Firms embrace ethics training
WEST WINDSOR, N.J. — When Peter Ferris was hired by Tyco International five years ago, he received an employee handbook but little other formal training in business ethics. Today, employees at a company that made headlines for its former CEO’s lavish spending must take an interactive, online class that covers everything from insider trading to sexual harassment.
There’s also a column on business ethics in the company’s newsletter, and a new ombudsman to address any employee concerns about the issue.
“The programs have helped define what is appropriate behavior in real-world situations. A lot of it is common sense, but some of it you may not know,” said Ferris, Tyco’s vice president of strategic marketing. “You have to define ethics because, if you don’t, people will do it themselves.”
The changes are part of Tyco’s efforts to move past the embarrassing scandal that resulted in larceny charges against former top officers including CEO L. Dennis Kozlowski. They also reflect a broader trend in U.S. companies amid increasing regulatory pressure and emphasis on corporate governance. Many of the biggest U.S. companies, including MCI Inc. and Boeing Corp. are expanding their training programs and hiring ethics officers and ombudsmen.
Critics say many of the efforts are public relations moves. They say real promotion of ethics requires more than online programs or seminars — and note that many of the recent corporate scandals occurred at companies that already had programs. They also question whether such efforts would have stopped some of the unethical executives in recent scandals who knew they were breaking the rules.
“They knew they were taking a risk and it’s because of greed,” said David Silverstein, president and CEO of Breakthrough Management Group, a consulting group. “No training is going to change that.”
Still, demand for ethics training products is increasing.
The Sarbanes-Oxley Act, a landmark corporate governance bill passed in 2002, requires public companies to establish a confidential system for employees to report wrongdoing and create an ethics code for senior financial officers.
At the same time, the U.S. Sentencing Guidelines, which help determine penalties for corporate wrongdoing, are being rewritten to require companies to “promote and organizational culture that encourages ethical conduct.”
Experts say a successful ethics program integrates its principles into the work place. That means everything from staff meetings to discuss online training to providing employees with wallet-sized cards that reiterate company values.
Ethics can even figure into an employee’s paycheck via performance evaluations.
“That’s where employees’ bread is buttered. If ethics is not part of the evaluation process, I don’t think ethics will be taken as seriously as it needs to be,” said W. Michael Hoffman, executive director of the center for business ethics at Bentley College in Waltham, Mass. “This is part of getting people to talk about ethics.”
Still, many recent high-profile scandals have occurred at companies with big, well-funded ethics programs — including Halliburton’s Engineering and Construction Group, known as Kellogg Brown & Root. KBR, which also has an ethics training program and code of conduct for its employees, has been accused of overcharging the government by millions of dollars for its services in Iraq. The company has denied any wrongdoing.
Boeing, which has had an ethics program for roughly 20 years, could lose a $23 billion government air-tanker deal because of allegations it tried to hire the government’s lead negotiator on the deal during contract talks. The company also had seven military satellite launches taken away last summer because it used proprietary records of rival Lockheed Martin Co. to help win a $1.88 billion contract in 1998. That case is still in court.
Boeing spokesman Ken Mercer declined to discuss the company’s legal troubles, but said the company considers ethics to be a “zero-tolerance issue.” Over the years, the program has evolved to include annual ethics training,a hotline, ethics officers and other resources. More recently, the program has expanded to include an annual Ethics Recommitment Day and conduct code that every employee must sign off on.
At Tyco, employees are required to take an annual six-hour online training course that introduces and then quizzes employees on concepts ranging from sexual harassment to what do if you believe unethical behavior has occurred. There’s a hot line run by an outside company for employees to report ethics violations.