EthicsPoint sponsored this webinar and these are my notes. Howard Sklar, Vice President & Global Anti-Corruption Leader, American Express Company was the presenter. Howard was quick to point out that it is not just the “tone” but having the right “tone.” Also, it not be just the tone “at” the top, but that it be the tone “from” the top.
Howard started off with trying to define “tone at the top.” Many people just default to the Justice Potter Stewart’s take on pornography: “We know it when we see it.” Howard likes the ACFE definition:
An organization’s leadership creates the tone at the top – an ethical (or unethical) atmosphere in the workplace. Management’s tone has a trickle-down effect on employees. If top managers uphold ethics and integrity so will employees. But if upper management appears unconcerned with ethics and focuses solely on the bottom line, employees will be more prone to commit fraud and feel that ethical conduct isn’t a priority. In short, employees will follow the examples of their bosses.
Howard offered up his working definition for the presentation:
Tone at the top is a visible willingness by senior management to let values drive decisions to prioritize those values above other factors – including financial results and to expect all others in the organization to do the same.
Howard pointed out that the first recommendation of the Treadway Commission was the importance of setting the tone at the top.
But who is the top? The Audit Committee, CEO, Board of Directors, vice presidents, . . .? They are clearly at the top of the organization. But in this context you need to be thinking about all leaders throughout the organization. Front-line employees are most influenced by their immediate manager.
Repetition is important. Leaders and employees throughout the organization need to hear the message and hear it consistently. It is important for leaders to talk about the values of the company and to live up to those values. You can not have a message of “win at any cost” and you can no longer operate as a company with the value of “win at any cost.”
Howard says there is no such thing as “compliance training.” It is all business training. You sell the product in the right way. You need one message. It is also important to integrate personal stories into explaining the values of the company.
Compensation is an incredibly important part of the message. If your salary or bonus is not affected by compliance. [For an example of misaligned pay structure look at Countrywide in originating sub-prime mortgage loans: Did Compliance Programs Fail During the Financial Industry Meltdown?]
The example of an opposite message is a company ingraining earnings targets in employee. Employees should not be told that earning targets are the most important part of the company. Short term thinking is short term thinking, and values are long term.
Compliance can set the goals, but they are part of the business goals not a separate set of compliance goals.
An important measurement for compliance is whether an employee feels comfortable reporting misconduct.
Howard recommends that a compliance officer become a stop in the exit interview process. Departing interviews can offer some insights and discuss problems that they may have been unwilling to report when they were an employee.
Howard says you should make sure that compliance and the compliance officers are on the company’s organization chart.
Some of Howard’s other best practices:
- Make compliance part of hiring. Check references.
- Make compliance part of the non-monetary reward and recognition process. Recognize employees who do the right thing.
- Trumpet your failures as well as your successes.