5 Signs Your Organization Might Be Headed for an Ethics Scandal

Alison Taylor has an insightful piece in the Harvard Business Review with important red flags to indicate that executives and directors may be at risk for ethical violations. She says that rather than a “rotten apple” model, “we see a “tone at the top” underpinned by widespread willful blindness, toxic incentives, and mechanisms that deflect scrutiny. These conditions seem to persist and metastasize. They replicate despite changes in leadership and in management systems.”

Responding to problems with “urgency and fear…can be used to justify the creation and maintenance of toxic incentives, and it will undermine any efforts to raise concerns.” She also points to “fragmentation and plausible deniability” as indicators of a problem.

Unethical cultures have similarities, but what we need to describe is an absence. There will be a lack of perspective taking, an unthinking, reactive way of dealing with time and pressure, no alternative narrative to growth at all costs. By contrast, ethical cultures are not all the same, and they are much harder to maintain than to destroy.

Source: 5 Signs Your Organization Might Be Headed for an Ethics Scandal

Steven Cohen raises eyebrows by using auditor to sell fund assets holding up SEC settlement – MarketWatch

VEA vice chair Nell Minow is quoted in this story about Steven Cohen offloading illiquid assets to an affiliate of his accounting firm.

Corporate governance expert Nell Minow, the vice chair of ValueEdge Advisors, told MarketWatch “Steven Cohen had one job: to stay squeaky clean until he could get permission to manage outside money again. Instead he cut a corner he didn’t have to, creating a conflict of interest with the public accounting firm he’s paying to protect his family, his employees and future investors.”

Source: Steven Cohen raises eyebrows by using auditor to sell fund assets holding up SEC settlement – MarketWatch

The World’s Most Ethical Companies 2017

Through its ethics survey, Ethisphere evaluates firms on five criteria, which roll up into a single Ethics Quotient (EQ) score. The first and most important topic is a company’s ethics and compliance program, which accounts for 35% of the EQ. Firms must answer questions like whether they track gifts received by employees and what resources they offer employees for reporting misconduct.

Ethisphere observed an interesting trend in the data in 2016: more companies disclosed information about misconduct to their own employees, telling them how many complaints were filed and what was done about it. Previously, firms tended to keep such matters confidential, says Michael Byrne, Ethisphere’s general counsel. “Essential to an effective compliance program is people feeling comfortable expressing a concern … One of the best ways to [do that] is to shine a light on it.”  

The second factor in the ethical list scoring, accounting for 20% of the EQ, gauges whether ethics are embedded into a company’s culture from top to bottom. The third element, corporate citizenship and responsibility, includes questions about what methods companies use to measure their environmental impact.

Corporate governance is the fourth criterion. Ethisphere’s survey asks whether a company’s CEO and board-chair roles are held by separate people. This year, Ethisphere also placed an increased focus on diversity in board and leadership positions.

The final element is leadership, innovation and reputation. Ethisphere asks if companies have been named to top business lists, such as Forbes’ own Most Trustworthy Companies, and whether its executives have spoken at high-profile conferences like the World Economic Forum in Davos, Switzerland.

Of the 124 firms on this year’s list, 13 have made the cut every single year, including: Aflac, Deere & Company, Ecolab, Fluor, GE, International Paper, Kao Corporation, Milliken and Company, PepsiCo, Starbucks, Texas Instruments, UPS and Xerox.

Source: The World’s Most Ethical Companies 2017