In today's complex world of constantly changing laws and regulations, ethics training is increasingly necessary for manufacturing organizations. As companies continue to grow globally, it is imperative their philosophy on ethics be understood across different cultures.

 A brief history of corporate compliance tracks its early origins from the beginning of the last century, when the first public safety agencies were created. In the 1950s and 1960s, the development of modern management culture and organizational structures brought new challenges to companies. Prior to that, companies focused on compliance issues pertaining only to the country in which they operated. In 1977, the Foreign Corrupt Practices Act came about due to several bribery scandals during that decade.

In 1991, the Federal Sentencing Guidelines for Organizations was created. The FSGO included a focus on compliance within organizations. During the period of 2001-2005, known as the Golden Age of Compliance and Ethics, most corporate compliance departments came into being due to several highly publicized scandals in prominent corporations, such as Enron and WorldCom, and the resulting Sarbanes-Oxley Act which required companies to audit internal controls. Among the defining events during that time period were a revision of the FSGO and the adoption of corporate governance requirements by the NYSE and Nasdaq.

From 2006 to the present, the U.S. government has reinforced the FCPA and significantly increased the number of investigations resulting in large fines. During this period, the world has seen an increased focus and the expansion of compliance and ethics programs.

Remind employees that they need to be part of the solution. By not raising their hands, they could become part of the problem.

Several countries have also enhanced and revised their own anti-corruption laws. Mexico, for example, enacted a law designed to prevent money laundering entitled the “Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita” (Law for the Prevention and Identification of Transactions With Illegal Proceeds). This law reinforces the actions that must be taken by companies to prevent transactions involving money laundering, regulating not only financial institutions but also businesses that can be vulnerable, such as casinos, car dealers, and jewelry dealers. It also prohibits cash transactions above a certain amount of money. There have been numerous scandals involving big corporations in the last several years related to money laundering. The most recent case involves the British Bank HSBC which, due to a lack of controls, failed to monitor transactions exceeding $670 billion. This allowed the Sinaloa drug cartel to move more than $881 million through U.S. bank accounts from 2006 through 2010.

Five Areas of Emphasis

Navistar's compliance strategy is built on points highlighted in the Federal Sentencing Guidelines. At Navistar, the compliance strategy is supported by these five areas of emphasis: awareness, documentation, training, validation, and investigation and remediation.

Awareness: Businesses need to ensure that their employees are aware of their compliance organization and view it as a resource. It is equally important that the compliance organization is aware of what is going on in the business that could affect compliance. There needs to be open communications flowing both ways.

Documentation:  Compliance needs to ensure there is proper documentation to protect the organization and the employee. This is particularly important in due diligence efforts for third parties.

Training: This is the cornerstone of the compliance effort at any organization. Training is the key to help set the expectations and ensure that employees have the tools to make the correct decisions. Your efforts start in hiring the right people and then training them on expectations in order to meet organization objectives.

Validation: After you set the expectations within your organization, it is important to validate your process is working. This will assist the organization in ensuring that you have adequate controls in place to meet your compliance expectations. Compliance can also use this as a means to reinforce expectations.

Investigation and Remediation: The organization needs to have an investigative process that fits its culture while still getting to the right answer. The process should be designed to be consistent in approach as well as in remediation.

Navistar has developed and used a methodology in ethics training at its worldwide locations for the past seven years. The methodology is based on three different ethical themes:

Raise your hand.

Acknowledge your mistakes. (It is not the mistake—it is the cover up.)

Clarify requests and intentions. (Do not make assumptions.)

These three themes fit within Navistar's strategy to ensure that employees always have the tools and resources to figure out the right thing to do.

Raise Your Hand

When someone encounters an ethical challenge, they need to “raise their hand.” It is important employees are aware of this because raising their hands could keep someone else from making a big mistake. Also, it is possible no one else will raise a hand, so they may be the only ones to sound an alarm. Emphasize the importance of not ignoring potentially unethical conduct. Remind employees that they need to be part of the solution. By not raising their hands, they could become part of the problem. It is imperative that if someone is ethically uncomfortable, they do whatever it takes to become ethically comfortable again.

Acknowledge Mistakes

Making mistakes is inevitable and usually will not result in ethical problems, but covering up mistakes can have serious consequences. Employees need to understand that mistakes must be acknowledged so they can be addressed quickly. Also, they need to understand that, in most all cases, the consequences of a cover-up are worse than the mistake itself. It is important to emphasize that mistakes might not be discovered without acknowledgement and seemingly small cover-ups can have a significant effect on the organization.

Clarify Requests and Intentions

It is important employees realize that when someone asks them to do something, the vast majority of times the intent is not to ask them to do something wrong or unethical. What looks wrong or unethical could actually be a misunderstanding, lack of information, or a change in existing policy or process. If there is a doubt, the employees should clarify that they heard the request correctly. In addition, they should be encouraged to consult the appropriate policy or expert to ensure their understanding of the potential ethical issue is accurate. If the issue cannot be resolved, they should contact the appropriate resource within their organization. This is an additional opportunity for them to raise their hand!

The three ethical themes discussed above are universal concepts. We believe they fit within any organization's ethical framework. Nevertheless, ethical training needs to incorporate the culture of the company, as well as the culture of the country where that organization operates.

Bruce Patterson is vice president and chief compliance officer at Navistar, an international truck and engine manufacturer. J. Ivan Cano is a business developer and Ph.D candidate at the Universidad Panamericana.