May 29, 2009
Ten things your company can do to avoid being the next Enron: 1. Examine your ethical climate and put safeguards in place. Corporations are composed of cultures. Take a good close look at your culture. What are the norms of behavior? What is valued? Are employees rewarded for succeeding at any cost or are they urged to be shepherds of the corporation's reputation as well as its assets? What pressures do they face to commit misconduct? What systemic problems exist that could encourage good people to make bad decisions? Consider conducting a formal assessment of your corporate culture from the perspective of attitudes, perceptions, values, standards of conduct, pressures to commit misconduct, communications, risks and vulnerabilities. Pay particular attention to your corporate values and how well they have been internalized by your Board, senior leadership, employees at all levels and key stakeholders. 2. Don't just print, post and pray.
If you have a Code of Conduct or an Ethics Code, printing copies, posting them on the wall and on bulletin boards is not enough. Codes of conduct are an outgrowth of company missions, visions, strategies and values. Thoughtful and effective corporate codes provide guidance for making ethical business decisions that balance conflicting interests. Codes of conduct need to be actual living documents encouraged and valued at the highest levels. Board members and senior executives have to set an example for the type conduct they expect from others. Ethical lapses at the upper echelons of management tend to be perceived as tacit permission to choose the "path of least resistance" at lower levels. Senior management needs to hold itself to the highest standards of conduct before it can demand similar integrity from those at lower levels. Executives who refuse to tolerate misconduct among their peers and who actively seek to model high standards of honesty, transparency and trustworthiness can best demonstrate the commitment to ethical conduct. Publicly restate your corporate Code of Ethics as soon as possible and agree to publish the Code every year in your corporation's annual report. 3. Build a robust ethics infrastructure that is self-sustaining. Writing a code of conduct, supporting it at top levels and communicating it to employees is just a start. Corporations should have a committee of independent non-executive directors on its Board of Directors who are responsibility for ensuring that systems are in place in the corporation to assure employee compliance with the Code of Ethics. Measures they recommend should include staff training, evaluations of compliance systems, appropriate funding and staffing of the corporate ethics office, and effective protections to employees who "blow the whistle" on perceived actions contrary to the spirit and/or letter of the Code. Many corporations establish independent "hot lines" or "help lines" where employees can seek guidance when they are faced with an ethical dilemma or when they encounter unethical conduct in the workplace. Annual training on the code is becoming commonplace. Every publicly listed corporation should consider establishing a regular review system to ensure the Code is dynamic and updated in the light of new developments. 4. Publicly commit to being an ethical organization.
Go public. No, not an IPO (Initial Public Offering) an EPO: an Ethical Public Offering. Corporations that are open about their ethical standards and conduct seem to be more trustworthy than those who stay silent. Some issue an annual report of their ethics accomplishments and the challenges they faced. Other corporations openly post their vision, values and codes of conduct on their web sites for public viewing. Every member of the Board of Directors of a publicly listed corporation should be required to sign the Code of Ethics and pledge that she or he will never support a Board motion to...