detect corrupt activities, according to a recent survey conducted by Deloitte LLC. [story length: about 500 words]
Employees in the United States, Europe, and Japan are in agreement: There are basic standards of conduct that companies should follow worldwide. But actually meeting those standards will require new approaches to managing business conduct, conclude three Harvard Business School professors in a September Harvard Business Review (HBR) article, “A Global Leader’s Guide to Managing Business Conduct.” [story length: about 500 words]
UPS recently became the first U.S. company to have its annual ‘sustainability’ report ‘assured’ (vetted) by a Big Four accounting firm (Deloitte). U.S. companies have trailed European and Asian firms in this area. Only one in eight corporate ESG (environmental, social, and corporate governance) reports are “assured” in the United States, while one in two reports are assured in Europe, noted Ernst Ligteringen, chief executive, Global Reporting Initiative (GRI). [story length: about 1,000 words]
Of the 7,000 publicly traded U.S. companies [listed on the NYSE or NASDAQ], only 29 have instituted a chief sustainability officer (CSO), according to a recent study conducted by the Weinreb Group. The position is relatively new—the first official CSO being DuPont’s Linda Fisher, who was appointed to the post in 2004. Among the 29 listed in the report are UPS’ Scott Wicker, AT&T’s Charlene Lake, Alcoa’s Kevin Anton, and General Mills’ Jerry Lynch. [story length: about 400 words]
July/August 2011 (Vol. 25, No.1)
Kimberly-Clark Corporation (Dallas) isn’t a household name, but the products that it manufactures are: They include Kleenex tissues, Scott towels, and Huggies diapers. With 57,000 employees worldwide and operations in 36 countries, Kimberly-Clark is a global company, and it shares many of the ethics and compliance preoccupations of other transnational concerns, including the Foreign Corrupt Practices Act (FCPA). [story length: about 2,000 words]
L’ORÉAL, the giant French cosmetics company, has been at the forefront of the European business ethics movement. A U.N. Global Compact signatory since 2003, the company was one of the earliest to deploy a social and environmental audit program through its supply chain. In 2009, it sponsored the initial class of the new master’s degree program in Law and Business Ethics at the University of Cergy-Pontoise, the first degree of its kind in Europe (see Ethikos, January/February 2009). Recently Ethikos spoke with the company’s group director of ethics, Emmanuel Lulin, a familiar presence in the global business ethics community. He is known to many U.S. practitioners as a director of the Ethics and Compliance Officer Association (ECOA).[story length: about 2,200 words]
S. Prestley Blake founded the Friendly’s restaurant chain in 1935 along with his brother, Curtis. He sold the business in 1979. About 10 years ago, however, Blake, well into his 80s, embarked on a crusade to oust Friendly’s top management, vying with then-chairman and CEO Donald Smith. The nearly eight-year legal battle ended in August 2007 when Friendly’s was sold to Sun Capital Partners, a privately held Florida firm. [story length: about 1,800 words]
Even in the computer age, case management for compliance officers isn’t an easy task. But thanks to software programs designed for the industry, the process is much more efficient.
“It started with companies sort of rolling out their own solutions,” says Jim Preysz, Vice President of Devesys Technologies. “There’d just be one IT guy, compiling spreadsheets in Excel, or Access, keeping track of this information, and it was very limiting.”[story length: about 800 words]
A recent global study conducted by KPMG has shed an interesting light on the profile of the average employee most likely to commit fraud. [story length: about 500 words]
When Alcoa, a leading producer of aluminum, acquired two metallurgical plants in Russia in 2005, visibility was counted as among the company’s key strengths. [story length: about 500 words]
It is the job of a strong Chief Ethics and Compliance Officer (CECO) not only to ensure that regulatory standards are met, but to make sure that an organization sticks to its core values—and fosters an “ethical culture,” says Patrick Gnazzo, former CECO at CA Technologies and earlier, at United Technologies. [story length: about 400 words]
While aggressive Foreign Corrupt Practices Act (FCPA) case action continues to be the trend among U.S. enforcement authorities in the first half of 2011, an increased interest in internal corruption within foreign countries may suggest an expansion of the FCPA’s purpose. [story length: about 400 words]
May/June 2011 (Vol. 24, No.6)
Evolving technology has improved management of the corporate ethics and compliance office. When Tom Schumacher first started working in the compliance area about 10 years ago, the ethics hotline was simply an answering machine in the internal audit office. Corporate hotlines are much more sophisticated now, and many are Web-based. Organizations can issue pin numbers to anonymous ‘reporters’ and follow up with them via email—surely a kind of progress. But the really important advancement these days is something different: It’s getting employees to “speak up” the moment they see something wrong—or think they do. [story length: about 1,800 words]
When an individual in Hyderabad, India, required a personal reference for a job application with Indian Airlines, it wasn’t as simple as contacting a previous employer. The prospective candidate paid a senior executive of engineering 20,000 rupees, or $452 (U.S.), for a recommendation.
He didn’t get the job.
“My application was never processed as the engineer needed 20,000 rupees more which I hesitated to give,” said the candidate. “As usual, I didn’t get any job as promised nor did I get my money back which I paid in advance.”
The incident occurred in February 2007. It passed unnoticed, along with countless other similar cases.
Three years later, it is now available for viewing by thousands of people a day. It was reported on ipaidabribe.com (http://ipaidabribe.com), a website created to spotlight instances of corruption in India as that nation weathers another year of high-profile corporate and political scandals.[story length: about 1,600 words]
Do you think you have in place a stable and reliable process for assessing, identifying, and reducing compliance risk, one that essentially operates on autopilot, allowing you to focus on other priorities? If so, think again. It is far from clear how the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, for example, will ultimately impact the financial sector. Also unclear is how the 2010 U.K. Bribery Act, with its international implications, will be implemented. These are just two examples of far-reaching legislation that may destabilize your company’s regulatory compliance risk process more than they stabilize it. [story length: about 1,400 words]
The whistleblower bounty provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act continue to reverberate through the corporate ethics and compliance community. Asked where the provisions rank among corporate ethics and compliance developments over the past two decades, Amy L. Goodman, a partner in Gibson, Dunn & Crutcher’s Washington, D.C., office, answers: “It’s a 10 out of 10” (10 is the most significant.) The provisions make the key ‘concerns’ list of most general counsels these days. Public companies fear that employees will go directly to the SEC with reports of wrongdoing rather than using internal reporting mechanisms like hotlines—given that whistleblowers can collect bounties of 10 percent to 30 percent of what the SEC collects from monetary sanctions. [story length: about 700 words]
After a comprehensive review of its uniform policy, British Airways announced in a press release that the airline would allow its employees to wear a lapel pin with a symbol of faith, i.e., a crucifix or a Star of David. This is just one instance of the increasingly controversial role that religion is playing in the workplace, according to the Institute of Business Ethics (IBE) in its new study, “Religious Practices in the Work Place,” released in March 2011. [story length: about 700 words]
BP held its annual meeting in London in April, almost a year after the company’s oil spill in the Gulf of Mexico. Social investor groups were on hand—many to vote against BP on a number of proxy issues, including accounts and reports, and the reelection of director Sir William Castell, chair of BP s Safety, Ethics and Environment Assurance Committee. The groups criticized BP for a lack of risk management disclosure since the spill, the worst in U.S. history. One of the dissident investors was Mark Regier, director of stewardship investing at MMA Praxis Mutual Funds. Ethikos spoke with Regier at that time. [story length: about 1,000 words]
“The financial industry has failed in its duty of care,” says Beckwith Miller, CEO of Ethics Metrics, LLC (Charlottesville, VA). Many financial institutions still do not disclose their true level of exposure to bad assets and the like. Are they really keeping $1 in reserve for every $1 in bad assets? (Like they’re supposed to do.) Or are they only reserving $1 of capital for every $5 of bad assets—or $10 or $15? It’s a manager’s job to push the edge of the envelope, to make that extra money. But whose job is it to see that they don’t cross an ethical line? It’s the job of auditors, and the audit committee of the board, answers Miller. “The audit committee is ground zero,” he tells Ethikos. “And many are not doing their job properly.” [story length: about 700 words]
Charles Prince, the deposed former head of Citigroup, said in 2007: “As long as the music is playing, you’ve got to get up and dance.” He was referring to why on the eve of the great financial crisis so few corporate leaders, who must have seen the warning signs, failed to speak out against business practices that would eventually lead to the great collapse. Individuals often react similarly when faced with issues of ethical practice in the workplace, according to Mary Gentile in her recent book, “Giving Voice to Values” (Yale University Press, 2010). “When we encounter values conflicts in the workplace, we often face barriers in the form of ‘reasons and rationalizations’ for pursuing a particular course of action that can confound our best attempts to fulfill our own sense of organizational and personal purpose,” she writes. [story length: about 800 words]
March/April 2011 (Vol. 24, No.5)
Pitney Bowes (Stamford, CT), the mail and document management company, draws about 30 percent of its revenues from outside the United States. Like many large companies (30,000-plus employees) with an overseas presence, its management is deeply concerned about anti-bribery issues, given the increasing number of prosecutions related to the Foreign Corrupt Practices Act (FCPA) and the recent implementation of the U.K.’s Anti-Bribery Act. When it comes to fashioning an ethics and compliance policy in this area, cultural differences loom large, and the process can be more art than science, observes Robbie Narcisse, vice president, Global Ethics & Business Practices, Pitney Bowes. [story length: about 1,500 words]
When Best Buy Company, Inc.’s social media policy was developed two and a half years ago, there was a great deal of debate as to whether or not the company even needed one. In the face of a rapidly expanding social media environment, one that had grown to include outlets like Facebook and Twitter, the general consensus was that yes, it was necessary. Best Buy’s public relations, marketing, and legal departments outlined a set of guidelines meant to identify the company’s primary concerns regarding social media. It was originally called ‘Blogging Guidelines’ but as time went on, it became clear that ‘Blogging’ was a limited terminology. It was renamed ‘Social Media Policy,’ but as it grew in scope, it expanded into Best Buy’s ‘Social Media Guidelines.’ It is one and a half pages, and subject to constant revisions as social media trends and outlets continue to evolve [story length: about 2,800 words]
Is the new whistleblower bounty program Draconian? Will employees be tempted by the vision of hefty financial rewards from the Securities and Exchange Commission (SEC) to circumvent internal reporting systems—thus leaving compliance officers unaware of problems and unable to fix them? The new bounty program, part of the Dodd-Frank financial reform act, has seized the attention of corporate compliance and ethics officers. But some—at least for now—are discounting its impact on their programs. “We have a new strong program already in place,” Arjun Rajaratnam, chief compliance officer at Smith & Nephew (Durham, NC), the medical device manufacturer, told us. “We’re not going to do anything different.” Companies with good in-house compliance programs systems need not be overly worried about the lure of big SEC payouts, agreed Allan Bachman, education manager at the Association of Certified Fraud Examiners (ACFE) in Houston, Texas. [story length: about 1,200 words]
The global economy has been weak in recent years, and most large companies have not seen any dramatic increase in their compliance budgets. This means ethics and compliance officers must marshal existing resources wherever possible, asserts David Karas, vice president, business and ethics conduct, Hitachi Data Systems (Santa Clara, CA). For instance, if ethics and compliance officers want to communicate on a regular basis with employees, they might write articles for the company’s weekly newsletter—on the subject of expense reports. This could require additional effort on the part of the ethics and compliance office, obviously, but it doesn’t require any great outlay of cash. [story length: about 1,200 words]
How does a large retail establishment raise awareness of ethics and compliance throughout the organization? You don’t just put out a memo from the CEO. There is no personal association attached to that, and the message can get diluted. When Thomas Matthews was chief ethics and compliance officer at Saks Fifth Avenue, he visited his company’s stores and made a point of gathering the Saks Fifth Avenue executives around a table and just talking for an hour about ethics and what it meant to the company. He also met with rank-and-file company employees. One goal was to help the department store executives with their decision-making. Along these lines, they made good use of an interactive training program. “It was tailored to their functionality,” explained Matthews, and “let them play out decisions in a safe environment.” [story length: about 1,200 words]
KPMG, the Big Four accounting firm, has released its 2010 Annual Ethics and Compliance report, part of the firm’s “commitment to transparency.” Published annually since 2007, the report shares in-house ethics and compliance statistics from the most recent fiscal year. [story length: about 900 words]
January/February 2011 (Vol. 24, No.4)
Teddy Roosevelt was president when “business ethics” first entered the public consciousness—during the Progressive Era. Interest grew in the 1920s leading up to the Great Crash, but attention dwindled during the Depression and for years after. “Business ethics” got a boost in the mid-1970s with the Lockheed bribery hearings. The trend steepened with implementation of the U.S. Sentencing Guidelines for Organizations in 1991. A peak was reached as the millennium turned, around 2002. [story length: about 1,500 words]
Once an innovation, the corporate code of conduct is now standard fare at most large public companies. That doesn’t mean the book is closed with regard to ethics codes, though. Much work still awaits in terms of content and presentation. It’s critical to make clear to employees your expectations with regard to ethics and compliance and to say all this in plain, simple language, observes Robert Herst, vice president & chief compliance officer, Kraft Foods, Inc. (Northfield, IL). In early 2009, Kraft Foods rewrote its code of conduct. It was later translated into 32 languages and distributed to its employees situated in 70 countries. [story length: about 2,300 words]
There are films, and then there are films. In the 1950s, artists like François Truffaut pioneered the auteur theory: that a film reflects the director’s personal, creative vision. That isn’t quite how things work at Pratt & Whitney’s (P&W) annual ethics film festival. No solitary artistic visions here—the winning film in 2010 was a team effort. That was one of the points of the enterprise. The business practices office at Pratt & Whitney (East Hartford, Conn.), one of the world’s Big Three airline engine manufacturers and a United Technologies Company, held its first ethics film festival in 2009 to promote ethics awareness and to build an ethical culture across the company with its more than 35,000 employees. [story length: about 1,700 words]
As the case builds for the senior-level “standalone” chief ethics and compliance officer (CECO), you can’t blame the CECO in the small- to medium-sized company for feeling like the last kid on the playground to be picked in kickball. Certainly the majority of large multinationals seem to have gotten the memo, and lately more of them are creating CECO roles with true positioning, empowerment, and direct access to the Board. But what about companies with fewer employees and limited resources, which typically pass out multiple hats to officers and senior managers? In organizations where the CECO is also the general counsel (GC) and corporate secretary, or a vice president for finance reporting to the CFO, does this mean that the role will be marginalized—destined for failure? [story length: about 1,700 words]
It has been widely reported that the Department of Justice (DOJ) has been ramping up enforcement of the Foreign Corrupt Practices Act (FCPA). Given the number of cases in the pipeline—there were 22 FCPA prosecutions in 2010 alone—government vigilance isn’t expected to flag anytime soon. As companies review their FCPA compliance protocols, one area worth particular attention is the hiring of middlemen or consultants in the developing world. This area has long been problematic. “Companies should develop guidelines and processes for hiring these third-party agents, and those processes should become part of their FCPA compliance training regimens,” says Jon Groetzinger, Jr., Visiting Professor of Law at Case Western Reserve University School of Law in Cleveland. [story length: about 2,000 words]
November/December 2010 (Vol. 24, No.3)
In few corporate areas does “setting an example” matter quite as much as it does in ethics. No single person’s example is more critical than the CEO’s. At Xerox Corporation (Norwalk, CT), the company expects its senior management to “live” its values, “and we expect our employees to witness that,” says Patricia M. Nazemetz, corporate vice president and the company’s chief ethics officer. [story length: about 1,600 words]
“Most of us who have been doing ethics programs for some time are looking for new ways to keep the message in front of people,” says Sherry B. Greer, director, Ethics & Integrity Programs, Olin Corporation. Olin’s online ethics newsletter appears to fit the bill: It is concise, informative, easily navigable, and—dare one say it—sometimes “fun.” (Olin Corporation, based in Clayton, Missouri, is a manufacturer of ammunition through Winchester Ammunition and chlorine and sodium hydroxide through Olin Chlor-Alkali Products.) Integrity Matters (go to http://www.olinintegrity.com) appeared for the first time in September 2007. It affirmed in its lead feature story: “This newsletter is dedicated to the proposition that operating with integrity not only matters … it is critical to our company’s continued success.” [story length: about 2,300 words]
“Ethics are essential for boards,” says Thomas Flannery. “Without boundaries, the best of companies can slip to the dark side.” Flannery leads the North American Board Services Practice of Boyden, an executive search firm with 70 offices in 40 countries. That firm recently published a white paper for corporate boards: “Why Ethics Are Not Optional.” Among other things, the paper argues that boards are responsible for setting the ethical tone in an organization: “Creating an ethical ‘tone at the top’ turns out to be one of the most important duties of directors.” [story length: about 1,700 words]
Could the timing be any worse? In a year in which BP claimed top-line ranking among the world’s most pilloried corporate entities, the company mulled plans to close its ombuds office. The giant UK-based oil company established its Office of the Ombudsman after a fatal explosion in 2005 at BP’s Texas City refinery that claimed 15 lives. The Washington, DC-based office was run by former federal judge Stanley Sporkin. It continued to take calls during the company’s disastrous April 2010 oil spill in the Gulf of Mexico. In October 2010, however, the company told the UK’s Guardian that that it “would not extend the office’s tenure beyond June next year.” This followed a similar report in June by CNN that “BP has been trying to shut down an internal safety watchdog agency it set up under congressional pressure four years ago, according to sources close to the office and a leading congressman.” [story length: about 1,400 words]
This periodical has been excerpting chapters from “501 Ideas from 30 Years of Practice,” by Ethikos co-editor Joseph E. Murphy and published by the Society of Corporate Compliance & Ethics (SCCE). [story length: about 900 words]
September/October 2010 (Vol. 24, No.2)
Details matter. That applies when drawing a contract, furnishing a house, or designing a health care plan. It’s also true when managing an ethics and compliance program. That insight hasn’t been lost on Cummins, Inc. (Columbus, IN), the storied manufacturer of diesel engines. About 10 years ago, the $11 billion (2009 sales) company stationed 10 “master investigators” around the world to manage investigations into alleged ethics violations involving Cummins’ employees. [story length: about 3,000 words]
Sandy Cutler, CEO of Eaton Corporation (Cleveland, OH), speaks often about “doing business right,” and that goes beyond the obvious things, like honoring customer commitments. It includes helping an employee give voice to his or her grievances. In 2002, Eaton, a diversifi ed industrial company, established an ombuds offi ce at Cutler’s urging. The vast majority of the cases that the offi ce handles are not monumental issues of corporate wrongdoing or fraud, but individual complaints, mostly matters related to human resources (HR).[story length: about 2,000 words]
For years, the U.S. Foreign Corrupt Practices Act (FCPA) was the gold standard when it came to anti-bribery compliance. Enacted in 1977 in the aftermath of the Lockheed bribery scandals, the FCPA made it a felony to bribe foreign offi cials to obtain business. For years, the United States stood alone with its hard line on overseas payoffs. But less and less that seems to be the case. First the OECD drafted its Anti-Bribery Convention, which has been adopted by 38 countries to date. And the recent UK Bribery Act that will take effect in the United Kingdom in April 2011 actually goes beyond the FCPA.[story length: about 1,500 words]
Wal-Mart Stores, Inc. (Bentonville, AR) is an enormous company with 2.2 million employees, 8,400 stores, and $405 billion in annual sales. The numbers are never small at this organization—even for an ‘integrity’ award. This year’s annual “Integrity in Action Award,” in fact, drew nominations from 7,600 Walmart “associates” (employees) around the world. About 60,000 Walmart employees voted to select the overall winner.[story length: about 1,000 words]
Branding the program. Develop a “branding” strategy for the program. This can be used on all program materials, to help convey a consistent, coordinated message. One branding symbol companies have used is a lighthouse. In this sense the compliance and ethics program is a guiding light.[story length: about 1,500 words]
July/August 2010 (Vol. 24, No.1)
When a report arrives via the corporate ethics line, a company must quickly decide: Does the matter require investigation? If the answer is yes, then it faces a crucial second question: Who in- or outside the company will conduct the investigation? [story length: about 3,000 words]
Having clear and unfettered access to a company’s board of directors would seem to be a big plus for any ethics and compliance (E&C) officer. If so, then Duke Energy’s E&C office would appear to be well positioned. That’s because Jeff Browning, the company’s chief E&C officer, also serves as the fi rm’s chief audit executive, with executive oversight for the Charlotte, NC-based firm’s internal audit function.[story length: about 2,500 words]
Not too long ago, KPMG, the big four accounting firm, published its third annual ethics and compliance report. Relatively few fi rms have been doing this—publishing annual corporate responsibility reports or ethics and compliance (E&C) reports—but for those that have, two challenges appear fairly regularly: 1) How much detail should one include? and 2) How does one keep the material fresh? The fi rst might be called the Goldilocks problem.[story length: about 3,000 words]
A recent study of workplace data collected by the Ethics Resource Center (Arlington, VA) indicates that employees tend to respond to an ethical culture with improved company loyalty and a willingness to “go the extra mile” for their employer.[story length: about 500 words]
Training is one of the most basic compliance and ethics tools, and is covered in USSGs (U.S. Sentencing Guidelines for Organizations) item 4. Here are ideas to make training work.[story length: about 1,500 words]
May/June 2010 (Vol. 23, No.6)
About a year and a half ago, Tyco International, Ltd. conducted a cultural diagnostic survey to assess what its employees were thinking about ethics and compliance. There was good news and bad news. At the top of the company—e.g., senior managers— there was strong support for ethics and compliance, recalls Matthew O. Tanzer, the company’s vice president and chief compliance counsel.[story length: about 2,500 words]
Soon after Nan Stout assumed her new position as Staples, Inc.’s vice president of business ethics in 2004, she attended a sales meeting of Staples managers from around the world. Staples CEO Ronald L. Sargent made a speech in which he asked, rhetorically: What would it take for the company to still be around 100 years from now? First, the company would have to be profitable. That goes without saying. Second, though, the company would have to “stand for something more,” in the CEO’s view. Staples had to do something more than simply make money if it was going to endure another 100 years. [story length: about 2,500 words]
U.S. companies have paid more attention in recent years to enforcing ethics and compliance in their supply chains. “More and more, that goes with being a big company,” observes David Reid, vice president, ethics director, Texas Instruments (Dallas). Given that Texas Instruments (TI) has 27,000 employees and as many as 5,000 contractors, the odds are good that someone, somewhere will eventually step out of line. Yet enforcing standards with suppliers is “tricky from a number of perspectives,” notes Reid in a recent interview.[story length: about 2,000 words]
It’s one thing to have an integrity code. It’s another thing to enforce it. That has been made abundantly clear once again in the recent Daimler AG bribery case. In March, the huge German concern, which makes Mercedes-Benz automobiles, agreed to pay $185 million in fines to the U.S. government to settle a multiyear corruption investigation. Two of its subsidiaries pleaded guilty to bribing foreign government officials, a violation of the U.S. Foreign Corrupt Practices Act (FPCA).[story length: about 1,500 words]
Training is one of the most basic compliance and ethics tools, and is covered in USSGs item 4. Here are ideas to make training work.[story length: about 2,000 words]
March/April 2010 (Vol. 23, No.5)
A convergence of ethics and compliance has occurred over the last decade. The two functions are increasingly managed from the same corporate office; they often have the same director or vice president in charge. Four years ago the Ethics Officer Association changed its name to the Ethics and Compliance Officer Association (ECOA). In this it was simply reflecting “the reality of our current world,” ECOA Executive Director Keith Darcy said at the time. Yet “it is not a convergence without controversy,” says Earnie Broughton, ethics director at USAA, the insurance company....[story length: about 2,000 words]
Something remarkable transpired in Paris on Dec. 9, 2009—a development that should be on the radar screen of all boards of directors of multinationals. The occasion was a high-level symposium marking the 10th anniversary of the Organization for Economic Cooperation and Development (OECD) Anti-bribery Convention’s taking effect. At this event, the quiet inclusion of three words—“ethics and compliance”—into newly issued anticorruption recommendations marked a dramatic international recognition of the critical need for proactive compliance and ethics programs for companies both small and large, around the world. [story length: about 1,500 words]
A merger between companies can be an anxious time. Who will stay? Who will leave? How will the cultures meld? Will treasured programs be jettisoned? But it can offer opportunities, too: A chance to start again with a clean slate. That’s how Garrett W. Reich sees it. On June 30, 2008, America’s second- (Miller) and third-largest (Coors) breweries combined forces to create a new company—a joint venture, technically, given that it operates in the United States only—MillerCoors, with headquarters in Chicago. By merging their U.S. shipping, transportation, and brewing resources, the joint venture’s owners, Great Britain’s SABMiller plc and Molson Coors Brewing Company (Montreal and Golden, CO), hoped to gain ground on Anheuser-Busch Companies, America’s undisputed beer leader. [story length: about 2,000 words]
The corporate ombuds office struggles against a perception. It is often viewed by senior management as a “non-revenue center,” and it is often depreciated for that reason. There is “constant pressure” on every non-revenue generating office or department (ethics and compliance officers are familiar with this) over time, particularly in an economic downturn, notes attorney Charles L. Howard. Indeed, the last few years have been “tough times” for corporate ombuds offices, says Howard, author of the recently published The Organizational Ombudsman: Origins, Roles, and Operations-A Legal Guide. [story length: about 2,000 words]
For a compliance and ethics program to work, it needs support all up and down the line, from the top of the corporate structure to the employees on the front line. Here are ideas and information to use for convincing the board, management and the employees to support the program. 124 Fines. Fines for violations have become astronomical. Just as one example, U.S. antitrust fines were recently increased from $10 million to $100 million. Fines in the hundreds of millions are now imposed for corporate crimes.[story length: about 2,000 words]
January/February 2010 (Vol. 23, No. 4)
At Fluor Corporation (Irving, Texas), the $23 billion engineering concern, business is often organized by projects—huge, billion-dollar affairs, like construction of a bridge, or an offshore oil platform, or a road, like the I-15 highway in Utah, where Fluor was recently contracted to expand a 23-mile corridor. This is reflected in Fluor’s compliance and ethics program, which is decentralized, fluid, and portable. “We rely on the individual,” says Wendy Hallgren, Vice President, Corporate Compliance, not just to know right from wrong—but to ask questions if something seems amiss. [story length: about 2,500 words]
The University of California (UC) system is huge and diverse. It encompasses 10 campuses, five medical centers and three U.S. Department of Energy (DOE) national laboratories (which it is involved in managing), including the famous Livermore and Los Alamos labs. All together, it has some 150,000 employees and 250,000 students. The ethics issues raised within the UC system reflect this diversity. There are medical issues, research issues, state and federal government funding issues. The Department of Energy labs require their own compliance programs.[story length: about 2,500 words]
It isn’t only large, publicly held companies that establish formal ethics and compliance programs. Small and mid-sized businesses have also been moving in this direction. TAMKO Building Products, a privately held, Joplin, Missouri-based manufacturer of roofing and decking materials, for one, has resolved to build a compliance and ethics program equal to any SEC-regulated concern, its chief compliance and ethics officer, Art Weiss, told us recently.[story length: about 2,000 words]
Proponents of strong compliance training programs received some backing recently from the Securities & Exchange Commission (SEC). In a somewhat obscure case involving American Commercial Lines Inc. (ACL), an Indiana-based marine transportation and manufacturing company, the agency elected not to bring an enforcement action against the company for a Regulation FD (Fair Disclosure) violation. Rather, it filed a civil action against an individual within the firm, Christopher A. Black, the company’s former chief financial officer.[story length: about 1,500 words]
Have the board adopt a resolution establishing and empowering the compliance and ethics program. Publish the board’s compliance resolution in the company’s annual report/proxy statement. (See Singer, “AEP’s Ethics Interviews Are ‘About the Passion of the People,’” ethikos 13 no. 6 (May/June 2000): 1, 3; Murphy, “Chapter 10: Protections for Compliance People,” in Murphy & Leet, Working for Integrity (Minneapolis: Society of Corporate Compliance and Ethics, 2006): 397-416.)[story length: about 2,000 words]
November/December 2009 (Vol. 23, No. 3)
Corporate citizenship reports make easy targets. Critics routinely dismiss them as little more than public relations fluff. Others attack their statistical claims. Where’s the validation? Has an accounting firm certified the accuracy of the numbers? General Electric Company (GE) has heard all those criticisms, and it has worked assiduously over the past decade to make its own citizenship report—now in its fifth edition—a serious working document. [story length: about 3,000 words]
There is compliance and then there is “demonstrable compliance.” Yes, companies must comply with rules and regulations. But they must also be seen to be complying, particularly in a highly regulated industry, like the United Kingdom’s (UK) telecom sector, notes Keith Read, Group Compliance Director, British Telecom (BT). [story length: about 1,500 words]
AOL LLC, the Internet company, runs a lean ethics office. It consists of three individuals, one of whom is Kimberly Strong, the New York-based company’s Vice President, Chief Ethics and Compliance Officer. With about 7,000 employees, many based outside the U.S., AOL, has been able to extend the reach of its ethics office through the establishment of a network of part-time advisors called SBC (standards of business conduct) advisors. [story length: about 1,500 words]
In the midst of a global economic meltdown, when “people are running around with their hair on fire, you can’t be reactive.” You must be proactive, says Marjorie Doyle, former chief compliance counsel at DuPont and now principal, Marjorie Doyle and Associates (Landenberg, PA). After all, you will be fighting for resources to sustain the ethics and compliance program. [story length: about 1,500 words]
For the compliance and ethics program to work, there must be a compliance and ethics officer, and the necessary compliance infrastructure to make the program successful.[story length: about 2,000 words]
September/October 2009 (Vol. 23, No. 2)
The Internet continues to change the world in ways that were completely unforeseen a generation ago—from the way people communicate to how they receive their news to where they purchase their books, clothes, and music. It is even changing the way employees report business misconduct. At the Coca-Cola Company (Atlanta), more ‘concerns’ about business conduct and ethics are now reported through the firm’s Internet portal than arrive via its ethics hotline (telephone).[story length: about 2,500 words]
In their quest to communicate the ethics and compliance message, a few companies have gone so far as to publicize their own employees’ missteps and transgressions. DuPont was a pioneer in this area, publishing one-page ethics ‘bulletins’ of compliance violations from the company’s own files (see “DuPont’s Daring Communications Formula,” Ethikos, January/February 2004). Others have followed, including Boeing with its “Ethics Report” that detailed code of conduct violations—and the corrective actions taken (see “Boeing Company’s Ethics Improvements Take Flight,” Ethikos, July/August 2006). Cisco, too, has recently embraced this concept (see “Cisco Transmits Ethics To A ‘Wired’ Work Force, Ethikos, November/December 2008). The number of companies that have gone this route likely remains small, however. In-house attorneys and sometimes human resources officers often advise against it, fearing defamation lawsuits or worse.[story length: about 2,000 words]
U.S. Foodservice, Inc. (Rosemont, IL) wants to be a trusted business partner. And if it takes something as far out as improvisational theatre (improv) to achieve that end, so be it. “We put food on trucks,” explains Ellen M. Hunt, the company’s Vice President, Ethics and Compliance. “We pick up food from suppliers and distributors and deliver it.” Her firm has 26,000 employees and 5,000 drivers. “What we do is not terribly unique,” continues Hunt. There isn’t that much to differentiate U.S. Foodservice from others in a strict business sense, which means that “we have to be people that the customer wants to do business with,” she says. “They have to trust us.” Gaining trust is “not about following rules,” says Hunt. “It’s about affecting behavior.” U.S. Foodservice (USF) has had an ethics office since 2004. It conducted its first ethics training in 2005. Because the company is so decentralized, with so many employees doing so many different things—drivers, salespeople, warehouse workers, procurement officers, support people—they’ve always had live-based ethics training.[story length: about 2,000 words]
How well is ethics integrated into your organization? How can an ethics program be assessed in a systemic way? In our previous article (Part I, see Ethikos, July/August 2009), we introduced a model and three of the six components of the audit: ethical climate, ethics policy, and sanctions and rewards, enabling one to conduct an audit of an organization’s ethics and compliance program and a continuum with which to evaluate the audit results.[story length: about 3,000 words]
Include compliance and ethics points in the company values statement, such as a commitment to integrity. This can also be incorporated into the company’s mission statement. (See Sigler & Murphy, Interactive Corporate Compliance: An Alternative to Regulatory Compulsion [Westport, CT: Quorum Books, 1988]: 82; Roach & Davis, “Establishing a Culture of Ethics and Integrity in Government,” ethikos 21 no. 2 [Sept./Oct. 2007]: 1, 3.)[story length: about 2,000 words]
July/August 2009 (Vol. 23, No. 1)
Your board and executive management are numbers oriented. Every day they review metrics to assess the organization’s performance. And they know what those metrics mean: higher is better when it comes to revenues, but not expenses. Lower is better when it comes to safety issues, while higher is better when it comes to customer satisfaction. Experienced ethics and compliance officers will tell you that the most robust source of numbers they have are the data points from their internal reporting systems. But are the numbers effectively measuring anything? And do your executives and board members understand what these numbers really mean?[story length: about 3,500 words]
For more than a decade, Novartis Corporation (New York), the U.S. pharmaceuticals holding company, has been conducting Ethics and Compliance Officer Network meetings. About 35-50 people participate, including the ethics officers at the corporation’s seven operating U.S. companies. Each meeting—two are held every year—has a theme. At one gathering, the theme was corporate corruption. Novartis brought in the former controller of WorldCom. (WorldCom, Inc., it may be remembered, perpetrated what was then the largest accounting fraud in U.S. history early in the decade. Now called MCI, it emerged from bankruptcy protection in April 2004 after being fined $750 million.) The controller provided an inside look at what happened at the company—how people in middle management acquiesced to fraud.[story length: about 2,500 words]
For more than a century, managers in some businesses created ethical and compliance safeguards to enhance employee decision making and behavior. In the past few decades, programs were developed or revised following passage of the U.S. Foreign Corrupt Practices Act (1977), implementation of the U.S. Federal Sentencing Guidelines for Organizations (1991), and the mandates included in the Sarbanes-Oxley Act of 2002. Given this repeated and increased attention to ethics and compliance safeguards, we offer here a model for auditing an organization’s ethics and compliance program. The model enables managers to evaluate an organization based on six components: ethical work climate; ethics policy; sanctions and rewards; employee ethics training; enforcement officer; and reporting mechanisms. Based on these evaluations, the organization can be located on the “organizational ethics continuum,” a model adaptable to almost any size and type of organization.Over two articles, we examine how this model can be used in the development and review of an ethics program, as well as strategic analysis for risk management and comprehensive corporate development.In the current article we focus on the model and the first three components. The second article covers the latter three components and the use and implications of the model.[story length: about 3,000 words]
This article, appearing in two parts, suggests a template for use in forecasting and pre-empting those opportunities for unethical, or at the very least, questionable behavior by management and others in times of crisis. In Part I (see the May/June issue of Ethikos), we discussed seven spontaneous early management reactions that crisis and ethics management strategists must plan against. We also presented a (fictitious) case study of one company’s failure to protect and enhance corporate trust in a crisis. When an outbreak of E. coli, a bacterial contaminant commonly found in meat products and undercooked food, was traced to BurgerMax, a fast food restaurant chain, that company’s reaction ranged from denial to ‘stall and delay’ to blaming others, including the victims. In Part II, we present a further analysis contrasting what BurgerMax actually did versus what was expected by the community, with a particular focus on what is ethically and morally acceptable.[story length: about 2,000 words]
May/June 2009 (Vol. 22, No.6)
McDonald’s Corporation received plaudits for its 2008 Worldwide Corporation Responsibility Report, published in late 2008. “McDonald’s unveiled a state of the art corporate responsibility report in 2008,” commented Ethisphere, which subsequently named Bob Langert, McDonald’s vice president for corporate social responsibility (CSR), one of its “100 Most Influential People in Business Ethics” The giant food-service retailer—it claims to feed more than 58 million people in 118 countries each day—had little time to celebrate its rave reviews, though. Shareholders soon demanded that McDonald’s include more information in the report—specifically, data on sustainable pesticides.[story length: about 2,000 words]
In the battle against government corruption, the Organization for Economic Cooperation and Development (OECD), an organization of the world’s leading economic powers, has been a prime mover. It was the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions that caused the major trading nations and a number of other countries to adopt laws against foreign bribery.As part of its campaign against corruption, the OECD periodically reviews member countries’ compliance with the treaty and their efforts to prevent bribery. In the past it has staged on-site reviews of members’ enforcement activities. Recently, it turned its attention to the private sector and ways that it might adopt measures to prevent bribery. In this context the OECD’s Working Group on Bribery in International Transactions (“Working Group”) staged a Seminar on Internal Company Controls and External Audit at the OECD Conference Center in Paris on March 16, 2009. Its purpose was to consider OECD recommendations to member countries on ways to enlist the private sector in the battle against corruption.[story length: about 2,500 words]
As deregulation lit up the energy industry in the late 1990s, companies expanded into new and sometimes perilous ventures. El Paso Corporation, the Houston-based oil and gas concern, was no exception. The company, the largest owner of natural gas pipelines in the United States, eventually found itself with operations in 22 different industries and $25 billion in debt. Its finances were shaky. The credit ratings on its debt were reduced to ‘junk’ status by Moody’s Investors Service in 2002. El Paso also faced federal charges of price manipulation in California. (Another diversified, Texas-based energy concern, Enron Corporation, also found itself over-extended around this time.)[story length: about 3,000 words]
All too often when large companies and organizations fix mistakes and cope with disaster, embarrassment, and difficulty, a familiar pattern of initial behaviors occurs that actually generates more adverse results and more serious ethical lapses. This article, appearing in two parts, suggests a rather extensive template for use in forecasting and pre-empting those opportunities for unethical, or at the very least, questionable behavior by management and others in times of crisis. Part II contains specific templates for regaining public trust and confidence, and repairing whatever ethical damage has occurred.[story length: about 2,500 words]
The key to understanding why corporate reputation is so easily threatened is to comprehend the different priorities communities and individuals set versus the corporation. On a day-to-day basis, companies and organizations tend to operate around what is in their economic and operational best interest. So long as the community and/or individuals are unaffected, there is little difficulty. However, when a crisis situation occurs, it is the community’s value system that predominates.[story length: about 200 words]
March/April 2009 (Vol. 22, No.5)
In an earlier article (The Limitations of Surveys and How They Can be Used Most Effectively: Part I, March/April, 2008) I raised concerns about relying too heavily on employee opinion surveys to assess corporate culture, identify ethics and compliance risk areas, and evaluate the success of ethics and compliance programs. While there is no doubt that surveys can be a useful tool, the article examined instances where surveys have been badly designed, poorly implemented and even manipulated by managers and employees. As a consequence of these all-too-common problems, employee opinion surveys may not be as reliable as often assumed, and they need to be balanced by other information-gathering methods.
As corporate scandals go, this one was decidedly low megawatt. In 2004 Edison International/Southern California Edison disclosed that 12 of its employees had falsified data to influence the outcome of independent customer satisfaction surveys. In the wake of those revelations, however, the electric utility company, California’s largest, took action. A total of 33 employees were disciplined, with measures ranging from counseling to termination. The company also named a chief ethics and compliance officer, instituted ethics training for its managers, and raised publicity about its ethics hotline. It created, too, a central ethics and compliance office. Previously the ethics function had been “decentralized,” overseen by the law department.
How many times have you heard that greed was the cause of the present financial crisis? Lending practices were too lenient, credit ratings too optimistic, and the public too easily took on debt rather than save. Were these behaviors driven by greed? Or self interest? It is beyond an ethicist’s expertise to comment on the various economic causes of the crisis, but we can investigate the claim that behavior was driven by greed. Greed is an ethical issue. What constitutes greedy behavior? To begin, greed is more than simply a pursuit of self-interest. Greedy people are those who behave in the manner Aristotle describes in the opening quote, driven by an unconstrained habit of acquiring simply for the sake of acquiring. It is when we create and accumulate wealth simply for the sake of having more wealth that we have greed.
Business scandals sometimes seem like Independence Day fireworks: Lighting up the sky, then quickly fading. So it is with the stock options backdating scandal that embroiled more than 100 U.S. corporations several years back. Firms caught up in this practice included Apple and Dell and UnitedHealth Group, among others. Given the depth of the current economic crisis, this seems like distant history, indeed. (For the record: The practice of backdating stock options is not necessarily illegal, but it is when it misleads company shareholders—as did the options backdating that drew public censure in 2005 and 2006.) Costco Wholesale Corporation (Issaquah, WA), the multi-billion dollar global retailer, was yet another firm caught up in this abuse. Between 1996 and 2003 it issued stock to employees of the company, including executive officers, that was improperly accounted for on the company’s books, including in statements filed with the SEC. Federal prosecutors launched an investigation.
Coffee is a stimulant, and its social lubricity has long been celebrated. But can it stimulate compliance conversations? Steve Koslow thinks so. Koslow is the chief ethics and compliance officer for CUNA Mutual Group (Madison, WI), a company that provides insurance, investments and other financial services to credit unions. It has some 4,700 employees worldwide. Lately Koslow has been conducting regular coffee meetings with small groups of the organization’s compliance professionals. These are known informally within the organization as “Coffee with Koslow.” They stroll to the cafeteria, grab a cup of coffee, “and we talk for an hour.”
A potential individual conflict of interest may arise when there is the possibility, from the perspective of an independent observer, that a university member’s private interests, or his or her family’s interests, may influence the individual’s professional actions, decisions, or judgment. A conflict may occur when a member has a financial interest in the outcome of certain university research or the company sponsoring the research, for example. It is also imperative for the university ethics and compliance officers to set forth significant reasons for managing conflicts of interest. These reasons include, among others, that managing potential conflicts helps assure the integrity and objectivity of the institution’s decision-making process, and it also protects institutional funds by assuring proper stewardship and limits the possibility that civil damages or government fines will be imposed. In this segment, we suggest some internal controls for managing such conflicts.
