Followers of this blog know that Ethics and Compliance don't always mean the same thing.  In fact, they can be in stark contrast to each other.  Here's one example:

Part of the court settlement of the BP oil spill in the Gulf of Mexico requires compensation for losses incurred within a specified time period . . . even if the loss was not as a result of the spill.  So a farmer who elected not to plant during this time period is going to be compensated for lost revenue, even though his decision was not as a result of the spill.

This is a classic example of compliance, but it is hardly ethical.  A similar example took place in my community after a severe hailstorm.  Home owners filed insurance claims to have their roofs replaced, even though there had been no damage, and the insurance companies paid for these replacements.

We continue to elect lawyers to most public offices, and their training and their profession is grounded in compliance, not in ethics.  It is understandable that they will default to the compliance position, and it is understandable that there will be no shortage of clients who want this kind of representation.  

This reminds me of the old adage:  Just because you have the right to do something doesn't make it the right thing to do.

The disconnect between scientific progress and the inability for humanity to show the same progress in social matters is relevant to any discussion of ethics and appropriate behavior.  There are many different interpretations of this dilemma.   The below statement is an interesting and insightful approach by a classically trained economist.

 “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority.

Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based—a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, "dizzy with success," to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society—a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

Friedrich A. Hayek's lecture "The Pretense of Knowledge," delivered upon accepting the Nobel Prize in economics, Dec. 11, 1974.

Whenever I am asked why there is a need for ethics officers, the  easy answer is: “the world has just gone to heck in a hand basket.”    However, I tend to say it is a combination of things including a trend towards moral relativity, complex work space relationships, conflicting laws, rules and regulations.  

However recent news reports may be a better indicator of why ethics needs to remain in the spotlight. 

July  and August 2013 headline stories:

 -Mayor Bob Filner inappropriate conduct with respect to women in San Diego.

 -Alex Rodriguez and other baseball players, role models for children, accused of using illegal and  harmful drugs to get an edge.

 -David Ortiz using the F word to get the citizens of Boston to rally against terrorism following that up  with a reverse Superman imitation by destroying a phone in the Red Sox dugout after striking out.

 -Ariel Castro holding multiple women in captivity for over 10 years, kills an unborn baby, pleads guilty, and tells the court, he is not a bad  person.

 -Eliot Spitzer running for office.

 -400 teens killed in Chicago in gang violence with no public outcry.

 -Congress continuing to exempt itself from laws they impose on the public.

 -One in four people around the world paid a bribe in the past 12 months.

 -IBM is being probed by the U.S  Justice Department over corruption allegations in Poland, Argentina, Bangladesh and Ukraine, adding to bribery charges from the Securities and Exchange Commission.

 -A director of a Chevron Corp. (CVX) contractor was jailed for five years after being found guilty of defrauding Indonesia of
$23.4 million.

 -Anthony Weiner running for office. 

Perhaps the need for ethics officers in today’s world is not that  complex. 
If it looks like a duck, quacks like a duck, and walks like a duck, maybe it is a duck.   Maybe“the world has just gone to  heck in a hand basket.”

Some of the blog readers have asked for some real live examples of ethics or ethics breaches in the work place; something to put their hands on.  In the world of ethics and compliance, unfortunately the privacy and anonymity aspects of the workplace restrict highlighting the best examples.  However, there was a particularly stunning case recently surfacing in of all places, the USEPA.

Before detailing this event, it would appropriate to review a couple of previous discussions in this blog.  First, the USEPA is a government agency and as you may recall doing business with the government, the contracting firm must have an ethics program in place which among other things meets the guidelines termed the Federal Sentencing Guidelines.  These seven guidelines are detailed in this blog and also can be reviewed in the Federal Acquisition Guidelines.

In this report from the USEPA it was noted that during the tenure of Lisa Jackson as the presidential appointed leader maintained a separate email account under the name of Richard Windsor to be used by environmental activists and Obama administration officials.    To be sure, senior managers in large organizations use multiple email accounts for various reasons; however, very rarely using a fictitious name.

Lisa Jackson then created completed certification courses for the fictitious Mr. Windsor, perhaps to maintain the email account.  Basically, a nonexistent employee completed courses and examinations including management of email records for an account belonging to Lisa Jackson.

Lisa Jackson publicly defended her position blaming it on her anger with the way politics are played.

USEPA is a federal agency and those who do business with it must have a code of ethical conduct.  This code must meet the following metrics:

1.                   Does the program have compliance standards and procedures in place that can reasonably reduce the prospect of criminal conduct?

2.                   Does the program assign high level personnel to oversee compliance?

3.                   Does the program avoid placing people in responsible positions that they know or should have known have a propensity to engage in illegal activities?

4.                   Does the program communicate the standards and procedures through training and other mechanisms?

5.                   Has the program established monitoring, auditing, and reporting systems where employees can report criminal conduct without fear of retribution?

6.                   Does the program enforce the standards including discipline of individuals for failure to detect and report offenses?

7.                   Does the program have appropriate responses in place to respond and prevent future occurrences and modifies existing standards and procedures accordingly?

 

How many of these requirements are violated in the events detailed above?    Unethical conduct in high places fosters lack of respect for rules in the workplace - federal as well as private sector - and the hypocrisy in demanding high standards while failing to adhere to them has a very negative multiplying effect. 

“The government is the potent omnipresent teacher. For good or ill it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. To declare that the end justifies the means -- to declare that the government may commit crimes -- would bring terrible retribution.”  Louis Brandeis 

Before you write all this off as “anger with the way politics are played” consider the following, Lisa Jackson now is the environmental and compliance director at Apple computer reporting directly to Tim Cook.

During a recent training session, one of the participants asked why not use the term morals or morality instead of ethics.  Although I should have had a clear response, other than referring to the connotative tone of the work morality, I had no ready response.  Additionally, when I checked the Merriam Webster’s dictionary, I did not get a warm and fuzzy feeling.

Ethic(s)- the discipline dealing with what is good and bad and with moral duty and obligation

Moral(s)- of or relating to principles of right and wrong in behavior

Distinction without a difference?

Merely connotation?

In the research, several attempt to distinguish these concepts were noted; one of particular note.

 “Ethics is the rules for deciding proper conduct.  While not absolutely timeless, ethical principles change very little though the ages.  Morality is the standards for behavior that exist at some point in time.  Compared to ethics, morality undergoes changes frequently.  Compared with ethics, morality is more like a snapshot taken of something moving.  Since the principles of ethics are more fundamental and stable, ethics is bigger than morality.  Ethics is able to call morality - the existing standards for conduct - into question, and cause morality to change.  As an example, consider slavery.  Once it was considered moral to own slaves.  Over time, ethics called the morality of slavery into question and the eventual     result was that slavery was no longer considered moral.”   Ethics and Morality George Desnoyers 

Another example could be the evolution of the swimsuit with respect to moral standards over the past 100 years in the US, Europe and Brazil.      

How about this thought?  Ethics are a standard; right wrong, good evil, Yankee fan, Red Sox fan; no shades of gray.   Morals on the other hand, reflect a form of relativism, changing to reflect the current state acceptable behavior as defined in the selected population base.

While we are on the topic, how does integrity fit into the discussion?  Ethics, morality, integrity are all parts of the same coin; how we want to operate, how we want to be perceived, how we want others to deal with us.

Consider this as the classical ethics and compliance discussion.  Ethics are the standard; compliance is the legal interpretation of meeting the various rules set up to ensure ethical conduct. 

These are incredibly challenging issues and you may find that only recourse to operate within fundamental values can you navigate in the challenging environment in which we all live.

More to follow.  Your thoughts?

This past week has provided great examples of how US communities will respond favorably when stressed as in the explosion in West, TX and the IEDs at the finish line of the Boston marathon.  What we saw in America were outstanding acts of selflessness and heroism. 

What do you think was portrayed in the world press and media? 

Two images come to mind to this writer.  The first image is that of a very wealthy American telling the world not to mess with Boston, our “f***ing city” during a highly advertised event that was conducted to showcase the great acts of personal courage of the previous week. 

The second image is that of an “angel” being framed by police willing to shut down a major US city to make sure they got this terrorist, who by the way once captured is not treated as a terrorist.

The US has come a long way since George Carlin uttered those “seven dirty words” in 1972 resulting in his being  blackballed for years and 2013 where the Chairman of the FCC gave David “Papi” Ortiz a free ride and in fact complimented him on his lack of command of the English language by reverting to the lowest common denominator when there are literally hundreds and perhaps thousands of appropriate adjectives that would sum up the strength of Boston and actually tell the real story of a united community. 

This may play well in Boston but not in Grozny or Riyadh.  You can’t have it both ways when your ethical compass consistently slouches towards Gomorrah.

Tone from the top is one of the hallmarks or key metrics in the evaluation of a quality ethics and compliance program.  The reasons for this metric are obvious and have their origin in quality, safety, and other staff functions of an enterprise.  Additionally, without the Chairman or the president of the company strongly supporting the ethics and compliance initiatives, the day to day “closest alligator in the swamp” (tyranny of the immediate) overcomes the platitudes and maxims related to something very difficult to measure, something that has no apparent rewards, and also costs time and money.

However, classical management theory accurately states that the hardest job in the enterprise is that of the first line supervisor.  This is where the rubber meets the road and also where the tyranny of the immediate truly resides.  First line supervisors are the heart and soul of middle management.  They provide constant and visible leadership and are the glue that holds the enterprise together. 

Relevant, sustainable, and effective ethics and compliance program must permeate every aspect of the enterprise.  The executive in the corner doesn’t have the time or the visibility to get the message out daily.   The middle manager has no choice; he or she must be that messenger.  This is the most effective way to get the ethics and compliance message out daily. 

As noted in the previous posting, tone from the top is not the first critical measure of an effective ethics program but is typically the most important aspect of an ethically excellent enterprise.  

In this posting, we will discuss the leader of the organization and his or her responsibility and requirement to drive the ethics and compliance program.

Why do organizations start ethics programs?  Although there are myriad of reasons for ethics and compliance programs, most often they are the result of external circumstances rather than a moment of inspiration by the President/CEO. 

 

Sometimes, it is an external event that caused the organization great pain, either in dollars, reputation or other major issue.  Perhaps the CEO or the organization’s general counsel attended a seminar where the need and benefits of an ethics and compliance program was a topic.  Often, the genesis of an E&C program is an industry standard that is introduced through an industry oversight group.

As with any new metric, the ethics and compliance roll out is completed with fanfare, enthusiasm and resources.  Everything rolls along with speed, alacrity and clear vision.  After a period of time, the novelty wears off, the originating impetus us resolved and the management team starts attacking other more “critical” alligators in the swamp.

This is where the “tone from the top” must reenergize the E&C program.  This can be done in a wide variety of ways with the most effective ones being those consistent with the organizations vision and the CEOs management style.    Effective techniques include CEO headlining a short Ethics training event or adding an ethics update as part of an operational or financial update to the employees.  Providing employees with the latest developments in the organizational climate reviews and surveys are also excellent methods to energize the Ethics and Compliance Program.

Tone from the top is not the first critical measure of an effective ethics program but is typically the most important aspect of an ethically excellent enterprise.   An ounce of prevention is worth a pound of cure is more than a saying.  The best time to identify a world class employer with leadership committed to ethical conduct is prior to employment. 

Allen Wass, CPC of Sanford Rose Associates recently posted a commentary discussing the importance of organizations and their sets of values which determine their perspectives and actions.  A company forms an ethical foundation by creating and openly listing the principles it follows, and these standards guide its employees.  He provides two examples:

Company #1

-Integrity

-Safety, safety, safety

-Respect

-Competitiveness

-Teamwork

-Results, not reasons-make it happen

 Company #2

-Nothing is more important than the safety of our people

-Dedication to the customer

-Respect for the dignity, rights, and contributions of each associate

-Mutually beneficial supplier relationships

-Active participation in and communication with the community

-Commitment to integrity and high ethical standards.

Company stating their values are more likely to be operationally excellent with respect to ethical behavior.  Other techniques available to the applicant are interviews with former and current employees and research to include recognition of the organization by industry associations or ethics and compliance oversight groups.

Being able to identify these enterprise values before you sign on to the team is a “freebie” and when available should always be checked out.

Next time, we will discuss the leader of the organization and his or her responsibility and requirement to drive the ethics and compliance program.

Does the program have appropriate responses in place to respond and prevent future occurrences and modifies existing standards and procedures accordingly?

There are many components common to all seven of the guidelines for a quality ethics and compliance program.  

 
Ways to reasonably reduce the prospect of future occurrences of non compliant behavior:

A Code of Conduct

Corporate policies and procedures

Assignment of a competent and respected ethics and compliance officer

Company hotline

Audits

Investigations

Education and training.

Specific tools and processes to assist in the basics include:

Ethics Training, Targeted Compliance training

Newsletters and other communications tools

Ethics and Compliance Website

Screening procedures prior to and during employment

Misconduct database management

Do these look familiar?  They should as they permeate all of other six guidelines for an effective ethics and compliance program.  Additionally as in any other enterprise activity, continuous improvement through proactive preventative and corrective action processes are essential in each of the areas noted above.

Now that we have worked our way through the basics, future postings will focus on specifics and examples to assist and illustrate how to use these programmatic to improve your organization’s ethics and compliance performance.  More importantly, we will do this to make these processes assist your business to not only run more efficiently but more profitably, short and long term and increase enterprise value.