EB class 9 quiz 3

According to the Federal Sentencing Guidelines, To have an effective compliance and ethics program, . . . an organization shall—

(1) exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law. --- is generally effective in preventing and detecting criminal conduct. - Ethics = do's, compliance = don'ts

The ethics audit

- A systematic evaluation of an organization's ethics program and performance to determine effectiveness - Highlight trends, improve organizational learning, and facilitate communication and working relationship - Assess the effectiveness of programs and policies - Identify potential risks and liabilities, improve compliance - Improve relationships with stakeholders

steps world com took after its accounting scandal

- Apply new leadership: new board members and CEO - Established an ethics office - Published a code of conduct - Implemented an ethics helpline, with a no-retaliation policy - Investigated allegations of wrongdoing - Punished wrongdoers - Launched communication and training initiatives

FSGO: A "carrot-and-stick" philosophy

- Carrot = Avoid penalties should a violation occur - Stick = Possibility of being fined or put on probation if convicted of a crime - Encourages federal judges to increase fines for organizations that continually tolerate misconduct - reduce fines for firms with extensive compliance programs - a program developed in absence of misconduct will be more effective than a reactionary - Cannot assume people know how to behave appropriately

Big splash

- Compliance & Ethics Month: Launch Values, Code, Ethics Helpline - All-employee town hall - Road shows - Use company intranet & email - Weekly messages from key execs - Technologies - Training - All employees sign

statement of values

- Conceived by management, fully developed with input from all stakeholders - The terms "code of ethics" and "statement of values" are often used interchangeably

Common mistakes in designing and implementing an ethics program

- Failure to understand and appreciate goals - Setting unrealistic and unmeasurable program objectives - Senior management's failure to take ownership of the ethics program - Developing program materials that do not address the needs of the average employee - Transferring an "American" program to a firm's international operations - Designing an ethics program that is little more than a series of lectures

You are the new Chief Ethics & Compliance Officer of Wayne Enterprises, a publicly traded U.S. company that does business in over forty countries around the world. Although you're ultimately worried about the company's ability to comply with the complex maze of laws and regulations at the federal, state and local levels across over forty countries, which of the following should concern you the most: A. The company's ability to establish an anonymous, confidential, non-retaliatory reporting mechanism that can serve the needs of its employees around the clock. B. The company's ability to create and deliver ethics training that will resonate in the many languages and cultures in which the company does business. C. Senior management's commitment to the company's compliance and ethics program.

C

key elements of ethics hotline

Confidential Anonymous Non-retaliationary Independent User friendly

If the authors of our textbook were to answer Lucius Fox's question, they would suggest that as CEO of Wayne Enterprises he should want a corporate compliance and ethics program in order to, among other things: A. To sensitize employees to potential legal/ethical issues in work environments B. Increase employees' ethical awareness, participation in ethical decision making and ethical behavior C. Foster ethical decision making, which requires terminating unethical employees and improving the firm's ethical standards D. Eliminate 'Bad Apples' (employees) E. Prevent an entire organization from becoming a 'Bad Barrel' F. All of the above G. a, b and c only

F

You've just been named Chief Ethics & Compliance Officer of Wayne Enterprises. Your duties probably include working with others to: A. Assess needs/risks an organization-wide ethics program must address B. Develop/distribute the code of conduct C. Conduct training programs D. Establish/maintain an ethics helpline E. Investigate allegations of wrongdoing F. All of the above G. a and b only H. a, b, c and d only

F

Communication

big splash followed by drip drip

Updated foreign corrupt proactices Act guidelines

recommend incorporating incentives into the firm's corporate culture to encourage ethical behavior

a comprehensive code of conduct can

- Guide employees in situations where the ethical action is not obvious. - Help the company reinforce—and acquaint new employees with—its culture and values- create a climate of integrity and excellence. - Help the company communicate its expectations. - Minimize subjective and inconsistent management standards. - Help a company remain in compliance with complex government regulations - Build public trust and enhance business reputations. - Offer protection in lawsuits. - Enhance morale, employee pride, loyalty, and the recruitment of outstanding employees.

Systems to Monitor and Enforce Ethical Standards

- How employees handle ethically charged situations - Role-playing exercises - Discussion regarding ethical issues and dilemmas - Questionnaires - Internal systems that allow employees to report misconduct - Consultants - Case-management services and software

Key goals of successful ethics training

- Identify key risk areas - Provide experience in dealing with hypothetical or disguised ethical issues through mini-cases etc - Let employees know wrongdoing will never be supported and employee evaluations will take their conduct into consideration - Let employees know they are individually accountable for their behavior. - Align employee conduct with organizational reputation and branding. - Provide ongoing feedback - Allow a mechanism for employees to voice their concern - Provide a hierarchy of leadership for employees to contact when they are faced with an ethical dilemma they do not know how to resolve.

informational ethics audit

- Interviews of employees and management - And surveys, focus groups - Provide key areas for improvement where management can better lead, educate employees - Questions to gauge employee's opinion on awareness, preparedness, and confidence over the existing ethics and compliance program - HR managers seen as ethical role models are almost always central to the ethics audit

the need for organizational ethics programs

- It's impossible to know all the laws - The more misconduct, the less trust employees feel toward the organization → the greater the turnover - Companies are vulnerable to ethical problems and legal violations if their employees do not know how to make the right decisions - Develop a program by establishing, communicating, and monitoring the ethical value/legal requirements for corporate culture, industry, and country

drip drip drip

- Monthly newsletter - Posters - Branding --Related to company colors and look and feel --Yet distinctive -Free stuff

code of conduct

- More like a regulatory set of rules - Tends to elicit less debate about specific actions

code of ethics:

- Most comprehensive; consistent of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rules of conduct - Specifies methods for reporting violations, disciplinary action for violations, and a structure of due process

why codes of conduct failed

- Not promoted so employees don't read it - Not easily accessible - Written too legalistically - Written vaguely, providing no accurate direction - Top management never refers to the code in body or spirit

compliance orientation

- Requires employees to commit to specific required conduct - Uses legal terms, statutes, and the like to teach employees the rules and penalties for noncompliance - Helps employees understand rules of conduct when there are identified risks - Linked to employees' awareness of ethical risks at work and a clear understanding of rules and expectations that facilitates decision making

compliance vs values based

- Research: Both approaches can interact or work toward the same end - Problem with compliance-heavy approach: you can't have a rule for everything! Values-focused approach: appeal to employee's highest and best instincts!

Values orientation:

- Strive to develop shared values - Penalties are attached but the focus is on an abstract core of ideals - Gives employees a clearly defined basis on which to make decisions - Fairness, compassion, respect, and transparency - Employee diversity: Requires explicit communication and training (financial reporting, use of company resources, and intellectual property) - Increase employees' work ethics awareness, integrity, willingness to deliver information to supervisors, use of reporting mechanisms, and perception that ethical decisions are being made - Research: When personal and organizational values are compatible with one another, it tends to positively influence workplace ethics

sources of ethics compliance programs

- federal sentencing guidelines

responsibility of corporations

- having effective ethics and compliance is part of a corporations obligation to its stakeholders - corps inc. viewed as more than just profit making - since they are charted as citizens of state, they have same rights and responsibilities as indivs -- held accountable for conduct of employees and their decisions -- required to obey law -- but also not human beings who can think through complex ethical issues

implementation training

- must be effective to modify behavior - need top level commitment to set the tone - content based on risk assesment - trigger audience self interest - entertaining - repetition - structure and content vary b/w organization and based on size, industry, culture, geographic scope, demographics, access to tech

ethics officer responsibilities

1. Assess needs/risks an organization-wide ethics program must address 2. Develop/distribute the code of conduct or ethics 3. Conduct training programs 4. Establish/maintain confidential services to answer employees' ethical questions 5. Make sure company is in compliance 6. Monitor/audit ethical conduct 7. Take action on code violations 8. Review/update code Want: (1) program to be our program; (2) expertise of others, (3) resources of others

Developing and implementing a code of ethics

1. Consider areas of risk and state the values as well as conduct necessary to comply with laws and regulations. 2. Values are an important buffer in preventing serious misconduct. 3. Identifying values that specifically address current ethical issues 4. Consider values that link the organization to a stakeholder orientation. Attempt to find overlaps in organizational and stakeholder values 5. Make the code understandable by providing examples 6. Communicate the code frequently in a language that can be understood 7. Revise the code every year with input from organizational members and stakeholders

Minimum requirements for ethics and compliance programs

1. Establish standards and procedures to prevent and detect criminal conduct 2. Ensure the firm's board, top management, and high-level personnel exercise reasonable oversight 3. Keep individuals whom organizations knew or should have known to have engaged in illegal activities out of key positions 4. Communicate standards and procedures by training employees

Ethics audit process steps

1. Gain support of top management and board of directors 2. Establishe a committe to oversee the ethics audit 3. Define the scope of the audit process 4. Review the firms mission, values, goals, and policies 5. Identify the tools or methods used to measure the firms progress and collect and analyze the relevant information 6. Have the results verified by an independent party 7. Report the audit findings to the board of directors and top executives -- in early days only focused on low hanging fruit- posters, certification, evaluations and helpline data

T/F: According to the Federal Sentencing Guidelines for Organizations, in order to have an effective compliance and ethics program an organization shall: (1) exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

TRUE

Six values that are desirable for codes of ethics

Trustworthiness Respect Responsibility Fairness Caring Citizenship Integrity??

organizational probation

use of on-site consultants to observe and monitor legal compliance efforts and report firm's progress toward avoiding misconduct to the U.S. sentencing commission

how was world com's fraud discovered

worldcom's internal audit department - investigated capitalization of line costs- amounts paid to third party network providers - internal team connected audit committee who determined that transfer of line costs to capital amounts did not comply with GAAP