This document discusses the importance of establishing an ethics and compliance program in organizations. It argues that having strong ethical leadership and culture helps improve productivity, loyalty, and reputation while preventing legal and reputational harm. The roles of ethics and compliance officers are to help create codes of conduct, provide trainings, investigate issues, and ensure a speaking up culture. Implementing best practices like these helps reduce the duration and costs of unethical behavior in organizations.

1. Bernard Gutierrez & Abbas Al Abbas
Internal Audit/Ethics and Compliance Professionals
Ethics in Business
The Need to Establish an Ethics & Compliance Program
20 February 2012

2. Objectives
“Ethics”
 What is it anyway??
 Why it is important in organizations
Importance of leadership and culture
Organizational challenges and safeguards
Roles of ethics and compliance officers

3. Ethics
A concept of right and wrong
conduct beyond legal compliance
Ethical principles are implicit contracts that
represent who you are and what you stand
for—what your constituents expect to rely on
Michigan Business School Guide to The Ethical Challenge,
How to Lead with Unyielding Integrity

4. Why is Ethics Important in Organizations?
Character and ethical behavior in
organizations affects:
 Attendance
 Safety
 Quality
 Productivity
 Loyalty
 Security
 Profitability
 Reputation

5. Why Should Organizations Behave Ethically?
 Prevent harm to others, avoid
reputational harm and reduce
potential liability
 Fulfill public expectations and
improve external relations
 Protect organization from others
(employees, competitors, etc.)
 Improve workforce productivity
but protect employees if needed
from their employers
 Promote personal morality

6. Reasons for Ethical Problems in Organizations
 Personal Gain and Selfish Interest
 Competitive Pressure on Finances
 Organizational Goals vs. Personal Values

7. Ethics and Compliance Risks in the Company
 Cash on hand funds are misused,
mishandled, and unrecorded
 Online payment facility can edit bank
account details
 Weak organizational and process
structures
 Workplace discrimination
 Disgruntled employees
 Tone-at-the-top/corporate culture
 Bribery
 False financial reporting information
 Poor communication practices

8. Impact of the Individual Leader/Manager
“The behavior and ethical attitude
of an employee’s boss
is seen as the most important factor
determining whether the
employee will behave unethically on the job”
(Liebig, J.E. 1990)

9. Organizational Safeguards
BBeesstt PPrraaccttiicceess
 Leadership/Open door policy
 Ethics and compliance officers
 Ethics committee
 Code of conduct
 Discussion forums
 Conflict of interest assessments
 Periodic risk assessments
 Ethics and compliance training
 Help line
 Recognition effort
 Corporate citizenship

10. Organizational Safeguards
Fraud Prevention - Code and PPoolliiccyy JJuussttiiffiiccaattiioonn
When a strong Code of Conduct was in place:
The median fraud losses were reduced by 46%*
and
The duration of the fraud scheme was reduced on
average by 37.5%*
When an anti-fraud policy was in place:
The median loss related to fraud was reduced by 40%*
and
The average duration of a fraud scheme was reduced by
28%*
Source: 2010 ACFE (Association of Certified Fraud Examiners)
Report to the Nations on Occupational Fraud and Abuse

11. Ethics and Compliance Program
Corporate Ethics & Compliance Program
 Do the Right Thing: Principles of Business
Conduct
 Ethics & Compliance Officers
 Risk Assessment
 Continuing Education – Awareness Campaign
 Integrity Hotline (Confidential and/or
Anonymous)
 Integrity in Action Awards
 Organizational Leadership

12. Ethics and Compliance Program
What Will Ethics & Compliance Officers Do?
 We will help establish codes of ethics, and require all
employees to read, understand, and sign it.
 Examine the stated values, mission, and goals of the
organization and determine if the organization’s behavior
supports these statements
 Conduct anti-fraud, compliance and ethics orientation and
awareness trainings.
 Assess risks and correct inconsistencies in implementing
disciplinary actions.
 We will also recommend to reward employees’ ethical
conduct.
 Implement an anonymous and/or confidential “hotline” as
an effective misconduct reporting mechanism. (Occupational
frauds are much more likely to be detected by tip than by any other means. – ACFE 2010)

13. Ethics and Compliance Program
What Will Ethics & Compliance Officers Do? (cont.)
 Establish and communicate a whistleblower protection
policy to report misconduct in the workplace.
 Create a compliance program based in institutional and
personal values
 Review and amend the language of the Company
policies, communications, training to incorporate ethics &
values
 Follow through with reports of misconduct and promote
effective internal controls.
 Undertake investigations into specific employees or
activities to confirm that they conform with the Company’s
ethical guidelines
 Help management create a culture of doing the right thing.

14. Ethics and Compliance Program
Implementation
Standards
Education
Resources

15. Thought for the Day
All that is necessary for the
triumph of evil is that good
men [people] do nothing.
Edmund Burke
Irish orator, philosopher, &
politician (1729 - 1797)