Ethics Resource Center President Patricia Harned

Lately, I’ve been thinking a lot about a conversation I had with a manager from a community credit union. His staff included many enthusiastic and energetic young employees. They enjoyed each other’s company at the office and often socialized outside of work. And sometimes their socializing got a little out of hand.

Among the many, many tales of ethical lapses at Enron, one of the more poignant and painful episodes involved an employee meeting that happened just before the company fell to pieces in late 2001.

It can’t be easy for compliance executives to talk with the audit committee these days. Just two quarters ago, many of you probably met with the committee to discuss conditions in a slowing economy, but nothing so dire as to leave boards alarmed or panicky.

The following letter is in regard to the ethical dilemma of doing right vs. being right:

I first heard the story on the radio: Merck, the pharmaceutical giant, had ghostwritten a number of research studies about a best-selling drug that, not coincidentally, Merck had developed. Prestigious doctors had then signed on as authors of the reports for publication in medical journals.

He was the sheriff of Wall Street, a rising star whom some believed might eventually occupy 1600 Pennsylvania Avenue. Beyond Wall Street, he wanted to change the ethics of New York State and perhaps the nation as a whole. But his own ethical decisions paved the way for his political demise and his disgraced exit from the Statehouse in Albany, N.Y., long before the White House became a reality.

A letter came to me from a reader not long ago, and I have to admit that her question gave me pause. (I’ve kept the author anonymous.)

Rising numbers of mortgage defaults, growing business inventories, declining consumer confidence, falling interest rates, and roller-coaster trading sessions—without question, few economic indicators are heading in the right direction these days. Regardless of the terminology we will ultimately use to define this period in our economic development, it also doesn’t appear that the situation is going to change anytime soon.

Picture the scene: It’s the end of the quarter, and your compliance report is due for inclusion in the board materials. You and your staff have been busy crunching the numbers; so far they’re looking pretty good. The board is going to be pleased, you say to yourself. Fewer helpline calls this quarter. Theft numbers are also lower.

The phone rings; it’s a call to the compliance helpline. You greet your caller, and you are pleased to meet a well-spoken and seemingly responsible employee. She proceeds to tell you her problem.

Picture the scene: You arrive home late from work, again. You’re exhausted and searching for something to eat when the phone rings. A very excited friend blurts out: “I've got two free tickets right behind home plate at the game tomorrow afternoon! Come on, this is a once-in-a-lifetime opportunity!” You say yes right away, thinking that you’ll figure something out with the office.

Imagine waking up from the following nightmare: massive floods caused by global warming; four-year-olds running large machines in dark factories; a village of shacks razed to make way for a new chemical plant. And above it all, the CEO of your company behind the curtain, controlling everything.

Last month’s fifth anniversary of the landmark Sarbanes-Oxley Act spurred a flurry of discussion in both business and political circles about that legislation’s effect on business practices, as well as its success in curtailing the kinds of abuses that brought down Enron, WorldCom, and other giants early in this decade.

OK, compliance and ethics directors: what would you do if your e-mail monitoring system uncovered a romantic relationship between two employees?Or what would you do if you discovered an employee was using his office computer to post corporate information—though completely banal—on his personal blog?

Even a company with a longstanding reputation for ethical conduct and responsible behavior can get mixed up in the bribery and corruption maze. And that should serve as a reminder to every organization involved in international commerce that, along with legal, financial and societal considerations, ethical culture counts.

Walk into any fitness club this time of year and witness the phenomenon: What started on Jan. 1 as an unwavering commitment to get in shape has become a struggle to keep the momentum, if not an outright surrender. Gyms that were packed with people three weeks ago are starting to look deserted. For many people, fitness has lost ground to time and inertia.

With such wide variations in salary and earnings and widespread acceptance of high pay for actors and athletes, why has the topic of excessive executive compensation become the subject of such vehement public outcry? In part, it results from some high-profile instances of executives receiving compensation beyond the average Joe’s comprehension. With new disclosure requirements soon going into effect, the issue once again has risen to the surface. At the heart of the issue is a question of ethics: How much should one individual, even the top executive, receive for an honest day’s work? What is fair?

You hear the shout from Jim next door in the Purchasing Department: “Woo hoo! Look at what our vendors at Acme Corp. just sent me!” He waves the gift over the cubicle wall. “It’s one of those remote-control dinosaurs that’s sold out everywhere. Boy, my son is going to love this!”

There is little question that a company has a right to regulate employee activities that might impact unfavorably on the business—in this case, restricting relationships between certain levels of employees to avoid the potential for harassment claims or accusations by other employees that a supervisor is granting favors to a lower level employee. In fact, when a company does have a policy in place—in writing and publicized to the staff—it is not only right for the company to take action; it is required to investigate and discipline violators appropriately.

Many people firmly believe that what others do in their private lives should not matter to the office, as long as they are able to perform their jobs properly and safely. To a large extent this is true. As the president of an organization myself, I cannot (nor do I want to) tell my employees what they may or may not do in their off-hours. That is, so long as they continue to perform quality work, uphold our values statement, abide by our employee manual and the law, and do not maliciously harm the organization.

It isn’t easy being an executive these days; the risks to organizational and personal reputation alone are enough to cause many a sleepless night. And while being able to point to a Code of Conduct and existing internal controls may help leaders sleep a little better, even enforcement agents are beginning to realize that corporate malfeasance often results from two things: bad decisions by individual actors, and a corporate culture that allows the conduct to occur.

Patricia Harned, president of the Ethics Resource Center, introduces a new column on corporate ethics and explores how ethical problems subtly permeate all aspects of corporate life.