Ethics In Organizations Gary Wheeler, SPHR, GPHR, CCP, CBP

Ethics What is ethics? “Ethics is a set of values defining right from wrong.” …ethical behavior is not black or white, right or wrong.

What is ethics?

“Ethics is a set of values defining right from wrong.”

…ethical behavior is not black or white, right or wrong.

Ethics & the Individual Ethics are a personal set of values …ethics are relative to our perception of reality, and are based on our point of view. It begins when children are taught… No one viewpoint can seek to define ethics.

Ethics are a personal set of values

…ethics are relative to our perception of reality, and are based on our point of view.

It begins when children are taught…

No one viewpoint can seek to define ethics.

Summary of Ethics …ethics should not intrude upon the private lives of other individuals who are not harming anyone.

…ethics should not intrude upon the private lives of other individuals who are not harming anyone.

Examples of Corporate Ethical Issues Cloning Abortion Religious tolerance Homosexuality Population growth Gifts and persuasion Drinking Smoking Gene therapy Nuclear energy Death penalty Politics Open and honest Democracy Dictatorships

Cloning

Abortion

Religious tolerance

Homosexuality

Population growth

Gifts and persuasion

Drinking

Smoking

Gene therapy

Nuclear energy

Death penalty

Politics

Open and honest

Democracy

Dictatorships

Pressures that Compromise Following boss’s directive Meeting aggressive financial objectives Helping the organization survive Meeting scheduled pressures Wanting to be a team player Saving jobs

Following boss’s directive

Meeting aggressive financial objectives

Helping the organization survive

Meeting scheduled pressures

Wanting to be a team player

Saving jobs

Pressures continued Advancing boss’s career interest Rationalizing that others do it Feeling peer pressure Resisting competitive threats Advancing own career interests

Advancing boss’s career interest

Rationalizing that others do it

Feeling peer pressure

Resisting competitive threats

Advancing own career interests

Types of Misconduct Research survey by SHRM 24 types of misconduct observed Top Five Misreporting hours worked Employees lying to supervisors Management lying to employees, customers, vendors or the public Misuse of organizational assets Lying on reports / falsifying records

Research survey by SHRM

24 types of misconduct observed

Top Five

Misreporting hours worked

Employees lying to supervisors

Management lying to employees, customers, vendors or the public

Misuse of organizational assets

Lying on reports / falsifying records

Conflict of Interest Conflict of interest: bribes, kickbacks, sharing inside information, falsifying records, defrauding customers, obstructing an investigation

Conflict of interest: bribes, kickbacks, sharing inside information, falsifying records, defrauding customers, obstructing an investigation

Protection of Company Assets Protection of company assets: misuse of company property, cash, information, ideas, intellectual property

Protection of company assets: misuse of company property, cash, information, ideas, intellectual property

Employment Practices Employment work practices: Federal, state laws: sexual harassment, civil rights violations, discrimination, etc., reporting violations

Employment work practices: Federal, state laws: sexual harassment, civil rights violations, discrimination, etc., reporting violations

Antitrust Antitrust: laws, price fixing, bid rigging, allocation of customers, restraint of trade, how to distance yourself from a possible violation

Antitrust: laws, price fixing, bid rigging, allocation of customers, restraint of trade, how to distance yourself from a possible violation

Environmental Protection Environmental protection: strict legal compliance with corporate, state and federal laws, personal and corporate responsibility

Environmental protection: strict legal compliance with corporate, state and federal laws, personal and corporate responsibility

Influences of Ethical Behavior Personal values Credible enforcement of ethics violations Attitude and behavior of supervisors Attitude and behavior of senior managers Friends and co-workers Internal drive to succeed Ethics related legislation

Personal values

Credible enforcement of ethics violations

Attitude and behavior of supervisors

Attitude and behavior of senior managers

Friends and co-workers

Internal drive to succeed

Ethics related legislation

Corporate and Criminal Fraud Accountability Act SOX

The Sarbanes-Oxley Act Sarbanes-Oxley Act of 2002 Required by law Major changes to the regulation of financial practice and corporate governance Named after Senator Paul Sarbanes and Representative Michael Oxley

Sarbanes-Oxley Act of 2002

Required by law

Major changes to the regulation of financial practice and corporate governance

Named after Senator Paul Sarbanes and Representative Michael Oxley

Reporting Responsibility Corporate officers have reviewed the final report No untrue statements or omissions Financial statements and related information fairly present the financial condition The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings

Corporate officers have reviewed the final report

No untrue statements or omissions

Financial statements and related information fairly present the financial condition

The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings

Reporting Responsibility cont. List of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities Any significant changes in internal controls or related factors that could have a negative impact on the internal controls

List of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities

Any significant changes in internal controls or related factors that could have a negative impact on the internal controls

Disclosure of Periodic Reports Financial statements are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information. These financial statements shall also include all material off-balance sheet liabilities, obligations or transactions.

Financial statements are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information.

These financial statements shall also include all material off-balance sheet liabilities, obligations or transactions.

Management Assessment Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting.

This statement shall also assess the effectiveness of such internal controls and procedures.

Management Assessment cont. The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

Real Time Issuer Disclosures Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.

Criminal Penalties Up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation. Up to 10 years for any accountant who knowingly and willfully violates the requirements of maintenance of all audit or review papers for a period of 5 years

Up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation.

Up to 10 years for any accountant who knowingly and willfully violates the requirements of maintenance of all audit or review papers for a period of 5 years

Corporate Sentencing Guidelines Company fines Individual fines Jail time Loss in share value Company reputation Impact to employee morale Recruiting and attracting talent

Company fines

Individual fines

Jail time

Loss in share value

Company reputation

Impact to employee morale

Recruiting and attracting talent

Best Practices

Accountability Corporate Compliance Officer Internal Audit Team Board of Director Responsible Board Audit Sub-Committee Training Tracking and monitoring tools

Corporate Compliance Officer

Internal Audit Team

Board of Director Responsible

Board Audit Sub-Committee

Training

Tracking and monitoring tools

Business Code of Conduct An outline of responsibilities of or best practice for an individual or the organization Set of principles of good corporate behavior adopted by the company

An outline of responsibilities of or best practice for an individual or the organization

Set of principles of good corporate behavior adopted by the company

Training and Communication Ethics and Integrity New employee orientation Policy and/or employee handbook Periodic discussions in meetings Formal annual communication Performance reviews Employee hotline

Ethics and Integrity

New employee orientation

Policy and/or employee handbook

Periodic discussions in meetings

Formal annual communication

Performance reviews

Employee hotline

Whistle-blower Act A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action. Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest -- fraud, health, safety violations, and corruption are just a few examples

A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action.

Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest -- fraud, health, safety violations, and corruption are just a few examples

Voluntary Reporting Immediately report appropriately Board of Directors Government Shareowners Correct and put controls in place

Immediately report appropriately

Board of Directors

Government

Shareowners

Correct and put controls in place

Discipline The punishment should fit the crime Unintentional Write-up Impact on performance review Deliberate Termination

The punishment should fit the crime

Unintentional

Write-up

Impact on performance review

Deliberate

Termination

Social Responsibility Report appropriate information Suppliers and Vendors Employees General public

Report appropriate information

Suppliers and Vendors

Employees

General public

Thank You