Corporate Ethics Is a Business Imperative
 
May 13, 2003
 

Note to Corporate America: Shareholders and customers are outraged by corporate malfeasance and moral irresponsibility, and they’re not going to take it any more.  Increasingly, their dollars will follow companies who act ethically and exude stability. You have been warned.

Ethics is an issue for all industries. Corporate ethics is now a business imperative.  Creating a corporate ethics program is simply good business practice for every organization in every industry. Fundamentally, successful ethics programs can create a reputation for stability and moral behavior in a company.  They can also be a point of differentiation at a time when companies are becoming increasingly interchangeable.  Studies by leading ethics researchers show that employees of companies with ethical cultures have higher levels of job satisfaction, feel more valued, and are more loyal to their company than employees at companies where ethics are not emphasized.

Recognizing the cost pressures all organizations are subject to in today’s economy, ethics programs do not need to be costly.  Ethics committees can be composed of a small group of existing management and employees, and can be flexible and scalable based on company size and complexity. 

The following five essential ingredients for a successful ethics program apply to all companies, regardless of ownership structure, industry, size, relevant regulations, company culture or priorities.  They constitute a flexible framework that can be adapted for each specific case.

Secure a Top Down Commitment

For an ethics program to succeed, it must receive visible, sustainable support by the company leadership.  Top company executives must actively show their commitment to behaving ethically in all of their business practices.  One way is to create a formal Ethics Committee.  In larger companies, the Committee can be composed of members of the Board of Directors, the CEO, president, vice presidents, and other leaders.  This committee, in turn, oversees the Ethics Officer, who is responsible for implementing and running the ethics program.  In choosing the Ethics Officer, whether this person has full or part-time ethics duties, it is essential that he or she is well-regarded in the company and is known to have a strong relationship with the CEO.  This is important both for real and perceived efficacy of the ethics program.

Tailor the Program

Infusing an ethical culture into a business requires tailoring every aspect of the ethics program to the company.  If a company conducts business in several regions or countries, differences in common customs, business practices, and languages should be taken into account.  For smaller companies, a single, centralized program may be best.  Regardless of the company’s size, the person selected to run the ethics program must know the company well enough to recognize what type of program would work best and be committed to implementing it successfully.

Put It in Writing

A successful ethics program must include a written Code of Conduct outlining the company’s ethics goals, policies, and programs.  The document should identify firm goals and priorities, detail components of the ethics program, and give employees an easily accessible resource.  The Ethics Committee and Ethics Officer should be named, with information on how they are appointed and their specific responsibilities.  The document should explain the steps to take when an employee has an ethical question or concern.  Also, the formal policy should include a section on how allegations of ethics violations are investigated, including what committees are involved, what the process is, and what consequences are considered.  This formal ethics document should be readily accessible for all employees, customers and investors.  This could include posting the document on the company’s intranet and public Web site, distributing the document to all employees, including it in the annual report for shareholders, posting the document in public areas of the office including reception, company cafeteria, and so on. Prospective employees can be given the document to ensure that they will adhere to the company’s policies.  It can also be distributed when hiring external auditing firms, law firms and consultants to ensure they also will comply with the company’s ethical culture.  This formality will help to keep both employees and external parties aware of the company’s commitment to the ethics program

Create and Promote Channels of Communication

Where can your employees turn when they have a question on ethics? Managers and supervisors can be used as point people, a confidential ethics help-line can be created and an e-mail account can be set up for concerns and questions.  The ethics helpline can be useful both for employees who want to remain anonymous and for those outside the company, such as vendors and customers, who need to voice a concern.  Of course, no punitive action should ever be taken against an employee who voices concerns about ethical behavior. 

How you communicate this program is as important as the contents of the program.  When the ethics program is first being implemented, there should be numerous vehicles for distributing information to employees to ensure that everyone in the company is aware of the new program.  Education and training programs, ethics related lectures, brochures and newsletters, updated Web sites, e-mails, and the formal Code of Conduct document can all be used as ways of educating employees about the new or reinvigorated program.  These same channels can then be used to update employees, customers and shareholders about revisions and additions to the program. 

Strive for Continuous Improvement

Like any program, a process for evaluating and improving the effectiveness of an ethics program is critical to its long-term success.  Regular surveys of employees and clients, small discussion groups, records of compliance, media attention, and voiced concerns and their consequences can all be used to track how well the program is reaching company goals.  Creating regular programs to educate employees and renew their commitment to the policies is a way to ensure that the program stays tailored to the company and fresh in employees minds.  This can be done with annual ethics refresher training, pledging to the Code of Conduct, and having employees play an active role in revising the Code of Conduct and ethics programs.

Get Started

These guidelines establish a model that is flexible enough to adapt to any company.  The guidelines emphasize five keys to a successful ethics program: leadership, company-wide tailored programs, written policies, communication, and continuous evaluation.  Companies today cannot afford to disregard ethics.  It is critical to retaining the trust of your employees, shareholders, and customers.

For more information, call Sandra Doran, toll free, at 1-888-688-8500.

Ms. Doran gratefully acknowledges the assistance of Sarah Butterfield, also of Holland & Knight LLP, in the writing of this article.