Are your employees lying about telling the truth? The unique challenges of ethics and compliance measurement27 Mar 2014 Written by James D. Meacham
The primary goal of most Chief Compliance Officers is to decrease compliance risk by increasing ethical behavior. One of the most difficult questions in pursuit of that goal is how to measure progress. Unfortunately, ethical behavior can’t be directly measured, so the measurements compliance officers rely on are actually proxies for ethical behavior. For compliance programs that have reached a degree of maturity, surveys are among the most commonly used broad-based tool for measuring employee knowledge, attitudes, and buy-in regarding compliance and ethics.
Ethics and Corporate Social Responsibility seem, at first glance, to be two sides of the same coin. Both are voluntary constraints on behavior while in pursuit of profit. Ethics and compliance programs focus on keeping the behavior of individual employees within the law and creating an internal culture of compliance, whereas CSR is concerned with strategic and operational relationships with external stakeholders. The key tool of the Ethics department is the Code of Conduct and its related policies.
It seems like we are always looking for ways to assess our ethics and compliance culture. Is it really possible? Even if areas like culture, which can be tricky to assess and measure…we can see some evidence of some innovative ways to look at concrete data points to develop a risk mitigation strategy. For example, using the data provided by Geert Hofstede’s research database, it’s possible to compare national cultures along the dimensions pioneered by Hofstede.
It’s tempting to think of “best practices” in ethics and compliance as fixed, static, and their evolution as slow and obvious. It’s also easy to forget that our industry is only two decades old and there’s quite a lot that isn’t known about how to reduce compliance risk. At SAI Global, our Advisory Services team is tasked with continually researching and assessing emerging compliance and ethics trends and advising our clients how best to apply best practices in diverse business contexts. As a result, we often discover that generally accepted best practices are in fact in need of updating. One recent example helps refine some established ideas regarding the effective use of e-learning. E-learning has been considered the best practice for cost-effective dissemination of general compliance and ethics training for the past fifteen years and, as the technology has matured, the value of e-learning has increased as well.
How Effective Is Your Ethics & Compliance Program? Whether your program is just getting off the ground or is an established fixture of your company, it has the same goals: to reduce risk and increase ethical behavior. Neither of these is easily measured - and the depth and breadth of existing compliance risks makes assessing program effectiveness a vital part of its success.
When workplace retaliation rises, so does the structural risk of under-reporting of compliance and ethics issues. The antidote to retaliation and reporting risk is a “speak up culture” in which employees feel empowered to report a wide variety of issues of concern. To understand how to create such a culture, we use research on whistleblowing, corporate culture, and demographics studies to understand exactly what circumstances encourages and discourage employees from reporting difficult issues. Based on that understanding, we will equip attendees with tools to overcome retaliation and foster a speak-up culture.
The media has recently been afire with news of the discovery of state-sponsored hacking by the Chinese. While it has long been hypothesized that hackers – based in China with possible links to the government of the People’s Republic of China – were targeting businesses in the west, the nature of the relationship was unknown and the aims of these hackers unclear. A report released last week by U.S. cyber-security firm Mandiant claims that these hackers in fact comprise a unit of the People’s Liberation Army. If this is true (as the preponderance of evidence in Mandiant report suggests), the implications for western businesses and governments are considerable and will present substantial challenges to both.
In the perfect, abstract world of traditional economics, everyone behaves in a way that maximizes his or her benefit and no one acts against his or her self-interest. Unfortunately, as the emergent field of behavioral economics has shown, human beings are remarkably unpredictable and given to myriad biases and random, non-rational (and irrational) influences. This complicates the compliance and ethics professional’s job, especially with respect to incentives and discipline. Even more dishearteningly, even when we are able to predict initial effects, unintended consequences frequently exacerbate the very problem we were trying to solve.
It has long been claimed that an open corporate culture reduces compliance risk. This is based on the intuitive notion that if employees feel free to bring ethics and compliance concerns to management without fear of recrimination or retaliation, they are more likely to do so. This willingness to discuss and report wrongdoing, in turn, should reduce the likelihood that potential bad actors will actually engage in harmful behaviors.
The search for universal principles in the social sciences has been far less successful than it has been in the physical sciences. The last two hundred years have seen many such theories proposed (e.g., Social Darwinism, Marxism, and Postmodernism), fervently advocated, and ultimately abandoned because they didn’t take into consideration the full complexity of human experience and motivation.
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