JULY/ AUGUST 2017 Vol. 31 | No. 4 THE JOURNAL OF PRACTICAL BUSINESS ETHICS A PUBLICATION FROM THE SOCIETY OF CORPORATE COMPLIANCE AND ETHICS
Cyber security crisis: From the front lines of corporate law page
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What the U.S. Army can teach business organizations about ethics page
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corporatecompliance.org/ethikos
Can ethics be monitored? BY ROBIN SINGH
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hat is ethics? There is no standard definition of the word ethics. The Macmillan Dictionary describes ethics as a set of principles that tell people what is right and wrong. This is remarkably similar to the definition for morality, except that morality is about what society considers to be right and wrong. Ethics is more personal, and because every person thinks differently, his/her ethics could be different from the next person. But broadly speaking, it is about putting others first, above self. Professional/workplace ethics is easier. There wouldn’t be many people, if any at all, who think it is ethical for a doctor to prescribe the drugs of a manufacturer that pays for his vacation. For a lot of business practices, high ethical standards are accepted by many without question, mostly because they agree with the personal ethics of the people concerned. Corporate ethics are the hardest, because both ends of the spectrum could agree with one’s own personal ethics. For instance, some might think it is alright to do business with a firm located in a country that is politically opposed to the country where the organization is located. Others might feel it is politically incorrect, and hence unethical. Yet others might hold views that fall somewhere in between—they might think it depends on the nature of goods/services involved.
This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.
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The role of perception Perception is one key element which can make or break the ethical barrier. Perception is like the smoke before the fire in a pile of wood. For instance, if employees perceive a CEO to have loose character, then that could be detrimental for the company and team as well. On the other hand, if a CEO is perceived to be a person with character, they will be seen as a person with ethics and that will be beneficial for the company and the company’s shareholders. In the end, a simple perception can make or break a person’s viewpoint toward another. The role of a compliance officer to monitor ethics There is no point to talking about ethics if they are not going to be monitored for compliance. The latter is otherwise known as “walking the talk” and a full-time compliance officer is necessary to ensure this.
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In some sectors, like the pharmaceutical and/or life science industries, ethics is of the utmost significance. Ethics are closely tied to regulations that govern research, and a compliance officer ought to be well-versed in all aspects of the company and also where possible breaches of the regulations are likely to occur. It would be the compliance officer’s job to communicate the organization’s key ethics principles and organize periodic training sessions so that everyone knows what is expected of him/her at work. Compliance officers must, therefore, be people of integrity as their job would require them to review others’ work. They need to have a keen eye for detail so they are able to notice violations and possess excellent interpersonal and communication skills. They must not be willing to let their professional working relationships take precedence over the company’s code of ethics. Compliance program is the key for guiding ethics A compliance program must list out which are the ethical guidelines to be followed. It must also identify possible breaches and the penalties associated with each violation. The point is to build ethics into the compliance program. The compliance program should outline who is responsible in case of a breach. At ethical companies, managers willingly take responsibility for any shortcomings in compliance within their business unit. They realize it is their job to ensure compliance by their subordinates. The more ethics are included into the compliance program, the less of a burden it will become on these managers
This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.
and others who are placed in charge of compliance. This happens as the right decisions are always taken every time, with respect for both people and processes. Ethical companies also make it possible for employees to anonymously report violations of the code of ethics at the workplace. This is part of the compliance program and makes it easier to take remedial action before things get out of hand. Thought leaders propose two varied lines of thought when it comes to internal reporting in a compliance program. One thought is, should reporting be optional, giving a person a choice to report? The other line of thought suggests making reporting mandatory, where a person must report a witnessed unethical act, fraud, or misconduct. Does it make a difference? Well, in my opinion, it is not the line of thought, but rather “doing the right thing.”
By itself, a well-designed compliance program would ring the alarm bells even before the ethics compliance violation occurs. This requires a thorough understanding of processes at the organization when framing the compliance program. If anything is headed on the wrong path, the senior management can step in and set things right before any damage is done. How to ingrain ethical culture Good organizations realize that it is their employees, not regulations, which drive the company forward. They lay as much emphasis on ethics as skill upgradation. The only way to ensure that a culture of ethics is ingrained in the minds of the employees is for the top leadership to set an example. When senior executives practice ethics, it has the effect of percolating down to the lower layers. Some companies don’t leave it to their
This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.
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compliance officers to conduct training workshops on corporate work ethics—they have their senior managers do it themselves. This sends the message out loud and clear that the organization is one which stands for ethics. Anyone who wishes to be a part of the company must follow the code of ethics that has been laid down. No one is exempt, be he the chairman or the doorman. To further reinforce this, the consequences of not being ethical are informed to every employee at the time of joining. Companies could do well to build a culture where those pointing out possible breaches are not victimized in any way. Those who engage in unethical practices are also not to be rewarded, even if those result in revenue for the company. Ramification on compliance officer and the CEO for not monitoring ethics in the eyes of the stakeholder It is the responsibility of the compliance officer to work closely with business units within the organization to put in place appropriate contingency plans in the event of a breach—if word gets out, it could result in the company being censured by regulatory authorities. The loss to the share value notwithstanding, fines imposed may amount to millions of dollars. This is why the compliance program is headed by a Chief Compliance Officer at large institutions. The CCO’s role is such that even the members of the Board are not exempt. At Beech-Nut, the CEO discovered that the concentrate used by the company for its “100% pure apple juice” was nothing
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but water, sugar, and chemicals. Instead of withdrawing the product from the shelves, he chose to let the status quo continue. An FDA investigation led to the company being fined $25 million for mislabeling and adulteration. The profit they stood to make was only $700,000 at the time. Beech-Nut subsequently went out of business.
If an organization is not ethical, it will not have customers. It will also lose the respect of its peers in the industry; and over the long term, it will find itself struggling to survive. The CEO’s job is to review the code of ethics periodically and make changes as necessary, in tune with the changing business environment. One cannot monitor individual’s ethics but can develop a framework for employees to “operate by a code” for which a management plays a key role to set the right tone at the top. n Robin Singh (robinsingh002@yahoo.com) is Senior Compliance & Fraud Control Officer at Abu Dhabi Health Services Company in Abu Dhabi, UAE.
This article appears with permission from the Society of Corporate Compliance & Ethics. Call +1 952 933 4977 or 888 277 4977 with reprint requests.