Organizational Integrity, and how values, principles, and practices are integrated throughout the organization 27 July 02

The nature of an organization's program must be congruent with or "fit" its culture. If it has a compliance culture, it may easily implement a compliance program. But if it has a more values-based culture, it will find a compliance program actively or passively resisted. In any event, until the rules, principles, or values are fully integrated, anything short is still essentially a compliance program from its stakeholders' points of view.

Putting Values and Principles into Practice. Implementing an ethics or compliance program (referred to here as a "Corporate Responsibility Program") can be a complex and daunting task. The goal is to make ethical norms the basis for decision-making and action at all organizational levels. Implementation requires broad as well as intimate understanding of organizational culture, history, structure and systems and its external environment.

A recent study and experience find several organizational and Corporate Responsibility Program design factors that influence ethics/compliance management effectiveness

• Ethical and Legal Context (the extent to which its industry is characterized by government laws and regulations, whether its employee base is compliance- or values-oriented, the national cultures influencing its operations)

• Organizational Culture (executive and supervisory leadership, fair treatment of employees, ethics in discussion and dialogue, ethical conduct rewarded, organizational focus)

• Program Orientation (whether the approach taken is compliance-based, values-based or designed to satisfy external stakeholders or protect management)

• Formal Program Characteristics (e.g., an ethics/compliance officer, a code of conduct, a telephone hotline, and performance appraisal)

• Program Follow-through (detection of violators, follow-up on reports, and consistent policy/action)

What tends most to lead toward effective Corporate Responsibility Programs is the ethical culture of the organization, program follow-through, and program orientation. The program must integrate well within the ethical and legal context. Formal program characteristics themselves are of relatively little importance.

Within the ethical culture, what helps are the perceptions that executive and supervisory leadership is strongly committed to ethical conduct; that employees are treated fairly, that ethics issues are talked about, and that ethical behavior was rewarded. What hurts is a culture that requires unquestioning obedience to authority or that is focused on self-interest.

Within program orientation, what helps is emphasizing shared organizational values, supplemented with compliance and external stakeholder aspects. Where balance between the three lies depends upon the culture of the organization, the health of the organization, and the urgency of its situation. What hurts is perception that the program is designed to protect management.

Within program follow-through, what helps most are consistent policies and actions, and following up on reports of misconduct.

The framework described in the executive summary below is intended as a guide to implementing a Corporate Responsibility Program reflecting the above influences and others learned through experience. It is divided into seven sections, each of which identifies key issues to address in building a Corporate Responsibility Program. A detailed description of the required documents and structures follows it.

Operational Summary

1. Prepare and Plan for an Ethics Initiative

• Senior management explores the need for an ethics initiative: this often includes an ethics environment assessment and planning sessions to review assessment recommendations.

• Consider influence of national culture(s).

• Translate all documents into appropriate languages.

• Conduct an in-depth ethics/compliance risk assessment and stakeholder analysis.

• Consider contextual meaning of organizational social responsibility and environmental ethics considerations.

• Develop a rationale and proposal for an ethics initiative, build a supporting "ethics network," and formalize an Ethics Initiative Action Plan for CEO and Board approval.

• Build consensus on the ethics initiative using a comprehensive communication strategy.

• Align organizational goals and strategies with those of involved stakeholders.

• Appoint high-level personnel to lead the effort, and provide them with adequate staff and other resources.

• Train and educate key personnel as necessary.

2. Clarify and Document the Organization's Core Purpose, Core Values and Vision

• Review and reflect on the organization's history, culture and related documents.

• Revise or draft new core ideology and vision statements as necessary.

• Communicate them throughout the organization for review and feedback.

• Finalize core ideology and vision statements and present for Board approval.

• Circulate approved statements as widely as deemed appropriate, including external stakeholders.

3. Clarify and Document the Organization's Mission and Standards of Conduct

• Review and reflect on the organization's history, culture, and related documents.

• Revise or draft organizational and principal division mission statements.

• Communicate them throughout the organization for review and feedback, and present for Board approval.

• Draft a formal code of ethics/conduct based on shared organizational visions and values.

• Distribute code of ethics for review, make revisions, and present for Board approval.

• Begin to review and align existing policies with core ideology and vision statements and ethics code.  

4. Build a Formal Organizational Ethics Structure

• Clarify the roles of the Board of Directors, audit committees, and CEO and their reporting relationships.

• Clarify roles of outside legal counsel, auditors, and ethics and compliance consultants.

• Develop appropriate ethics infrastructure, which may include: appointing ethics officer(s), standing committees, an ombuds, etc. and clarifying the roles, responsibilities and jurisdictions of each. Ensure that there is adequate supporting staff and other resources.

• Create clear communication channels between senior leadership and ethics personnel.

• Conduct ethics/compliance risk analysis and integrate into organization strategies.

• Clarify role of ethics office in strategy and operational policy formulation.

• Clarify role of ethics/compliance office in organizational social responsibility, including philanthropy, public relations, and government relations.

• Join organizations or attend conferences that provide best practices or benchmarking, e.g., the Ethics Officer Association, Health Care Compliance Association, or the ERC Fellows Program.

• Integrate provisions organized labor contracts or labor law into the Corporate Responsibility Program. In US, this includes code of ethics as a bargaining issue, with rare exceptions. In many countries, matters in a US code or routinely provided by contract or labor law.

• Develop due diligence process in hiring, placement, performance evaluation, and retention.

• Develop policy regarding confidentiality of sources.

• Develop a process for conflict resolution consistent with organizational vision and values.

• Develop a process for dealing with external stakeholder, especially government in the event of misconduct.

• Ensure that the Ethics Initiative embraces all applicable legal requirements.

• Develop a process for learning from problems, conflicts, and mistakes.

5. Develop Auditing, Monitoring and Reporting Mechanisms to Support Ethical Conduct

• Develop means to monitor, record and evaluate ethics and compliance systems.

• Develop reliable systems to advise employees and other agents on ethics and compliance matters, and to ensure employee and other agent safety (e.g., from retribution) in ethics reporting.

• Develop contingency plans to guide decision-making in the event of an "ethics crisis," such as a hazardous waste spill or product recall.

• Develop policy regarding exit interviews.

6. Communicate the Organization's Vision, Values, Standards and so forth

• Create a comprehensive ethics/compliance training and education strategy.

• Create the means to implement this strategy and develop the content. Include general ethics training and area-specific training where appropriate.

• Ensure that all employees receive ethics orientation and training.

• Consider online training.

• Evaluate and validate the effects of communications and training at all organizational levels.

• Develop an interactive Web site to communicate to stakeholders and the public the essence of the Corporate Responsibility Program.

7. Align Ethics/Compliance initiatives with other Organizational Systems

• Align mission and vision of organizational units (e.g., branches, departments) with company-wide statements.

• Integrate ethics and compliance goals into organizational strategic planning.

• Integrate ethics and compliance efforts into other organizational initiatives (e.g., HR, IT, PR, Labor-Management, government relations, philanthropy).

• Align work assignments to existing capabilities to achieve creative tension, flow, and learning and growth (facilitation/intrinsic value).

• Align reward systems to encourage behaviors consistent with organizational vision and values (manipulation/instrumental value).

• Periodically publicize disciplinary actions for ethical abuses.

• Create opportunities to share ethics and compliance ideas with regulators, suppliers, vendors and clients.

• Respond appropriately to wrongdoing and prevent further wrongdoing.

• Learn from problems, conflicts, and mistakes and communicate lessons learned as appropriate.

• Support legislation and judicial actions leading to effective Corporate Responsibility Programs.

Corporate Responsibility Program Documents and Structures. The following are typical documents and structures and system adopted as part of a Corporate Responsibility Program.

• Organizational Documents:

• Core Purpose, Core Values, and Vision Statement

• Mission Statements

• Codes of Conduct

• Confidentiality policy

• Compliance Norms and Standards

• Promotional materials

• Structures and Systems that:

• Oversee ethics and compliance

• Communicate standards and procedures.

• Monitor and audit compliance.

• Encourage employees and other agents to report wrongdoing.

• Reinforce appropriate conduct and discipline inappropriate conduct.

• Learn from problems, conflicts, and mistakes.

• Principles and practices:

• Evolving World Ethics

• Stakeholder Engagement

• Ethical Leadership

• Ethical Decision-making

• Managing mental models

• Forming communities of inquiry/practice

• Participation/team building

• Communication

• Cooperation

• Compliance

• Conflict resolution

• Crisis management

• Risk analysis/management

• Quality/Continuous Product/Process Improvement

• Labor-Management Practices

• Environmental Quality Practices

Implementing a Corporate Responsibility Program. As the table in Appendix 2 suggests, the actual strategy employed to implement a cultural change will depend upon the urgency of the situation, the time available, and whether the culture of key stakeholders will support the change.

There is no one-size-fits-all Corporate Responsibility Program. The kind and degree of participation in designing the ethics initiative will depend upon the situation and the condition or health of the organization. The following questions for self-governing organizations in the attached "Model" may be helpful.

It will take attention to all aspects of organizational life to implement a Corporate Responsibility Program. From a systems view, all tasks of the organization must be evaluated. The people who are to perform these tasks must be considered to see if the challenges of the tasks are balanced with the capabilities of the people. The formal structure must be designed and developed to provide the capacity for the people to realize their potential toward shared ends. But most importantly, the organization culture must usually be changed so that organizational aspirations can be achieved.

The dirty little secret of ethics/compliance program implementation is that it is a disruptive and long-term (3-5 years) process if the organization is not otherwise healthy. To be successful, it must often raise fundamental issues. It takes time from business as usual. Moreover, it is highly unlikely that all stakeholders will embrace it. If they did, the organization would not need the initiative. Some members, especially some of long standing, will have to leave for the initiative to take hold. It may be no other way.

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