Performance Management

Ethics Training: New Needs, New Times

Learning and development are important parts of profitable organizations. Topics such as communication, leadership, team building, change management and diversity are all familiar to the vice president of human resources or the chief learning officer. In this new era, ethics and surrounding compliance laws have become a vital topic for training. The chief ethics and compliance officer (CECO) is an emerging title in the corporate world.

How does the leader of an organization set an example and instill ethics into the fabric of everyday business? How does an organization go from just a profitable company to one that is also values-based? It’s no wonder ethics training is becoming mandatory.

With the Sarbanes-Oxley (SOX) federal sentencing guidelines keeping a watchful eye on publicly traded companies, top-level executives are on notice. No one wants a repeat of Enron, WorldCom or Hewlett-Packard.

Of course, this raises more questions about how publicly traded versus privately held companies operate.

Although ethics training mandates exist for publicly traded companies, most companies do not want to disclose why they implement an ethics training program. Does it mean they have internal issues that need to be resolved? Not necessarily. For most organizations that offer ethics training, however, it typically is folded into a larger training program that covers diversity, leadership or values training.

Interestingly, in 1992, the Ethics & Compliance Officer Association was established with 19 companies, and it has since grown to nearly 700 member organizations. Each of these companies agrees to adhere to the code of conduct of the association.

What is a Code of Ethics or Conduct?
Before SOX, when employees joined an organization, they received and read a handbook that included a code of ethics. After reading the handbook, they simply signed off, stating they had read and understood it.

Was this enough? In hindsight, no. Today, companies share a universal element: They all have a code of ethics or a code of conduct that resides in a policy handbook given to every employee.

It’s the implementation, however, that sets these companies apart. Before we address how to put a code of ethics into action, we need to define it. So, what is a code of ethics or conduct? That depends on whom you ask.

The common thread among trainers, HR professionals, CLOs, executives, ombudsmen and consultants is that communicating core company values reinforces best practices, behaviors and standards for all employees. The result is strict guidelines that spell out what is considered acceptable and unacceptable behavior and is deemed enforceable.

The biggest mistake companies make is they don�t take the time to monitor and enforce their code of ethics when it�s not followed. Enron is a great example of this � it had ethics training, but it didn�t enforce the training.

Ronald Castaneda is an instructional designer and ethics trainer who has worked in many industries. He said he thinks every company needs a moral compass or a code of conduct to create a culture embedded in ethics. This ultimately keeps the organization on track.

�If a culture is embedded in ethics, it will live in all departments from the top down,� he said.

Because of SOX, companies across the country are dusting off their policy and procedures handbooks and taking out the code of ethics to review. They are tasked to revise and put these codes into action through some form of ethics training.

Although most companies execute these programs through HR or learning and development, others (such as Bertelsmann, Hewlett-Packard, Google, Levi Strauss and Merck) now execute through the CECO department.

Other companies, including GE, have ombudsmen throughout their organization, and Gap Inc. has a vice president of social responsibility.

Whatever the title, these executives are charged with finding a way for employees at any level to ask questions and report integrity concerns or misconduct without the fear of retribution. They also help incorporate values into the day-to-day business.

Ethics training varies from organization to organization, especially when it comes to documenting and reporting any potential conflict. Training of this nature often can be perceived as a �gray� matter, largely depending on whether an organization is publicly traded.

Ann Sullivan, Innovative HR Resources owner and HR consultant, said effective ethics training helps participants recognize real and potential conflicts of interest and take appropriate action.

�This includes situations that present clear or obvious conflicts of interest but also those that can create the impression of impropriety,� Sullivan said.

The procedures and requirements for reporting conflicts of interest vary, including who must be notified, options for retribution and ultimate consequences. Sullivan said there is a solution.

�A comprehensive approach must be taken and should include a review of internal procedures and policies,� she said. �This includes policies governing operations, financial and employment, training employees, and training and periodic auditing of the system to ensure it is actually working.�

Bridget Graham, Graham Consulting HR consultant, said the cornerstones of good ethics training are integrity and accountability.

�The key is to engage every employee to buy into this and to self-regulate by asking, �If this makes the morning news, would I be OK with it?� Or, �Would I tell my family or children about this?� If the answer is yes, then it probably passes the ethics standard.�

One of the most recent convictions and modern examples of an ethical downfall is Dennis Kozlowski, former Tyco CEO. He was imprisoned for evading sales taxes and pocketing hundreds of millions through the sale of company stock while lying about the company�s finances. He also received unauthorized bonuses and ran personal expenses through interest-free Tyco loans.

In a recent interview on �60 Minutes,� Kozlowski said he did nothing wrong because Tyco had policies that allowed him to take such actions.

�This was the way the company had been run for years,� he said.

So, why then did jurors convict him? What did he do that was illegal or immoral if the company policy authorizes executives� carte blanche?

The case of Tyco and Kozlowski brings us back to what is considered ethical and unethical in the workplace. Several experts agree that if the company�s policies � more specifically, the code of ethics � are not written in black and white, it creates a larger problem to enforce any consequential actions.

Although SOX has made it mandatory for publicly traded companies to comply, what about privately held or nonprofit organizations? This poses an interesting problem, as well.

What motivates an organization to act ethically when greed, egos and power are today�s priorities? It makes for an unusual conundrum. Companies such as Boeing, Microsoft, Nortel, American Express, AOL, AstraZeneca and Lockheed Martin are taking this very seriously. In fact, many of these companies are tying the code of ethics to performance reviews.

Values Aren�t Meant to Live on the Wall
The greatest challenge for CECOs and corporations is to implement ethics training that is long-lasting. Although certain companies have no choice in the matter, they do have a choice on how they go about it. As is almost always the case with ethics training, the impetus to train employees began with a legal/compliance-related requirement. Anyone can set up something to comply with the law, but companies need to determine the value an ethics program can provide the company.

For ethically driven companies, it�s about taking the values off the wall and living them daily. Consider this: If employees know that acting with integrity is part of their performance reviews, they are more likely to act with integrity, and if not, pay the consequences.

This also makes it easier for whistleblowers to come forward the instant the violation is observed. Graham said whistleblowers are the new protected class, which has helped companies encourage employees to bring questionable matters to the proper attention immediately. This eliminates the issue of �Should I or shouldn�t I tell?�

What is the Best Way to Implement This Solution Over the Long Term?
Some organizations have rolled out an ethics-training program as part of a diversity or leadership program that�s directly tied to performance goals and based on values.

�These companies have a much greater success rate in creating a values-based organization or what some might call an ethically sound culture,� said Richard Friend, Ph.D., and Judy Seidenstein, co-founders of Diversity Matters.

They also said it�s critical that all employees participate to sustain the integrity and accountability of a solid ethics-training program.

Typically, the components of a well-structured ethics program begin with the organization�s leadership. Employee buy-in is essential for its long-term success. The program has to be aligned with the corporate culture and must have written policies and procedures to reinforce it. The training must be designed with real workplace scenarios and moral issues to discuss and deliver effective training to all employees.

The question that remains for executives, HR professionals, trainers and consultants is: How do you ensure employees will do the right thing when no one is looking? Where do you draw the line of ethical and unethical behavior, and what constitutes raising a red flag?

Some would say any red-flag behavior could lead to more delinquent behavior. Others might say it is innocent, harmless behavior. For the employee in a minefield of ethical issues, it might be difficult to determine.

Many CLOs and HR professionals implement ethics-training programs that create situations that pose moral questions and workplace scenarios, allowing employees to discuss these types of situations so they know how to make a proper decision.

They typically hire consultants who use various tools in the marketplace or create scenarios on their own as part of a strong ethics-training program. They allow the employee to learn how to engage in honest conversations, take accountability for their decisions and understand the consequences. Often, participants find it refreshing to get these types of issues and situations out on the table and learn about the options and �what ifs� that lead to good decisions.

The bottom line is that organizations need to be on their ethical toes to keep everyone on track and create an environment that instills values in the daily fabric of their employees� lives.

As a CLO, can you ensure your code of conduct or ethics has the systems to enforce it? Are your employees operating with integrity and accountability in their everyday performance? One mistake made public can send a company�s stock or valuation plummeting. Is your company on the ethical high road?

Michelle Burke is co-founder of Interact Games Ltd., a company focused on bringing products that bridge the communication gap into the workplace and home. She can be reached at

When is the Last Time You Reviewed Your Company�s Code of Ethics or Code of Conduct?
As the CLO of your organization, ask yourself the following questions:

1. Have you reviewed your code of ethics or code of conduct in the past 12 months?

2. Have your employees reread your code of ethics or code of conduct in the last 12 months and signed off?

3. Do you have ongoing e-learning or classroom training that includes real-world moral dilemmas and ethical issues?

4. Does your performance management system support ethical behavior, and is it tied back to your company�s values?

5. Are systems in place to deal with an unethical situation with an employee or executive?

6. Do you have someone who is responsible for managing and overseeing these processes?

7. Are procedures for reporting violations posted, and is there a toll-free number set up to report violations or possible violations?

8. Have you ensured fairness throughout this process via a checks-and-balances system?

9. Is leadership prepared to deal with these reports?

10. Are you willing to take the necessary action if a violation has occurred?

If you are able to say yes to the above questions, your company likely has created an ethical culture with the right systems in place. If not, what are you going to do about it? It takes only one issue that is grossly mishandled to land a company in the news, or worse, before the Securities and Exchange Commission.

Filed under: Performance Management, Technology