Ethics Training and the FSGO l l Federal

Ethics Training and the FSGO l l Federal Sentencing Guidelines Organizations Ethics training initiatives Gray Matters ethics training Soy-DRI ethics training simulation

What influences ethical behavior? l corporate culture l opportunity l individual values l significant others

10 -40 -40 -10 Principle l l 10% will take advantage of a situation if the risk is low 40% will go along with the work group 40% will try to determine what the organization wants them to do and comply 10% feel the organization has not gone far enough & push for their own personal beliefs

Bausch & Lomb l 3 contact lenses: Sequence II, Optima & Medalist with 3 different wearing schedules: daily, monthly, & yearly l 3 prices: $11, $32, & $70 l So what’s the problem?

Pennzoil Settles Discrimination Lawsuit l l l agreed to settle $6. 75 million racial discrimination lawsuit (no admission of guilt) alleged Pennzoil paid black employees less & promoted them less frequently settlement available to 700 salaried black employees working between 8/94 -8/98 Pennzoil has agreed to designate a senior level employee to oversee compliance & EEOC concerns also agreed to improve communications, training, recruiting, & community activities to provide equal employment opportunity • Reuters Newswire (1998) Pennzoil Will Pay $6. 75 Million to

We’ve Seen More Wrongdoing in Organizations in the Past 10 years. . . l l l greater media attention more accountability from varied stakeholders changing legislation holding the organization accountable for individual wrongdoing (FSGO)

Why were the FSGO enacted? l l l calls attention to the key elements that must be in place in an organization to assist in preventing illegal & unethical behavior encourages organizations of all sizes to invest in developing & implementing due diligence ethical compliance programs punishes organizations that disregard the need to address key risks and implement ethics programs

What are the elements that all organizations must consider? l l l l grapple with & determine key risk areas appoint high level oversight maintain top management support for the program communicate risk areas to employees develop devices to allow reporting discipline offenders revise the program as needed

FSGO Compliance Programs l l organization, except criminal purpose organizations, may reduce their fines by implementing an effective compliance program that is reasonably designed, implemented, and enforced program must: prevent and detect offenses, disclose the conduct, cooperate with the government, and accept responsibility

Examples of Offenses. . . l l l l fraud antitrust theft payments to a public office privacy and eavesdropping infringement of copyrights & trademarks embezzlement l l l l l money laundering extortion conflict of interest commercial bribery drug offenses civil rights kickbacks racketeering tax fraud

Organizational Ethics Initiatives l l only 1/3 of Ethics Officer’s Association members had an ethics officer prior to 1991 organizations with best practices are not creating programs to check off the steps related to FSGO

Factors Influencing Organization’s Commitment to Ethics l l initiated by the CEO (79%) to ensure commitment to corporate values (76%) to reduce the risks to the company of employee misconduct (75%) to establish a better corporate culture (68%) • Source: Ethics Officers Association 1997 Member Survey

Effect of the FSGO on Business l l l before the guidelines, compliance programs were not deemed important quality and quantity of literature, conferences, best practices forums, have increased many more companies have moved to adopt the programs quality of program quality & enforcement policies have improved shift from “compliance” to “integrity” based efforts. • Source: Win Swenson (1998) “The Legal and Regulatory Environment: Where We’ve Been and Where We’re Going, ” Sixth

Principle Obstacles to Developing an Ethics Program l l l l employee anxiety financial & other pressures compensation/performance appraisal system not consistent with company values declining trust & cynicism of employees lack of financial or staff support lack of training support general apathy • Source: Ethics Officers Association 1997 Member Survey

How Does Ethics Training Occur l l l development of a code of ethics (79%) lectures (63%) workshops and seminars (53%) case studies (46%) videos with discussion (41%)

New Developments in Ethics Training l educational cd’s l interactive media • intranet l simulations

Benefits of Interactive Multimedia Education & Training l l l retention of course material 3 times more effective than traditional classroom instruction. subject mastery 4 times more effective than traditional classroom instruction training time 1/2 to 1/3 required for traditional classroom 92% of all users rated the training as “very good” or “excellent” significantly lower cost than traditional classroom methods

Advantages of Multimedia Education & Training l l l l consistent message/flexible scheduling high retention/mastery customized courses with geographic flexibility easy to update high acceptance easy & effective to use self-paced (no instructor limitations) builds on prior knowledge

Gray Matters Ethics Training Developed by Lockheed Martin

You miss a day at work because you partied too hard the night before. The following day, during a meeting, your supervisor asks why you were not it. What do you say? l l A. Explain to your supervisor that you were ill. B. Explain to your supervisor that an emergency came up in your home and it entirely consumed you. C. Tell your supervisor you were absent for personal reasons. D. Tell your supervisor that you were ill because of over-partying.

You miss a day at work because you partied too hard the night before. The following day, during a meeting, your supervisor asks why you were not it. What do you say? l l A. Explain to your supervisor that you were ill. (5 points) B. Explain to your supervisor that an emergency came up in your home and it entirely consumed you. (-10 points) C. Tell your supervisor you were absent for personal reasons. (5 points) D. Tell your supervisor that you were ill because of over-partying. (10 points)

As a secretary, you are responsible for making travel arrangements for people in your office. An airline agent whom you know offers you bonus points for every booking you make with his airline and you can cash in the bonus points for free travel. What do you do? l l A. As long as the company incurs no additional costs, accept the offer. B. Reject the offer summarily. C. Accept the offer for company and use the free travel for productivity awards. D. Tell the airline agent that you have to think about it.

As a secretary, you are responsible for making travel arrangements for people in your office. An airline agent whom you know offers you bonus points for every booking you make with his airline and you can cash in the bonus points for free travel. What do you do? l l A. As long as the company incurs no additional costs, accept the offer. (-10 points) B. Reject the offer summarily. (10 points) C. Accept the offer for company and use the free travel for productivity awards. (5 points) D. Tell the airline agent that you have to think about it. (0 points)

After 3 months you discover that a recently hired employee who appears to be very competent falsified her employment application in that she claimed she had a college degree when she did not. As her manager, what do you do? l l A. You’re happy with the new employee so you do nothing. B. Discuss the matter with human resources to determine company policy. C. Recommend she be fired for lying. D. Weigh her performance, length of service, and potential benefit to the organization before making any recommendation to anyone.

After 3 months you discover that a recently hired employee who appears to be very competent falsified her employment application in that she claimed she had a college degree when she did not. As her manager, what do you do? l A. You’re happy with the new employee so you do nothing. (-10 points) l B. Discuss the matter with human resources to determine company policy. (10 points) l C. Recommend she be fired for lying. (5 points) l D. Weigh her performance, length of service, and potential benefit to the organization before making any recommendation to anyone. (0 points)

What does Gray Matters do? l l l employees perceive ethics training as more important employees feel greater self confidence in making the correct decision (self-efficacy) employees place less reliance on their peers in making ethical decisions and more reliance on company rules and procedures

Soy-DRI Ethics Training Simulation Linda Ferrell University of Northern Colorado Debbie Thorne Le. Clair Mississippi State University

Key Considerations. . . l l l Who are the stakeholders & what are their stakes? (How does this affect your recommendations? ) What could have been done to prevent the product misuse? What are the key short, mid and long range considerations in resolving the current dilemma? What are your recommendations and action plan for the CEO? How did the FSGO affect your decisions?

Soy-DRI Stakeholder’s Concerns l l l l suppliers-loss of sales customers-product misuse concern government-legal concerns employees-loss of jobs, sales owners/shareholders-profit concerns media-public interest competitors-maximizing the situation for their benefit

Texas Instruments Ethics “Quick Test” l l l l Is the action legal? Does it comply with our values? If you do it, will you feel bad? How will it look in the newspaper? If you know it’s wrong, don’t do it! If you’re not sure, ask. Keep asking until you get an answer.

Lockheed Martin “Warning Signs” l l l l l “Well, maybe just this once. ” “Everyone does it. ” “Shred that document. ” “We can hide it. ” “No one will get hurt. ” “What’s in it for me? ” “This will destroy the competition. ” “We didn’t have this conversation. ” “It doesn’t matter how it gets done, as long as it gets done. ”