After the fall of Enron and other ethical scandals, most corporations enacted a code of conduct and distributed it to their employees. Some corporations have undertaken costly internal audits by ethics experts. Corporate counsel have instituted elaborate compliance programs, auditing committees and review boards. So why are corporate ethical violations still in the news everyday? What role can and should corporate counsel play to ensure a corporation doesn't see itself in the headlines for ethics violations?
Fundamentally, despite many corporate counsels' various good faith efforts, very few organizations have actually changed their inherent business culture to be one where ethical violations of any kind are simply not tolerated. This change can only come from the top down and must actively involve employees at all levels of the organization, with corporate counsel leading the charge.
CORPORATE CULTURE AND ETHICS
What is corporate culture and why is it so important regarding ethics? Corporate culture is the shared beliefs, norms, traditions and values of the members of an organization. Simply put, it is "how we do things around here." Corporate culture is an essential aspect of every organization.
Corporate culture guides employees in decision-making where no clear guidelines exist. Similar to the unwritten "rules" that exist in a family, certain inherent principles and values direct employees and supervisors of a corporation.
How do employees learn "how we do things around here"? From the time an employee interviews with an organization, he or she gleans information about corporate culture. Every time an employee attends a company meeting, works on a team project or hears news of a colleague's discipline or departure from the company, that employee formulates his or her perception of corporate culture.
Organizations expound their culture in documents such as mission statements, marketing materials, strategic plans and corporate mottos. However, these documents do very little to inform employees about how the organization perceives itself, what is valued and what behavior is and is not acceptable. Employees look primarily to the behavior of peers and management officials for guidance.
Often, the qualities that make for a highly successful corporate culture from a success and profits standpoint do very little to serve the organization in the ethics arena. Many highly profitable companies are innovative, decentralized, creative, risk-taking and foster internal competition. Corporate counsel can play a pivotal role in assessing the cultural aspects of the company that might serve the organization well from a business standpoint but could indirectly lead to a lapse in ethical practices.
A year ago, the National Business Ethics Survey (NBES) was released by the Ethics Resource Center, the oldest non-profit in the United States devoted to organizational ethics. According to a survey of over 3000 U.S. employees, corporate culture had a stronger impact on ethical outcomes reported by employees than did formal ethics and compliance programs.
The analysis conducted was based on the Federal Sentencing Guidelines, as well as the defining elements of formal compliance programs, ethical culture, risk and outcomes expected of an effective program. The survey revealed that, despite the increased implementation of ethics and compliance program elements, desired outcomes, such as reduced levels of observed misconduct, have not changed since 1994.
(More on this analysis can be found at www.workplaceanswers.com/News/In-House-Counsel-Can-Help-Create-an-Ethical-Corpor218.aspx )
CORPORATE COUNSEL'S ROLE
What role should corporate counsel play in establishing and maintaining an ethical corporate culture?
Enlist outside assistance. Often, those within an organization cannot clearly assess corporate culture and how it might contribute, subtly or not so subtly, to ethical lapses or violations. An objective viewpoint can be invaluable, especially when top levels of the organization are resistant to changing corporate culture.
Honestly assess corporate culture. Is pressure on making certain departments "profit centers" compromising ethical business standards? Where does internal competition become dangerous and invite unethical shortcuts? Do employees at all levels know that doing things the ethical way -- even if it is not the shortest or easiest way -- is expected business practice?
Set measurable criteria for assessment of the success of your organization's compliance program. A year from now, what assessment factors would make your compliance program demonstrably successful? Less actual misconduct? More reports of potential misconduct? More questions from employees about ethical dilemmas?
Take the organization's temperature. Corporate ethics is often perceived very differently by the top of the organization than by the rank-and-file. Research has shown that the higher the level of leadership, the rosier the perception of organizational ethics. Institute mechanisms by which the corporation can elicit feedback from all levels of the company as to what their perceptions are of corporate ethics and where changes are needed.
Communicate, communicate, communicate. Corporate counsel can play a vital role in company meetings, training programs, and daily interactions if they continually explain to all levels of the organization the urgency of strengthening the corporate ethical environment and the responsibility each individual has in that effort.
CONCLUSION
Culture is not just for the human resources department anymore. Empirical data now demonstrates that corporate culture has perhaps the most dramatic effect on whether the members of an organization will act in accordance with the corporation's code of conduct and compliance program than any other single factor. Corporate counsel are in a unique position to institute a robust, comprehensive compliance program, encourage corporate leaders to act in a manner consistent with the spirit of the program and garner feedback from all levels of the organization to ensure that the compliance programs are successful in practice, not just in policy.
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Lynn D. Lieber is the CEO and founder of www.workplaceanswers.com a provider of Web-based human-resource, financial and ethics compliance courses to organizations across the country and around the world. Lieber is a seasoned employment law attorney and a nationally recognized spokeswoman on ethics as well as harassment and discrimination law.
