Ethics Training and the

FSGO

 Federal Sentencing Guidelines

Organizations
 Ethics training initiatives
 Gray Matters ethics training
 Soy-DRI ethics training
simulation
What influences ethical
behavior?

 corporate culture

 opportunity

 individual values

 significant others
 10-40-40-10 Principle

 10% will take advantage of a situation if

the risk is low
 40% will go along with the work group
 40% will try to determine what the
organization wants them to do and comply
 10% feel the organization has not gone far
enough & push for their own personal
beliefs
 Bausch & Lomb

 3 contact lenses: Sequence II,

Optima & Medalist with 3
different wearing schedules:
daily, monthly, & yearly

 3 prices: $11, $32, & $70

 So what’s the problem?

 Pennzoil Settles
Discrimination Lawsuit
 agreed to settle $6.75 million racial discrimination
lawsuit (no admission of guilt)
 alleged Pennzoil paid black employees less &
promoted them less frequently
 settlement available to 700 salaried black
employees working between 8/94-8/98
 Pennzoil has agreed to designate a senior level
employee to oversee compliance & EEOC concerns
 also agreed to improve communications, training,
recruiting, & community activities to provide equal
employment opportunity
• Reuters Newswire (1998) Pennzoil Will Pay $6.75 Million to
We’ve Seen More Wrongdoing
in Organizations in the Past
10 years...

 greater media attention

 more accountability from varied

stakeholders

 changing legislation holding the

organization accountable for
individual wrongdoing (FSGO)
 Why were the FSGO
enacted?
 calls attention to the key elements that
must be in place in an organization to
assist in preventing illegal & unethical
behavior
 encourages organizations of all sizes to
invest in developing & implementing due
diligence ethical compliance programs
 punishes organizations that disregard
the need to address key risks and
implement ethics programs
 What are the elements
that all organizations
must consider?
 grapple with & determine key risk areas
 appoint high level oversight
 maintain top management support for
the program
 communicate risk areas to employees
 develop devices to allow reporting
 discipline offenders
 revise the program as needed
 FSGO Compliance
Programs
 organization, except criminal purpose
organizations, may reduce their fines
by implementing an effective
compliance program that is
reasonably designed,
implemented, and enforced
 program must: prevent and detect
offenses, disclose the conduct,
cooperate with the government, and
accept responsibility
Examples of Offenses...

 fraud  money laundering

 antitrust  extortion
 theft  conflict of interest
 payments to a  commercial bribery
public office  drug offenses
 privacy and  civil rights
eavesdropping  kickbacks
 infringement of  racketeering
copyrights &
trademarks  tax fraud
 embezzlement
 Organizational Ethics
Initiatives

 only 1/3 of Ethics Officer’s

Association members had an ethics
officer prior to 1991

 organizations with best practices

are not creating programs to check
off the steps related to FSGO
 Factors Influencing
Organization’s Commitment
to Ethics
 initiated by the CEO (79%)
 to ensure commitment to corporate
values (76%)
 to reduce the risks to the company
of employee misconduct (75%)
 to establish a better corporate
culture (68%)

• Source: Ethics Officers Association 1997

Member Survey
 Effect of the FSGO on
Business

 before the guidelines, compliance programs were

not deemed important
 quality and quantity of literature, conferences,
best practices forums, have increased
 many more companies have moved to adopt the
programs
 quality of program quality & enforcement policies
have improved
 shift from “compliance” to “integrity” based
efforts.
• Source: Win Swenson (1998) “The Legal and Regulatory
Environment: Where We’ve Been and Where We’re Going,” Sixth
 Principle Obstacles to
Developing an Ethics
Program
 employee anxiety
 financial & other pressures
 compensation/performance appraisal
system not consistent with company
values
 declining trust & cynicism of employees
 lack of financial or staff support
 lack of training support
 general apathy
• Source: Ethics Officers Association 1997 Member Survey
 How Does Ethics
Training Occur

 development of a code of
ethics (79%)
 lectures (63%)
 workshops and seminars
(53%)
 case studies (46%)
 videos with discussion (41%)
New Developments in
Ethics Training

 educational cd’s

 interactive media
• intranet

 simulations
 Benefits of Interactive
Multimedia Education &
Training
 retention of course material 3 times more
effective than traditional classroom instruction.
 subject mastery 4 times more effective than
traditional classroom instruction
 training time1/2 to 1/3 required for traditional
classroom
 92% of all users rated the training as “very good”
or “excellent”
 significantly lower cost than traditional
classroom methods
 Advantages of
Multimedia Education &
Training
 consistent message/flexible
scheduling
 high retention/mastery
 customized courses with geographic
flexibility
 easy to update
 high acceptance
 easy & effective to use
 self-paced (no instructor limitations)
 builds on prior knowledge
Gray Matters Ethics
Training

Developed by Lockheed
Martin
You miss a day at work because you
partied too hard the night before. The
following day, during a meeting, your
supervisor asks why you were not it.
What do you say?
 A. Explain to your supervisor that you
were ill.
 B. Explain to your supervisor that an
emergency came up in your home and it
entirely consumed you.
 C. Tell your supervisor you were absent
for personal reasons.
 D. Tell your supervisor that you were ill
because of over-partying.
You miss a day at work because you
partied too hard the night before. The
following day, during a meeting, your
supervisor asks why you were not it.
What do you say?
 A. Explain to your supervisor that you
were ill. (5 points)
 B. Explain to your supervisor that an
emergency came up in your home and it
entirely consumed you. (-10 points)
 C. Tell your supervisor you were absent
for personal reasons. (5 points)
 D. Tell your supervisor that you were ill
because of over-partying. (10 points)
As a secretary, you are responsible for making travel
arrangements for people in your office. An airline
agent whom you know offers you bonus points for
every booking you make with his airline and you can
cash in the bonus points for free travel.
What do you do?

 A. As long as the company incurs no

additional costs, accept the offer.
 B. Reject the offer summarily.
 C. Accept the offer for company and
use the free travel for productivity
awards.
 D. Tell the airline agent that you
have to think about it.
As a secretary, you are responsible for
making travel arrangements for people in
your office. An airline agent whom you know
offers you bonus points for every booking you
make with his airline and you can cash in the
bonus points for free travel. What do you do?

 A. As long as the company incurs no

additional costs, accept the offer. (-10
points)
 B. Reject the offer summarily. (10 points)
 C. Accept the offer for company and use
the free travel for productivity awards.
(5 points)
 D. Tell the airline agent that you have to
think about it. (0 points)
After 3 months you discover that a recently
hired employee who appears to be very
competent falsified her employment
application in that she claimed she had a
college degree when she did not. As her
manager, what do you do?

 A. You’re happy with the new employee so

you do nothing.
 B. Discuss the matter with human
resources to determine company
policy.
 C. Recommend she be fired for lying.
 D. Weigh her performance, length of
service, and potential benefit to the
organization before making any
recommendation to anyone.
After 3 months you discover that a recently
hired employee who appears to be very
competent falsified her employment
application in that she claimed she had a
college degree when she did not. As her
manager, what do you do?
 A. You’re happy with the new employee so
you do nothing. (-10 points)
 B. Discuss the matter with human
resources to determine company
policy. (10 points)
 C. Recommend she be fired for lying. (5
points)
 D. Weigh her performance, length of
service, and potential benefit to the
organization before making any
recommendation to anyone. (0 points)
What does Gray Matters
do?
 employees perceive ethics training
as more important
 employees feel greater self
confidence in making the correct
decision (self-efficacy)
 employees place less reliance on
their peers in making ethical
decisions and more reliance on
company rules and procedures
Soy-DRI Ethics Training
Simulation

Linda Ferrell
University of Northern Colorado

Debbie Thorne LeClair

Mississippi State University
 Key Considerations...

 Who are the stakeholders & what are their stakes?

(How does this affect your recommendations?)
 What could have been done to prevent the product
misuse?
 What are the key short, mid and long range
considerations in resolving the current dilemma?
 What are your recommendations and action plan
for the CEO?
 How did the FSGO affect your decisions?
 Soy-DRI Stakeholder’s
Concerns
 suppliers-loss of sales
 customers-product misuse concern
 government-legal concerns
 employees-loss of jobs, sales
 owners/shareholders-profit concerns
 media-public interest
 competitors-maximizing the
situation for their benefit
 Texas Instruments
Ethics
“Quick Test”
 Is the action legal?
 Does it comply with our values?
 If you do it, will you feel bad?
 How will it look in the newspaper?
 If you know it’s wrong, don’t do it!
 If you’re not sure, ask.
 Keep asking until you get an answer.
Lockheed Martin “Warning
Signs”
 “Well, maybe just this once.”
 “Everyone does it.”
 “Shred that document.”
 “We can hide it.”
 “No one will get hurt.”
 “What’s in it for me?”
 “This will destroy the competition.”
 “We didn’t have this conversation.”
 “It doesn’t matter how it gets done, as
long as it gets done.”