The students who read that free will was an illusion cheated (by failing to prevent the answer from appearing) on average 14 out of 20 times, while those who read the other section only cheated an average of 9.5 times. It’s pretty clear that how we feel about our personal responsibility affects our choices. If we have a choice, if our honor and our reputation are in our own hands, we’re much more likely to behave ethically. If we feel as though it’s out of our hands, we simply don’t try as hard to do the right thing.

How do your employees feel about the choices they make at work? Do they feel empowered to make decisions? Do they know that they are personally responsible for making the right choice?

MetLife vs. Glenn
In this case, a corporation that both pays for and administers a benefit plan is found to have a conflict of interest that may weigh against the firm when deciding on the legality of benefits decisions. “The employer’s fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary,” wrote Justice Breyer explaining the conflict. The conflict may be viewed less negatively if the firm has addressed it by “walling off claims administrators from those interested in firm finances, or imposing management checks that penalize inaccurate decision making irrespective of whom the inaccuracy benefits.”

Meacham v. Knolls Atomic Power Laboratory
The Court decided that the burden of evidence that an employment action was done for reasons other than age rests with the employer not the employee. In this case, 31 people were laid off by a federal laboratory; 30 were over the age of 40. The Court decision means that the laboratory—and other employers—must prove non-age related reasons for decisions such as this.

CBOCS West v. Humphries and Gomez-Perez v. Potter
These two cases are the most important of all for ethics and compliance officers, for they appear to recognize that U.S. civil rights legislation broadly prohibits retaliation against private and public sector employees for raising concerns about employment issues that may be viewed as discriminatory. In CBOCS, a black manager at a Cracker Barrel claimed he was fired for complaining about discriminatory treatment against other black managers. In Gomez-Pearce, an employee at a federal agency claimed he was retaliated against after she complained about age discrimination. Solid Court majorities in both instances recognized the rights of the plaintiffs.

In the face of these decisions, what can organizations do to protect themselves? The answer is simple, and no longer naïve: Do the right thing in the first place.

Ethics/compliance officers can and should be involved in making sure that their employer has reviewed structures for conflicts of interest, and put steps in place to reduce or eliminate them. (MetLife vs. Glenn) Ethics/compliance officers—not just employment attorneys—should be involved in thinking through large scale downsizing or layoffs, so that employees perceive fair criteria as guiding these difficult decisions. (Meacham v. Knolls Atomic Power Laboratory) And ethics/compliance officers not only have a critical role to play in fostering a culture of respect and non-discrimination, but in protecting from retaliation employees who have the courage to raise issues. (CBOCS West v. Humphries and Gomez-Perez v. Potter)

It is not every month that the Supreme Court provides so many ways for ethics and compliance professionals to demonstrate value. This is not a Midsummer Night’s Dream, it is the real thing. Take advantage of it.

Yet there are signs of hope. The New York Times of May 29, 2008 has an article called Hot Ticket in B-School: Bringing Life Values to Corporate Ethics. The Times reports that a lot of MBAs are deeply concerned with bringing their values to work. One Wharton alum who took a class with Professor Stuart Friedman is quoted saying “The course had a profound effect on me. As part of the class, you have to create a leadership vision for yourself, and he asks you to write a brief analysis of yourself 15 years from now. That exercise made me realize that what I was doing at the time — recruiting for hedge funds and venture capital firms — was not having any societal impact other than driving up compensation for people who were already grossly overpaid. I wanted to do something that was still financially rewarding, but had more of a positive impact on society.”

I had my own brush with hope last week. I was interviewed on Fox Business for a program called Fast Track—a career advice segment. (You can view the segment here.) Anna Gilligan and Christina Scotti are the two bright women responsible for this segment. They appear to be in their twenties (it would have been rude to ask)—a generation that many of us a little/lot older criticize for ethical behavior. (“How could they download that music for free?”) They have considerable latitude in choosing content. Yet these intelligent—and presumably ratings savvy—professionals have created a number of segments on ethics issues. “Is it ok to lie?” “Age in the office,” and “What do you do if you see an unethical act?”

After the interview, I asked Anna why. “We find these topics really interesting. We think others do too.”

There is hope for us yet.

But these days I can’t help looking at everything through the eyes of business ethics, and here I think Shakespeare’s insight is fundamentally flawed.

Analogizing medieval Scotland to modern day corporate life is not too difficult. King Duncan is the benevolent CEO. Macbeth is the striving corporate officer who has just received a promotion and is now one rung from the top. Except the CEO has named a new potential successor. And Macbeth’s wife is nudging (ok, manipulating—this is a sexist tale with not so subtle allusions to Adam and Eve) Macbeth to displace the CEO. She taunts him

“Do I fear thy nature; it is too full o’ th’ milk of human kindness to catch the nearest way. Thou wouldst be great, art not without ambition, but without the illness (evil) should attend it. . . . [thou] wouldst not play false.”

Lady Macbeth believes that the way to the top is achieved through ambition fueled by evil and stoked by falseness. And she urges her husband to be a man and murder Duncan in order to become King/CEO.

In one of his many self reflective moments, Macbeth reinforces this theme by accusing himself of having “vaulting ambition, which o’erleaps itself.”

The theme of corporate evil as a result of unfettered ambition has persisted through the ages. Television commentators and congressional inquisitors use this story line to explain most acts of wrong doing, real and perceived.

Perhaps some of the more egregious acts in corporate history vindicate Lady Macbeth’s cynical world view. But more are far less evil; far more banal. Most acts are rationalized as “not too bad,” “what everybody is doing,” “just a little.” Are these bad actors ambitious? Yes. But these are not the acts of individuals devoid of virtue—just devoid of the discipline or courage necessary to do the right thing. And then the “toil and trouble” the three witches of Macbeth portend fall on the individual and the company alike.

We often forget in the middle of the picnics and the sales that this is a day to remember those who honored us all with their lives. This Memorial Day, all of us—especially those of us doing work in business ethics and corporate responsibility—should add a group of individuals to the roster of those we honor.

I am thinking of the men and women who work for private enterprise in support of those who serve our country. They may be involved in wars that many object to, and may even have jobs that many find objectionable, but there are tens of thousands of people serving as cooks, clerks and drivers who do not wear a military uniform, but put themselves in harm’s way for a the opportunity to earn a living and defend our country.

Over 1,000 contractors have died in Iraq alone since the war began.

We honor and remember them, and those in uniform, for their service.

• The Sentencing Guidelines and best practices call for periodic assessments;
• Boards and executives want to see empirical evidence of successes, failures, and trends as well as charts and graphs that help them understand the program and justify its expense and effort;
• Measuring your own program is a prerequisite to benchmarking with others; and, most importantly,
• We’ve all heard the maxim “you only get what you measure.”

This demand for metrics has driven more and more companies to rely on in-house surveys to gauge employee morale, assess culture and track opinions about ethics and compliance program elements. There’s no doubt that surveys are a useful tool, but are in-house surveys as reliable and accurate as we think?

Some of the problems with surveys are not new and are the result of poor question writing or faulty implementation. Leading questions are a common culprit: “Do you know that you can call our Helpline anonymously - Yes or No?” One can imagine survey-takers thinking, “Well I know it now. I’ll answer yes.” And how much of our data is skewed by “social desirability”. Most people like to present themselves in a favorable light, so their responses may be biased toward what they believe is socially desirable or, in this context, toward what they think is the most ethical answer.

Then there’s the problem of trust: “Is this survey really anonymous? Why are they asking so many demographic questions? Won’t they be able to identify me?” Like the problems above, these too can be addressed fairly easily. In this case simply ask if you really need all those demographic questions. Probably not, and consider what you gain by asking them and what you loose in terms of trust. In addition, it’s usually a good idea to have employees send their surveys to a third party for compilation. Trust is also an issue with on-line surveys. While they can be efficient and very cost effective, few believe they’re untraceable.

But what worries me more than these perennial survey problems is a new trend that seems to be occurring especially at companies that put the most emphasis on metrics. When ethics and compliance metrics are tied to performance reviews or when they are used to identify corporate problem sites, it doesn’t take long for everyone to realize what answers are most desirable. People know that a “wrong” answer will mean a manger’s bonus might be dinged or that poor numbers will result in remedial training or other unwanted attention from Corporate. In cases like these the pressure is strong to be sure to get the answers right. I’ve had employees tell me, “We don’t want to jam up our supervisor. When she’s happy, we’re happy…so we do what we can to help.”

It can get worse. I’ve seen examples of managers prepping their employees under the guise of training. And given the pressure, don’t be surprised when outright cheating occurs including manipulating the employee selection process to ensure that only those with “positive attitudes” are surveyed. Fortunately, in most cases actual cheating isn’t necessary because it’s safe to assume that everyone knows what answers are desirable. They’ll know what to do on their own.

Data-mining and consolidating survey results into a single overall number to be reported to the Board – another recent trend - only compounds the problems.

Most of these survey errors and problems tend toward a positive bias, and so the cumulative result can be greatly inflated data. Recently when conducting an assessment of a company’s corporate culture I ran into exactly this situation. Their in-house survey data was spectacularly good, but our focus groups told a very different story. Digging a little deeper, employees told us that so much emphasis was being placed on ethics and compliance metrics they had begun to “game” the system. The result was a false sense of optimism that went all the way up to the Board.

So what’s the solution? The quick answer is to avoid over-reliance on in-house surveys, perhaps by alternating annual surveys with focus groups. But there’s much more to it than that. We’ve scheduled sessions on the topic at this spring’s Conference Board meetings in San Diego and New York to explore the matter in more detail and I’ll have more to say about solutions in upcoming blogs. In the meantime, what are your thoughts? Have you seen problems like those I’ve mentioned? Do you have solutions that are working?

But no. France’s second largest bank, Société Générale, disclosed today that one rogue trader caused $7.1 billion dollars in losses. As is common in our experience, the trader did not appear to have personally profited from the trades.

Bank spokespeople are claiming that Jerome Kerviel was able to perpetuate this fraud because he used to work in the risk management office and thus was able to breach five levels of controls. Plus he was “a computer genius.”

Outside experts are criticizing the banks internal controls. Société Générale states that their internal controls “have been revised and reinforced to avoid any reoccurrence of further similar risk.” They have also fired five individuals, including Kerviel’s supervisor and the head of global equities and derivatives trading.

My hunch is they may want to look at the most critical internal control: culture. It is very difficult to believe that any one individual, even a “computer genius,” could pull off a fraud of such magnitude without awareness by anybody else at Société Générale.

I have had the privilege of conducting a lot of ethics training in France. Most of the time, in response to hypothetical case studies, I hear that “reporting the misconduct of others is not our job. To do so is not the French way. It is the responsibility of management to find this out and do something about it.”

I wonder what the employees of Société Générale think about this cultural value now. What do the shareholders think? This case provides $7.1 Billion reasons for working to build a culture where people take responsibility for acting when they suspect illegal conduct.

To begin, this is the perfect time to review your Code and policies to make sure they’re clear and up-to-date about contributions and campaign financing. These issues are complex and can vary from state to state. Email reminders to employees, especially senior managers, reminding them of the rules and encouraging them to ask questions if they’re in doubt is probably a good idea. This is especially important if you’re a government contractor or if your company or industry has a PAC.

But beyond campaign financing, sometimes employees are unclear about the limits on using company resources for political activities. Most have no problem making the easy calls: it’s not OK for an employee to make copies of campaign flyers. Emails to clients or customers urging them to support a candidate would be clearly wrong. But what about some of the tougher calls? For example, do you allow use of company facilities for rallies? Do you make exceptions if the rally focuses on particular issues – like healthcare, energy or defense – that are directly related to your business? Do you make exceptions if your CEO or a senior executive is a supporter? Which brings me to another set of problems.

What if a senior executive hosts a fund raiser and encourages peers and subordinates to attend? Does it matter if the event is off site and after hours? What constitutes inappropriate pressure? What happens to those who decline? How would you respond to a complaint from an employee who feels he is being retaliated against by his boss ever since they discussed their political preferences? Is there anything you can or should do if your CEO or a senior executive chooses to publicly support a controversial candidate?

Most companies prohibit employees, without clearance, from speaking on behalf of the company and publicly endorsing a candidate, but what do you do if a sales associate insists it’s her right to wear a candidates’ button when visiting customers?

The issues can be most difficult when a senior executive is an enthusiastic supporter. In the worst cases they see their choice as the only reasonable one and can’t understand how anyone could disagree. If asked, they often won’t see their advocacy as unacceptable pressure on subordinates or as creating tensions in the workplace, instead they’ll defend it as their right and even their public obligation. If you’re faced with a tough challenge like this, remember there is good news: there’s only eleven more months to go.

While I agree with Graydon for the most part, sometimes a little Aristotle can be a good thing. Take Aristotle’s advice that even noble intentions, when taken to the extreme, can result in vice not virtue. This is good advice and I can think of few times when I wish I had followed it. Here’s one.

In 1999, following the Salt Lake City and International Olympic Committee’s bribery scandals, I was asked to join a newly created Ethics Oversight Committee for the U.S. Olympics. One of my first tasks was to help Pat Rodgers, the Director of Compliance, draft a new Code of Ethics for the U.S. Olympics. Determined to take a strong stand against the mistakes of the past, and committed to protecting the reputation of the U.S. Olympic movement, we wrote that executives and staff should avoid “even the appearance of conflicts of interest.” These were high-minded sentiments but as we learned just a few years later they were impossible to enforce. What exactly constituted an “appearance of a conflict?” We quickly found that it was subject to wildly differing interpretations.

My experience is not unique. I know of others who have also been led by good intentions into similar Code drafting blunders. A few years ago I became familiar with an organization’s Code that included the promise: “We will always tell the complete truth.” Once again, a noble aspiration but it subsequently raised problems. For example, could employees claim the company violated its own Code when it failed to inform them of impending layoffs? What if they asked and management didn’t tell all they knew? In fact, something very much like this did happen. The problem could have been avoided if the organization had used more common wording such as We Value Honesty. They really didn’t need to promise to always tell the complete truth.

This advice might be timely since there seems to be a lot of companies reviewing and updating their Codes. I recommend they follow Aristotle’s advice and take a close look at the aspirations and promises they make. Is the $25 gift and entertainment limit well meaning but impractical? Do they really mean it when they say “retaliation in all its forms will never be tolerated”? All its forms? How do they plan to enforce that?

They should also review similar language in other communications. Are they over-promising about their ability to maintain confidentiality? Is External Affairs making claims about the company’s commitments to social responsibility that employees read as over-the-top hyperbole (and consequently question the company’s credibility)?
Have you seen other examples of Codes, policies or corporate communications that have over-promised or otherwise gone too far? Let me know. I look forward to hearing from you.

One of the disappointments I wrote about was the overemphasis that has been given to the Organizational Sentencing Guidelines. It turns out my comments surprised some of my colleagues since many of them have known me primarily through my work with the Sentencing Commission. So maybe a clarification is in order.

On the one hand, it’s undeniable that in 1991 when they were first approved, the Organizational Guidelines gave the business ethics movement a structure, impetus, a common language and a common set of issues. It’s no coincidence that the ethics officer community exploded in both size and energy immediately after 1991.

Similarly, since the 2004 revisions, we’ve seen a huge increase in the number of conferences and forums devoted to culture, integration of ethics and HR practices, board training, and tone at the top – all topics that were added to the Guidelines in 2004. It’s clear that the Guidelines continue to be extremely influential in setting our agendas.

But therein lies the problem. Our focus on the Guidelines has advanced a best practice model and a specific set of issues but at the same time it has led to an overly narrow view of what constitutes business ethics.

As a community we have too often excluded broader marketplace and strategic issues which don’t fit neatly into the Guideline’s scheme of things. Even today, and in spite of their critical importance, executive compensation, marketing and advertising practices and human rights generally fall outside most ethics and compliance officers’ responsibilities. I think this narrowing of our concept of business ethics can be directly traced to the dominance of the Guideline model.

For 2008, we have included sessions at the Conference Board’s Ethics and Compliance Conference which attempt to address some of these broader issues. I’m interested in your opinion. What do you think? Should topics like executive compensation and marketing practices be addressed by ethics and compliance officers? Do you already do so or have you considered the possibility and rejected it?

In the early days of what was then called the Ethics Officer Association (now the Ethics and Compliance Officer Association, ECOA), probably around 1992, a meeting was held with no more than 30 or so attendees. When asked how long they intended to continue in their new position several of them made the case that no one should stay in the position for more than a year or two.

They argued that if, on a regular basis, the position was filled by someone new, then eventually this would result in a growing cadre of leaders in the organization who had actually served as ethics officer. These alumni could then be expected to be strong allies of the program wherever their careers eventual took them.

Further, it was said that the ethics office would benefit from new perspectives. Some also noted that agreeing to serve as ethics officer might be a career ender, but, they argued, that prospect would be lessened if the position was established as a regular stop on all managers’ career paths.

I recall that a spirited discussion followed about how the new ethics officer would be brought up to speed, and what criteria should be established for creating the succession plan.

Years later I remember telling this story at a conference where many of the ethics officers from the original meeting were in attendance. They were all still in their positions as ethics officers. No one had implemented the plan. Instead they saw themselves as in it for the long-term, and many viewed it as the job they were likely to hold for the rest of their careers.

What had happened? Was the idea impractical and unwise from the beginning? Or did the position of ethics officer change in ways that made the idea of regular turn-over impractical or even unwise?

I suppose the original idea now seems a bit quaint, just like the notion of part-time citizen legislators. It used to be the norm for law-makers to have other jobs to go to and other professions that identified them. But today we have professionalized the job of legislator. I for one don’t see this as progress.

Does anyone know of an organization that has tried – or still follows the succession idea? Would it work? Or has the position of ethics officer become a job requiring special training, specific skills and even professional certification?

Today’s sexual harassment verdict starring the New York Knicks, Isiah Thomas and Madison Square Garden fits neatly into Carrie’s findings. You can read the details anywhere, although some of the details are clearly adults only. The interesting points for those of us in the ethics and compliance profession are, it seems to me:

1: While Isiah was found to have engaged in sexual harassment, it was his employer (Madison Square Garden) and the CEO of his employer (Thomas Dolan) who are required to pay the price. (MSG owes $8.6 Million in punitive damages, Dolan $3m.)

2. Half of the damages ($6M) are due to the hostile work environment created by Thomas and MSG. The other half ($5.6M) stems from the jury’s finding that Ms. Anucha Brown Sanders was fired in retaliation for her sexual harassment complaint.

3. Thomas Dolan, CEO of Madison Square Garden, fired Ms. Brown Sanders, then VP of Marketing and Operations. MSG claims she was fired for incompetence and for interfering with the investigation of her sexual harassment complaint.

I have no idea what is the truth of this sordid story. Isiah Thomas and MSG deny all allegations and will appeal. But their ultimate success may not matter. This decision, even if it doesn’t stand, will strike fear in executives everywhere.

Executives who harass should be afraid. So should those who retaliate against those who report misconduct. But the last thing we need is executives who are afraid to hold bad performers accountable for fear that they will be held personally liable in court. Our research shows that one of the leading contributors to bad corporate cultures is when executives don’t hold people accountable.

Organizations need to better equip their leaders to know how to handle employee concerns. With sensitivity and professionalism, without formal or informal retaliation. This is not easy—but it must be done. Perhaps today’s verdict will give organizations the incentives to address this glaring need—and executives the self-interest to pay attention.

Geoff Colvin: You are in a great position to evaluate consumer trends. What is the most important thing you are seeing?

James Stengel: The biggest thing going on with consumers is that they want to trust something. They want to be understood, they want to be respected, they want to be listened to. They don’t want to be talked to. It’s trust in the largest sense of the word. People really do care what’s behind the brand, what’s behind the business. They care about the values of a brand and the values of a company. We can never forget that. We can never be complacent about that.

This is an enormous phenomenon, enabled by technology in many ways. Businesses and brands that are breaking records are those that inspire trust and affection and loyalty by being authentic, by not being arrogant, and by being empathetic to those they serve.

He is a marketer, and a good one.

“People . . . care about the values of a company. We can never forget that. We can never be complacent about that.”

As a result of this newest violation, the regulator has fined the CEO and the company, and has ruled that the company cannot bid on an important upcoming project, and this can have potential implications for your company's competitive position for years to come. As importantly, the scandal is being widely reported on radio and television, and is the topic of considerable coverage in the papers as well. Your company's reputation has taken a huge hit as a result of the actions of your CEO.

What do you do with your CEO? Do you promote him? Tolerate what he's done? Discipline or coach him? Do you fire him?

I'm guessing that most of you would select an option other than promote or tolerate. I'm guessing some of you might even say he should be fired. CEO's of recent vintage have been removed for less. What do you do?

Well, if you're the owner of the New England Patriots, apparently you do nothing.

Your thoughts??