Leading with Ethics and Compliance

By Mark Meaney

As millions take to the streets in a global protest of corporate malfeasance, Dean Rich Lyons of the Haas School of Business at the University of California, Berkeley, has taken the approach that ethics reform begins from within an organization.

The Occupy Wall Street movement has become a global phenomenon. From downtown Manhattan, the movement has mushroomed with remarkable speed to include 185 cities in 82 countries from Alaska to Auckland. Protests, marches and occupations have taken place across every continent garnering the support of millions of participants.

Many in the press have criticized the movement for failing to present a unified set of demands. Although the voices of the global campaign are many and diverse, they do share a single strong and consistent message: a demand for greater corporate accountability and transparency. This clear message unites the protestors.

Vikram Pandit, CEO of Citigroup, echoes the claim when he states,“their sentiments are completely understandable. Trust has been broken between financial institutions and the citizens of the U.S., and that is Wall Street’s job, to reach out to Main Street and rebuild that trust.” Pandit expresses his belief that unethical behavior among corporate executives is one of the root causes of the current global economic downturn.

There is indeed wide agreement among Tea Partiers and Wall Street Occupiers alike of the need for corporate reform to address fraud and corruption.


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Reform of business schools


Dean Rich Lyons of the Haas School of Business at the University of California, Berkeley, has been on the forefront of those who have argued for radical changes in business schools to address the need for greater accountability and transparency in business decision-making. Since his inauguration as Dean at Haas, Lyons has preached the importance of creating a culture within the business school that encourages students to go beyond themselves as future business leaders in learning to accept responsibility for the impact on society of their actions. In fact, to practice what he preaches, Lyons built the principles of responsibility, accountability and transparency right into the Haas School Strategic Plan. According to Lyons’ Strategic Plan, “We shape our world by leading ethically and responsibly. As stewards of our enterprises, we take the longer view in our decisions and actions. This often means putting larger interests above our own.” The whole of the Haas curriculum is shaped by this principle.

In Lyons’ view, responsibility, accountability and transparency build trust relationships. Trusting relationships, in turn, build sustainable brands in an “idea economy.” Ethical lapses, on the other hand, have devastating effects on brand reputation, as evidenced by the collapse of such firms as Enron, WorldCom, Arthur Anderson, etc. You need only to watch the nightly news to observe millions taking to the streets, worldwide, as a consequence of the impact of ethical lapses on the brand reputation of financial institutions.

Haas will begin to offer training and education for individuals who will have as their function to change the ethical climate of corporations from the inside in their role as Chief Ethics and Compliance Officers (CECOs).

Taking it one step further

Now, under Lyons’ leadership, Haas is about to go one step further in heeding the voices that demand corporate reform. For the first time ever in an institution of higher learning with Haas’ reputation, Haas will begin to offer training and education for individuals who will have as their function to change the ethical climate of corporations from the inside in their role as Chief Ethics and Compliance Officers (CECOs). Through Haas’ Center for Executive Education, Haas will offer a curriculum to address the needs of CECOs through, “Leading with Ethics and Compliance.”

In creating the curriculum, Haas has attempted to address the following issue. It seems many corporations that experienced meltdowns as a consequence of ethical lapses and illegal acts had Chief Ethics and Compliance Officers as well as seemingly robust ethics and compliance programs. In fact, most of the financial institutions that currently bear the brunt of the ire of millions have CECOs, who are very well-intentioned in their attempts at corporate reform.

The question then becomes, what can Haas do to help CECOs become most effective in the implementation of corporate compliance and ethics programs?

Ethics and compliance program becomes truly effective only when an organization fully integrates the CECO into the strategic planning process.

Leading with Ethics and Compliance

Dean Lyons has deployed Haas resources in devising a solution called “E&C 3.0”. Researchers at Haas concluded that CECOs usually adopt one of two approaches to corporate ethics and compliance programming: a rules-based approach or a values-based approach. They also concluded that neither approach is entirely effective at corporate ethics reform.

In a rules-based approach, CECOs use deterrence as a means of enforcing employee compliance with corporate policies, ethical standards, and government rules and regulations. Researchers at Haas concluded that an emphasis on the rules and the investigation and punishment of employees creates a ‘culture of fear’ that stifles open communication. In a values-based approach, CECOs emphasize creating a corporate culture that encourages employees to speak up about potential issues without the fear of retaliation. While a vast improvement over the rules-based approach, the values-based approach to corporate compliance and ethics still does not go far enough.

Researchers at Haas concluded that an ethics and compliance program becomes truly effective only when an organization fully integrates the CECO into the strategic planning process. Of course, it is because of his commitment to this proposition that Dean Lyons has integrated responsibility, accountability and transparency into the Haas School Strategic Plan. Once senior executives make the connection between brand reputation and success in an “idea economy,” they realize the ROI of an ethics and compliance program. They can then learn through the CECO how best to leverage their ethics and compliance programs in strategic planning to maximize innovation and performance with integrity in gaining a competitive edge.

The focus of Leading with Ethics and Compliance is on providing CECOs with the necessary tools that will empower them to achieve strategic relevance by partnering with key decision makers to cultivate influence, earning a reputation as a creative thinker intent on progress and not obstruction, and by measuring how ethics and compliance improves the organization’s ability to meet its corporate objectives.

In an immersive, action-oriented curriculum, Haas matches its world-renowned faculty experts in the field of organizational strategy with industry experts in the field of ethics and compliance from such firms as CHW, Deutsche Bank, Elan Pharmaceuticals, Google, Microsoft, Templeton Funds, etc. Participants can thereby gain real-time strategic and tactical insights that can be applied immediately in helping them to become most effective in achieving the goal of corporate ethics reform.

 

Conclusion

As millions take to the streets in a global protest of corporate malfeasance, Dean Lyons has taken the approach that ethics reform begins from within an organization. Decision-makers must learn to take responsibility for the impact on society of their actions and hold themselves personally accountable for their conduct. Under Lyons’ leadership, Haas is taking one step further by providing a curriculum to assist individuals who have as their function to change the ethical climate of corporations from within in their role as Chief Ethics and Compliance Officers. Through the deployment of Haas dedicated resources, “Leading with Ethics and Compliance” will help CECOs become most effective in their efforts on behalf of corporate ethics reform and succeed where others have fallen short.

About the author

Dr. Mark Meaneyis the Systemwide Director of Ethics and Compliance at University of California, Office of the President. He is also the former First Deputy Director, Office of Compliance; Chief Compliance Operations Officer for the City of Chicago.

Leading with Ethics and Compliance will take place February 13-15, 2012 on campus at UC Berkeley.
Visit www.executive.berkeley.edu for more information.

 

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