My computer is full of half-finished blog posts and white papers. Every time I look at them, they stare back at me - mute witnesses to my indecisiveness and procrastination. The path that leads a nascent idea into the purgatory of my “working papers” folder is familiar: it begins with a conversation with colleagues or clients about an emerging ethics, compliance, or corporate responsibility topic, and a recognition that nothing good has been written about it lately. It then leads to research and reading on the topic. An outline follows, then a draft. Then, something else comes up. Or I decide the draft isn’t ready. The specific reason why my writing project gets abandoned doesn’t matter, so much as that I never seem to find the time to revisit and complete it. I focus on other priorities. Ironically, sometimes it’s another writing project that sometimes lands in the “working papers” folder.

The beginning of the year is the time for resolutions, and mine is to finish these writing projects I start. I’ll start working on it right after I finish this blog post!

The reason I’m airing this personal failing is because it might sound familiar to you, too. One of the most common things I hear among ethics officers, when asked about policy gaps, is that they recognize this gap, and often have even begun the preliminary work to fill it, but somehow they never found the time to finish the process. Believe me, I understand. But the gap remains. The unmitigated risk remains.

Why don’t you join me with your own resolution? We know there are emerging ethics, compliance and corporate responsibility issues that could affect our organizations. We know having a policy in place is a great first step for risk management since it gives employees and agents guidance on doing the right thing. It also leads to further actions, such as training and communication about the policy, as well as offering resources for addressing violations. In short, it’s the first step in managing risks.

And if you can’t think of any current policy gaps, take a look at our predictions for 2010. You might find something you need to address.

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by Nate White, Ethical Leadership Group, a Global Compliance company

In a recent Op-Ed column in the New York Times on proposed Supreme Court Justice Sonia Sotomayor, David Brooks writes about the myth of the objective judge, suggesting that empathy is just as important to an individual on the bench as cold facts and reason, if not more so. I believe a similar argument could be made in the case of corporate compliance, ethics, and culture. It’s important to have codes and rules and laws in place for your employees, but if your employees aren’t able to rely on their own moral compasses, your organizational culture will suffer. And when your culture is sick, it affects morale, productivity, behavior, and pretty much everything else within an organization.

That’s what we try to emphasize at ELG. Yes, you need laws and rules, but to think that that’s all you need is to make a fundamental mistake. You also need a common purpose, a gut-level understanding of the fact that there’s a right and wrong way to do things. You need every employee to understand that no set of rules could possibly cover every eventuality, and that when the rules fail to clearly define the path they must make good decisions based on what they know is right. You also need your employees to understand that occasionally the rules allow behavior that will hurt the organization and its reputation in the long run, as we’ve all seen in the last 12 months, and that they must do the rules one better and behave not only legally, but ethically.

I understand that there’s an element of naiveté in my personal approach to business ethics – my background is in physics and theater, I don’t have an MBA and I haven’t spent 20 years in the corporate world. But the current thinking in neurology is that emotion is an essential part of the decision-making process. When you remove emotion from the picture, you don’t automatically arrive at the best and most logical result. Rather you most often get stuck in an endless loop as no result feels better to you than any other. Emotions help us find the right answer. Antonio Damasio, the prominent neurologist, discovered in his work with patients whose brains’ emotional centers had been damaged that such individuals, while they could logically discuss the decision-making process, were often unable to come to any conclusions when making basic choices, such as what to eat or what pen to write with.

As noted psychiatrist John J. Ratey points out in his book A User’s Guide to the Brain, “emotions tap into areas of our brains that judge situations effectively without our having conscious access to them.” Comply with all the laws. Make your code as good as it can be. Draw your policies clearly and make them thorough. Just don’t forget to make sure your employees know that they’ve got the best fraud- and waste-prevention tool at their disposal at all times – their gut.

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by Steve Priest, President of Ethical Leadership Group, a Global Compliance company

Imagine your firm is under fire. Lawsuits threaten your business and profitability. NGOs and other do-gooders criticize your business practices. The media is circling. Employees are confused: “We are a good company. We provide something important for society. Why are we being vilified?”

Our great American story of expansion ever westward tells us what to do when under attack. Circle the wagons. Bring everybody inside. And fire when the attackers get too close.

Smart companies now realize that this is a perilous strategy.

Last night I attended a dinner conversation hosted by the Center for Audit Quality, a nonprofit organization largely sponsored by leading audit firms. Audit firms have been besieged in recent years. But instead of withdrawing inward, they convened a series of off the record meetings with leaders from academia, the press, investor advocates, F500 audit committee members, heads of internal audit, generals counsel and me.

Last night’s topic was what external auditors can do to more effectively prevent fraud—or at least reduce it. Several representatives from leading audit firms were there to listen. They didn’t attempt to pontificate nor to deny responsibility. (Although one made a vigorous case for a legal reform that doesn’t have a chance of passing in this climate where only 12% of Americans in a recent Gallup Poll believe business leaders are honest and ethical.) They engaged.

Will this improve the perception of audit firms? Maybe. Will anything concrete happen as a result? Hard to say. But it might.

Look at Wal-Mart. For years Wal-Mart was under attack. For years they circled the wagons and vigorously defended with a one idea mantra “Lower prices help Americans.” And it didn’t work. So they engaged with their critics. Nothing happened at first. But the Wal-Mart of today is far different from the Wal-Mart of five years ago. They have made significant strides in environmental practices, supplier standards, and even in areas like health care for employees.

Engagement is a good public relations strategy. But more importantly, it is a good corporate responsibility strategy, and a good business strategy. The engagement benefits all sides. Firms can change. An ancient Bedouin saying says “Once the nose of the camel is under the tent, it is hard to keep the camel out.” And either Sun Tzu, Machiavelli or Michael Corleone said “Keep your friends close and your enemies closer.”

In this world when regulations and expectations are evolving at lightning speed, engaging with critics is better than circling the wagons.

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by Leigh-Anne Walker, Ethical Leadership Group, a Global Compliance company

A debate has emerged in the news around the behavior of banking regulators and Bank of America (BofA) officials over the recent BofA/Merrill Lynch merger. Between the time of the merger announcement last September and the actual BofA shareholder vote to ratify the merger late last year, Merrill’s financial condition deteriorated substantially. Several BofA shareholders are now alleging that BofA chairman Ken Lewis, by failing to disclose the worsening condition of Merrill Lynch, violated his fiduciary duty and thus broke securities laws.

Lewis, in testimony to the New York Attorney General’s office, defended his actions by saying that Federal regulators told him completion of the deal was essential to preserving the stability of the financial system. Importantly, he says he was threatened with the loss of his job if he disclosed Merrill’s poor results, as this would jeopardize approval of the merger. Effectively, he implies that regulators told him to break the law.

This is troubling for several reasons. Is it acceptable to break a law or fiduciary duty if the government is pressuring one to do so in the name of “national interest” or “economic stability?” Is fear of losing one’s job an acceptable reason to violate the law?

Clearly this was a high stress, high stakes time. But a great deal of ink has been expended since the Enron and WorldCom scandals about the importance of having moral courage in ethically difficult environments, of being willing to stand up and risk one’s career to “do the right thing.” While I applaud this line of thinking, employees find it a difficult standard when faced with loved ones to support, mortgages and college bills to pay and healthcare needs to be met.

This is all the more reason why someone of Ken Lewis’ stature and resources needs to send the message that doing the right thing (for the nation’s economy) was the reason he acted as he did. Bank of America employees and stakeholders need to know that it is not expedience of job security that guides BoA’s leaders, but strong, sound principles.

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by Steve Priest, President of Ethical Leadership Group, aGlobal Compliance Company

“Here’s the dirty little secret. Most of the stuff that got us into trouble was perfectly legal.” Thus spoke President Barack Obama on The Tonight Show, March 19, 2009.

The President was speaking of the crisis in the financial services sector; and he was right. The firms that got themselves, our nation and the world into trouble had, for the most part, well developed regulatory compliance programs. Compliance officers tried to make sure that employees did not violate laws and regulations that applied to their companies. And these compliance officers were successful.

But while these compliance officers were busy avoiding speeding tickets, they missed seeing the fog bank ahead that was hiding a twenty car pile up.

And that is the all-too-common problem of compliance programs in all industries. We are so focused on legal and regulatory compliance that we miss the much greater reputational risks that our companies face.

In 2009, we face a public even more cynical about business than they were in 2001 in the wake of Enron, Andersen, Tyco and WorldCom. This cynicism may not be deserved, as JP Morgan Chase CEO Jamie Dimon pointed out: “When I hear the constant vilification of corporate America, I personally don’t understand it.” But the cynicism is real, and the mark of great businesses is rapid adjustment to changed environments.

So what should great businesses do in this unprecedented time? Here are some action items to consider:

1. Put compliance in its proper place—as one element of good business practices. Ban “compliance” from the name of your office or function. Call it “Integrity” or “Business Practices” or anything else.

2. Have senior management and the Board discuss where your Business Practices Office should reside. We have worked with many great General Counsels who are able to nurture a true Business Practices function—one that transcends compliance—in their reporting structures. But too often the reporting structure determines the job’s scope.

3. Think about whether your function has necessary clout. If your company is engaged in providing a product or service that is lucrative in the short term (think originating liar’s loans) but has a very strong likelihood of causing damage to the company in the future, will your Business Practices Officer get a fair hearing?

4. Review your Code of Conduct, training and other communications messages. Are they about “doing the right thing” and providing guidance in making reputation enhancing decisions, or are they primarily about complying with the law.

I have been studying business ethics for 24 years, and working in the field for 19. I have never been so frightened about the ability of our private sector to continue to do the good work that it does. The public that provides us with the permission to do business is virulently angry. If we don’t start now to place trust building at the forefront of our corporate agendas, we face the ugliest business environment in decades. And that won’t be good for any of us.

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