Tone at the Top: The Board’s Role

I am attending the Global Ethics Summit 2010, hosted by Dow Jones and Ethisphere. Here are my notes, live from this session:

Understanding and supporting a prudent ethical and compliant tone throughout an organization is a core responsibility of the board of directors. Board actions are more transparent than ever to employees, investors, regulators, media and the general public. This session will discuss the challenges and keys to success for today’s boards. What are the responsibilities and associated liabilities of the Board for a company’s compliance? How can a board become actively involved in assuring employees, stakeholders and regulators that their organization is being proactive about ethics and compliance?


  • Thomas O’Neil, Advisor, WellCare Health Plans
  • C. Turney Stevens, Dean, College of Business, Lipscomb University
  • TK Kerstetter, President & CEO, Corporate Board Member

Turney started off by a need to focus on the tone throughout the organization. It is great to have the board of directors focused on integrity and ethics. But it is useless if that message does not reach down throughout the organization.

Thomas pointed out the need to view and get involved in company operations. They should not limit their involvement to meeting in the boardroom.

Watershed Events

The test of company’s culture is during a crisis. TK used the example of Wal-Mart, when the vice-chairman was found to be abusing gift cards. They had to set the culture and discipline that person (terminate?).


It can be overwhelming for a board to oversee all of the operations. They need to have faith in the organization. Directors need to get comfortable that the company is doing the right thing. Turney mentioned the work of Ben Heineman and his book  High Performance with High Integrity. It is important to create some metrics to measure the process and the compliance program. Heineman came out of GE and its culture of measurement.

Cutting Corners

With the pressure of hitting budgets and performance goals, how do you temper this with the need to operate with integrity. The board needs to show that the employee was a rogue and that the company had the culture, operations and monitoring in place that would normally prevent the rogue employee from succeeding. You need to show that you were a reasonably prudent director. (Of course the standard for being a reasonably prudent director is a continually increasing standard.)

You need to temper “missing the numbers” and the need for integrity. How to reconcile these competing forces? It’s tough.

Going Public

Private equity firms need to do a better job on compliance, ethics and the “tone at the top” when preparing their portfolio companies to go public. There are the regulatory issues of course. But there is an increased pressure to make the numbers in the public markets.

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