Experts Offer Advice and Hope to Corporations Who Want to “Do the Right Thing” at AMA Current Issues Forum

With consumer confidence at an all-time low and the media overflowing with tales of the latest corporate “scandal du jour,” the spreadsheets and ethics of our institutions are coming under greater scrutiny than ever. Now sweeping change is underway to help restore corporate credibility. Corporate governance and auditor oversight reforms have been introduced by Congress (the Sarbanes-Oxley Act, signed in July 2002) and the Securities and Exchange Commission is in the process of further clarifying and codifying governance guidelines.

To shed some light on these complex, wide-reaching issues, AMA assembled a distinguished panel of business ethics experts to address the situation from a variety of perspectives. The half-day Current Issues event, Building and Ethical Corporation was held November 7 at AMA’s New York Executive Conference Center.

The program’s keynote speaker was Frank Ashen, Executive Vice President of Human Resources and Chief Ethics Officer of the New York Stock Exchange. Mr. Ashen stressed the obligation of each organization to formulate a clear code of conduct, but went on to say that a code of ethics alone it isn’t enough: “Enron had independent board directors and a code of conduct. But they didn’t have a culture that valued integrity. One without the other doesn’t work.”

In a critical effort to increase consumer confidence, the NYSE recently announced the formation of a Committee on Corporate Accountability and Listing Standards. The main goals of the Listing Standards are to underscore the importance of independent board directors, foster a focus on good corporate governance, establish new control and enforcement mechanisms and involve shareholders more directly in the governance of their companies.

Joseph T. Wells, CFE, CPA, Chairman and Founder of the Association of Certified Fraud Examiners, offered an overview of the Sarbanes-Oxley Act and its implications for corporate officers. He reminded the audience that for organizations, ethical conduct has to begin at the top, stating, “There is no such thing as an immaterial fraud involving upper management.” He also made the point that “A lot of what happened at Enron was legal—it complied with GAAP (generally accepted accounting principles).”

The purpose of Sarbanes-Oxley is to go beyond GAAP, with increased penalties for financial statement fraud and the requirement that senior financial officers (CEOs/CFOs) sign statements that they have fully complied with SEC reporting requirements, have reviewed the report and that there are no material misstatements or omissions to their knowledge. Wells advised the audience that if their companies truly want to limit their exposure to fraud, they must focus their efforts on prevention.

Carol Ann Soos, Esq., of Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C., offered advice from a legal perspective. She urged companies to “go back to the basics” to ensure that proper corporate governance procedures are in place. She also recommended that they set up training programs for directors to make sure they fully understand their legal and ethical responsibilities to shareholders.

Soos explained that the purpose of the Sarbanes-Oxley Act is to “Increase transparency of corporations to shareholders and the public, increase disclosure to the SEC and create best practices which can be applied to private as well as public companies.” Companies need to take quick, decisive action to ensure compliance with the new guidelines, Soos says, because “Corporate governance is changing and corporations need to deal with it.”

Other than staying in compliance with governmental regulations, just how does a corporation go about creating an ethical culture? According to Cathleen Sullivan and Jay Sullivan, President and Vice President of RedHawk/Ethics Coach Inc., it’s a two-fold process. First, they suggest, you have to formulate a framework for the code of ethics that should include three key values -- integrity, accountability and trust.

Second, you have to get buy-in from your people. The Sullivans outlined six “buy-in strategies,” many of which derive from tried and true advertising and communications techniques:

• Address the fundamental question, “What’s in it for me?” Tailor the response to the audience (i.e., senior executives vs. rank and file employees).
• Communicate from the top down.
• Create spheres of influence. (Recruit role models to champion the program).
• Encourage public commitment to ethics.
• Communicate with emotion.
• Repeat, repeat, repeat. (Training and communication must be ongoing).
  

NOTE: AMA’s 2002 Corporate Values Survey, conducted this summer, found that 76% of respondents reported that ethics and integrity are listed among their company’s corporate values. To stand behind that claim, many companies actually state their values in employee handbooks (71%), in company brochures (67%) and on their Websites (50%). Click here for a complete summary.

A number of popular AMA leadership seminars deal with the issues of corporate ethics, integrity and governance.
Many AMACOM books, such as “The 108 Skills of Natural Born Leaders” and the “The Bible on Leadership” also explore these issues. AMA also offers a self-study course. “Corporate Governance: What It Means for Managers” in both print and online versions.