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HR and Business Ethics: Lessons from the Downturn Shelly Trent, SPHR; Field Services Director
Ethics is Back in the News HR and Ethics Our financial crisis is due in large part to questionable business practices Madoff Ponzi scheme is among latest cases of fraud to hit the headlines Has HR done enough to create ethical business cultures?
“ The nation’s business leaders are confronting a confusing and stark reality. Few have ever faced such calamitous circumstances. A daunting task lies before them: making sure their corporations survive and positioning their businesses for the opportunities that lie ahead after this storm subsides. Every action and decision matters. Urgency, speed and flexibility become imperatives.
“ Leaders are being tested for their values, authenticity and realism. They need to be tough-minded. They will have to exercise intellectual rigor and be intellectually honest about the challenges they face and whatever painful steps must be taken to keep their businesses on the right paths. This is a time for leaders to lead.”
Ram Charan, HRMagazine, February 2009
HR and Business Ethics Ethics is Back in the News
Wall Street Firms Implode HR and Business Ethics Starting with Bear Stearns, venerable financial institutions have faced bankruptcy The U.S. government has been forced to spend billions on rescue and stimulus plans News of CEO “golden parachutes” and untimely bonuses have shocked Americans The reputation of the banking and financial sectors is at an all-time low
Sarbanes-Oxley Act of 2002 HR and Business Ethics Passed by Congress in response to Enron and other scandals High-level oversight of publicly traded company financial records Companies must disclose whether they have a code of conduct HR is involved in onerous and expensive SOX compliance
SOX Provisions HR and Business Ethics Section 301: Must have complaint system, anti-retaliation statement Section 404: Must show adequate internal control structure and procedures for financial reporting Section 406: Must have code of conduct in place Section 806: Must have system to protect Whistleblowers
SOX is not a panacea: It is only for publicly traded companies
and only a legal framework for ethics
HR professionals can take a leadership role by creating
cultures in which integrity is a priority
Being legal is not enough -- Litmus test must be: Is it ethical?
Six Basic Elements HR and Business Ethics Ethical Business Culture 1- Written Standards 2- Ethics Training 3- Mechanism for Getting Advice 4- Means to Report Anonymously 6- Ethics Inclusion in Performance Rating 5- Discipline for Misconduct
SHRM 2008 Business Ethics Survey HR and Business Ethics www.shrm.org/Research/SurveyFindings/Pages/CorporateEthicsSocialResponsibility.aspx
Many ethical situations are not clear-cut and require HR
expertise to arrive at a workable solution.
Most HR professionals in our 2008 survey said their HR
departments were a primary resource for ethics issues
Most also indicated involvement in formulating ethics
policies to a moderate or large extent
Unfortunately, many others do not feel they are truly part
of the ethics infrastructure, except to clean up the mess
Chief Ethics & Compliance Officer HR and Business Ethics
Many organizations are beginning to name CECOs with
specific responsibility for ethics and compliance
At some organizations, the senior HR executive has taken
on this added role
To be effective, a CECO must have sufficient authority and
ideally should report to or be a member of the C-suite
2007 PricewaterhouseCoopers Crime Survey HR and Business Ethics “ Internal controls are not sufficient. Rather, it is the ethical corporate culture that plays a key role in deterring fraud, with companies that have ethical policies and compliance programs reporting fewer economic crimes.”
Case Study – Cisco Systems In 2007, Cisco decided to rewrite its code of conduct and wanted a new ethics training tool To accomplish this, it partnered with The Network, a San Diego-based IT company The new user-friendly code of conduct rolled out in 2008 and was well received by Cisco’s 65,000 employees worldwide It also received an “A” rating by Ethisphere Magazine and was featured in CRO Magazine’s 2008 “100 Best Corporate Citizens”
Case Study – Cisco Systems In conjunction with its new code of conduct, Cisco launched “Ethics Idol,” an online cartoon parody of “American Idol.” The educational flash module on Cisco’s intranet engages employees in making decisions about ethical situations. “Ethics Idol” has helped raise awareness among Cisco employees that ethical dilemmas are not always cut and dry.
Business Ethics and CSR HR and Business Ethics
Ethics and good governance are important elements of
corporate social responsibility and business sustainability
CSR also includes corporate concern for the environment
and for community needs
Fortune 500 companies like Cisco value their reputations
as good corporate citizens since it helps their stock prices
The rise of CSR to become a strategic business objective
has helped raise the profile of business ethics
Look to SHRM for Support HR and Business Ethics
Look to SHRM for Support HR and Business Ethics
Look to SHRM for Support HR and Business Ethics
HR and Business Ethics MY SPACE SURPRISE You are Director of HR for 21st Century Pharmaceuticals; in the final stages of filling a Senior Systems Analyst position in IT. It’s a critical position, overseeing several key systems for the organization. Director of IT has identified Jason Martin as top candidate; asks you to conduct reference check on his background. All professional/personal references checked out; your final step is to “Google” him and to see if he has home pages on myspace.com and facebook.com. You find the normal photos, overview of interests and a personal blog. While reading the blog, you discover that Jason is passionate in his opposition to the use of animals in medical research, something that is a common practice at your company and in your industry. Do you hire Jason?
HR and Business Ethics TO THE NTH DEGREE You are HR Manager for Dominion Supplies; in process of filling new position of Call Center Operations Manager. Laura Grant has been a stellar Customer Service Rep for you for the past three years and is top candidate for the position. As part of your regular processes and policy, which states “ In consideration of an applicant for employment, or a current employee for promotion, transfer, reassignment or retention, Dominion Supplies may inquire into an individual’s background ,” you are verifying Laura’s educational background. She stated that she was graduate of Commonwealth University with a B.A. Degree in Business Administration on both her resume and her original employment application. Commonwealth University has reported that while Laura was a student there, she did not attain her degree. You meet personally with Laura and she admits that she falsified her degree. Your policies also state that falsification of information on the application form may be grounds for employment termination. What should you do?
HR and Business Ethics WOULD YOU MIND? A major metropolitan city has asked several IT companies to respond to a $50 million proposal to install a new computer system for the city and its various operating departments. HIGHTECH is one of the two finalists, and as part of the final negotiation process, the sales team has an opportunity to observe and become knowledgeable about the competing company’s (DIVERSE PLUS) sales and marketing group. Of DIVERSE PLUS’s five representatives, two are African American and one is Hispanic. One of the African Americans is female. HIGHTECH’s sales and marketing representation consists of five white males. The judging panel consists of six people – three are people of color and four are female. DIVERSE PLUS is awarded the contract. Upon debriefing the situation, the HIGHTECH team comes to the conclusion that one possible reason why the company was not selected was because its sales and marketing team lacked the diversity that DIVERSE PLUS had. Next week, HIGHTECH is scheduled to enter into an almost identical competitive bid situation with another major metropolitan government. The sales manager suggests that Roosevelt Jackson, an African American male hired by the department about six months ago, be the one to pitch the firm’s services to this client, even though he has not been involved in the project and knows little about it. Mr. Jackson is subsequently asked by management to “make the pitch.” Roosevelt Jackson then goes to you , the HR Director, to suggest that he sees this request as a form of racism and misrepresentation because the company has few people of color in its sales and marketing group and, in general, is not known for any special type of attention to diversity. While the request is offensive, he suggests to you that it also could have life-long career implications for him – either positive or negative. Also, he mentions a desire to help the company in its sales efforts. He’s not sure what he should do. How do you advise Mr. Jackson?
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