Compliance and ethical business practices aren’t usually linked. However, as an ethics author, speaker and consultant, who believes strongly in business ethics, the question is not only important but critical. In fact, all of the actions that a compliance department should take must encourage ethical business practices.
The other guy is you.
The Securities and Exchange Commission (SEC) has arrived at a list of ethical business practice expectations that every publicly-traded organization should meet. It is so important a “list,” that ethically aware organizations, organizations that practice corporate social responsibility, incorporate the list into their mission statement.
As a business ethics consultant, book author and motivational speaker, it is interesting that the rather staid SEC is unafraid of tossing around words such as honesty and integrity, while I have known CFOs and other C-Suite executives who shy away from such language.
Indeed, the SEC helps to answer the question of “What actions should a compliance department take in encouraging ethical business practices?”
Let me paraphrase a selection of 7 key points, out of many, the SEC emphasizes:
- Agreement to applicable rules and regulations with transparency, trustworthiness and veracity. The pressure to circumvent rules must be resisted. Unethical business behaviors have the potential to become habit and habits become patterns.
- Avoidance of conflicts of interest. Therefore, if an employee – at any level – is ethically uncertain of a conflict of interest, make sure the doubt is brought before legal. Whistleblowers are usually not popular; however, whistleblowers have saved companies.
- Gifts or any kind of bribe intended to “curry favor” must be strictly avoided. Business ethics demands fair play, especially for publicly traded entities. This is why accepting bribes have been heavily penalized.
- Insider trading of any kind is an anathema to ethical business practices. This includes conflicting “outside directorships,” talking up potential mergers, acquisitions, new products and the like to friends, relatives and any other parties.
- Personal prospects of business. Employees must avoid capitalizing on opportunities created by an organization’s actions.
- Discrimination, bullying, sexual harassment. One of the easiest ways to destroy a publicly (or privately) held is my fostering an environment of unethical behaviors.
- Politics and political contributions. Creating an environment of politics, coercion to a political point-of-view, or similar patterns is a no-no for any publicly-traded company.
It is the responsibility of everyone in a publicly-traded company to conduct business in an ethical fashion, and to call out unacceptable behaviors.
Compliance starts with you. If we review the points from above, it is obvious that any unethical business behaviors have the potential to potentially damage compliance and to create an abundance of negative publicity.
What actions should a compliance department take in encouraging ethical business practices? Virtually any business practice of an organization should be done so in the light of compliance. Conversely, every necessary action the compliance department brings forward, must mirror the desired environment of ethics within an organization. The point being, is that compliance and ethical business practices are intertwined.
Going forward
In my keynote speeches on business ethics, I am often asked in the Q&A sessions if business ethics matters anymore? My response is to have the person who asked the question to think of a recent example of a corporate scandal.
“Tell me what you think of the company?” I ask. “Now tell me if you would invest your life savings in their stock?”
The response I most receive is a shrug, a loss of confidence and worse – the fear that the company would probably “get into trouble” again.
Business ethics matter, and people in compliance have learned the lesson all too well as they scramble to explain what happened to the SEC.
