Briefing April 2008 How to Ensure Ethics and Integrity Throughout an Organization At a Glance A fundamental issue facing organizations today is how to ensure employees act ethically and with integrity. The goal of an effective ethics office is to create a culture where questions are encouraged. Leaders should use constant reinforcement to make ethics and integrity an everyday “lens” through which employees view their roles. Tailoring messages to the specific circumstances of the employee makes it easier to talk about ethics and integrity. H igh-profile scandals in both the public and private sectors over the past few years have raised a fundamental concern for organizations: how to ensure employees act ethically and with integrity. Although public, corporate, and not-for-profit organizations have developed and implemented ethics and integrity programs, the focus now is to move beyond strict compliance programs toward ensuring that ethics and integrity become values lived by everyone within an organization. The challenge facing organizations is how to most effectively make the transition from programs to lived values. Key issues for organizations seeking to make this change include the following: To what extent should they relinquish their focus on compliance and Governance and Corporate Social Responsibility 2 | The Conference Board of Canada the letter of the law? Should they focus primarily on principles and “soft” approaches to ethics? And what is the best way to combine both approaches? In January 2008, The Conference Board of Canada convened an expert roundtable of ethics and compliance practitioners to reflect on new developments and discuss best practices and lessons learned across the public, corporate, and not-for-profit sectors. The decision to hold the roundtable was spurred in part by new legislation and institutions recently introduced in the public sector and by the coming fifth anniversary of the Sarbanes-Oxley Act. This briefing reports on a new institution in Canada dedicated to ethics and integrity in the public sector and outlines some key lessons in ensuring ethics and integrity. Public Sector Integrity Commissioner: Dedicated to Integrity in the Federal Public Service In the public sector, one of the more significant developments is a new institution dedicated to promoting integrity in the Canadian federal public sector. This institution is the new office of the Public Sector Integrity Com missioner.1 The position was created in 2007 by the Public Servants Disclosure Protection Act and is unique in Canada and the world. The Commissioner is appointed by resolution of both houses of Parliament and reports directly to them. As such, the position is highly independent. The establishment of the office also provides a significant opportunity to promote and communicate the contributions ethics and integrity can make to the public service and Canadians. The Commissioner’s mandate covers the more than 400,000 federal public sector employees who work for federal departments, agencies, and Crown corporations. The Commissioner plays two key roles in support of integrity in the federal public service. First, she receives allegations of wrongdoing in the public sector and has the discretion to determine whether to launch an investigation. She has robust tools for investigating and, when 1 Public Sector Integrity Canada, www.psic-ispc.gc.ca. wrongdoing is found, publicly reporting her findings to Parliament and making recommendations for corrective action. Second, she provides protection against reprisals for public sector employees who participate in a disclosure process. The ability to protect whistleblowers will contribute significantly to creating a culture where employees feel comfortable raising questions on issues relating to ethics and integrity. In addition to carrying out these two roles, the Com missioner emphasizes the importance of integrity in the federal public sector through communications, education, and prevention activities. The establishment of the office also provides a significant opportunity to promote the contributions ethics and integrity can make to the public service and Canadians. The work of the Public Sector Integrity Commissioner will contribute to broader efforts to maintain a culture of ethics and integrity across government. Such a culture is vital to the prosperity and effective functioning of Canadian society: When public servants are not perceived to be acting ethically and with integrity, citizens may lose trust in the institutions of government. The federal public administration is a fundamental national institution and a key part of Canadian parliamentary democracy. The 1996 report A Strong Foundation: Report of the Task Force on Public Service Values and Ethics remains the most comprehensive study of ethics and values in the federal public service. The report clearly outlines the link between integrity in the public service and trust. The distinctive form that integrity assumes in the public service is the ability to hold a public trust and to put the common good ahead of any private interest or advantage. Integrity in the public service also imposes on public servants, at all levels, a commitment to the trust and therefore an obligation to speak truth to power: to provide ministers and their superiors with a full range of analysis The Conference Board of Canada | 3 and advice that will help them to take the best possible decisions for the public good.2 What is the most important role of the senior ethics executive in an organization? What can be done to ensure senior ethics executives By promoting trust in the institutions of government— and working to ensure ethics and integrity are lived values in the public sector—the Public Sector Integrity Commissioner can improve the ability of the public service to navigate the challenges of an increasingly complicated and interconnected world and to meet the needs of Canadians. Lessons in Ensuring Ethical Behaviour in Organizations Organizations in the corporate and not-for-profit sectors have also taken significant steps to ensure that ethics and integrity are lived values for their employees. For example, in the wake of the Enron and WorldCom scandals, the corporate sector created a number of programs and institutions to help protect it from ethical lapses by employees and leaders. And the not-for-profit sector recognized the importance of trust and integrity to their operations even earlier. In Rebuilding Trust,3 the Conference Board reports that this sector is one of the most trusted in Canada. Leaders in this sector are keenly aware of the role ethics and integrity play in creating trust, protecting reputations, and providing not-for-profit organizations with the legitimacy they need. The January 2008 Conference Board roundtable was designed to explore lessons learned by organizations in their efforts to embed ethical behaviour and integrity in their operations. Discussions centred on three key questions: What is the most effective way to ensure that ethical conduct is the primary lens through which employees view their interactions with all organizational stakeholders? 2 John C. Tait, A Strong Foundation: Report of the Task Force on Public Service Values and Ethics (Ottawa: Canadian Centre for Management Development, 2000 reprint), p. 56. 3 Zachariah Ezekiel, Rebuilding Trust in Canadian Organizations (Ottawa: The Conference Board of Canada, June 2005). are viewed as contributors to the organization’s brand rather than simply as enforcers? These deliberations produced a list of actions that can prevent the integration of ethics and integrity throughout organizations. (See box “What Does Not Work.”) By promoting trust in the institutions of government—and working to ensure ethics and integrity are lived values in the public sector—the Public Sector Integrity Commissioner can improve the ability of the public service to navigate the challenges of an increasingly complicated and interconnected world and to meet the needs of Canadians. What Does Not Work Focusing exclusively on either compliance or ethics. Focusing solely on inhibiting business—being the office of “no.” Talking about integrity exclusively in terms of ethics without connecting this discussion to organizational effectiveness. Putting too much emphasis on the right tone at the top without appreciating the importance of ethics and integrity through all levels of management. Having ethics offices that work in isolation from other divisions or business lines in the organization. Ensuring Ethics and Integrity: What Does Work Opinion leaders and practitioners had various suggestions for organizations seeking to build ethical behaviour and integrity throughout their operations. (For a summary, see box “What Works.”) From these suggestions, three key themes emerged: the need for both ethics and compliance roles; the need to set the right tone through constant communication; and the need to work through partnerships and collaboration. 4 | The Conference Board of Canada The Need for Both Ethics and Compliance Roles In some organizations, ethics programs initially focused exclusively on legal compliance. The ethics offices were seen as policing agencies and consequently faced a great deal of suspicion and concern from employees and leaders. When ethics offices are seen as enforcers—as the offices of “no” or as actively seeking opportunities to expose wrongdoing by employees—a culture of hostility and silence can develop. In this culture, the ethics officer is seen as someone to be avoided or as adding no value to the organization. Organizational issues are not discussed openly, and the silence may actually contribute to unethical behaviour. For instance, managers’ fears of discussing organizational performance issues may lead them to take unethical actions to meet targets. Roundtable participants emphasized that leaders need to create an organizational culture in which managers and supervisors also “walk the talk” on ethics and integrity. The ethics office should be seen as a non-threatening environment where employees can raise their concerns without fear of being judged or penalized. An effective ethics office creates a culture where asking questions is encouraged—where employees feel safe raising questions instead of pointing fingers. On the other hand, roundtable participants cautioned that ethics offices without a compliance or enforcement role may suffer a loss of credibility if they are seen as secondary to the “real business” of the organization. Thus, creating and enforcing codes of conduct and ensuring compliance with laws and regulations are as important as creating a non-threatening environment. In addition, the compliance function helps the office demonstrate its contribution to the organization’s success by helping it protect the organization’s reputation. Linking ethics to reputation can also make discussions about ethics more concrete for employees who may struggle to connect abstract notions of ethics and principles with their day-to-day work. The lesson from the corporate and not-for-profit sectors is to integrate the compliance and ethics promotion roles. This will give ethics offices the tools necessary to build a culture of ethics and integrity. The Need to Set the Right Tone Through Constant Communication The need for the right tone at the top has long been recognized as a key contributor to creating a climate of ethics and integrity. Employees look to the leadership of their organization to connect the talk around organizational ethics and integrity with the actions the organization expects from them. Organizational leaders must not only communicate regularly about the important role of ethics and integrity in their work, but they must also “live” these principles inside and outside the organization. Employees will be the first to recognize inconsistencies between stated organizational values and leadership practices. Leaders who fail to embody the organization’s ethical principles undermine all other efforts to promote ethical actions. In contrast, strong leadership based on ethics and integrity will be reflected throughout the enterprise. Moreover, it is not enough for organizational leaders to ensure the consistency of their own messages and actions. Roundtable participants emphasized that leaders need to create an organizational culture in which managers and supervisors also walk the talk on ethics and integrity. If they don’t, it will undermine the leaders’ credibility with employees. Organizational leaders need to constantly reinforce the importance of ethics and integrity, so that they become the guiding theme for employee behaviour and the work of the organization. Communication does not need to focus on ethics per se but should link the goals and aspirations of the organization with its principles and values. Leaders must create an environment where the ethical culture of the organization is discussed, understood, and reflected in the actions of employees at all levels of the organization. The Conference Board of Canada | 5 It is also important for values and ethics to be incor porated in employee performance discussions. As one participant at the roundtable said, “The emphasis should not only be on what you produce, but also how you produce it.” Tying performance to values and ethics reinforces the message that leaders and managers think ethics is important. The Need To Work Through Partnerships and Collaboration An ethics office should ensure it is not working in isolation. Rather, it should strive to build partnerships with the other divisions or business lines of the organization. These connections are important because they help the ethics office promote awareness of its role throughout the organization. They also help the office better understand the pressures and challenges faced by the different business lines, enabling it to better tailor its communications to all parts of the organization. An ethics office that understands the specific circumstances of employees can support managers in leading discussions on ethics and integrity by providing practical tools and techniques. These may include worksheets or case studies based on real and relevant organizational examples, which help managers raise ethical dilemmas and engage their staff in ethics discussions. What Works Taking a balanced approach to compliance and ethics that gives ethics offices responsibilities in both areas. Linking ethical decisions to value creation or value protection for the organization. Embedding ethical discussion throughout the organization. Linking ethics and integrity discussions to concrete examples relevant to each business line. Communicating messages on integrity in terms that relate these issues to important business goals such as protecting the organization’s reputation, effective recruiting, or meeting customer expectations. Ensuring the right tone at the top is reflected in the words and actions of all levels of management. Building ethical considerations into performance reviews by discussing not only what was accomplished but also how it was accomplished. Creating strong links between ethics offices and the different branches and divisions of an organization. Conclusion: An Opportunity for Canada The new office of the Public Sector Integrity Commissioner should go a long way in helping to prevent and resolve wrongdoing in the federal public sector and protect whistleblowers from reprisals. At the same time, responsibility for ethics and integrity is shared across the public sector. The creation of this new role also presents a starting point for employees and executives to discuss the importance of values and ethics in the federal public service. The net result should be a federal public sector where ethics and integrity are values lived by all its employees. An ethics office should strive to build partnerships with the other divisions or business lines of the organization. The scandals of the past few years have forced leaders in all sectors to more seriously consider the relationship between ethics and organizational success. The January 2008 roundtable revealed that a great deal of progress has been made in understanding how to make ethics and integrity the lived values of all employees. This road is not straightforward, and progress can seem elusive. At the same time, some Canadian organizations are recognizing that ethics and integrity are a key means of differentiating themselves in today’s highly competitive public, corporate, and not-for-profit sectors. Methodology This briefing is based on discussions at a Conference Board of Canada expert roundtable held on January 31, 2008. The event brought together a cross-section of senior ethics executives from the private, public, and not-for-profit sectors to reflect on their experiences in promoting ethics and integrity in organizations. A list of roundtable participants is provided at the end of this briefing. The Conference Board of Canada has dedicated more than five years to the study of ethics and compliance in Canadian organizations. 6 | The Conference Board of Canada Roundtable on Lessons Learned in Ethics and Integrity in Canadian Organizations: A Conference Board of Canada Dialogue—Held January 31, 2008 Participant List Michael Allen President and Executive Director United Way/Centraide Ottawa Jean-Daniel Bélanger General Counsel Public Sector Integrity Canada Bonnie Boretsky Vice-President, Compliance Canada Post Corporation Anne Buchanan Coordinator, Organizational Excellence Canadian Council for International Co-operation Joe Chidley Editor Canadian Business Georges Dessaulles Compliance Director Canada—Consumer and Corporate RBC Financial Group Zac Ezekiel Senior Manager, Business Conduct and Projects, Domestic Bank Compliance Scotiabank Nigel Fisher President and Chief Executive Officer UNICEF Canada National Office Al Hatton President United Way of Canada-Centraide Canada Cheryl Leis Ethics Advisor Boeing Canada Technology Ltd. Valerie L. Macdonald Assistant General Counsel Farm Credit Canada Carole Mackaay General Counsel and Corporate Secretary VIA Rail Canada Inc. Heather MacNab Senior Advisor, Corporate Compliance and Whistleblowing Canada Post Corporation Annie Martineau Chief, Privacy and Compliance Officer Merck Frosst Canada Ltd. Richard Morris Vice-President, Audit and Inspection Business Development Bank of Canada Christiane Ouimet Public Sector Integrity Commissioner Public Sector Integrity Canada Stephanie Rich Senior Counsel, Privacy and Ethics Officer Aeroplan Michèle Thibodeau-DeGuire President and Executive Director Centraide of Greater Montreal Alexander Todd President and Chief Executive Officer Trust Enabling Strategies Christina Van Loon Senior Communications Advisor Public Sector Integrity Canada Michael Weil President and Chief Executive Officer YMCA Canada Conference Board Staff Michael Bassett Senior Research Associate, Governance and Corporate Responsibility Prem Benimadhu Vice-President, Governance and Human Resource Management The Conference Board of Canada has a unique ability to bring together the senior leaders of Canada’s top organizations to discuss issues, share and compare best practices, and learn from each other. 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