Ethics Programs in a New Era

In the past, business ethics and compliance were often deemed to be one and the same. Today, corporate ethics programs are being held to a higher standard. They are asked to ensure board diversity, supply chain resilience, and support employee morale and motivation. Oftentimes an independent chief ethics officer reports directly to the board of directors. The framework for ethical conduct in organizations seems to be broadening very quickly. Ethics programs still start with the focus of guiding employees not to violate legal or regulatory boundaries. To this end, blanket training and "checking the box" on such initiatives are quickly fading. Instead, companies are faced with making legal and ethical mandates relevant to the specific role an employee plays within the organization. Instead of telling sales employees the consequences of engaging in bribery, the company would help an employee identify and resist pressures to engage in this illegal act. There is a shift in focus occurring now with much more emphasis on training effectiveness versus simple completion.

Companies are also rethinking how incentives are structured and what impact they have on ethical or unethical employee conduct. We have seen this play out at Wells Fargo Bank which provided incentives to sales employees for getting a greater 'share of customer' and opening new accounts. The unintended consequence of the incentive was that Wells Fargo employees opened unauthorized new accounts for current customers, potentially damaging their credit ratings. It's becoming increasingly important that managers not just evaluate whether growth or sales targets were achieved, but how they were achieved.

Another challenge in ethics program development and implementation is breaking down the silos that exist and connecting audit, legal, and sustainability functions beneath a senior member of the leadership team. When there are too many places where ethical issues are managed, there is little overall responsibility for ethical conduct. Boards of directors should play a role in supporting the measurement and management of the ethical culture and behavior of the organization. Engaging in annual, independent culture audits or assessments can determine any potential gaps between stated positions and aspirations and actual behavior.

Today, codes of conduct, along with all of the other changes, are evolving from legalistic risk assessments to principles reflecting legal & regulatory issues as well as ethical commitments. To create an effective and durable ethics program requires collaboration between compliance, culture, and corporate responsibility functions.