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Company culture essential to strong ethics and compliance program

Last week, San Francisco-based Wells Fargo bank was fined $185 million because employees opened two million unauthorized bank and credit card accounts. About 5,300 employees associated with this fraudulent conduct were fired over a five-year period, the bank said.

The incident has not only marred the organization’s brand, but has also raised questions about its company culture. How can other organizations prevent similar misconduct?

“It is important to address ethics and compliance at the beginning of an employee’s employment, making sure that they know what is expected from the company, they know what the culture is, they know what the values are and they know where to go if they have a question,” said Eileen Krouse, program manager at Staple’s Ethics and Compliance Office, during a recent panel discussion titled Preparing your Employees to be the Compliance Front Line at the Thomson Reuters Compliance and Risk Forum in Boston.

There are several reasons why employees engage in unethical behavior. Financial worries, pressure to reach sales targets, being unaware what they are doing is wrong or not knowing where to seek help if needed can contribute to the problem, panelists said.

But panelists agreed that at the top of this list is an “I don’t care about the company” attitude.

“Especially when you are talking about a large enterprise with frontline employees, the ‘I don’t care’ dynamic is an important one that you have to address somehow. You have to convince them to care,” said panelist Matt Kelly, editor and CEO at Radical Compliance. “The other part is just incentive pressures. Organizations have to know how to tie how people get paid and rewarded to the caring about ethics and compliance.”

Companies need experienced and creative people to figure out what incentives can take employees down the wrong path — and who is most susceptible to head down that path, said panelist Daniel Nathan, a partner at Morvillo law firm.

It is important to show employees that the company values proper ethics and a strong set of principles, he added.

“You got to make sure you are reaching the right group of people with the right message. It’s what people call ‘tone at the top’,” said Nathan.

Organizations can help set these standards by making a helpline available for employees with questions about ethical behavior, regularly holding ethics training, and sending out informative newsletters, panelists said.

At Staples, Krouse’s team doesn’t wait for employees to come to them with questions or problems, but reaches out to them first, she said.

“Associates need to know that the ethics and compliance team are people, and that we are a resource and not the ethics police,” Krouse said.

It’s important to have a robust internal audit program and a disciplinary system where employees who engage in any misconduct are dealt with accordingly, Nathan added.

Kelly talked about how a company can collect useful intel from the organization’s whistleblower hotline to help diagnose a company’s culture.

“Look at as many metrics as you can get from your hotline calls, about retaliation specifically,” he said. “Are people alleging retaliation? Are they alleging it against a specific manager or alleging against a specific type of misconduct that they are alerting you to?”

Partnering and communicating with other departments also helps drive an ethical corporate culture, panelists agreed.

Krouse said her department partners very closely with HR and with employment attorneys so that they can cooperate when ethical issues come up.

It is equally important to have a risk assessment program to analyze potential risks of corporate ethics violations before introducing any new program, product or service, Nathan added.

“The classic formula for setting up a compliance program is to identify upfront the risks of the program, product or sale,” he said. “Identify any conflicts of interest that would cause a potential problem and figure out how to mitigate it.”