The Importance of Encouraging Ethics

In the past several years, complaints of unethical behavior--whether coming through hotlines or elsewhere--have anecdotally been decreasing in many companies. Could it be that ethical conduct in the corporate world has reached a high point against the backdrop of the recession? That would seem too naive an interpretation of this information.

Ethics compliance programs had already been established before the start of the recession, with many companies starting them in the years following Sarbanes-Oxley. During the recession, when corporate resources were stretched, ethics programs were not eliminated; rather, they lost the focus that companies previously gave them.

In addition, employees were very fearful of complaining--even if reports were anonymous--because their primary concerns were their jobs. If employee confidence increases as the economy improves, there will be less fear of losing jobs as a result of a complaint or investigation.

So now is the time to re-evaluate your ethics program and make it an integral part of your company.

Reconsider whether your organization needs a chief compliance officer who works independently of the general counsel. The CCO's role should be to initiate and execute the company's compliance program, investigate any claims of unethical conduct, and report investigation results and make recommendations to the CEO and executive team.

The general counsel can maintain objectivity if the CCO role falls to someone else, even if that person has responsibilities within the legal department. Optimally the CCO has legal training. It will bring some discipline and fairness to any investigation. An attorney will understand the weight given to different forms of evidence and the limited reliability of types of hearsay evidence.

Establish an anonymous hotline, if not already in place. If one already exists, encourage steps to better publicize it. Remind employees of the company's nonretaliation policy. Hotlines operated by an outside firm can reassure employees that they can make complaints without fear of exposure or retaliation.

In-person training, if conducted in a meaningful, engaging way, can create a buzz among employees that the company is committed to ethical conduct. A vigorous training program can act as a defense against certain claims by individuals or the government. While online training can effectively reach the entire population of employees in a relatively short time, it's no substitution for live training.

Train employees to recognize potential conflicts of interests. Encourage disclosure of potential conflicts that should be resolved by the chief ethics officer. Lack of transparency in any organization can have a devastating impact on morale. Remember, the appearance of impropriety is not a concept that nonlawyers readily grasp. Explain how it applies to everyday workplace situations.

In-house counsel must set the standard for the company's ethical culture:

o Engage members of your staff and management in discussions that focus on the right thing to do in a particular circumstance. Considerations of ethical issues should not be limited to training sessions, but need to be part of everyday corporate life.

o Respect the anonymity of those who approach you with ethical complaints. When management asks who made the complaint, remind them that what is paramount is whether the subject matter of the complaint is true and is evidence of unethical conduct.

o Remember that someone's reputation may be tainted forever as the result of a complaint. Any charge of unethical conduct, even if unproven, can destroy an individual's career path within the organization.

Contributing Author

Thomas Lalla

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