Posts belonging to Category ethics



The Decline of Workplace Misconduct

workplace misconductThe good news coming from a recent Ethics Resource Center study? Corporate misconduct seems to be on the wane, overall.

The not-so-good news? A majority of the misdeeds that are occurring in the workplace are committed by those the organization counts on to set an example for employees to follow.

The Arlington, Va.-based nonprofit research organization’s eighth National Business Ethics Survey finds 41 percent of 6,400 U.S. employees reporting they observed misconduct in 2013; down from 55 percent in 2007. And only 9 percent of employees said they felt pressure to compromise their ethical standards in 2013, compared to 13 percent who said the same in 2011, the last time the ERC conducted its business ethics survey.

The shrinking number of employees witnessing transgressions at work implies a connection between fewer cases of misconduct and solid ethics training, along with a strong culture, said ERC President Patricia J. Harned, in a statement.

The numbers indicate as much, with the percentage of companies reporting a “strong” or “strong-leaning” ethics culture increasing to 66 percent in 2013, up from 60 percent in 2011. In addition, 81 percent of companies provided ethics training in 2013, with 67 percent including ethical conduct as a performance measure in employee evaluations, according to the survey.

So, it would appear that ethics training programs are largely doing a good job of connecting with the average employee. A more troublesome finding to emerge from the poll, however, suggests the message isn’t reaching the higher levels of the organization.

The survey found managers engaged in 60 percent of the misdeeds seen by employees in 2013, with senior managers more likely than lower-level supervisors to break rules. Senior managers were identified in 24 percent of these cases, with middle managers and first-line supervisors pinpointed 19 percent and 17 percent of the time, respectively.

It may not be all that surprising that the propensity for bad behavior increases with rank. But HR leaders are “uniquely suited” to push the organization’s ethics program forward and help build an ethically solid workplace from top to bottom, ERC Senior Vice President Moira McGinty Kios recently told Bloomberg BNA.

“Employee evaluations, promotions and activities related to counseling, discipline and terminations are HR responsibilities,” said McGinty Kios. “HR professionals are perfectly positioned to ensure that each one of these areas is an opportunity to promote the company’s values, and as a result, promote and improve ethics in the workplace.”

Severance Without the ‘Sweetener’

Ever said or written something you wished you could take back? Then you probably have some idea how Lucy Adams might be feeling right now.

200275121-001In Adams’ case, it’s the word “sweetener” that’s currently plaguing the BBC HR director. If you’ve been watching the news lately, you know that current and former BBC officials were grilled earlier in the week by the MPs on the House of Commons Public Accounts Committee over controversial severance payments that were made to senior managers who were terminated between 2005 and 2013. Many of those payments reportedly exceeded what was spelled out in their employment contracts.

One of those officials marched before the committee is Adams, who is accused of using the word “sweeteners” to describe the payouts.

Here’s how the Guardian describes the hearing …

At Monday’s hearing Adams said she could not recall using the word ‘sweetener’—which she described as a ‘strange term’—when asked repeatedly by Stephen Barclay, the Conservative MP and PAC committee member who obtained the email.

However, when the MP said it came from a leaked email in his possession, she conceded: ‘I may have used the term by means of an incentive to get to a swift resolution.’ ”

In the Guardian story, Barclay is quoted describing the term as a “ ‘damning illustration of the attitude at the top of the BBC’ towards six- and seven-figure payouts to departing executives” and shining “a light on the real culture of the HR department which saw payments [that went beyond] contractual terms as simply perks of the job.”

According to the piece, Adams “denied that she had instructed HR staff to be lax about paying handsome severance deals in an effort to reduce the senior-management headcount at the BBC.”

As a result of the uproar over her alleged role in the matter and her choice of words, some have called for Adams to immediately step down from her role as the BBC’s HR chief, in advance of her recently announced departure next April.  Accusations by the MP against Adams, who has headed HR at the BBC since 2009, reportedly brought cheers to the BBC newsroom.

I imagine it hasn’t been one of the better years for the BBC HR chief, especially the last week or so. But I think  a strong case could also be made that BBC controversy—and the principal role Adams is alleged to have played in it—hasn’t done the HR profession as a whole any favors either, at least not in the U.K. (Here’s a slightly over-the-top-piece that appeared in the Telegraph.)

I’ve come to appreciate many of the British TV sagas that have made their ways to U.S. shores, like Downton Abbey and State of Play. But this is one real-world drama we all probably would have been better off without.

Integrity and the C-Suite

rba1_34New research from the Center for Creative Leadership suggests that integrity, bravery and social intelligence are important predictors of performance for top-level executives. The research, including a poll of 246 middle managers and 191 top executives along with an analysis of feedback data from direct reports, bosses and board members, found a positive relationship between the direct report ratings of leaders’ character strengths and the boss/board member ratings of performance; the more integrity, bravery, perspective and social intelligence leaders have, the higher their performance ratings.

The research also uncovered a disconnect between C-suite executives’ perception of their own integrity vs. that perceived by their direct reports. It found that top executives tended to overrate their integrity in comparison to ratings provided by their direct reports. Meanwhile, middle managers’ ratings of their own integrity tended to hew much closer to the ratings provided by their direct reports.

For top executives, integrity was the biggest predictor of performance, accounting for just more than one-third (34 percent) of the total variance explained by all four character strengths, followed by bravery (33 percent) and social intelligence (23 percent).

Ambitious middle managers may want to focus on their own integrity and bravery: Although integrity and bravery best predict performance of top executives, social intelligence is the most important performance predictor for middle managers. In other words, the characteristic that most helped middle managers succeed in their current positions may not be enough to help them at the executive-level.

HR and Risk Management

How often do you collaborate with your risk-management counterparts at your organization? You should be doing so on a regular basis, according to Lowers Risk Group, a consulting firm with about 1,000 global clients. We’ve covered the issue of risk and human capital before, including this byline and this cover story. Now, a new whitepaper from Lowers highlights what it believes are key trends “driving the expanding role of human resources in enterprise risk management.”

Vince Pascarella, who has an SPHR and is vice president of Lowers Risk Group, has this to say:

Executives tend to rank human capital very high in terms of the potential impact on business results — often ahead of financial risks — but few believethey are managing human capital risk effectively. Most risks begin and end with people, so it’s not surprising to find that human resources is increasingly being called to the table to help mitigate risk.”

The whitepaper is free but requires registration, so I’ll summarize some of the key points and then you can decide whether to delve deeper. First, it cites a Deloitte report that finds a number of trends are leading to a greater focus on human capital risk management: “Black swans,” or low-probability events that have far-reaching impact (including the Euro crisis, the Gulf of Mexico oil spill, the tsunami in Japan, the Middle East uprisings) and ”people risks” such as fraud, theft and security breaches that end up making headlines. The view of what constitutes human capital risks is expanding, the whitepaper notes, and now includes four “manageable areas of HCM”:

1. regulatory compliance

2. position risk level

3. management risk tolerance levels, and

4. onboarding issues “that may allow individuals to fall through the cracks.”

This new awareness of risk is, according to the whitepaper, leading HR to collaborate more closely with their risk-management brethren and create a “risk mindset” for day-to-day HR activities. HR must also “make the most of its existing data” to help identify potential risks.

Leaders Behaving Badly, Cont.

The big news on Friday was the surprise resignation of Gen. David Petraeus as head of the Central Intelligence Agency after he admitted to an extramarital affair. In a statement announcing his resignation, Petraeus—a highly decorated veteran of the wars in Iraq and Afghanistan—said: “After being married for over 37 years, I showed extremely poor judgment by engaging in an extramarital affair,” Mr. Petraeus wrote. “Such behavior is unacceptable, both as a husband and as the leader of an organization such as ours.”

Not an hour after that story broke came an announcement from giant defense contractor Lockheed Martin that its CEO-to-be was also a goner for involving himself in a situation similar to Petraeus’. The company released a statement in which it said the board of directors had “asked for and received” the resignation of Christopher Kubasik, who had previously been scheduled to become CEO in January, after an ethics investigation uncovered evidence of an affair between Kubasik and a subordinate at the company.  He had been serving as vice chairman, president and chief operating officer. His replacement will be a woman: Marillyn A. Hewson will take over his current position and will become the new CEO in January.

While it’s unfortunate to see leaders like Petraeus, in particular, done in by poor judgment, these two resignations at least serve as a reminder to rank-and-file employees that ethical violations—at the CIA, indiscretions such as Petraeus’ could have left him vulnerable to blackmail—have consequences at the top of the pyramid, not just the bottom.

Do As We Say, Not as We Do …

There’s just one question that comes to my mind while reading over the alleged misdeeds of former Best Buy Chairman and Founder Richard M. Schulze: Just what was this guy thinking?!?

By this point the general outline of the story is fairly well-known: Schulze has just resigned after acknowledging he knew about an “improper relationship” between Best Buy’s (married) CEO and a younger female employee, yet failed to report it to the board of directors. CEO Brian Dunn, who resigned last month, “violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment,” according to a report by the board’s audit committee, which began looking into the matter in March after a Best Buy HR exec heard about it, according to the New York Times.

The 51-year old Dunn and the 29-year-old employee appeared to have had a rather intense relationship, even if–as they maintain–it was not sexual. According to the audit report, the CEO contacted the female employee by cellphone “at least 224 times during one four-day and one five-day trip abroad, including at least 33 phone calls, 149 text messages and 42 pictures or video messages.” Things got especially awkward in the workplace when the employee began boasting to other employees about her relationship with Dunn and the favors he provided her with, including tickets to concerts and sports events.

For me, the kicker is when an executive provided Schulze with a signed, written statement from another employee detailing the relationship between Dunn and the young woman. Chairman Schulze proceeded to confront Dunn with the written allegation and ask if it was true. Dunn denied it was true, and Schulze dropped the matter, failing to follow company policy by notifying the appropriate company officials. Let me state that again: Schulze confronted Dunn with a SIGNED, WRITTEN STATEMENT from a whistleblowing employee, and then did nothing. So, Best Buy, how’s that whistleblower program working out? How’re the corporate ethics folks feeling these days? And how’s that whistleblowing employee doing–does he or she still have a job at Best Buy?

After flagrantly violating company policy, Dunn is walking away with an estimated $6.6 million severance package. Schulze will receive the “honorary title of chairman emeritus” when his resignation is official in June.

Resigning in a ‘Very’ Public Way

By now, I probably don’t need to tell you who Greg Smith is.

Yesterday, Smith resigned as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa in the most public of ways: through an op-ed piece in the New York Times!

Since then, the piece has created quite a stir, including leading off last night’s NBC Nightly News broadcast (and perhaps others).  As of early this morning, roughly 365 people posted comments to the op-ed piece on the NYT’s website and the news has been all over the business news channels, Twitter and the like.

This isn’t the first time a departing employee or executive has found an unusual way to tender his or her resignation. For example, I vaguely remember hearing about an incident where someone brought a cake to work colorfully decorated with their resignation letter on it.  But I wouldn’t be surprised if this wasn’t the first time someone used the op-ed section of a major national newspaper to bid his or her employer farewell. (Be sure to let me know if this isn’t the case.)

In his op-ed, Smith cites the “firm’s decline in moral fiber” as the reason for his departure, writing:

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids?  No humility?  I mean, come on.  Integrity?  It is eroding.  I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

Goldman Sachs (headquarters pictured above) responded to Smith’s assertions, saying that it didn’t reflect the way the company treated its clients.

So what’s the takeaway for HR leaders?

Merrie Spaeth, a Dallas-based communications’ expert, offers this assessment of Smith’s letter:

Normally, you’d say this is exactly the wrong, wrong, wrong way to go out the door. But this is like the woman who wrote the long letter to Ken Lay (Enron.) This is a very substantial, very senior, very well respected executive. He is actually sending a love letter to the firm, meaning—he loves GS and is willing to have a potentially very negative impact on his own position in the industry by calling them to account.

(Spaeth says she considers the op-ed piece credible because of what happened to “a good portion of the financial services/banking industry,” not because she personally knows Smith.)

I suspect the folks at GS may not see it the same way as Spaeth.

So returning to my earlier question of what this might means to HR leaders, Spaeth suggests the following:

I think the message for the senior HR executives is that you have to have functioning internal feedback and safety valves which hold executives accountable. (Think of Mark Hurd at HP and his behavior with the ‘escort.’ Think how many people had to know about that but no one stepped in and said, ‘Mark, pal, knock it off. No good will come of this.’  The GS example is potentially much more detrimental. Think of what just happened to Olympus, the Japanese company. They fired their CEO when he uncovered massive wrongdoing, and they thought they could get by.)

Thoughts on PSU as Paterno is Laid to Rest

There are so many thoughts and feelings swirling in me as mourners gather for Joe Paterno’s funeral in State College, Pa., today. One is my wish that I could be there with my son, a recent main campus mechanical engineering graduate. It just wasn’t realistic, considering both our jobs. (He’s now an engineer for a Philadelphia firm – a job I am enormously proud of, for him; a job I am — and I’m sure he is – eternally grateful to Penn State University for.)

I’m also thinking of the culture I knew as a visiting parent, the tugs at my heart looking at a picture like this one, of the Old Main building, thinking of the many trips my son must have taken up and down those steps. No doubt the trips Joe Pa must have taken, too, in his 62 years there.

I’m thinking of the family weekends we attended at my son’s fraternity, the spirit and enthusiasm in the air about promising futures and convictions and pride, the life-size cutout of Joe Pa I remember standing alongside us on at least one of those occasions.

My heart aches for every one of those graduates, every one of their parents, every one of those victims at the heart of the scandal now hanging over the campus, every member of the Paterno family and even every trustee who had to wrestle with whether he or she would or should attend today’s ceremony.

Did Paterno’s firing hasten his death? Probably. Was his termination handled the way it should have been? I don’t believe it was. Was Paterno blameless in all this? Of course not. Erring through omission, not commission, is erring nonetheless.

But I hope, for Penn State’s sake, that the already-controversial investigation now under way into how the crisis was handled takes a long, hard look at the culture Paterno was part of and the system he said he was trying to protect by handing the information over to his next-in-charge. Merrie Spaeth, head of Spaeth Communications Inc., recently addressed the importance of PSU’s culture in this piece written after the scandal erupted. In it, she offers some lessons learned that every organization should take to heart from this tragedy — not the simple ones, like having tighter policies for child-abuse or sexual-harassment reporting in place, but the much deeper ones, like, “What are the unspoken barriers or constraints that affect how we process information and how we act?”

I hope investigators will consider the thinking of someone like behavioral-science expert Darnell Lattal, who talks in this piece about the much-bigger factors than one man’s omission or commission when an organization goes through an ethical breakdown the size and scope of Penn State’s. ”Decisions are [often] determined by a phenomenon that Hal R. Arkes and Catherine Blumer call the ‘sunk cost effect,’ “ Darnell writes, “meaning that people are often more influenced by what they have already invested than by factors that should determine the appropriate action.” I think we can all agree there was an element of that going on when certain people chose to go only so far, or to not go at all.

Clearly, Penn State will never be the same. Songwriter Don Henley’s “The End of the Innocence” keeps playing in my head. I just hope, and pray, that the entire world that is Penn State — investigators, new leaders and all — can tread carefully and objectively into this next chapter with a vision for a Happier Valley that doesn’t kill the spirit and the legend and the pride any more than those three entities have already been killed.

Kozlowski’s Take on Pay

In the early to mid-2000s, Dennis Kozlowski became something of a poster child for corporate greed thanks to his exorbitant pay package and other perks, including the well-publicized $6,000 shower curtain.

As you no doubt remember, the former Tyco CEO was convicted in 2005 of grand larceny, securities fraud and conspiracy and was sentenced up to 25 years behind bars. So it’s been quite some time since we’ve last heard from him—until today.

In an exclusive interview with Wall Street Journal writer Joann S. Lublin, Kozlowski talks about the past, including Tyco’s controversial pay practices. It makes for an interesting read.

On his pay package, Kozlowski tied it to being the “competitive person I am,” telling the journal it was “a way of showing how well I was doing.” No doubt. But I also felt, after reading the piece, he still feels a need to deflect some of the responsibility.

The Journal article said:

The disposed Tyco chief also wished he had chosen more seasoned people for his top team. ‘The lack of documentation was the key’ in his conviction for taking unauthorized compensation, he said. ‘We needed somebody to rein us in.’ 

Wonder who he’s referring to?

The story also points out that Kozlowski (who is now earning 80 cents a day doing laundry) is seeking early work release and wants to take a job with Access Technologies Group, whose offerings include job-search training for ex-convicts. Were he to be granted that opportunity, I suppose that means Kozlowski’s path back to the workplace will ironically pass, at least indirectly, through HR.

More Scandal for Murdoch?

This is an updated story:

According to the British paper, The Guardian, the Wall Street Journal has been engaging in controversial circulation activities involving its European edition — and it accuses the CHRO of ignoring a whistleblower’s accusations.

According to the news story, “the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal‘s true circulation.” That scheme led to the resignation earlier this week, it said, of Andrew Langhoff, the European managing director for Dow Jones.

“The emails show that the chief human resources officer for Dow Jones, Gregory Giangrande, organised a meeting in London on 14 December at which the whistleblower detailed his allegations to a Dow Jones lawyer from New York, Tom Maher, and Dow Jones’ European human resources executive Carol Bosack.

“After the meeting, Bosack emailed the whistleblower: ‘You are expected to keep details and your reaction or beliefs about the recent events confidential and not shared with anyone external or internal to the business. This matter is to be kept between us, Andrew [Langhoff], Internal Audit and Corporate Legal.’ No action was apparently taken at that time on the whistleblower’s allegations. The whistleblower, who had worked for Dow Jones for 9 years, was made redundant in January.”

As you probably can figure out, “made redundant” is British for terminated.

This certainly won’t do anything to embellish Rupert Murdoch’s tarnished reputation in some circles. Nor do the Guardian‘s accusations reflect well on the way whistleblower complaints were handled by the company.

Dow Jones emphatically denies the allegations, saying the British paper’s “inflammatory characterization … is replete with untruths and malign interpretations. Andrew Langhoff resigned because of a perceived breach of editorial integrity, not because of circulation programs, whose copies were certified by the ABC UK.”

The company also says Giangrande, the CHRO, did not ignore the alleged scam, but, in fact, initiated an investigation into the allegations. Dow Jones says the employee who was fired was not a whistleblower, but was, instead, “first investigated by the company because of concerns around his business dealings.”

It acknowledged the circulation program was “admittedly complex,” and because the company was “not comfortable with the appearance,” it subsequently no longer has “relationships with any of the third parties directly involved in these agreements.”