Business Ethics - How Employers Encourage Ethical Behaviour
But in this post-Enron era, honorable behaviour is the new corporate mantra. Nortel has an Ethics Officer. General Electric posts its 'Integrity Policy' online (in no less than 27 languages). And employee conduct guidelines? Popping up quicker than election promises.
Critics dismiss this as a knee-jerk, band-aid reaction. Smoke and mirrors rather than meaningful change.
Alison Dempsey, Director of Calgary-based Chumir Foundation for Ethics in Leadership, argues differently. 'Employers are recognizing that they must put forth a clear statement of operating principles in order to guide behaviors,' she says. 'This is not just an exercise in public relations: we are addressing long-term sustainability.'
Employers are taking note, but not necessarily en masse. Dempsey recently organized a conference, 'Blowing The Whistle On Ethical Lapses,' in tandem with EthicsCentre CA (www.ethicscentre.ca). The Calgary version, where Dempsey spends most of her time, drew more than 80 executives from prominent companies, government and non-profit organizations.. Attendance in Toronto was about 65.
Dempsey stresses that while most employers and their employees are interested in operating ethically, the real work is just beginning.
Like at Bank of Montreal (BMO). With 34,000 people who act as custodians of our funds, it's no surprise they're striving to create a principled workforce. Rose Patten, Executive Vice President, Human Resources, explains BMO's approach. ''We try to reinforce appropriate conduct by coming at it through a variety of lenses. This includes personal accountability, ethical leadership, clear corporate values and strong stewardship.'
Providing employees with tangible means to act justly is no picnic. As Dempsey points out, 'Realities such as deadlines and profit targets can obviously militate against doing the right thing.'
Which explains why some firms do more than just put up fancy posters. At BMO, they've added a section on handling moral quandaries to employee and management training. And each year every staffer must read the bank's booklet, 'FirstPrinciples: Working With Integrity', then sign a declaration that they abide by it. Topics include honesty, respecting the rights of others, conflicts of interest and confidentiality.
'Everything is measured by three simple questions: Is it fair? Is it right? And is it legal?' says Patten, noting BMO has been evolving FirstPrinciples for a decade.
Within the bank's HR department, Employment Equity and Engagement is deemed 'keeper of the values.' They conduct a company-wide annual survey where employees get to voice concerns anonymously. A slight portion of a manager's performance pay is affected by the survey's ratings within his or her department.
Steps in the right direction.
More immediately, staff can call Employee Services for advice on matters involving fairness, truthfulness and legality. Identities are protected so there's no fear of repercussion.
BMO's approach, positive as it is, typifies ethics at the institutional level. Frameworks and policies are being utilized. Tactics are getting into place gradually. But if you really want integrity, better start punishing transgressors and rewarding decent behaviour at employee appraisal time.
For that we mosey over to Canada's oil patch. Petro-Canada and Nexen (formerly Canadian Occidental Petroleum) are beginning to put their money where their morals are. Employees in these firms are measured, albeit in fairly minor ways, on how well they follow their company's codes of conduct.
'What you do is important, but how you do it is important too,' says Tony Pargeter, Director of Internal Communications for Petro-Can.
Supervisors take their staff through a list of 10 ethical measures at review time, based on the company's Code of Business Conduct (petro-canada.ca/eng/about/environment/7089.htm).
Pargeter notes that this is only a first step. 'In most cases, this assessment will not alter the overall compensation impact of the total performance review, though there is scope to raise or lower the performance score if this assessment is very strong or clearly shows deficiencies,' he says.
Like BMO, Petro-Can offers guidelines on how to make decisions. Beyond profitability, they encourage employees to ask: Is life, health or safety, or the environment endangered by the action? Is it legal? Does it feel fair and honest? Does it compromise trust or integrity? And could it be justified to the public?
'We look at everything these days, from insider trading to running in elections to accepting gifts from suppliers,' adds Pargeter, who designed Petro-Can's first conduct code more than 15 years ago. 'Today, with the Sarbanes-Oxley Act (the U.S. initiated law forcing companies to be more transparent), our broader view of compliance makes even more sense.'
While Petro-Can's efforts are encouraging, the process relies mainly on subjective measures. It pretty much depends on the boss's perceptions and the employee's ability to answer enquiries. Still, it's better than others.
Calgary's Nexen is going a step further, with attempts to quantify good behaviour. In two specific areas, worker injuries and environmental incidents, they've made numerical targets part of everyone's appraisal.
'Our performance management system starts with the executive committee, including the CEO,' says Laura de Jonge, Manager of Social Responsibility. 'Targets are based on hard numbers. You have to do better than last year in order to get your bonus.'
To foster a sense of what's right, Nexen puts each of its 2,800 employees through an Integrity Workshop, delivered by peers. Staff can contact Integrity Leaders within their division for advice when things get murky -- as can happen when you operate in Columbia, Nigeria and Yemen, like Nexen does.
The company's actions are being acknowledged. Carla Yuill, Nexen's Manager of Corporate Communications, notes the firm was voted one of the 50 best employers in Canada for 2003 by Report on Business. And they just earned Southern Alberta's Better Business Bureau 2003 Ethics Award.
It all has the air of righteous progress. And it is a novel approach. But is it perfect? Not right now. Hopefully, Nexen's system will eventually include a formal mechanism for peers and subordinates to give their side of the story at review time. That way more of the day-to-day truth about an employee's behavior can be part of the appraisal process.
In summary, the movement to create ethical companies is really in its nascency. The lack of quantifiable measurement, the absence of 360 degree input into performance appraisals for every employee, and the minor impact of decency on pay leaves a gap between intentions and outcomes.
Still, employers are gambling that ethics will pay dividends in several ways. 'Beyond legal compliance, employers are hoping to attract principled employees who will enhance the firm's reputation, which can increase value for all stakeholders,' says Dempsey.
And that's the new ethos right there. Making money while behaving ethically. Win-win results for the era of transparency. As de Jonge sums it up: 'We do the right thing because it's the right thing to do and it positively affects share price.'
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