Amid sinking employee morale and increasing public distrust in corporate leadership, without question maintaining an effective ethics and compliance program is more important than ever. The challenge facing many ethics and compliance professionals is how to do that with tighter budgets and fewer resources.
“There’s increasing cynicism and stress in the workplace, hits to budgets … controls and oversights are stretched,” says Ed Petry, a program director at The Conference Board and vice president of the Ethical Leadership Group. “It’s a perfect storm for ethics and compliance problems. And we know when there are problems … we can count on stepped-up enforcement.”
His remarks came during a recent Webcast sponsored by The Conference Board about maintaining compliance in troubled economic times. Petry and Joan Dubinsky, director of ethics for BAE Systems, offered tips on how to make the most of their existing resources.
When asked to name the biggest risk to their organization during the current downturn, 46 percent of Webcast participants cited increased government enforcement, while 31 percent cited a downsized workforce with low morale and 23 percent cited “doing the same or more” with a smaller budget.
Petry
Petry, noting the huge fines imposed against Siemens and others for bribery, fraud, deceptive marketing, and other misconduct, warned listeners that under the U.S. Sentencing Guidelines, using a “cookie cutter” ethics and compliance program no longer passes muster with government overseers today.
A compliance program “needs to be tailored for your risks, your industry, and your organization,” he said. “That means continually assessing its effectiveness and the alignment of your program, training, Code, and communications with your emerging risks.”
Ethics and compliance professionals may be able to increase their success in promoting an ethical culture through better integration with human resources. The relationship between ethics and compliance and HR is “one of the most critical relationships in the corporation to nurture,” Dubinsky said. Compliance with the U.S. Sentencing Guidelines “is probably impossible” without the HR department’s help, she added.
REASSESS; REPAIR; REFRESH
A sampling of slides from The Conference Board-sponsored Webcast on Ethics and Compliance—how to reassess, repair, and refresh:
Reassess
Reassess the environment
—Culture and values:
Is your culture being stress-tested? What are the results?
—Strengths:
Have there been positive stories you can tell?
Have you avoided litigation because an internal investigation caught harassment before it resulted in adverse action?
Did a hotline report reveal attempted fraud or theft?
Did a request for ethics guidance lead to an employee refraining from an inappropriate action?
—What has sustained your organization thus far?
Mine the data and conduct trend analysis to obtain answers to these questions and others:
—Hotline reports
—Customer/constituent complaints and concerns
—Litigation over past years
Claims typically rise in poor economic times as employees are laid off or fear being terminated
—Industry issues, including investigations, sanctions and settlements involving competitors and partners
—Human resources trends, including attrition and complaints
—Staff and business leader suggestions
Have there been changes in law or regulations which require you to update your communications and training?
—Americans with Disabilities Act updated law to broaden who is considered disabled
—Ledbetter Act lengthened the time allowed for a person to file a discrimination complaint
—Employee Free Choice Act—may broaden unions’ ability to organize and sign up employees (pending)
—Industry-specific legal updates
Repair
Repair your ethics and compliance training program
—Code and policies
Should the format, style be simplified?
Are employees consulting the code? How can you ensure they use it as a resource?
Have there been changes in the law or your business which require you to update your policies?
Government contractors—FAR regulations requiring establishment of an ethics program:
1. Written code of conduct
2. Reporting mechanism
3. Training
4. Awareness posters
Repair your compliance and ethics training program
—Training
Have there been changes in the law that require changes to the training program?
Has your business changed in such a way that you are now subject to certain rules?
Could the old training use improvements, or a new vendor?
Was the training standalone, or supplemented with related awareness campaigns?
Were the training methods effective at meeting your objectives to improve employees’ knowledge, skills, and attitudes?
Refresh—Cost Effective Training
— Focus on the critical issues of today and tomorrow
— Combine efforts for certain essential aspects of your program with other stakeholders?
Less time for employees to focus exclusively on compliance and ethics:
1. Mix the messages into existing channels
2. Break up blocks of training into smaller time frames
3. Plan—Create a Communications Calendar
—Tone in the Middle-Use Line Managers, Prepare Them, Give them tools, support
Source
The Conference Board.
Dubinsky cited forthcoming research from The Conference Board, due in a report slated for this summer, which found that collaboration between HR and compliance functions resulted in improved risk management. (She also noted, however, that the findings showed no direct tie to the bottom line or increase in customer satisfaction.)
The other related research showed that collaboration between the two functions commonly occurred in investigations, development, and distribution of Codes of Conduct, training, discipline, and communication. Some collaboration around hotlines exists too, Dubinsky said, but it “wasn’t universal.”
The two departments should have a solid working relationship, Dubinsky said, and “there are no show-stoppers we could see that prevent greater collaboration.” That means finding ways to increase reciprocity between the two functions; periodically re-assessing reporting relationships and program leadership; and recognizing that top management deeds are more important than words.
“It’s the reality of how values and principles are put in play that has an impact on culture,” she said.
She also recommended that compliance and HR jointly decide on “business impact metrics” that both departments can use, to develop a common language that lets them jointly report their accomplishments to the higher-ups.
Notably, when asked about their biggest challenge in updating their training programs, 60 percent of Webcast participants cited uncertainty about what to emphasize. “To me that underscores the importance of continual risk assessment,” Petry said. “That’s key to knowing what to prioritize in your training.”
Petry recommended that ethics and compliance officers reassess the strengths and weaknesses of their programs to determine what’s been working. They should also mine their existing hotline data more effectively to identify trends. “That can be a treasure trove of information if done correctly,” he said.
Talk the Talk
Both Petry and Dubinsky stressed that ethics and compliance officers must get out and talk to employees and managers in the field. In recent years, Petry said, “too many ethics and compliance officers have become number crunchers. They don’t get out enough and talk to management to learn what problems may be on the ground.”
Compliance executives should also evaluate whether there have been any changes in law or regulations that require an update to training and communications. Likewise, they should review their Code of Conduct and policies to make sure they cover all current risks. In particular, Petry said compliance officers should review their Code from an employee’s point of view. Does it make sense? Can it be simplified?
“Too many Codes we’ve seen of late are cumbersome,” he said. “They look beautiful, almost like coffee table books, but they’re difficult to navigate.”
He cited the idea of putting Codes of Conduct online and making them shorter and more printer-friendly, with bullet points that include links to more detailed information. “Employees want quick access to information and a means to get to more detailed policies if they need it,” he said. And if it isn’t already, the Code may also need to be updated to apply to third parties, which are often a critical risk area for companies.
Noting that “tone in the middle” is just as important as tone at the top, Petry urged compliance and ethics professionals to use line managers to help get their message out to employees, such as by incorporating brief communications on ethics and compliance at the start of a meeting, he said.
Petry also stressed that publicizing discipline activities “can be an important tool for letting people know that the company takes these issues seriously.” To overcome objections that may be raised by the legal department, he suggested that the information be “sanitized” to be anonymous trend data, rather than specifics.
Another potentially valuable but often under-used source of information for ethics and compliance: the exit interview with departing employees, conducted by HR.
“There’s a lot of information available through exit interviews,” he said. But they are time-consuming and often done by mail or phone, he warned, which makes the results less immediate and useful.
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