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Ethics Officers: Support From The Top Crucial To Success

Martinek Paul J. | May 31, 2005

This article is Part One of a two-part series on ethics programs. Next week, we take an outsider's view of corporate ethics programs; when it comes to corporate ethics programs, many experts fear there is too much focus on "process," and not enough focus on results.

Helplines, surveys, focus groups and employee training are great, but active support from the top may be the most important aspect of having a successful ethics program. That’s the message from three ethics and compliance officers who agreed to share their experiences with Compliance Week.


The support of corporate leadership should be connected to the business, notes Barbara (Bobby) Kipp, global ethics leader for PricewaterhouseCoopers. “You really have to understand your business first and make your leaders understand that what you’re doing is critical to the success of the business that you’re in,” says Kipp, citing a survey sponsored by the Ethics Officer Association that showed that ethics and loyalty are directly linked—both at the employee and the vendor level.

For a company like PwC, where one of the main challenges is attracting and retaining good employees and clients, that connection is important, says Kipp. “Suddenly it’s not ‘Dudley Do-Right,’ it’s ‘Oh, this is critically linked to our business success.’”

Claudia Toussaint, vice president of corporate governance and ethics for Sprint Corp., agrees that companies “absolutely need to have the tone at the top and senior executive leadership support. Your board and CEO must be 100 percent committed to this. You can’t just say, ‘Let’s put a program in place’ and have it be on autopilot.”

An effective compliance program requires “benchmarking, reinvigorating, raising awareness and making people understand that they have accountability. Every employee and every manager has it,” adds Toussaint.

Kristine Rapp, vice president of ethics and compliance for Hospira, says that it’s important to remember that one of the primary reasons companies are required to have ethics programs is in the event of a worst-case scenario in which the company is called before a judge and forced to defend its conduct. “Any compliance officer who says he doesn’t think about that at least a couple times a week is probably not being honest,” she says. But Rapp adds that defending conduct in the courts isn't necessarily the motivating force behind her group's ethical focus. “We need to do things for the right reasons—reasons that are supportive of the company’s objectives.”

Ethics ‘Baked Into The Process’

PwC, according to Kipp, was “clearly first out” among the Big Four accounting firms in terms of having an ethics program. “We have a longstanding program that’s been in effect since 1996, long before the auditing profession was in such a limelight,” she says.

One of the things that is unique about the PwC program, according to Kipp, “is the way we operate it globally.” A lot of large multi-national U.S.-based companies “have a code of conduct but it’s a one-size-fits-all program that they translate and they ship around the world,” Kipp says. “They might even have one global telephone number. What we decided for PwC was that it wasn’t the best approach.”

PwC has one standard code of conduct, with 24 principles of conduct, that applies around the world. But, Kipp adds, the company “determined that the implementation of that [code] needs to be driven on a local basis—guidance, training, communications, response mechanisms, helplines. [We do that because] there are differences in law and regulation and some significant cultural differences.”

Kipp says it’s “very difficult to reach conclusions” about a company’s ethics program based solely on indicators such as violations of the law, whether the rate of violations is going up or down, or activity on the helpline. “You should look at all these indicators but also look at periodic employee-attitude measurements,” she says. “We ask people if they believe they are personally responsible for reporting ethical violations. We ask them if they feel they can report questions or potential misconduct in a confidential manner. We ask these questions through internal surveys. We look at responses over time and it gives us a good idea whether our business-conduct programs are having the right effect on our culture.”

Ethics is “one of the core competencies for PwC from the time [employees] are recruited, all the way through the employment relationship,” says Kipp. “Courage and integrity—we look for that quality in people before we hire them. We ask them about their life experiences, their work experiences, times they’ve been asked to break the rules, things they didn’t agree with and how they responded. … That whole notion of courage and integrity is built into all of our employment relationship activities.”

Kipp adds that training is important but that PwC doesn’t do the "once-a-year-everyone-gets-the-same-code-of- conduct-refresher-course" type of training. "If you want an ethics program to become part of the culture, you integrate ethics into your normal learning," she says. According to Kipp, ethics is also built into the performance-assessment process, which occurs "at major career milestones" and other points as well.

According to Kipp, evidence of the institutionalization of ethics at PwC is supported by the reality that the ethics office has become involved in key decisions. “More and more, as people are doing initiatives, whether it’s negotiating contracts with big suppliers, or rolling out products, we’ve been baked into the process. As the firm is going through the process of appointing its new partners, or assigning people to leadership positions, there’s a stop along the way … to make sure that the ethics office has input into these important decisions.”

‘Constant Vigilance And Reinforcement’


At Sprint, ethics has been an “evolutionary process,” says Toussaint. “We have had an ethics program, an ethics helpline and an ethics code since the first federal [sentencing] guidelines were passed; with the passage of Sarbanes-Oxley and the revised sentencing guidelines, we’ve looked at what kind of refinements or additional program elements [are necessary].”

According to Toussaint, the company has an “ethics and compliance council" led by the CEO, which meets three to four times a year. The counsel gets reports "on how the various components of ethics and compliance programs are run and operated throughout the company,” says Toussaint. “We’ve also put in place something we call an ethics liaison program—additional arms and legs in our corporate center functions and business units that supplement the central ethics and compliance office.” Toussaint says that the liaisons play a key role in "customizing our communications strategy, our training strategy and our risk assessment strategy in the different organizations that they represent.”

Heightened awareness of ethics issues can be seen in the amount and type of activity on Sprint’s 24/7 helpline, adds Toussaint. “There is a great deal of activity with regard to calls from employees seeking guidance,” she says, noting that hotline personnel “are trained to answer most calls for guidance right there.” The helpline, according to Toussaint, allows the company to “hear about things, including things you might not have considered. You can take that input and look at it from the perspective of how we should structure the compliance program. … We also use this data to facilitate the substance of risk assessment processes.”

Sprint also conducts online, Web-based ethics training programs that have a video component; Toussaint says that 98 percent of the company’s 58,000 employees completed the program well before the deadline. “It has 10 different scenarios to it," she says. The employees "get different scenarios and are tested on it .... [they] have to get 100 percent right.”

Another means of benchmarking the ethics program at Sprint is an employee "preference survey," which is held with a randomly selected group of employees every quarter. “There is a set of ethics-related questions in the survey," says Toussaint. "We’re now monitoring and tracking our ethics index to see what it looks like and how it changes. … We [also] look at external benchmarks in terms of program elements and in terms of what others are doing to get a sense of what others look at and what standards others use to benchmark our program.”

Ethics is also a component in the employee evaluation process, Toussaint notes. “There is a value that measures how you do work, not necessarily what you do but how you do your job. One of them is based on the value of integrity,” she says. “We do not compile statistics based on that, but it’s something we’re looking at, putting a more quantifiable element to that. And we have hard-wired the ethics training as part of everybody’s performance review. We look at ethics liaisons and their performance evaluation reflects how effective they’re doing their job.”

Toussaint says that “constant vigilance and reinforcement” are crucial to having a successful ethics program—“otherwise you’ll have a paper program and not one that is a living, breathing program that people feel is providing the company with a competitive advantage.”

The Integrity Direction


Of the three ethics officers who spoke with Compliance Week, Kris Rapp’s experience is unique because Hospira—a pharmaceutical and medication delivery company—is just one year old. “We are a spin-off, so we are building a new company with a new culture,” she says, noting that the company’s CEO, Chris Begley, tried to get things started on the right foot by handing out copies of a book called The Integrity Advantage” to employees on Hospira’s first day.

Because it was so new, Hospira had to build its ethics and compliance program from the ground up. According to Rapp, that provided the company with a unique opportunity to ensure that the messages resonated with employees. “One critical aspect of a Code of Business Conduct that works is that you have to speak to the everyman, not simply to the lawyers in the organization," she says. "We asked people, ‘What does “integrity” mean to you?’ We wrote our code around fundamental interpretations of what the word is—we started thinking [about] what should be our principles of integrity.”

Live, face-to-face training in a classroom is important, Rapp says. “Ethics particularly is about discussions with people. You have to have an ability to have interactions. ... Each employee takes the same multiple-choice test. Next quarter we will do a management certification—we’ll ask our management very pointed questions to get at whether they have taken the messages in the Code to the next level.”

Because Hospira is relatively new, it's more difficult for the company to benchmark the effectiveness of it's ethics program. “It’s rather early to gage our success,” she says, noting that she is just now “considering the sort and scope of ethics and compliance survey that we want to do.” According to Rapp, she does conduct focus groups with employees at all levels in every facility that she visits. “When the sessions begin, everyone is a little uncertain about why they’re there," she says. "But, by the time we get to the end of the session, the employees have the sense that they’re important. … They realize that we all have a role in making sure we steer this new company in the right direction—the integrity direction.”

Hospira’s ethics hotline is handled by an outside service that has the ability to handle calls “in nearly all languages,” Rapp says. “When we first started, people didn’t realize that [the helpline] existed, so we sent out brochures with reminder cards and reinforced that message in the Code itself. At the early days of the company, I would report to senior management that there was not much activity on helpline. But we’ve begun to see greater use of helpline.”

Like her colleagues in other companies, Rapp stresses the importance of the “tone at the top” in making an ethics program successful. And for Rapp, that means gaining access to executive offices and the boardroom. "I’m at the table with the officers," she says. "I have an opportunity to influence their thinking and help them to integrate ethics and compliance considerations into their roles.”

But Rapp notes that it's critical companies are consistent in how they handle issues. "Deal with people at the top, middle and bottom of the organization in the same way," she says. "It’s the right way to do it, the fair way. Fairness is part of the whole ethics and compliance framework. It sends a strong message about what ‘integrity’ really means.”

Part Two of this series on ethics programs will be published June 7.