Aletter came to me from a reader not long ago, and I have to admit that her question gave me pause. (I’ve given the author a psuedonym.)

Dear Pat,

I read some of your articles in Compliance Week and wanted to seek your perspective on incentives—specifically, the thought of recognizing employees who have set an example in working with compliance with a letter (perhaps signed by the CCO or CEO). Have you experienced this type of reward, or could you direct me to a resource where I might obtain a letter template?

I appreciate your feedback.

Anne, CCEP

Regional Compliance Officer

Hmmm. I am not aware of any company whose CEO or CCO sends a signed letter to ethical exemplars, and now that I think about it, I’m not sure I can point to many companies that make a concerted effort to provide incentives for good conduct beyond an annual award or a chairman’s cup given to a select few employees. Given the lack of resources to point you toward, permit me to offer a few suggestions on what is the best way to acknowledge and thank employees who do the right thing.

First, we can take some cues from the U.S. Federal Sentencing Guidelines for Organizations. The guidelines suggest that a compliance and ethics program “shall be promoted and enforced consistently throughout the organization through appropriate incentives to perform in accordance with the compliance and ethics program,” in addition to disciplinary measures for wrongdoing. Most companies have gotten the discipline part down, but the incentives haven’t really materialized yet. The important part about the guideline on incentives is that it references conduct that upholds compliance and ethics—not just working hard, or being a nice person. Incentives should be given to those who act ethically.

Even further, research by Trevino, Weaver, Gibson, and Toffler confirms the importance of having reward and punishment systems. Both significantly improve:

Reduction in misconduct;

Awareness of ethics issues;

Willingness to seek advice about ethics issues;

Willingness to deliver bad news to management;

Reporting of violations;

Perceptions of company decision making as a result of the ethics and compliance program; and

Employee commitment to the organization.

What’s really interesting in the research is that rewards are more powerful than punishment in promoting ethical conduct. Reward systems are a significant factor in employees’ willingness to deliver bad news to management, to report observed violations, and to make an overall commitment to the organization.

We know that finding effective ways to reward employees is important. It’s common practice to give bonuses or awards for major business successes such as exceeding revenue targets or landing a major deal. But many (perhaps even most) companies still struggle to find ways to celebrate employees who do the right thing when it comes to ethics and compliance. Perhaps because it seems too personal or subjective, many companies fail to evaluate employee compliance and ethics (even in the performance review process), and few routinely honor the everyday ethical actions of employees.

ETHICAL REWARDS

Sample letter from CEO

[on executive letterhead]

Dear Ms. Narvaez,

At Inspire Corp., we diligently strive to meet the needs of our clients, shareholders, and the communities in which we operate. We work to uphold our core values of respect, excellence, leadership, and responsibility. We work hard to be a successful company—and to succeed while doing things the right way.

Recently, I was made aware of your decision to report an incident that you observed. First, I would like to assure you that we take such reports very seriously and will work hard to address the situation in the most just and appropriate way.

More importantly, I would like to express my gratitude to you for bringing your concern forward. It takes insight to recognize when conduct is questionable and a great deal of courage to share your concerns. Thank you for being such a fine example of our core values.

I am grateful and proud that you are a part of the Inspire family.

Sincerely,

[personal signature]

Annual awards for employees who demonstrate extraordinary character are increasingly common, but recipients are often employees who go above and beyond in volunteerism and philanthropy. Granted, it is important to acknowledge employees’ generous gifts of time and talent, but nonetheless the majority of ethical actions go unnoticed and unheralded. And while an ethics award at an annual company-wide event can send a nice message that ethical conduct is important, the problem is that only exceptional behavior gets recognized. What about the employees who do the right thing in small ways that are not “chairman’s cup” worthy?

It is equally important to thank the young sales associate who is confronted with an ethical challenge, recognizes its importance, calls the advice line, and takes the high road. We should applaud the courageous mid-level employee who discovers, and then reports, theft by a coworker. These are the situations that can encourage others to do the right thing; they remind employees that your company truly appreciates employees who uphold its standards and values.

As I said earlier, I am not aware of any company whose CEO or CCO sends a signed letter to employees thanking them for their ethics. I do know of one director who sends hand-written cards to employees who report ethics violations to her. She believes that it is important to take the time to thank those who show moral courage and to do so in a personal, confidential way. I think her choices suggest a meaningful and helpful set of principles for others to follow:

1. Decide on the best bearer of good news. Each corporate culture has its own way of recognizing greatness. In some companies, nothing could be more meaningful than a hand-signed letter from the extremely busy and highly respected CEO. In others, employees know little about their CEO and would instead appreciate a thoughtful gesture of recognition from an immediate or regional supervisor. Think about what will be meaningful for the employee and design your reward system with that in mind.

2. Do no harm. Like it or not, your noble employee could face retaliation stemming from his or her decision to report an observed violation. When deciding how to reward an employee, always do so in a way that protects his or her confidentiality and safety.

3. Spread the good news as appropriate. It can be difficult to make the right choice. Employees need to know that you will support them when they make the ethical decision. Also, they want to see proof that their leaders value ethics as much as the bottom line. Use your internal communications vehicles such as the company newsletter or Web site to share positive stories about employees who’ve chosen the right road and the positive feedback they received. Even if you can’t share names and don’t want to put anyone in the hot seat, you can still spread the good news—after removing any identifying details.

4. Honor small actions. Rather than singling out the Mother Teresas and Ganhdis in your office, work to identify specific actions that merit praise, such as reporting, calling the advice line, or even just acknowledging mistakes that could damage the company’s reputation or cost the company money.

5. Consistency is more important than grandeur. Company-wide awards definitely bring a sense of importance, but they also may leave other excellent employees wondering why they weren’t recognized or feeling that the bar is so high as to be unattainable. Be sure to balance grand gestures with consistent, frequent efforts to see and celebrate the good in employees.

Thank you, Anne, for your important question. You’ve raised a critical issue, and in the spirit of offering incentives, I want to commend you for your courage in asking the question. To other readers I would only add, what’s on your mind? Feel free to send me your questions!

Sincerely,

Pat

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