Download - Ethical Culture
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TOWARD AN ETHICAL CULTURECharacteristics of an EthicalOrganization
Kirk O. HansonBusiness and Organizational Ethics Partnership
Markkula Center for Applied Ethics
Santa Clara UniversityApril 5, 2007
(Revised with input from Partnership Members)
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Importance of IdentifyingCharacteristics of an Ethical Organization
Enables us to create most effectiveculture of integrity
Learn where each element can gowrong
Identify items to include in ethical risk
analysis Create checklist to meet expectations of
prosecution and sentencing guidelines
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New Sources of
Ethics Best Practices
Learning by the best companies
Sarbanes Oxley Act (2002) Stock Exchange Standards
(rev.2003)
Sentencing Guidelines (rev. 2004) DOJ Principles of Prosecution (rev.
2006)
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Model Values
Communicate Values
Create Systems
to Embody Values
Continuous Monitoring
of Behaviors
Discuss
Difficult
Ethical
Cases
Compliance:
Audit
Enforce
Discipline
Renew Values
Regularly
Best Practices for a Culture of IntegrityCopyright 1984,2007 Kirk O. Hanson
Clarify Values
GovernanceSystem
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Best Practice Elements
1. Statement of values
2. Code of conduct
3. Example of senior executives4. Training and repeated communication
of values and standards
5. Systems which embody the values
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Best Practice Elements, cont.
6. Continuous evaluation of behaviors7. Effective hotline system
8. Mechanism for resolving toughest
cases9. Compliance enforcement system
10. Periodic renewal process for values
and standards11. Governance system for ethics and
values
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Values Statements
Best Practice Grows out of experience of company
Broad input to identification of values
One pager
Where It Can Go Wrong Words, not values in action
Unrelated to company decisions, actions Deliberate misreading of meaning
Ignores reality of global operations
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Codes of Conduct
Best Practice Organized and comprehensive Applies to all employees Annual signoff
Examples, Q and A
Where It Can Go Wrong Impenetrable, looks like legal wrote it Captures last years trivia
On the shelf and never consulted Exemptions (routinely) granted Deliberate misreading meaning, gaming it Unclear application outside US
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Executive Modeling
Best Practices CEO a walking embodiment of values in both
public and private life CEO talks about the values
CEO tells stories about putting values to work
Where It Can Go Wrong CEO behaves at odds with values
CEO private behavior inconsistent CEO pleasures himself with corporate funds CEO never mentions values CEO demonstrates disdain for employees
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Training and Communication
Best Practices Constant communication about values New hire training in values Regular and engaging training in values Training that focuses on recent issues
Training that emphasizes responsibility of individuals Training that helps employees know how to raise issues
Where It Can Go Wrong Lack of follow-up to assure it is done
Obvious lip service regarding values Snickering references by managers Reductionist approach to training - do the least Dont really expect employees to risk raising issues
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Systems that Embody Values
Best Practices Performance evaluation system has explicit
reference to values Repetitive systems have values categories
Key decisions examined in light of values
Where It Can Go Wrong Fuzzy stuff in performance ignored
Systems exist but ignored Some systems deliberately left out Key decisions made by purely financial criteria Performance pressures drive out values
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Systems that Embody Values
Ernst & Youngs list of systems/operations to beaddressed: People processes
Recruiting Orientation
Performance objectives and measures Global people survey Learning and development
Client-related processes Proposals Engagement planning Client acceptance
Balanced Scorecard Quality and risk management function Corporate social responsibility function
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Continuous evaluation of behaviors
Best Practices Annual survey on peer and boss behavior Identification of problem areas via survey Identification of problem areas via hotline
reports
Identification of problem areas by executiveteam
Explicit discussion of problem areas in ethicsgovernance process and in executive meetings
Where It Can Go Wrong Lack of trust in survey, confidentiality Poorly drawn survey Lack of candidness about problem areas
Failure to engage executives in assessment
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Hotlines and Helplines
Best Practices External and credible reporting
Anonymity possible; no retribution
Effective system for follow-up Effective system for investigation
Where It Can Go Wrong
Lack of employee understanding of function Lack of empathy in those answering phone
Violation of anonymity; retribution
Lack of adequate follow-up
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Way to Discuss Difficult Ethics Cases
Best Practices Transparency exists regarding tough cases Employees confident they can take tough case to boss and
actually get help Top executives take tough ethics cases seriously Mechanism or place exists for vetting cases
Employees confident that they will not be penalized forraising issues, implementing values
Employees believe they may be rewarded for raising issues Executive culture encourages raising issues with CEO
Where It Can Go Wrong Dont ask culture; deniability Fear of negative management reaction Unwillingness of executives/managers to share burden Failure to apply ethics commitments to global operations
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Compliance Enforcement
Best Practices Audit everything that is important Put compliance in context; one dimension of
value commitment
Investigation and enforcement thorough andrespectful Discipline appropriate and just
Where It Can Go Wrong Compliance is the whole of the values message Compliance and discipline easier on executives Compliance system protects only the company
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Periodic Renewal
Best Practices Periodic rolling out of values and standards
usually a 3 year cycle Freshness of message for each renewal
Engagement of organization in fresh message
Where It Can Go Wrong Letting the messages go stale; unchanged
Failure to seek input from organization forrevisions Failure to address recent incidents; new issues Overemphasis on recent incidents
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Governance of Ethics and Values
Best Practices Senior executive overseeing ethics effort Qualified and motivated Ethics officer Active audit or ethics committee of board Periodic reporting to board
Real and deliberate learning from experience Continuous adjustments to ethics and values systems
Where It Can Go Wrong Assignment to lower level executive
Ethics officer not respected Audit committee not really interested Reporting is perfunctory Failure to apply to global operations No real expectation that reports will lead to improving
system