Corporate Concept

Corporate Ethics and Compliance Programs: A Report, Analysis and Critique
Author(s): James Weber and David M. Wasieleski

Source: Journal of Business Ethics, Vol. 112, No. 4, Special Issue: The 17th Annual
International Vincentian Business Ethics Conference (2010) (February 2013), pp. 609-626
Published by: Springer
Stable URL: http://www.jstor.org/stable/23433671
Accessed: 08-05-2018 10:24 UTC
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J Bus Ethics (2013) 112:609-626
DOI 10.1007/s 10551-012-1561 -6
Corporate Ethics and Compliance Programs: A Report, Analysis

and Critique
James Weber • David M. Wasieleski
Published online: 28 November 2012

© Springer Science+Business Media Dordrecht 2012
Abstract This research reports on the current state of

organization hierarchy, and thus have required specialized
ethics and compliance programs among business organiza
responses from regulators to correct and control behavior.
tions in the United States. Members of the Ethics and For example, the Foreign Corrupt Practices Act (FCPA) of
Compliance Officers Association (ECOA), the premier 1977 was created after a series of U.S. Securities and
Exchange Commission investigations into hundreds of

professional association for managers working in this field,
were asked to provide in-depth responses to a series of
companies that had issued bribes to foreign officials to
obtain government contracts. The FCPA was designed to
questions covering various elements of their corporate ethics
and compliance programs. The findings from this analysis
increase transparency of the exchanges. By effect, this new
indicate that ethics and compliance programs have multiple
regulation mandated the adoption of new accounting rules
components that are implemented developmentally, areorganizations. Shortly afterwards, in the wake of more
for
scandals involving defense contractors, the Packard Com
influenced by regulatory and legal efforts and have evolved
into more sophisticated approaches that include risk
mission, created by President Reagan, attempted to miti
gate procurement fraud by recommending that these
assessment and employee performance appraisal. However,
these programs remain vulnerable to sufficient resource
companies adopt ethics programs and encouraging indus
allocation by the organization to be fully effective. try-wide self-regulation (Kurland 1993).
Another wave of crisis-triggered government regulation
Keywords Compliance • Ethics programs • Regulation
occurred years later, after the savings and loan scandals of
the mid-to-late 1980s. Here the government responded
again by issuing the Federal Sentencing Guidelines in
Introduction 1991, which provided a formula, including a culpability
score, calculating the civil penalty imposed on a firm
Corporate ethics scandals span decades of American his
convicted of illegal actions (Canary and Jennings 2008)
The fine levied was increased or decreased based on
tory and are not limited to any single industry or profes
sion. These widely known ethical breaches have taken a
whether the firm addressed the steps articulated in t
variety of forms, have involved different levels of the
sentencing guidelines. These include: the establishmen
formal ethics procedures, the designation and appointm
of a high-level officer responsible for ethics and com
ance, evidence of the effective communication of ethi
Portions of the paper were presented at the 17th annual International
Vincentian Business Ethics Conference October, 14, 2010. standards, the formation of processes to monitor behav
to ensure compliance, and other similar efforts (U.S. S
J. Weber (El) • D. M. Wasieleski
tencing Commission Guidelines 1991). More recently, t
Palumbo-Donahue School of Business, Duquesne University,
Pittsburgh, PA 15282, USA Sarbanes-Oxley Act of 2002 was written in direct respo
e-mail: weberj@duq.edu to the chronic corporate executive scandals of the
D. M. Wasieleski 1990s, including infamous names like, Enron, WorldC
e-mail: Wasieleski@duq.edu Tyco, Parmalat, and Adelphia. The Sarbanes-Oxley
ö Springe
610 J. Weber, D. M. Wasieleski
effectively required more

corporate executives and esta
licly traded organizations t
accountable for the integrity
documents (Walker 2004). Much of this research is, by nature, an exploratory anal
As we have seen in these three most recent waves of ysis, thus the relevant research questio
regulatory response to crisis, these historical episodes have covery of trends and practices by busin
often been the catalyst for self-regulatory efforts or legally managers working in the fields of et
mandated regulatory reforms, as business organizations have Specifically, we want to discover how m
responded by creating and expanding their ethics and com- of the major ethical challenges have cha
pliance programs. For instance, the U.S. Organization Sen- decade, and what policy efforts have been
tencing Guidelines were directly responsible for the those challenges. We start by reporting
widespread adoption of ethics codes by Fortune 500 firms from past studies to serve as a comparison
(Hess et al. 2006). Thus, we see a government-organization Then we report our data and analyze the
reaction happening in tandem. These changes to the insti- oretical foundation that considers extra-o
tutions of ethics in organizations are the result of a crisis- organizational influences on business pr
driven government response. results are presented, a critique of the progress achieved
However, often these corporate reactions have been (or not achieved) is included to guide business organiz
either criticized or dismissed as window dressing or and their ethics and compliance managers into the
applauded as clear indications of business organizations decade of creating, sustaining or adjusting their cor
recognizing their ethical and legal obligations to society ethics and compliance programs,
and their stakeholders (Schwartz 2004). The 2004 amend
ments to the Federal Organization Sentencing Guidelines
were largely designed to reduce the perceptions that ethics Past Studies
and compliance programs are normatively meaningless
symbols by implicitly recommending a symbiotic integra- Our review of the literature uncovered six studi
tion of business ethics principles (Hess et al. 2006). This, assessed the state of ethics and compliance prog
along with an increased emphasis on corporate citizenship among business organizations. Each will be brief
rankings for enhancing organizational reputation has made marized in this section.
corporate ethics and compliance programs ever more The first published study focusing on corporate et
important (Logsdon and Wood 2005). programs appeared in the Journal of Business Ethics in 19
The importance of corporate ethics and compliance pro- Authored by the Center for Business Ethics at Bentley
grams is reinforced by empirical research that shows that lege, the Fortune 500 industrial and Fortune 500
employees in these programs are more likely to avoid organizations were surveyed to explore the emerging
unethical behavior, seek advice when confronted with ethi- ethics and compliance programs and asked some inter
cal dilemmas, have a greater commitment to the organiza- exploratory questions. The major conclusions drawn fro
tion, and are more willing to deliver bad news when this exploration were: 80 % of the largest industri
observing misconduct (Weaver and Trevino 1999). In service corporations responding to the survey had taken
addition to the internal benefits, external forces also provide to incorporate ethical values in their organizations, 93
a strong motivation for businesses to develop or strengthen these firms had written codes of ethics, 44 % had et
their ethics and compliance programs. Given the various training for their employees, and 44 % had some s
incentives on businesses to develop and sustain a corporate social audit; however, only 18 % of the firms had
ethics and compliance program, this research seeks to update committees, about one-third of the firms included h
earlier work conducted in the 1990s and 2000s (Center for employees in their ethics training program, and a littl
Business Ethics 1986, 1992; Ethics Resource Center 1994; 20 % of firms conducting social audits disclosed informat
Greater Omaha Alliance for Business Ethics 2008; Weaver to the public or to shareholders.
et al. 1999; Weber and Gillespie 1998) to report on, analyze The Center for Business Ethics concludes: "Based
and critique the current state of ethics and compliance pro- survey, [we are] ... convinced that corporations are m
grams among business organizations in the United States. more concerned with ethics than in the past... [but we m
Given changes in the ethical and legal climates for busi- press for more progress toward institutionalizing
nesses with the passage of the U.S. Organization Sentencing within corporations" (1986, pp. 69-70). This renewed e
Guidelines in 1991 and amendments in 2004 and 2010, and followed the foreign bribery scandals in the United Sta
the Sarbanes-Oxley Act in 2002, as well as numerous ethical and by consequence, led to the passage of the U.S. For
■£) Springer
Corporate Ethics and Compliance Programs 611
Corrupt Practices Act in 1977. It marks one of the

significant efforts by the federal government to r
ethical activities by business executives and dramat
changed the global marketplace for U.S. multinational
The study also was published the same year as Preside
Reagan launched his Defense Industry Initiative. At
time, much media attention was given to newly discov
fraud among defense contractors, involving "the procu
ment and overbilling charges levied against the def
industry" (Kurland 1993, p. 137). Thus, the need for
rules and efforts to deter such unethical behavior was q
salient to the general public at this time. Ethics Resource Center's sample included employees
Six years later, the follow-up study undertaken by the working in organizations with a wider variance in size.
Center for Business Ethics appeared in the Journal of The fourth study that explored ethics and compliance
Business Ethics. Similar questions were posed to a sample programs among large U.S. organizations was authored by
of large U.S. corporations (Fortune 500 industrials and Gary R. Weaver, Linda Klebe Trevino, and Philip L.
Fortune 500 service organizations) and the Center con- Cochran (Journal of Business Ethics, 1999). They contacted
eluded: "the Center's latest survey seems to indicate that Fortune 1000 firms and discovered a continued growth in the
large corporations are more likely now than they were five presence of ethics initiatives in large U.S. firms, when
years ago to be instilling ethical values in their corporations compared to the two Center for Business Ethics studies
{up from 80 %]" (1992, p. 866). (1986, 1992).
A number of responses from the follow-up sample sup- Weaver et al. found that 9
ported this conclusion. While the number of firms having a written document (i.e.,
code of ethics remained at 93 %, 52 % of firms (compared to reported in 1986 and 1
44 % in 1986) had employee ethics training programs, and employees receive no ethi
25 % (compared to 18 % in 1986) had ethics committees. sort," which means that 66
Similar, yet slight, increases were discovered for most of the ethics training, indicati
aforementioned initiatives undertaken by businesses to reporting 44 and 52 % re
instill ethical values across their organization. They also reported on new ethics initiatives in the organi
Large U.S. companies engaged as defense contractors zational ethics and compliance program. Fifty-four percent
with various branches of the U.S. military continued to be of firms had an ethics officer, and 51 % of the firms had a
accused of fraudulent practices spawning federal government telephone-based system for ethics complaints and inquiries,
demands for a more comprehensive ethics and compliance From this evidence, it appears that organizational ethics and
program by many U.S. corporations. These firms revised their compliance programs continued to expand throughout the
code of ethics, created employee ethics training programs and U.S. corporate landscape and deepened in complexity within
established internal processes for auditing employee prac- business organizations as continued pressure and incentives
tices, particularly with regards to pricing of products to the by regulators and the judicial system clarified societal
government. Many of these ethics and compliance program expectations of acceptable business practices,
revisions or improvements were in response to the threats by Two additional studies explored organizations' ethics
the federal government to terminate all contracts in the future and compliance programs but were different than those
if changes were not made (Darrough 2010). summarized above since they focused on a regional pop
Two years later, in 1994, the Ethics Resource Center ulation of business organizations. The Beard Center for
published its report entitled, Ethics in American Business: Leadership in Ethics published their report entitled "Ethics
Policies, Programs and Perceptions, heralded to be a Initiatives in Southwestern Pennsylvania." James Weber
report of a landmark study of U.S. employees. It is and Janet Gillespie, the authors of the report, used many
important to note that the Ethics Resource Center contacted the same questions asked in earlier studies when exploring
employees directly at their homes, as opposed to sending ethics programs in their region. It is also important to note
surveys to the business organization as the Center for that their sample was not only limited to a regional but al
Business Ethics did in their two previously discussed was more "size stratified" than the four aforementione
reports. The Ethics Resource Center focused mostly on the studies. The Beard Center reported having 19 % of al
employees' perceptions of ethics at work. Therefore, the respondents representing organizations with fewer than 24
conclusions were mostly along the lines of employee employees, whereas only 22 % of all respondent organi
pressures to act unethically, as shown in this example: zations had more than 1,000 employees. The size of the
£) Springer
organization could significan

ethics programs and its initiatives. focus.
The Beard Center reported that 57 % of the organizations Across the decades of investigating
had a code of ethics, 20 % trained their employees in ethics, compliance programs, scholars hav
17 % had an ethics officer in the organization, 11 % of the pressures exerted through governm
organizations conducted some sort of an ethics audit, and response, firms have adopted new fea
9 % of the organizations had an internal reporting system. ethics and compliance progra
While difficult to make a direct comparison between this data these discoveries when reviewin
and previous studies due to significant differences in sam- appears critical to conduct a nationa
pling, we begin to see that government regulatory and legal and compliance programs develope
pressures on creating and expanding organizational ethics tions in the post-Federal Organi
and compliance programs may be first encountered and lines and post-Sarbanes-Oxley Act
responded to by larger organizations before trickling down to to focus this new report and an
smaller firms in some regions. This may be partly a function responses from those who are entr
of being a publicly traded company, as larger firms may more these programs—ethics and compl
likely be than smaller firms. The large firms sampled were
held accountable to the Federal Organization Sentencing
Guidelines on corporate fraud, but smaller, private firms did Methodology
not have the same mandate. We see this same trend in the
2010s with reference to the Sarbanes-Oxley Act. Sample
The final study was undertaken by the Greater Omaha
Alliance for Business Ethics at Creighton University. Simi- In 2010, the more than 1,200 members of the Ethics and
lar to the Beard Center report, this study also was regional Compliance Officers Association (ECOA), the premier pro
limited and had a wide variance in organizational size among fessional association for managers working in this field, w
its respondents. The Greater Omaha Alliance report was emailed a request to complete our survey of ethics and
fairly consistent with the Beard Center's results in many pliance programs and practices via Survey Monkey. While
areas. About 60 % of the organizations had a code of ethics, there is the potential bias in the responses given due to a so
nearly 30 % of the organizations train their employees in desirability effect (Bernardi and Guptill 2008), we tried to
ethics, 81 % reported having an ethics office or staff, and minimize this potential issue by not tracking the respons
45 % had a formal reporting mechanism available to back to the organizations in our sample. ECOA members w
employees. Again, we see a marked difference in the specifically targeted to provide greater in-depth responses to a
response to governmental and legal pressures when consid- series of questions covering the organization's ethics polic
ering a broad spectrum of business organizations by size employee training, reporting mechanisms, and a host of oth
rather than focusing only on the largest U.S. firms. ethics initiatives commonly found in large business organi
It is worth noting that there are other national surveys of zations. In instances when more than one ECOA membe
U.S. employees undertaken by a number of organizations belonged to the same organization, we asked that only
to elicit employees' opinions and perceptions regarding member complete the questionnaire per organization. T
ethics at work: there are no duplicate organizations in our sample. In total, 61
of the 475 organizations belonging to the ECOA resp
Ethics and Workplace Study—annually since 2007 by
our survey, a 12.8 % response rate.
Deloitte LLP,
The respondent sample represented ten distinct in
2000 National Business Ethics Survey Volume I: How
groups, with the highest representation from fina
Employees Perceive Ethics at Work (Ethics Resource
vices (23 %), utilities/energy (20 %), and high tech
Center 2000),
communications (15 %). Other industry represe
National Business Ethics Survey: How Employees View
included consumer retail (8 %), food and bevera
Ethics in Their Organizations 1994-2005 (Ethics
transportation (7 %), engineering (6 %), non-pr
Resource Center 2005),
manufacturing (each at 5 %), and health care (3 %)
National Business Ethics Survey: An Inside View of
The number of employee working in the organi
Private Sector Ethics (Ethics Resource Center 2007), and
was varied across the sample, as indicated in Table
2009 National Business Ethics Survey: Ethics in the
organizations in our sample (53 %) had between 5,0
Recession (Ethics Resource Center 2009).
50,000 employees.
Yet these investigations do not explore or report orga- We also asked for annual sale
nizational ethics and compliance program elements, covered that for a majority of our r
Springer
Table 1 Number of employees Table

per 2 Ethics and compliance initiatives in organizations
organization
Number of employees Percentage of Ethics and compliance initiative Percentage of firms

firms in sample with initiative
Fewer than 1,000 9 Ethics or compliance officer 100
1,000-4,999 19 Code or policy on ethics 98
5,000-9,999 21 Ethics training program for employees 98
10,000-19,999 10 Internal ethics reporting mechanisms 95
20,000-49,999 22 Mission/vision statement 75
50,000-99,999 6 Employee performance appraisal 74
More than 100,000 13 Public statements by senior management 72
Risk assessment analysis 67
Ethics committee 44
organization's annual sales were between 5 and 50 billion
dollars (U.S.).
Survey
underlying motivations and pressures that give rise to these
The survey was developed by the authors and broken into programs.
nine sections: general information (basic organizational
data), ethics and compliance initiatives in your organiza Motivations for an Ethics and Compliance Program
tion (list of initiatives, motivations and pressures influ
encing the program), code(s) or policy(ies) on ethics Why does an organization undertake the development and
(topics covered, drafters of code, and communication maintenance of an ethics and compliance program? The two
methods), ethics and compliance officer (job title, reporting strongest incentives evident in this survey emphasize basic
responsibilities, and background), internal ethics and ethical and compliance motivations. There is a strong sense
compliance reporting mechanisms (staffing issues, contacts of ethical responsibility—"to do the right thing"—6.9 point
received, and investigations undertaken), ethics training average (out of a maximum of 7.0 points on a Likert-scale),
(goals, who is trained, by whom, when, how, and assessing coupled with a keen awareness of compliance—"comply
impact), ethics and compliance performance appraisal with government laws"—6.2 point average.
(who is evaluated and what criteria is used), risk assess There also appears to be importance given to enhancing
ment of ethics and compliance (who conducts it, when, and internal organizational systems—"provide guidelines for
results reported to), and emerging issues in the workplace employee conduct" (5.9 point average out of a maximum
(a series of "hot topics" to try to get a view of future of 7.0 points on a Likert-scale), "establish strong ethical
direction for ethics and compliance programs). culture" (5.8 point average), and "improve management
decisions" (4.7 point average). It appears that senior
management understands that an ethics and compliance
Results: The State of Ethics and Compliance program can help the managers within the organization,
Programs, 2010 resulting in a benefit to the organization itself. This finding
reinforces early discoveries of the internal benefits ema
Initially we asked, "What ways does your organization nating from an ethics program (Weaver and Trevino 1999).
promote ethics and compliance?" As shown in Table 2, The final emphasis focusing on the motivations for an
four initiatives were most prevalent: ethics and compliance ethics and compliance program emphasizes a financial
officer, code/policy on ethics, ethics training programs, and incentive—"protect company from unethical employees"
ethics reporting initiatives. (4.1 point average out of a maximum of 7.0 points on a
It must be noted that the 100 % response for having an Likert-scale), "maintain a competitive advantage" (4.1
ethics or compliance officer in the organization is expected point average), and "avoid costly litigation" (3.8 point
since we are asking ethics and compliance officers to average). These motivations may indicate some importance
complete our survey. More meaningful analysis of the given to corporate financial performance and the financial
responses focusing on ethics and compliance officers will obligations to corporate stockholders believed to be one of
be discussed later. Before launching into an analysis of the core responsibilities for organizations (Friedman 1970;
responses regarding specific ethics initiatives developed Margolis and Walsh 2003). Yet these three financial
and maintained by business organizations, such as ethics motivations appear to be the least important according to
policies or reporting mechanisms, we explored the the responses received.
ö Springer
Table 3 Comparison of the top thre
Bentley Center, 1986 Bentley Center, 1992 Weber and Gillespie (1998) Current study, 2010
To be socially responsible To be socially responsible Establish a strong ethical cultureTo do the right thing
To guide employees' behaviorTo guide employees' behavior To guide employees' behavior To comply with
government laws
To improve management To comply with government To comply with government To guide employees'
decision making laws laws behavior
An analysis of these results compared with results fromTable 4 Pressure to develop and maintain an ethics and compliance
previous studies, shown in Table 3, indicate exceptionalprogram
consistency across three decades. A strong focus on "socialSource of pressure Importance rating
responsibility" changed into a concern for "building an ethi (7 = most important)
cal culture" or "doing the right thing" as the most important 5.42
Maintain legal compliance
motivations, indicating a strong normative or ethics focus for
Reflect company leader's values 4.60
having an ethics and compliance program. Yet, organizations
Encouragement from employees 3.06
are also aware of the compliance aspect of their programs as an
From the marketplace, competitors 2.96
important motivator—"to comply with government laws"—
Economic incentives, "it pays" 2.79
and the importance of achieving the internal benefits from
From community, non-profit groups 1.96
these programs—"to guide employees' behavior."
Overall, when looking at this group of respondents and
previous studies, it appears that organizations are engagedcompliance killed ethics?" (Martens and Barry 2006). It
in developing ethics and compliance programs due toappears that compliance may not have killed ethics, but
strong ethical and compliance motivations and, secondar clearly has a prominent place in the minds of ethics and
ily, the benefits gained internally through enhanced mancompliance officers as a key motivator and impetus for the
agerial decision making and performance. organization's program.
Stakeholder Pressures for Developing an Ethics Initiatives
and Compliance Program

Code or Policy on Ethics
We also suspected that there were pressures, from within and
outside the organization, influencing the development andSince one of the main items in the U.S. Organization Sen
maintenance of an ethics and compliance program (Barneytencing Guidelines emphasizes ethics codes as preventative
and Hansen 1994; Pfeffer and Salancik 1978). One of themeasures against fraud, it seems a propos to begin our
external forces—"maintain legal compliance" as shown in analysis of the major ethics and compliance program ini
Table 4 below-ranked first among the pressures, but the tiatives with whether the organization has a code or policy on
other external pressures—"from the marketplace, competiethics. Not surprisingly, nearly all organizations in our
tors" and "from community, non-profit groups"—ranked atsample (98.3 %, or 60 of 61 organizations) have a code of
the bottom of the list. The internal pressures—"reflecting ethics. This is consistent with previous studies undertaken by
company leader's values," "encouragement from employthe Center for Business Ethics, who reported in 1986 that
ees," and "economic incentives" (i.e., ethics pays so it is93 % of their Fortune 500 industrial and service organiza
economically good for the company)—were in the middle oftions had a code of ethics and, in 1992, 93 % of the organi
the rank-order list of stakeholder pressures shown in Table 4. zations had codes. This is likely due to the mandate set by the
Consistent with the data focusing on motivations for Federal Organization Sentencing Guidelines in 1991. This
ethics and compliance programs discussed above, "maincommon practice was confirmed in the late 1990s when 98 %
tain legal compliance" is one of the strong pressures of the Fortune 1000 firms reportedly had codes of ethics
exerted on the organization. This emphasis on compliance (Weaver et al. 1999). Clearly a code or policy on ethics is one
may speak to the question recently appearing in Ethikos, of the first steps taken by an organization when developing an
the premier ethics and compliance officer publication,ethics and compliance program and is an initiative that is
when two leading international business ethics consultants, retained by organizations as their program grows and
Lori Tansey Martens and Megan Barry, asked, "Has expands.
<£) Springer
Tablecode
Table 5 Who is governed by the 6 Topics
of included
ethics?in a code of ethics
The code applies to Percent of firms (more than Topics covered in code of ethics Number of
one answer possible) firms (n = 60)
All employees and management 100 Confidential information 60
Board of Directors 80 Conflicts of interest 60
Salaried employees 65 Equal employment, discrimination 60
Senior management 63 Gifts and entertainment 60
Middle management 62 Sexual harassment 60
High-risk employees 61 Anti-trust compliance 59
Internet usage 58
Use ofcharacteristics
organizational assets 58
Our study delved more deeply into the
57
and impacts of having a code of ethics, Financial
initiallyreporting accuracy
by asking,
Intellectual property 57
to whom does the code apply? As shown in Table 5, there
Employeein
is a wide variance across the organizations substance
ourabuse
sample 55
regarding who is covered by the code of

Health,ethics.
environment and safety 55
A closer look into the data uncovers Political

thatcampaign
organizations
contributions 55
often have more than one code of ethics or ethics

Employee policy. It
expense reporting 50
is laudable to see that all of firms in our sample

Workplace apply a
relationships 49
general code of ethics to all employees Monitoring

and managers.
employee e-mail This 47
demonstrates a codification of the Monitoring

expectations
employee activityof 46
employee performance throughout the Government

organization
contracting (Foster 42
et al. 2009; Schwartz 2004). Purchasing procedures 41
Some firms, though, develop population-specific or

topic-specific ethics policies. For example, some firms'
policies target their senior financial officers, which
Table 7 Drafters of thereflects
code
the requirement in the Sarbanes-Oxley Act of 2002, where

Involved in drafting/redrafting of code Number of
all publicly traded U.S. firms must have a code of ethics firms (n = 58)
addressing responsibilities for their financial officers (Sar
banes-Oxley Act 2002). Other firms createGeneral Counsel/Legal
an ethics policy Department 58
Human Resource
for "high-risk employees," those that regularly Department 56
interact
with government regulators, the public,Communications
consumers,Department
or 48
Senior management
suppliers, where specific issues may arise that require a 46
Chief Executive Officer 39
code of ethics for guidance of employees' behavior. This is
Board of Directors 36
a significant expansion to the directives offered in the
Board-level committee 35
1990s by the U.S. Organization Sentencing Guidelines.
Outside legal
Certain types of business operations or practices counsel 33
have
prompted organizations to develop codes that cover
expectations regarding these activities, such as information
namely, general counsel and human
staff.
confidentiality among internal auditors or safety This likely reflects the im
adherence
among those working with hazardous materials.
compliance dimension in a code and
Insights into the emphasis given inethics code
the codes fall under the juris
can be
gleaned from responses to the question, "what topics
resources are
department (e.g., equal e
covered in your code of ethics?" as shown in and
tion Table sexual
6. harassment, amon
The list of topics shown above appears to
It indicate that
is not surprising to see involve
some areas have surfaced as critical for every
levels organization,
within the organization: sen
regardless of their industry membership:Executive Officer, Board
confidential of Directors, or a Board-level
infor
mation, conflicts of interest, issues ofcommittee.
employee discrimi
In the post-Sarbanes-Oxley era, organizations
nation or sexual harassment, and gifts and entertainment.
recognized the importance of involving company leaders in
Another important aspect in analyzing many elements
a code ofofethics
the development and maintenance of
may be, "who drafted the code?" Ascorporate
shownethics
in Table 7,
and compliance program (Oxley 2003).
there are a few key individuals involved Top
in management involvement
the drafting the was also directed by the
initial code or in the undertaking of a 2004 amendments
revision of aofcode,
the U.S. Organization Sentencing
£) Springer
Guidelines (Thelen 2004). It

organization's Communication
nearly 83 % of all code dra
understandable since the co
to external stakeholders, or
pany's Web site for public v
cations Department's expe
constructing the code.
When comparing our results
study, we find some differenc
drafting of the organization
Center's 1998 study, the onl
into the question of who wr
drafters of the code included
Executive Officer, General C
Human Resources Departmen
is important to remember th
a stratified organizational-size
smaller firms, the CEO is m
an absence of a formal Com
accounting for differences in
and our study. or compliance officer.
Most proponents of codes of ethics acknowledge that the Ad
code must be a living document: that is, it must be pro- officers
mulgated throughout the organization in a meaningful way asked
and in a timely manner (Murphy and Swenson 2003). We thou
asked the ethics and compliance officers how their orga- stan
nizations code is communicated. We received many of the more c
standard answers, such as at employee orientation (100 % if t
of the firms), after a revision or review of the code (85 %), n
at employee ethics training sessions (83 %), and annually plia
distributed to all employees (73 %). Weaver et al. (1999) report that 33 % of the firms in their
This is proportionately similar to the results reported by sample had a legal (or compliance) orientation or function
the Beard Center (given that only 57 % of their organizations associated with their ethics personnel, with 32 % empha
had code of ethics and smaller-sized organization are gen- sizing both ethics and compliance, 10 % audit, and 9 %
erally less formal in their activities): at employee orientation human resources management. In our sample there appears
(69 % of the firms with a code), after a revision or review of to be more of an ethics rather than compliance focus, as well
the code (35 %), at employee ethics training sessions as a strong emphasis on both ethics and compliance when
(39 %), and annually distributed to all employees (29 %). assessing the job title language. Thirty-six percent of our
Our results regarding the communication of the code of sample reported ethics and compliance officers having both
ethics is encouraging since it appears that all employees an ethics and compliance background, with 28 % having
receive the code when hired and then again periodically ethics only and 13 % compliance only. However, these
during their tenure at the firm. It also appears from our data managers more often had a legal (i.e., compliance) educa
that the code is available to employees 24/7 on the orga- tional background (45 %) as opposed to an ethics back
nization's Web site, with periodic reminders via e-mail or ground (22 %), with accounting and finance the second most
posters throughout the workplace. This is clearly a more prevalent educational background (28 %). It should also be
cost-effective method of making the code available than re- noted that an educational background in ethics is fairly rare
printing the document annually. with few universities offering degrees or majors in business
We also asked how often the code is revised or reviewed ethics (Frederick 2008; Weber et al. 2008).
and discovered that 36 % of the firms report "infre- We investigated the importance of the ethics or c
quently," and 28 and 27 % of the organizations revise or pliance officer within the organization by assessi
review their code of ethics once every 1 or 2 years, officer's organizational rank and to whom this man
respectively. We are not encouraged by these results since reports. The positional title associated with the et
Í) Springer
compliance officer is most often "chief'—as in Ch

Ethics Officer or Chief Compliance Officer (28 %), f
lowed by "vice president" (10 %), "executive vice pre
dent" or "senior vice president" (9 %), "director" (
"manager" (4 %), and "officer" (3 %). Organization Sentencing Guidelines called for a mecha
Ethics and compliance officers most often report to the nism to help employees report alleged violations and seek
General Counsel (79 %) and Chief Executive Officer guidance on how to handle questionable practices. There
(70 %), with fewer ethics and compliance officers reporting fore, organizations are seeking to "help" employees
to the Board of Directors (59 %), a board-level committee answering their questions or offering to be supportive whe
(57 %), or a senior vice president (28 %). Note that the a concern is raised and expressing a confidence that th
percentages add up to more than 100 % indicating that the concerns will be investigated. This also may reflec
ethics and compliance officer often has more than one direct maturity in the ethics initiative, initially a quick response
report. We expect some changes to this pattern of direct a crisis, now a more calming and reassuring ethics a
report given the passage of the 2010 amendments to the U.S. compliance program initiative.
Organization Sentencing Guidelines, where the ethics and We asked about various characteristic of the interna
compliance officers must have "direct reporting obliga- reporting mechanism to acquire greater insights into t
tions" to the Board of Directors (Daly and Morris 2010). ethics initiative. Forty-five percent of those respondi
indicate that their internal reporting mechanism has been in
Internal Ethics and Compliance Reporting Mechanism existence for more than 7 years, predating the Sarban
Oxley requirement, but the remaining 55 % of the orga
Since 1998, previous research asked whether the organi- nizations created this mechanism since then. Many of t
zation had an internal reporting mechanism, often referred organizations' internal reporting mechanisms are 3-7 yea
to as "hotline" or "helpline." The 1998 Weber and old (39 %), with the other 16 % less than 3 years old. It
Gillespie study found that only 9 % of the organizations seems clear from this data that the 2002 Sarbanes-Oxl
responding to their survey had this ethics initiative, Act and 2004 amendments to the Federal Organization
whereas a decade later the 2008 Greater Omaha Alliance Sentencing Guidelines helped shape the current state
study, another regionally based study, reports 45 % of their ethics and compliance programs among U.S. businesses,
firms had internal reporting mechanisms. The only national In our study, a majority of the internal reporting mech
sample survey reporting on the number of internal report- nisms (65 %) are staffed by third-party vendors, with on
ing mechanisms is Weaver et al. (1999) where 51 % of the 26 % of the organizations assigning their own internal per
Fortune 1,000 firms had a hotline or helpline. sonnel to staff the help or hotline. This is a dramatic change
In our sample, 95 % of the respondents report their orga- from 1999, when 83 % of the organizations had internal
nization having an internal reporting mechanism. It is likely personnel staffing the help or hotlines, with only 9 % ind
that the 2002 Sarbanes-Oxley Act requirement for all U.S.- eating the use of a third-party (Weaver et al. 1999). Given th
publicly held firms to develop or maintain an internal importance of this ethics initiative, it is not surprising
reporting mechanism and the language in the 2004 amend- discover that 71 % of the organizations have their interna
ments to the U.S. Organization Sentencing Guidelines, where reporting mechanism operable 24/7/365, with only 16%
an "anonymous or confidential reporting:" mechanism must limiting operations during business hours and 10 % havin
be included in the compliance program, are key motivators in an answering machine to receive the calls,
the increase in this ethics initiative among large business One of the primary purposes for having an interna
organizations (Sarbanes-Oxley Act 2002; Theten 2004). reporting mechanism, besides being compliant with t
The name given to this ethics initiative may provide Sarbanes-Oxley Act and the amendments to the Federa
some indication of the tone of the organization's ethics and Organization Sentencing Guidelines provisions, is
compliance program. For example, Weaver et al. (1999) identify issues within the organization that may requi
report that only 19% of the organizations call their investigation. The procedures the organization has in plac
mechanism a "help" line, whereas 57 % refer to it as a to follow-up on these calls is a critical element to ensu
"hot" line. This terminology may reflect the development that employees trust that something will be done, that th
of internal reporting mechanisms in response to a business anonymity will be protected, and that they will not
environment in crisis during the 1990s, thus "hotline" may subjected to retaliation (Muse 2007).
have indicated a sense of urgency. Complementing the focus on accommodating employees,
This imbalance seems to level out by 2010. In our study the organization understands that this ethics initiative has
43 % of our organizations refer to this initiative as a value for the firm as well. Table 8 exhibits some of vario
"help" line and nearly as many, 40 %, call it a "hot" line. uses of the information collected through the inter
■£) Springer
Table 8 How internal reporting

Table 9 Employee ethics training programs' goals and objectives m
resolution
Organizations' goals or objectives
After resolution, how is information used?
Enhanced awareness of ethics in common situations 92

Inform person who made the call 100 Develop an awareness of ethics and compliance 90
Report to the Board of Directors 74 standards
Report to the appropriate supervisor 70 Improve employee decision making 89

Use cases in employee ethics training 52 Increase ability to resolve dilemmas ethically 77
Learn
Publish investigation and resolution statistics internally 49from the ethical challenges facing others 71
Publish a disguised version of the case internallyIdentify
21 and mitigate (or minimize or manage) risk 70
Minimize the organization's vulnerability to litigation 48
reporting mechanism after the issue has been resolved. All of

aware
the organizations responding to our survey indicate thatof the ethical or compliance standards at their dis
they
posal.
inform every caller how the reported incident was Most organizations emphasize highlighting the eth
handled,
icalthe
with many going beyond this procedure to include resolution
Board of dilemmas faced at work and the
importance
of Directors or appropriate supervisor about the resolution of of minimizing or mitigating risk at work w
the issue triggered by the call. conducting their employee ethics training programs. T
We also discovered that organizations believe thaton minimizing the organization's vulnerability
emphasis
litigation
response to these calls must be prompt, with 77 % of theis not indicated as often as other issues as
organizations indicating that they respond to calls objective
involvingfor
a the firms' ethics training. However, we s
pect
clarifying question in 1-3 days. Calls that require that this remains an important priority for m
an investi
gation take a little longer, with a response time fororganizations
39 % of the but may be emphasized in the organizati
compliance training rather than in the ethics train
organizations to be 1-3 days and 29 % of the organizations
(Kaplan
indicating 4-30 days. Some organizations stated that and Walker 2008). We discovered that nine out
response
time varies greatly depending on the nature of theten organizations in our study report having separate et
call.
and compliance training modules.
Ethics Training In our study, the specific elements of the employee ethi
training programs are also explored. The ethics and com
The implementation of ethics training for employees inofficers
pliance the report that 91 % of their organizations ut
organization has been explored since 1992an
when the
organizational employee or internal trainer for the et
Bentley Center reported that 52 % of the organizations in
training, with 9 % employing an external professional t
their study conducted this type of program. Aner
feworyears
consultant. This is slightly different than the in
later, the Ethics Resource Center provided amation
markedly
reported in the 1998 Beard Center study, where 6
lower number, 33 %, which was reinforced by of the 1999
organizations with ethics training programs used
report by Weaver et al., 20-25 %. Given theinternal
strongtrainer, with an external professional trainer
emphasis on employee ethics training in the 2004 amend employed by 20 % of the organizations. Perh
consultant
ments to the Federal Organization Sentencing Guidelines
in the past decade more organizational employees are be
(Thelen 2004), we anticipated that there likely is more
versed in ethics and thus better able to administer the
employee ethics training in 2010 than previouslynization's
reported. ethics training (as advocated by Miller 2003).
Not surprising, we discovered that 60 out ofNearly
the 61all of the respondents report that traini
organizations (98 %) responding to our survey haveall managers in the organizations (92 %), whic
includes
employee ethics training programs in place. Thisconsistent
growth in with the data from the Bentley Center study
employee ethics training is consistent with a1992 (95con
study %) and the Greater Omaha Alliance study
ducted by SmartPros, an organization focusing 2008 (96 %). The inclusion of salaried (but non-man
on profes
sional education, where employee ethics training
rial)
jumped
employees is also consistent in our study, 89 %, an
from 21 % in 1987 to 96 % in 2005 among the
the225 cor Center study of 1992, 84 %.
Bentley
porations in their study (SmartPros 2006). The goals
Yet,and
significant increases in training among other or
objectives for this training are shown in Table nizational
9. groups also appear when analyzing the in
We found that organizations primarily focus on the issue
mation in our study. We find that 98 % of all organizat
of "awareness"—helping employees become in
aware of
our study train their senior management staff, compa
ethical issue they may commonly face at work to
and to be
only 31 % reported by the comparable sample studied
<£) Springer
Weaver et al. in 1999. subtle

We also
nuances discover
of ethical a signifi
decision making embedded in an
increase in the training ethics
of training
the program or to achieve the goals or
organization's objec
board
tives discussedreporting
bers, with 51 % of our sample earlier (DeSmet et al. 2010;
that Hunt they
2010). in
When comparing ethics
the board in their organization's our results with those reported previ com
training,
ously, we findstudy,
to the Greater Omaha Alliance inconsistent information.
which Similar to our
reported
only 16 % of the organizations
findings, in 1998train their
the Beard Center board
reports that 83 % of themem
training
This significant expansion of conducted
ethics by the organizations thatto
training had ethics
includ
training lasted
groups of senior management andless than 2 h. The
the Greater Omaha
board Alliance the
into
and compliance program
study is likely
in 2008 countered this a response
information to th
when they report
that 49 % of employee
banes-Oxley Act, which requires ethics training was
broader conducted for
training cov
(Oxley 2003, pp. 10-11), and
less than 2the 2004
h, with 22 amendments
% of the training program lasting for to
Federal Organization aSentencing Guidelines,
half day and 23 % of the training taking a full day. Again, w
"require senior management and
we should note boards
the significant of
differences directors
in the sample of
more actively involved ... in
organizations the
included in ourcorporate ethic
study versus the diversified
compliance programs" organizational
(Thelen 2004).
size sample Given
in the Greater Omaha Alliancethe
tive-level scandals of the late
study. Perhaps1990s, the
in today's heightened provisions
ethics climate smaller i
Sarbanes-Oxley Act and the
firms 2004
are better Sentencing
able to commit Guid
longer periods of time for
amendments focusing on the
employee ethics
ethics training education
than larger firms. of
Finally, we explore the educational approach or tools
corporate members were appropriate.
used to conduct the we
In addition to "who" is trained, employee ethics training in the
explored orga
"when"
training occurs and "for nizations
how long."
represented in our Table 10
sample. Overall, presents
there is little
information in combination and may
similarity or consistency indicate
in the educational approaches a f
limited and infrequent exposure to ethics
used across the organizations training.
in our sample. Most organi
Some organizations attempt to provide
zations use multiple ethics
or a variety of methods. Given the train
size
of the organizations (21
for their new hires at orientation in our of
sample61
and multinational
firms, or
locations
which is commendable, yet it of the organization's
may employees, most organiza
be difficult for new
to absorb and retain this tions
type resort to
of computer-aided
training training programs
during (74 %), as
thei
few days at work. Periodic,
shown ineven frequent,
Table 11. We ethics
certainly understand the efficiency tra
seems more plausible as an
of this effective
educational tool yet joinmethod for
others that are skeptical of rei
ing an ethical focus and the
developing
effectiveness of this approach
ethicalsince evidence
decision
support s
among employees (Hunt ing
2010) but
this approach has notis not
yet been found
reported in m
(Murphy 2009).
Lecture-style is the
the organizations in our sample. Itthird
is most common educational
recommended
training be repeated andapproach given in
used, yet oftensmall doses
is found to be an inferior to
tech incr
effectiveness (Lamendola 1998). Annual or bi-annual nique among students in educational institutions (Renshaw
training cycles does not seem to incorporate these best
practices found when delivering employee training.
We also are concerned about the limited amount of time Table 11 Educational approach
devoted to ethics training. With few exceptions most Educational approach Percentag
of firms
employee ethics training lasts for 2 h or less, with the
predominant time indicated to be less than 1 h. This may Computer-aided 74
training progr
not be a sufficient amount of time to fully explore the Group discussion of 55
general to
Lecture-style 48
Table 10 Employee ethics training—how long and how often
Group discussion of case studies 39
How long: Less than lh lto2h 2to4h 4to8h Multi-media presentation of material (Webcasts) 35
Presentation of ethical decision-making frameworks 32

How often
Interactive video programs 27
At orientation 8 110 2
Reading material 26
Occasionally 7 0 0 0
Face-to-face dialogue 21
Quarterly/semi- 2 4 0 0
annually Large group methods 17
Annually 15 7 0 4 Efforts to improve employee cognitive reasoning 16
Bi-annually 8 9 0 0 Cascade training (train the trainer) 15
Use of exemplary employees or businesses 12

N = 61, but some firms reported more than one training p
Springer
1995). We believe a more

include group discussion (l
list, currently used by 55
respectively) and the pres
making frameworks as well
cognitive reasoning (#6 an
tively) (as advocated by Hunt 2010; Murphy 2009). cific metrics to explain or support this conclusion. It
One of the most enlightening questions asked in the sur- appears that ethics and compliance officers have begun to
vey focuses on the organizations' efforts to formally assess discover some preliminary metrics to measure the impact
their ethics and compliance training program. We split the that their employee ethics training program is having on the
question into two parts: (1) Does your organization formally employees and the organization. This can only further
assess the process or delivery of the training program and, (2) facilitate the institutionalization of ethics and compliance
Does your organization formally assess the impact or out- in organizations.
come of the training program? We believe that there may be a
significant difference between assessing the delivery versus Ethics and Compliance Performance Appraisal
the impact of the program and we were correct in our hunch.
Seventy percent of the ethics and compliance officers report We suspect that the absence of any attention to soliciting
that their organizations formally assess the process or information regarding an organization's inclusion of ethical
delivery of the ethics training program, whereas only 30 % criteria into employee ethics and compliance performance
of the organizations formally assess the impact or outcome of appraisal systems in previous studies indicates that this is a
the training program. We should note that the organizations' relatively new trend. Our data confirms, since fewer organi
lack of conducting an assessment of employee ethics training zations report having this ethics initiatives compared to the
may be due to the lack of well-developed and available previously discussed initiatives. Yet, 74 % of the ethics and
metrics to conduct such an assessment. compliance officers responding to our survey acknowledge
The metrics used to conduct this assessment seem to that their organization does use ethical criteria in the perfor
reflect the general lack of metrics available to fully eval- manee appraisal of employees. Most organizations (69
uate an ethics and compliance program (some potential apply ethical criteria to all employees and managers' perf
metrics are presented in Murphy 2009). Some organiza- manee appraisals, with 35 % also including senior mana
tions revert to the basic model of recording the number of ment and 11 % targeting employees with public contact,
employees that complete the ethics training program. Our respondents report that their organizations use e
Others ask for feedback on the program, indicating that this ical criteria for discussions on performance with t
is a method to assess the effectiveness of the training employees (54 %), as an influence in determining promo
module. Other ethics and compliance officers note that tions (45 %), establishing the amount for annual bonus
monitoring employees' breaches of ethical behavior or the paid to employees (32 %), calculating the employees'
retention of clients are indications of the effectiveness of salaries (29 %), and ascertaining non-monetary compe
die ethics training, believing that ethics and compliance sation rewards (13 %).
training will affect employee behavior and positive cor- The performance criteria reported by our ethics an
porate results will follow. compliance officers range from ethical values (e.g., hon
For some organizations the assessment focus is on whe- esty, integrity, fairness, truthfulness, a
ther the employees are aware of other ethics initiatives, such specific performance activities (such
as the organization's code of ethics or internal reporting team building, collaboration with ot
mechanism, thus measuring the employees' awareness is a disclosure or avoidance of conflicts of in
focus for the assessment of the ethics training. Other orga- safety and customer service). These cr
nizations seem to have a more sophisticated assessment approach taken at Nationwide Insuran
metric and conduct various knowledge checks during the Andrew Singer in the Ethikos public
training program, often through the Web-based training
modules, or assess the employees' decision-making skills Risk Assessment
after the training is concluded. Finally, a few organizations
assess whether the employees' willingness to report ques- Another relatively new ethics init
tionable observed conduct has increased after the training—a rarely explored in previous studies is
key objective for the organization. thirds of our sample report that their organizations use risk
While the metrics employed are quite diverse, it is assessment, compared to 11 % of the organizations par
encouraging to see a higher percentage of organizations ticipating in an ethics study focusing on organizations in
Springer
Emerging Issues
Southwestern Pennsylvania in the Workplace
(Weber and Gillespie
This significant increase may be reflective of t
requirements contained in inthe
As shown Table 13, 2004 amendment
none of the emerging issues in our
Federal Organization Sentencing
questionnaire list were Guidelines
seen as a critical issue for where
most of
provision requires our respondents.
companies to However, some issues were acknowl
"periodically perfor
assessment in order to inform the
edged as important and compliance
warrant further analysis. off
risk areas so as to reduce the risk of criminal conduct The increased attention in the business climate toward
identified through this process" (Thelen 2004). greater transparency and sustainability as a way of pro
According to the ethics and compliance officers, orga
viding a "window in" to the organization for its external
nizations use risk assessment for a variety of purposes
stakeholders is shown in our study. Transparency was
including: to identify areas of concern before they become
acknowledged by 29 % of our respondents as an emerging
issue, with social reporting (27 %) and environmental
problems (71 %), detect fraud (42 %), meet legal require
ments (41 %), and assess the effectiveness of their performance reporting (22 %) also in the top five. We also
reporting systems (29 %). The responsibility for conduct
may be observing a trend toward ethics and compliance
programs expanding to include sustainability and global
ing the organization's risk assessment is spread out among
three major groups within the organization: auditing corporate citizenship. The ethical issues underlying envi
department (42 %), ethics office (32 %), or legal depart
ronmental and social responsibility to the earth and com
ment (23 %). Many organizations (42 %) conduct the risk
munity as corporate stakeholders has long been discussed
assessment each year, but some organizations assess their
in academic literature (Frederick 1995) but now may be an
risk more often (16 %) and some less often, as in everyemerging
2 trend for business organizations as identified in
years (20 %). The remaining 16 % of the organizations
our study.
report that the risk assessment is performed infrequently.
Table 12 shows who in the organization receives the risk
Conclusions and Implications of Our Study
assessment report, typically with reports made to multiple
groups. The most common recipients of the risk assessment
report are the General Counsel, Board of Directors, ethics
Our exploration into the current state of ethics and com
office, senior management team, and the audit department.
pliance programs among large U.S. businesses, through the
eyes of the ethics and compliance officers, uncovers a
However, we are surprised to learn that only 34 % of the time
is the Chief Executive Officer included in the distribution of number of important conclusions, as listed next.
the risk assessment report. Possible reasons for these
1. There is a strong normative or ethical motivation,
reporting chains could include the emphasis for board
along with an emphasis on legal compliance and
involvement in the ethics and compliance program to bal
benefits to the organization, for creating and maintain
ance the influence exhibited by the CEO (a Sarbanes-Oxley
ing an organization's ethics and compliance program.
Act influence), or the emphasis on maintaining privileged These are a consistent foci and set of motivations for
company information within the legal department.
maintaining these programs since the 1980s.
We believe that organizational risk assessment that
includes ethics and compliance issues will continue to
increase in number and in importance within the organi Table 13 Issues seen as emerging issues
zations (as forecasted years ago by Carris and Duska 2003;
Issue Percent of firms
Kaplan 2004). indicating
emerging
complianc
Table 12 Who receives the risk assessment results
Transparency 29
Risk assessment results reported to Percentage of firms
Sustainability 27
(multiple reports)
Social reporting 27
General Counsel/Legal Department 60 Global corporate citizenship 23
Board-level committee 54
Environmental performance reporting 22
Ethics office 52
Family/work balance 20
Senior management team 50 Health care of employees 18
Audit Department 49 Immigration 16
Board of Directors 47
Spirituality in the workplace 12
Chief Executive Officer 34 Social audits 9
Springer
622 J. Weber. D. M. Wasieleski
2. A mix of external an
organization forming
compliance program. M
appears to be the stron
3. Nearly all organizati
ethics, consistent with
organizations. Some or
of ethics covering dif
zational member grou
applies to all employee
topics common in all e
appear to be available
the company's Web site.
4. Ethics and compliance
the organization's ethic
creation of this positio
assign ethics and comp
single individual rather
ities across many empl
or accounting (auditing
tional backgrounds for
and they most often r
General Counsel or Chief Executive Officer. the ethics and compliance programs—the ethics and
5. There is a significant increase in internal reporting compliance officers. While previous scholars and consul
mechanisms, helplines or hotlines, mostly after the tants typically surveyed organizational practices by solic
Sarbanes-Oxley requirement in 2002 and the Federal iting employees or by sending questionnaires to
Organization Sentencing Guidelines Amendments in organizations addressed to the CEO, it may be fruitful to
2004. Most internal reporting mechanisms are staffed ask ethics and compliance officers directly about their
by third-party vendors on a 24/7/365 basis. Informa- organization's ethics and compliance programs. While
tion gained from calls to the help/hotlines is widely there may be some social desirability bias in their
distributed throughout the organization, while the responses, we tried to minimize this potential issue by not
anonymity of the caller is maintained. tracking the responses back to the organizations in our
6. By 2010, employee ethics training is common in most sample. Thus, while there may be some desirability
organizations in our sample. Ethics training seeks to embedded in our data, we believe this potential weakness is
improve employee awareness of ethical issues at work countered by the value that they are "in the know " and can
and is usually conducted by an internal trainer for all provide greater insight and detail when investigating their
managers in the organization. Recently, however, senior organizational ethics and compliance program,
management and members of the Board of Directors are We understand that soliciting information from ethics
included in the ethics training. Ethics training is most and compliance officer is a frequent practice by the Ethics
often conducted during employee orientation and and Compliance Officer Association. As academic schol
annually for employees for about 1-2 h a year. Most ars, we would encourage this professional association t
firms assess the delivery of the ethics training program continue to partner with academics in research projects and
but fewer organizations assess the impact or outcomes. release sanitized information resulting from these explo
7. Using ethical criteria in the organization's employee rations into the academic literature. This would protect t
performance appraisal system appears to be the first of identify of ECOA members and their organizations, but
the two new ethics initiatives that is part of the enable academics and their students, as well as ECO
organization's ethics and compliance program. Ethics- members, to kept abreast of the current trends in the field
based performance appraisal typically involves all and emerging best practices.
employees and managers in the organization and is When analyzing past studies and our current investig
used in a wide variety of ways to evaluate and reward tion of ethics and compliance program initiatives, w
employees. believe there is preliminary evidence to support the prop
8. The other new ethics initiative is risk assessment. Risk osition that organiza
assessment is often used proactively to detect concerns grams may be driven, or at le
•£) Springer
the external environment. This preliminary propos

could be further tested by scholars using institutio
theory or similar theoretical foundations in subsequen
research. directly to the CEO, Board of Directors, or board-level
This belief is based on the identification of significant committee, rather th
increases in and widespread attention to the development of vice president in
organizational code of ethics in the post-1977 (Foreign fied in 2010 when
Corrupt Practices Act) era, as initially reported in the Bentley tion Sentencing
College's 1986 and 1992 studies. In addition, there seems to ethics officer have
be some attention to ethics offices and training programs in of Directors" (Da
the post-1991 (U.S. Organization Sentencing Guidelines) During this pha
era, as discovered by Weaver et al. (1999 study) and has tion's ethics and c
continued to grow as we find in our investigation. was given to the em
Our data gives some credence to the emerging wide- importance expanded re
spread attention to internal reporting mechanisms in the and board members
post-2002 (Sarbanes-Oxley Act) era and the expansion to ipants, as noted above
include senior management and Boards of Directors in the Sarbanes-Oxley
organization's ethics training net of participants. We also ning to locate metri
discover increases in attention to employee performance pliance officer to ass
appraisal systems that includes ethics criteria and the or outcomes of the
periodic and comprehensive assessment of ethics and The Sarbanes-Oxle
compliance risk across the organization in the post-2007 Federal Organization S
(the 2004 amendments of the U.S. Organization Sentencing a greater emphasis
Guidelines) era. nism—helpline or hotline. Some organizations transferred
Consistently since the 1980s, there appears to be specific the responsibility for this ethics in
legal or regulatory efforts taken by U.S. government agen- vendor since it became too expensiv
cies that have directly and in a timely fashion resulted in the importance of a 24/7/365 basis a
changes in, and the expansion of, organizations' ethics and anism was required to be global in op
compliance programs. As described earlier, each of these What we seem to be witnessin
efforts is easily traced to a widespread ethical scandal morphic pressure on organization
involving a multitude of stakeholders. Thus, we continue to (Holzl 2006). Foster et al. (2009
witness reactionary tendencies of the government to address database of company codes of ethics
chronic ethical problems. This identification of ongoing Standard and Poor's 500 Index and
trends leads us to our next "learning point": organization's similarities in the language and structu
ethics and compliance programs are developmental. across organizations. Despite the rec
It appears that most large U.S. organizations have fol- SEC that codes should vary by company
lowed a set pattern of ethics initiative development and on their individual contexts and circum
implementation when constructing and expanding their found few variations among the codes.
ethics and compliance programs. from diverse industries are all still motivated by common
In 1977, or shortly thereafter, organization's drafted or national and international regulations and standards
significantly revised their code of ethics or ethics policy these strong commonalities developing. Future
statement. This ethics initiative pre-dates all other ethics should address this finding and evaluate the content
initiatives in the organization's ethics and compliance pro- and compliance programs in more detail so that com
gram. These codes are maintained and occasionally altered have tools specialized for their own needs,
as significant organizational or industry crises occur and The final developmental phase of an organiz
have now morphed into multiple codes covering different ethics and compliance program, as of 2010, identifie
topics or governing different organizational populations. new ethics initiatives: employee performance
In or around 1991, organizations centralized the systems with ethical criteria and risk assessm
responsibilities for their ethics and compliance programs Employee performance appraisals have been
by creating the ethics or compliance officer (or ombuds- organizations for many years but the inclusion of et
person) position and establish an ethics office. This move criteria to evaluate employee performance and
was necessitated by the need to provide oversight for the ethical behavior is relatively recent developmen
organization's code and emerging employee ethics training program.
•£) Springer
Similarly, conducting ris

organizational processes f
ethics and compliance dim
organization's overall ethics
occurred recently. It appear
sional framework
Conclusion
of an or
ance program—code, offi
mechanism—has expanded t
Although the
While much of what has
important for i
may appear to be good ne
ethics initiative
officer and academics study
leading ethics o
tice, there are a number of
ing issues reoc
our exploration. Particularly
interpreting th
mate of belt-tightening and
trend towards
leaner, we question whether
programs and
ment of resources to the o
today's busines
pliance program. This chal
command-and
by all organizations, inclu
companies are f
emphasize that ethics and
landscape in th
their organizations' values a
many of the c
that the only programs likel
, , . , . , , . , applauded for their dedication to improving ethical behavior
behavior are the ones consistent with a strong ethical cul- . r
v ■ orvnn within their organizations, we must be cognizant of other
ture within an organization (Kaptein 2009).
organizational and market pressures that often supersede the
We offer the following "resource check list" for ethics
lessons learned and the safeguards developed by even the
and compliance officers to evaluate their organizations'
most sophisticated ethics program systems.
allocation of resources to this program, keeping in mind
Ironically, this is a similar warning issued 11 years ago
that resources may be human or financial in nature, or
by Weaver et al. (1999). Even though we are seeing con
simply the general attention or emphasis given to the
vergence among American businesses towards similarly
program throughout the organization.
designed ethics institutions and policies, we continue to
Are the various organizational code of ethics reviewed witness ethical indiscretions at all levels of the organiz
frequently enough and distributed or available widely tion. This observation suggests that multi-dimensional,
enough? comprehensive, and well-implemented ethics and compli
Are adequate responsibilities and reporting opportunities ance programs reported in t
given to the ethics or compliance officer? combating and mitigating ethical misconduct in organizá
is there a sufficient commitment of time and frequency tions. It is not enough to simply trust in these institutions
to the employee ethics training program? Is there a because they only represent one aspect of organizational
comprehensive representation of the "right" employees culture (Weaver and Trevino 1999). The complex dynamic
(e.g., employees in high-risk positions within the orga- of human behavior is dependent upon many factors both
nization) included as participants in the ethics training internal and external to the organization, including indi
program? Are effective, rather than efficient, training vidual-level cognitive biases, group pressures, and
techniques used in the delivery of the ethics training national-level cultural dimensions,
program? Is the ethics training program assessed on both Furthermore, it has been suggested that some of these
its delivery and its impact or outcomes? ethics and compliance tools that organizations use lack
Is there a broad application of ethical values and normative reflection (Schwartz 2005). In other words, the
expected demonstrated behavior as criteria for employee content of codes, for instance, is too generic and devoid of
performance appraisal? Is this evaluation process mean- a real consideration of moral values. Without this norma
ingful when determining employee compensation or tive meaning behind the code, and without a culture to
other rewards? support the values espoused by the training program, these
Is there satisfactory application of an ethics/compliance- noble company efforts described
based risk assessment? Is the risk assessment conducted dered ineffective. We suggest that
frequently enough? Is the risk assessment sufficiently in- field examine the ethics and
depth to identify possible concerns before they become policies of specific individual profe
"£) Springer
each is faced with its own Darrough,

set of M. N.market
(2010). The FCPA and
and OECD legal
convention: pressu
Some
lessons from U.S. experience. Journal of Business Ethics, 93,
It is possible that constructing codes, training, and cont
255-276.
systems based on the unique context
DeSmet, A., McGurk, in
M„ & Schwartz, which
E. (2010). Getting moreeach
from
fession or industry operates
your may be McKinsey
training programs. a better strategy
Quarterly, 4, 101-107.
Ethics Resources Center: (1994).
achieving that normative dimension ofEthics
thein American Business:
programs.
Policies, programs and perceptions. Washington, DC: Ethics
The field of business ethics should feel a sense of urgency
Resource Center.
to devise methods for enhancing the
Ethics Resource Center. (2000). effectiveness
2000 National Business Ethics of t
ethics and compliance programs in
Survey Volume organizations.
I: How Today
employees perceive ethics at work (Ethics
Resource Center:
are faced with yet another wave of Washington,
corporateDC). scandals; t
Ethics Resource Center. (2005). National Business Ethics Survey:
time due to the subprime mortgage and financial crisis t
How employees view ethics in their organizations 1994-2005
became well apparent starting in
(Ethics Resource 2007.
Center: Washington,Like
DC). clockwo
governments began to intervene and
Ethics Resource Center. respond
(2007). National to
Business Ethics the
Survey: An ne
inside view
burgeoning crisis gripping the of private sector
world. ethics (Ethics Resource
Already we Center:
are see
Washington, DC).
a new phase of financial regulations that are likely to lead
Ethics Resource Center. (2009). 2009 National Business Ethics
stricter standards for compliance
Survey: Ethics inon organizations.
the recession (Ethics Resource Center: Hop
fully any requirements mandated by
Washington, DC). newfound governm
Foster, M., Loughran, T., &
agency regulations will reflect that "there is no singleMcDonald, B. (2009). Commonality in enti
or individual" to be identified codes
asoftheethics. Journal
root of Business
cause Ethics,of
90, 129-139.
this crisis
Frederick, W. C. (1995). Values, nature and culture in the American
(Masood et al. 2010, p. 51). Rather, the
corporation. New York: current situation is
Oxford University Press.
result of an agglomeration of W.factors
Frederick, and
C. (2008). The business schools'the decisions
moral dilemma. In D.
L. Swanson & D. G. Fisher (Eds.),ethics
worldwide actors. New organizational Advancing business
and ethics com
education (pp. 25-42). Charlotte: Information Age Publishing.
ance standards formed in response to regulatory pressures,
Friedman, M. (1970, September 13). The social responsibility of
from self-regulation withinbusiness an is industry, must
to increase its profits. New York Times be dynam
Magazine,
enough to encompass a greater32-33, 122, understanding
124, 126. of huma
Greater Omaha Alliance
behavior, and address individuals' for Business Ethics. (2008).in
tendencies Greater
aOmaha
norm
Organizational Ethics Survey, 2008 (Omaha, NE: Creighton
tively meaningful manner.
University).
Hess, D., McWhorter, R. S., & Fort, T. L. (2006). The 2004 Amendments
Acknowledgments The authors thank Dr. Virginia Gerde
to the Federal Sentencing Guidelines and their implicit call for a
Duquesne University for her contribution in developing the qu
symbiotic integration of business ethics. Fordham Journal of
tionnaire, Tushar Koshaley of Duquesne University for his assistan
Corporate and Financial Law, 11(4), 725-763.
in preparing the data for analysis.
Holzl, W. (2006).Ethics
Convergence ofandfinancial Compliance
systems: Towards an Offi
Association's Chief Operating Officer, Timothy
evolutionary perspective. Journal of Mazur, for his help
Institutional Economics,
contacting our survey participants and Jack Radke for his invalua
2(1), 67-90.
practical review of this manuscript.
Hunt, E. (2010, September). Corporate compliance training: Business
ethics education leads to sustained success—Values vs. rules:
The goal of ethics education. Corporate Compliance Insight
www.corporatecomplianceinsights.com/2010.
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Corporate Ethics and Compliance Programs: A Report, Analysis and Critique

Author(s): James Weber and David M. Wasieleski

Corporate Ethics and Compliance Programs: A Report, Analysis

Published online: 28 November 2012

Abstract This research reports on the current state of

Exchange Commission investigations into hundreds of

effectively required more

Corrupt Practices Act in 1977. It marks one of the

organization could significan

Table 1 Number of employees Table

Number of employees Percentage of Ethics and compliance initiative Percentage of firms

Fewer than 1,000 9 Ethics or compliance officer 100

1,000-4,999 19 Code or policy on ethics 98

5,000-9,999 21 Ethics training program for employees 98

10,000-19,999 10 Internal ethics reporting mechanisms 95

20,000-49,999 22 Mission/vision statement 75

50,000-99,999 6 Employee performance appraisal 74

More than 100,000 13 Public statements by senior management 72

Risk assessment analysis 67

Table 3 Comparison of the top thre

Stakeholder Pressures for Developing an Ethics Initiatives

and Compliance Program

All employees and management 100 Confidential information 60

Board of Directors 80 Conflicts of interest 60

Salaried employees 65 Equal employment, discrimination 60

Senior management 63 Gifts and entertainment 60

Middle management 62 Sexual harassment 60

High-risk employees 61 Anti-trust compliance 59

regarding who is covered by the code of

A closer look into the data uncovers Political

often have more than one code of ethics or ethics

is laudable to see that all of firms in our sample

general code of ethics to all employees Monitoring

demonstrates a codification of the Monitoring

employee performance throughout the Government

et al. 2009; Schwartz 2004). Purchasing procedures 41

Some firms, though, develop population-specific or

the requirement in the Sarbanes-Oxley Act of 2002, where

Guidelines (Thelen 2004). It

compliance officer is most often "chief'—as in Ch

Table 8 How internal reporting

Enhanced awareness of ethics in common situations 92

Report to the appropriate supervisor 70 Improve employee decision making 89

reporting mechanism after the issue has been resolved. All of

Weaver et al. in 1999. subtle

Presentation of ethical decision-making frameworks 32

Annually 15 7 0 4 Efforts to improve employee cognitive reasoning 16

Bi-annually 8 9 0 0 Cascade training (train the trainer) 15

Use of exemplary employees or businesses 12

1995). We believe a more

the external environment. This preliminary propos

Similarly, conducting ris

each is faced with its own Darrough,

for financial Singer, A. (2008). Typing ethicsInternatio

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