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Managing an International Corporate Ethics Program T H O U G H E T H I C S R E Q U I R E S T R A I N I N G A N D R A T I O N A L

C A P A B I L I T Y , I T C A N L A R G E L Y B E L E A R N E D A N D A P P L I E D

B Y J U S T A B O U T A N Y B O D Y . – P L A T O

I F Y O U R A I M I S T O T E A C H bad people to be good, you are doomed to failure. But any company that has somehow managed to exclusively hire a staff of “bad” folks is probably in trouble anyway—or will, at least, soon be. Though the development of a person’s moral judgment and character is an ongoing and continuous process, transforming an individual with little moral character into an honest employee is, most often, an insurmountable challenge. The bottom line—a corporate ethics training course won’t save you if you employ dishonest people, but it sure can help others make the right decisions to help your business.

N O T E : Some unethical decisions have been made due to inexperience or ignorance and not through any premeditated malice.

C a n Y o u T e a c h O l d D o g s N e w T r i c k s ?

Experts can’t emphasize enough that ethics training isn’t really about teaching somebody to be an honest or good person. Beware of the consultant that promises otherwise. The reality is that those values and good traits should have been learned at home, in school or through normal social interactions. The aim of an ethics- training program is to reinforce existing personal values and tie them into “the big picture” values of the company.

Personal character really does matter in the workplace. Employees don’t leave their character at home when they head for the workplace. It is clearly apparent in all social interactions and constantly relied upon when making decisions at work.

One British ethics training officer for a large service industry organization not- so-fondly recalls a time in the mid 1990s when she was sent to Moscow to introduce a training program explaining her company’s ethics code. Since opening in Russia a year earlier, her company had lost hundreds of thousands of pounds of merchandise and physical stock to pilfering.

“I knew pilfering rates in Moscow were high, but ours were even worse than most,” she says. “The first thing I did was look at employee records. Most locals had worked for service industries under the old Soviet system. This was a bunch that came as close to having virtually no ethics when it came to workplace behavior.

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EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 7/17/2017 6:14 PM via EXCELSIOR COLLEGE AN: 438230 ; Mitchell, Charles.; A Short Course in International Business Ethics : Combining Ethics and Profits in Global Business Account: s4946256

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“I didn’t even try to teach a course there. Instead I flew back to London and suggested that the only way we were ever going to end the pilfering and introduce any semblance of ethics in our organization there was to fire the lot. I can teach people how to deal with ethical dilemmas and how to match their personal values with our corporate values, but I can’t teach a bunch of dishonest people how to be honest. That’s society’s role.”

The training officer eventually went back to Moscow more than a year later— after most of the local staff had been replaced with a younger, less-Soviet crowd.

“The training course got a very good reception and we now have pilfering rates that are even below average—and they continue to drop. But I will be honest, it wasn’t really the course that changed the situation, it was the personal ethics of the new staff. We just showed them how to apply what they already knew and felt and showed them the rewards of ethical behavior.”

A s k B e f o r e H i r i n g

So how does a company ensure that the person they are hiring has at least some grounding in ethical business behavior? Of course, if you ask a potential employee outright if they are an honest, ethical employee, invariably they will answer, “Yes.” After all, wouldn’t you do the same? There are, however, more subtle methods to judge a potential employee’s ethical maturity.

Interviewers say it pays to be alert to how a person responds to a tough question. For example, you might ask the job candidate: “Give me an example of a tough ethical dilemma you’ve experienced in your career.” Or you could ask: “Suppose you come into our company and you find yourself working for a boss and you’ve got questions about his or her ethics. What would you do?”

H I N T : In employee interviews, always give the candidate plenty of time to answer a difficult question without interjecting or “helping” them with an answer.

The key is asking questions that don’t necessarily have a right or wrong answer, but enable you to see how a person responds. For instance, are they comfortable with the ethics issue? And do they have the ability to talk about it without getting nervous. If they say, “I never thought about that before,” that may be telling you something about their ethical awareness—and their lack of experience as well.

W A R N I N G : This direct approach is very difficult to apply in high privacy or high context cultures. Simply asking a direct question does not always bring a direct, or even true, answer even in cultures that revel in transparency. Interview situations often result in applicants saying what they think the interviewer wants to hear. Direct questioning is best used at upper management levels rather than with line employees.

T e a c h i n g E t h i c s M e a n s R a i s i n g A w a r e n e s s

If “good” and “bad” behavior can’t be easily taught, what can be taught is the ability to recognize ethical issues and problems in the workplace, the importance

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of the corporate ethics code and what actions one needs to take to arrive at a decision that complies with that code.

Before designing a training course, management needs to consider three basic facts of life:

1. Employees should be held accountable for their actions.

2. They cannot be held accountable for rules that are vague or unclear.

3. Employees are basically trustworthy, but may not be able to make good decisions in circumstances that are confusing.

Employees need to be armed with the knowledge to analyze and resolve ethical dilemmas so that they aren’t paralyzed. In fact, the word “training” can be misleading when applied to corporate ethics programs. No company, regardless of its geographic location or home culture, can train employees to act ethically in the same way that it can provide training in specific job skill courses like computer software or accounting methods. After all, employees come to a job with a personal set of moral standards and values already in place.

With this perspective in mind, the role of ethics training should be to raise awareness about business ethics issues and educate employees about proper business conduct standards and the core values of the organization. The goal should be to provide employees with the guidance and tools they need to apply these standards and values in the workplace and make sound ethical business decisions.

The goals of a corporate ethics training program can be summarized as follows:

■ Enhance staff knowledge on legal requirements. ■ Enable staff to understand and realize ethical standards set by their company. ■ Equip staff with skills to handle ethical dilemmas. ■ Equip management with skills to detect early warning signs of corruption, fraud

and malpractice. ■ Enable staff to abide by the company’s code of conduct.

N O T E : Most firms, especially retailers, make adjustments to their forecasts and pricing to allow for employee theft of goods and misuse of company time. Managers readily accept the existence of these ethical lapses, but become concerned when theft exceeds expectation.

T r a i n i n g B e n e f i t s

The 750 members of the Ethics Officers Association are thoroughly convinced about the benefits to their organizations of the job they do—and they seemed to have convinced those that hold the pursestrings that ethics training does have company-wide benefits. In a 2000 survey of ethics officers, 99 percent responded that they believed their company’s commitment to ethics will increase or at least remain the same in the next five years.

As for benefits, an effective training program can:

■ Improve performance by linking corporate values to individual success. ■ Enhance overall organizational effectiveness by encouraging mutual respect and

trust.

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■ Increase responsiveness to competitive challenges by fostering candor and willingness to learn from mistakes.

■ Strengthen organizational culture by encouraging, recognizing and rewarding values-based behavior.

■ Help create an honest, trustworthy and ethical staff that are valuable assets of a company and the community as a whole.

■ Enhance the reputation and brand name of a company.

D e s i r e d O u t c o m e s : F i r s t K n o w T h e R u l e s

Before beginning a training program it is essential that an organization define exactly what it wants to achieve through the training. Experts suggest some rather broad but worthy goals.

A L L E M P L O Y E E S S H O U L D :

■ Know the rules and understand why they are in place for the company as a whole as well as in their functional area.

■ Act responsibly. ■ Use decision-making resources and skills. ■ Apply the rules appropriately. ■ Know how and where to get help.

A D D I T I O N A L G O A L S F O R M A N A G E R S : ■ Know how to resolve gray areas. ■ Exhibit and encourage responsible behavior. ■ Identify areas of risk and areas of compliance. ■ Set values and provide vision.

P e r s u a d e , D o n ’ t D i c t a t e

Teaching ethical behavior is more than supplying a list of do’s and don’ts. No adult likes to be told what to do in an authoritarian, demeaning manner. In many cultures, especially those that value the independence of the individual, such an approach is likely to encourage potentially disastrous resistance to the ethics effort. It is a matter of not what you teach, but how you teach it.

Many large multinational corporations have shifted the emphasis of their training programs away from passive employee compliance toward a focus on accountability and active employee commitment to living out corporate core values.

The reason for this shift is simple. In the past, ethics training took on a dictatorial “thou shalt not” tone that alienated employees. Now in vogue is a more positive approach, one that stresses individual responsibility, gives employees the tools to understand corporate standards and values and make sound ethical decisions that put those values into action. Ultimately, the role of ethics training has become the empowerment of each and every employee to make ethical decisions.

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While a training course cannot always offer employees the clear-cut answers they may seek about ethical matters, it can reinforce a core set of standards and values that will enhance their abilities to make sound ethical decisions on behalf of the company they represent.

T y p i c a l T r a i n i n g P a c k a g e s

In large corporations, there is no one single training method that is guaranteed to be successful. Most rely on a variety of educational methods, precisely because employees have different learning styles that need to be addressed. Methods include videotapes, live action dramas that present questionable behaviors, ethical case studies and face-to-face meetings. Computer-based interactive multimedia training provides an opportunity to communicate a consistent message to all employees.

Face-to-face discussion and dialogue are perhaps the most important part of any ethics training initiative. Also useful in large firms is an ethics hotline—a confidential telephone number with dedicated trained employees that people can use 24 hours a day, seven days a week, to ask confidential questions and raise concerns about business conduct issues.

One key for success is to obtain input from employees about their most pressing concerns and use that information to design training programs. A training effort is much more effective when it addresses issues that are meaningful to employees. Companies can actually use their hotlines and training sessions as a channel for gathering information about the topics employees most want to discuss.

A P h a s e d I n t r o d u c t i o n : O n e C o m p a n y ’ s E x p e r i e n c e

Through trial and error, corporations have learned that introducing a corporate training program is best done though phases with management being trained before the rank and file. Here is how one large telecommunications company handled the introduction of its ethics training program.

All management employees from senior officers to first-line supervisors were required to take an Ethics Awareness Workshop. They experienced a training package designed to help employees understand the importance of using the ethics code and to encourage dialogue about ethical issues and decisions they might face on the job. Having equipped management with the fundamental tools, the company then included line employees through meetings with their supervisors.

The next building block enhancement, designed to bring awareness to a new level, was Values and Ethics in the Workplace—a course developed for managers to reinforce the company’s core values and help managers learn how to put those values into action in their organizations. The cornerstone of this training was an ethical decision-making model—a structured step-by-step guide for employees who face an ethical dilemma.

The other type of training program was a more targeted effort addressing specific topics or a particular job level or work function with a cluster of related concerns. One course dealt with employees working with government officials and employees. The training used hypothetical case studies to help employees refine their abilities to think through ethical issues.

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When the company’s ethics code was rewritten, the company devised a new training program; it featured a 30-minute videotape accompanied by a leader’s guide to help supervisors frame discussions about the video with their work teams. The tape included three real-life vignettes, each dramatically portraying a key ethics issue employees might face in the workplace—respecting others in the workplace, the accuracy of company reports and safeguarding the privacy of customer records.

After initial training modules helped employees gain a general understanding of the importance of ethics in the workplace, the company refined the training to help employees make daily job decisions using the company’s core values as a framework.

T h e B a s i c E l e m e n t s o f a n E f f e c t i v e E t h i c s T r a i n i n g C o u r s e

In the late 1990s, KPMG’s Business Ethics Institute and the Center for the Study of Ethics and Behavior in Accounting at Binghampton University surveyed 41 multinational firms to determine essential tools for ethics training. In addition to senior management’s genuine commitment to ethical behavior, the following are the most important elements of an effective training course:

1. Training that focuses on improving decision-making and reasoning skills rather than preaching legal compliance or rule adherence.

2. Live instruction and face-to-face interaction and dialogue among peers.

3. Small classes of no more than 25 people to allow employees to interact and role play more freely.

4. Executive endorsement. Ethics training programs receive more support among employees when senior managers make personal visits, provide a video-taped message and generally promote the importance of ethical behavior within the global marketplace.

5. Follow-up communication within six months of the first ethics course. Various follow-up approaches include an ethics article in the company newsletter, organizing an employee network and informal ethics focus groups to discuss case materials in person or via the company intranet.

6. Other key features of an effective ethics training program include realistic case materials, the use of a professional trainer, at least four hours of training, a separate course on compliance and an awareness program for new employees.

E s s e n t i a l s f o r E t h i c s T r a i n i n g

Experts agree that five elements are essential for an effective training program:

1. A phased approach.

2. Multi media messages and multiple delivery systems.

3. Decision-making resources (written code, help-line).

4. Case discussions.

5. Multimedia ethics games and simulations.

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W a y s t o D e l i v e r t h e E t h i c s M e s s a g e

■ Videos. ■ Brochures. ■ Posters. ■ Newsletters. ■ Novelties. ■ Intranet. ■ Management actions—“walking the talk.”

K e e p t h e M e s s a g e I n t e r n a t i o n a l

The term “ethics” is a culturally loaded and international companies need to be careful when devising a training program for all, lest they tap into a deep well of resentment. When devising a training program it is important to make sure that the ideas and concepts included in the program are not too deeply imbedded in any particular culture. While virtually all multinational organizations translate their ethics code, fewer actually translate their training materials—a silly mistake. When including videos in a training program, use subtitles whenever possible. It makes your international staff feel that you are interested in making ethics a transnational program. Do not staff all international ethics positions with individuals from your home country. Choose representatives and trainers who are native to the region in question—someone who knows the local language, customs and culture.

T r a i n i n g t o t h e R e s c u e : H o n g K o n g E m e r g e n c y

Over 80 percent of business managers and young workers responding to a 2000 Survey of Young People’s Attitude Towards Work Ethics commissioned by the Independent Commission Against Corruption (ICAC) said the ethical standards of working youth in Hong Kong were deteriorating. Besides, 40 percent of the respondents rated the work ethics of young people as low or very low.

The findings concurred with results of annual ICAC surveys over the past three years, which indicated Hong Kong’s youngsters were comparatively more tolerant of corruption than older generations who had witnessed or suffered from this rampant evil in the 1970s.

Worries over these findings prompted the Conference on Work Ethics of Young People, held at the Hong Kong Convention Center. About 450 people from 250 organizations in various fields—youth, business, education and social services— gathered to map out strategies to improve ethical standards of young people through training. Their answer: introduce ethical training in schools and companies.

T h e E t h i c s O f f i c e

In some organizations the ethics officer has often been seen as a policeman, enforcing conduct, doing formal audits and disciplining wrongdoers. However, this vision has changed in recent years, partly because corporate ethics programs

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have become more comprehensive (and subtle) and the ethics officers themselves realized that they were becoming more isolated within their organization. (No one wants to have lunch with a guy who may be spying on them.)

Today, the basic mission of the ethics office in a major corporation goes beyond simple enforcement and punishment. It must integrate organizational values and integrity throughout all operations to help the organization and its employees live their values with every decision and action.

The ethics officer needs to interact across all functions from legal to human resources to security to corporate governance. The role can be summarized as follows:

1. To ensure that business policies and practices continue to be aligned with ethical principles.

2. To clearly communicate ethical expectations.

3. To provide multiple channels for feedback through which people can ask questions, voice concerns, and seek resolution to ethical issues.

4. To oversee ethics training.

5. To oversee investigations.

T h e E t h i c s O f f i c e r P r o f i l e

According to the Ethical Officers Association, the typical ethics officer in a large multinational corporation:

■ Has been in his/her position for 3.2 years.

■ Has been at his/her company for 14.2 years.

■ Is 49 years old.

■ Has a background in the Legal or Human Resources departments.

■ His/her key responsibilities are: ■ Developing ethics policies and procedures. ■ Overseeing organization-wide ethics and compliance communications, including

external reporting. ■ Overseeing investigations, training. ■ Risk assessment.

Above all, an ethics investigator must be a good listener.

E t h i c s I n v e s t i g a t i o n s

The first step in any workplace investigation, regardless of where on the planet it is taking place, is to prevent the situation from getting any worse. If merchandise is going out the back door in Moscow, Idaho USA or Moscow, Russia, the reaction should be the same—get a better lock. If an employee is complaining about sexual harassment in New York or New Delhi, you should react the same in both cases— make sure that no further incidents occur while the investigation is taking place.

The reality of the international business world today is that no ethics program, no matter how well designed or implemented, can prevent all wrongdoing. But

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how seriously a company regards violations and pursues an investigation may dictate the severity of any legal sanction.

Every nation has its own set of laws governing privacy issues and every culture has its own set of norms regarding management intrusion into areas of personal privacy. Unions, too, will maintain their own versions of what management can and cannot do in an investigation. It is important that an investigation take these basic facts of international life into account—and every investigative team should have at least one individual who is aware of the cultural and legal intricacies of the region. Five basic rules of thumb for investigators, regardless of their geographic location, are:

1. First impressions aren’t always correct.

2. One new piece of information can change the whole perspective.

3. One small misunderstanding can take you down the wrong path.

4. Listening and trying to understand others helps to see the whole picture.

5. Good communication is essential in solving problems.

C o m m o n a n d U n c o m m o n I n v e s t i g a t i o n T e c h n i q u e s

The most common investigative techniques used in an ethics investigation in international businesses are not too dissimilar from those many local police departments would use, though investigators working for a corporation have an easier time getting access to some materials, such as computer disks, voice mail and e-mail.

Some of the basic techniques used by corporations in their ethics investigations include:

■ Document reviews of the transaction in question. ■ Examination of personnel records. ■ Examination of travel and expense records. ■ Interviews with witnesses and other affected employees. ■ Retrieval of electronic data such as e-mail and computer disks, including network

drives. ■ Retrieval of telephone records. ■ Examination of voice mail. ■ Examination of records of entry into the premises. ■ Public records searches (to establish possible motives or personal agendas). ■ Criminal background checks. ■ Confrontational interviews with the individuals in question.

Depending on the size and scope of the investigation and the potential impact on a corporation’s reputation or bottom line (potential fines for violation of laws), more intense techniques are sometimes employed. These include:

■ Physical surveillance. ■ Eavesdropping, such as telephone taps. ■ Desk, file and locker searches. ■ Police intervention.

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■ Personal trash searches. ■ Personal credit reports and review of bank records. ■ Paying informants for information. ■ Polygraph tests. ■ Undercover sting operations.

T i p s F o r H a n d l i n g A n E t h i c s I n v e s t i g a t i o n

■ Take each complaint seriously (but don’t assume the first story is the whole story). ■ Thoroughly understand all the factors involved. ■ Think though the steps that are required. ■ Uphold promises of privacy and confidentiality. ■ Act in a timely fashion. ■ Meet with the accused. ■ Document the investigation. ■ Suggest both internal and external remedies. ■ Implement a follow-up procedure to avoid future problems.

W h a t A c t u a l l y I s B e i n g I n v e s t i g a t e d T h e s e D a y s ?

According to a survey by the Ethics Officer Association, the typical ethics office staff launched an average of 59 investigations in a single year. For global companies with revenues over US$10 billion, the average was 120 investigations.

The most frequently investigated categories were:

1. Misuse of resources.

2. Conflict of interests.

3. Sexual harassment.

4. Discrimination.

5. Theft.

6. Bribery.

I n v e s t i g a t i o n P i t f a l l s

An ethics investigation is not just about catching the malefactor at any cost. Sometimes, how the investigation is conducted has as big an impact on employee morale and trust. A botched ethics investigation may have far worse implications for a company than the unethical practice under investigation. Investigators will face significant dilemmas:

■ Should the accused be made aware of the investigation and told who has leveled the accusation(s)?

■ When are civil authorities brought into the process? ■ Should “whistle-blowers” have their integrity questioned or taken at face value? ■ Should “whistle-blowers” be punished if the accusation(s) is proven false?

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Experts in the field of ethics investigations cite the following as the most common errors of ethics investigations in the workplace:

■ Corporate policies are not clear or non-existent. ■ Roles of parties involved in the investigation are not clearly established. ■ Investigators are not objective. ■ Investigators suffer from an over-zealous mindset. Instead of assembling

information for corporate managers to make a decision, they seek to “prove” guilt.

■ Confidentiality is violated. ■ Rights of the accused are violated. ■ Limits to the investigation are not set or not maintained. ■ Companies fail to consider the potential impact on customers of the investigation

process. ■ Inexperienced managers don’t know how to react.

W A R N I N G : Ethics investigators must be careful not to violate an employee’s legal rights during an investigation. Improper procedures may subject the company to legal liability and bad publicity.

H e l p l i n e s / H o t l i n e s : T h e y D o n ’ t W o r k I n A l l C u l t u r e s

When it comes to managing a global corporate ethics program, the use of telephone hotlines or helplines can be a major component of success—or a major cultural no-no, depending on how and where they are used.

Contrary to popular wisdom, international corporations view their ethics hotlines primarily, not as “snitch lines” for anonymous accusations and tips, but rather as a communications tool to help employees with questions about ethics policy or specifically how to deal with a specific ethical dilemma.

A survey of large multinational corporations by The Conference Board found that over half maintained a telephone information and reporting service related to their ethics program. The main purpose was two-fold: to report potential irregularities and to help employees seek clarification of company ethics and business conduct policies. One-in-five of the companies that maintained these hotlines said they had encountered significant resistance in some countries and cultures.

In some cases, employee resistance may be based on historical events, in others it is the national culture that causes helplines to go unused. Companies report significant resistance to the notion of telephone hotlines in Europe. Indeed, resistance to the idea of anonymous accusations, informers and telephone tip-offs about alleged wrongdoing seems too close to Soviet tactics of using such techniques to denounce enemies and neighbors.

In Latin America and Asia, where the individual comes second to the group and society has a rigid hierarchical culture, the use of a hotline to anonymously report a problem or a perceived ethics violation, is viewed as an act of great disloyalty. It is also considered wrong to deliberately cause a superior to lose face.

And in India, it is highly important who answers the telephone. Callers need to have complete confidence that the person on the other end will keep things

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confidential. For hotlines to work in India, a culture with great respect for office and authority, the person receiving the complaint must be identified as relatively high up in the organization (ideally, even the CEO). He/she should also be well respected within the organization.

International companies have found that in many cultures confidentiality is often a more important aspect of a hotline than anonymity. Disclosure of confidentiality is essential to the preservation of workplace morale; but anonymity can offer employees a dangerous temptation to make malicious or irresponsible accusations. In some cultures where personal vendettas are common, an ethics hotline program can be easily abused.

Companies should not pursue anonymous calls unless there is a clear cut and urgent concern about a threat to life or property. Finally, regardless of the country or culture they operate in, companies should never offer bounties for information. This action is almost universally disdained in the workplace.

To try and overcome this resistance, many international companies have learned to emphasize the advisory role and personal help in understanding the corporate code that hotlines offer. At the same time, they de-emphasize the “informer” aspects. This tactic will only work, of course, if the organization has an overall system of open and honest communication with its employees and a reputation for fairness and honest treatment.

N o b l e W h i s t l e - b l o w e r o r V e n o m o u s I n f o r m e r ?

As part of its international campaign against corruption, the European-based Business and Industry Advisory committee and the Trade Union Advisory Committee to the OECD issued a joint communiqué in December 1999 that recognized a key role for whistle-blowing in anti-corruption programs.

The two committees said that the real impediment to whistle-blowing in Europe was not lingering effects of the informant culture of World War II and the Cold War, but rather the absence of a context of procedures, protections and assurances for whistle-blowers and for those who might be injured by malicious accusations. The two committees said it was far better for systems to be put in place which encourage staff to raise worries within the organization than to place this same staff in a position where they felt they had to approach the media to vent concerns.

To have an effective program in Europe, the committees advised companies to:

1. Communicate a clear statement that malpractice is taken seriously and to give a list of examples of what a company considered to be unethical behavior.

2. Provide assurances of confidentiality for staff raising concerns and an opportunity to raise concerns outside the line management structure.

3. Institute penalties for false and malicious accusations.

4. Give employees a road map on the proper way in which concerns can be raised outside of the organization if they are not answered within the organization.

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