Category Archives: ethics

Successful C-Suite Psychopaths

Higher-than-expected levels of psychopathic traits exist among people found in the upper echelons of the corporate business sector, and companies should undertake psychological screening to help identify ‘successful psychopaths.’

That’s according to new research presented at the Australian Psychological Society’s Congress, which was recently held in Melbourne.

Forensic psychologist Nathan Brooks says emerging studies show that, while one in 100 people in the general community and one in five people in the prison system are considered psychopathic, these traits are common in the upper echelons of the corporate world, with a prevalence of between 3 percent and 21 percent.

Brooks says the term “successful psychopath,” which describes high-flyers with psychopathic traits such as insincerity, a lack of empathy or remorse, egocentric, charming and superficial, has emerged in the wake of the 2008 global financial crisis, prompting a range of new studies.

To arrive at their conclusions, Brooks and colleagues first examined psychopathic traits in the business sector. One study of 261 corporate professionals in the supply chain management industry showed extremely high prevalence rates of psychopathy, with 21 percent of participants found to have clinically significant levels of psychopathic traits — a figure comparable to prison populations.

The current issue of HRE also features a story by Julie Cook Ramirez about how HR can weed out psychopaths in the workplace:

What sets a psychopathic leader apart is the way in which he or she manages or interact with people, says William Spangler, associate professor of management and organizational behavior at the School of Management, State University of New York at Binghamton.

“Psychopathic leaders are toxic individuals who manage subordinates [with] a combination of fear, threats, punishment and public humiliation,” says Spangler. “They present a positive persona to their superiors and are often promoted for what is perceived to be their effectiveness, but they can [cause] great harm to the organization by destroying relationships, damaging work units and putting the entire company at risk for legal action.”

Ramirez also quotes A.J. Marsden, assistant professor of human services and psychology at Beacon College in Leesburg, Fla. who says that, by hiring a person who demonstrates these types of tendencies, “you are putting your other employees at risk for bullying and other abuse.”

“The organization may end up losing many good employees [and] facing harassment suits against the psychopath,” says Marsden. “At higher levels of employment, psychopaths may engage in unethical and illegal behaviors, such as embezzlement, just to look successful.”

 

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Internal Investigations are Getting Longer

Patience may be a virtue, but HR leaders shouldn’t expect their employees to necessarily see it that way when it comes to the increasing number of days it’s taking employers to complete internal investigations.

ThinkstockPhotos-470406181As some of you may recall, my colleague — Kristen Frasch — posted details on Friday from NAVEX Global’s 2015 Europe, Middle East, Africa and Asia Pacific State of Compliance Programmes Benchmark Report. In it, NAVEX reported that, on a global scale, boards are not getting regular compliance reports from their ethics and compliance officers.

Well, here’s an even newer report from NAVEX that sheds light on the time it’s taking these days to respond to open internal-investigation cases.

In its 2016 Ethics and Compliance Hotline Benchmark report, NAVEX reveals that the timeline for internal investigations is continuing to lengthen. More precisely, companies took a median of 46 calendar days to close such cases, up from 39 days in 2014 and 32 days in 2011.

HR, diversity and workplace-respect cases, in particular, jumped to 47 calendar days, up from 37 days in 2014. (These cases represented 71 percent of the 867,551 reports — at 2,311 client organizations — in NAVEX’s database.)

Needless to say, this doesn’t bode well for employers that want to keep employee morale high and limit how often employees take their complaints outside their organizations. Who needs the EEOC knocking on your door, right?

Asked what’s driving these longer timelines, Carrie Penman, chief compliance officer and senior vice president of advisory services for NAVEX Global, pointed to several factors.

In a poll conducted during a client webinar held by NAVEX last week, Penman said, roughly 46 percent of the respondents cited a lack of resources as the primary reason. “Resources are simply not keeping pace with the volume,” Penman pointed out. Case complexity turned out to be the second-most-mentioned driver in the poll.

Penman said some of the respondents specifically mentioned the global nature of many of the cases and the more frequent involvement of legal counsels as important drivers. (She said roughly 1,000 individuals participated in the webinar, with about six in 10 taking part in the polling.)

So what should HR leaders be doing about this lengthening time frame?

Penman hopes many will use these findings to hammer home the need for additional resources. As far as her clients are concerned, she said, she advises them to “record all of the issues they are working on in a central database so they can get a holistic picture of what’s going on in their organizations” and can, in turn, make a stronger case for more support.

Among other disturbing findings in the more recent NAVEX report: Workers are apparently skipping an internal remedy and taking retaliation claims outside their organizations. Despite the noticeable rise in retaliation claims being taken up by the Equal Employment Opportunity Commission in recent years, they continue to represent less than 1 percent of all reports in NAVEX’s database.

“People are simply not giving their organizations a chance to address their concerns and are instead taking them outside … ,” Penman said.

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Compliance Efforts Not So Great Globally, Either

507249886 -- compliance word cloudIt wasn’t that long ago that I wrote a news analysis about the problems with ethics and compliance programs here in the United States.

Experts in that piece lamented the lack of clout being given to many corporate ethics and compliance officers, and the tendency at far too many organizations to require ethics officers to wear too many hats — doubling up on such governance responsibilities as risk management and human resources, thereby not being able to focus properly on any one of them, especially ethics and compliance.

Well, it appears those two disciplines are in need of collar corrections on the global stage as well. According to the recently released NAVEX Global’s 2015 Europe, Middle East, Africa and Asia Pacific State of Compliance Programmes Benchmark Report, despite tighter government enforcement, boards are not getting regular compliance reports and 40 percent don’t have regular reporting cadence with their boards or are not sure. And the majority say their budgets for ethics and compliance will remain the same or will be less in the coming year.

To come up with its findings, NAVEX Global partnered with an independent research agency to investigate how companies headquartered  across Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) develop and execute their ethics and compliance programs.

Researchers polled 247 key decision-makers and individuals responsible for ethics  and compliance programs. The purpose of the survey was to benchmark “the top priorities and challenges faced by ethics and compliance professionals headquartered in EMEA and APAC,” according to the report.

From the report (edited slightly for English readers):

“It is not surprising that measuring program effectiveness was cited as the biggest program challenge, since this is a complex undertaking. Organizations struggle to define the right combination of key indicators of culture and compliance to demonstrate the program is working.

“The key challenges of time availability and managing regulations speak to the need for programs to be properly resourced. A robust risk-assessment process can help to identify and better manage resource allocation and to prioritize jurisdictional issues. Successful programs regularly review resources against the organization’s risk profile to ensure appropriate management and mitigation actions .

“Survey write-in responses to challenges included concerns about implementing standardized programs across locations and being seen as a “troublemaker” for bringing up issues. The wide variety of responses serve as a reminder that every organization has its own culture and challenges to be factored into the development and implementation of an effective ethics and compliance program .

Key takeaways from the report:

  • Take a Risk-Based Approach: Program components and implementation strategies can be complex and will vary significantly by company and by region. The development of these programs should be driven by the organization’s risk profile, which can be identified by conducting a comprehensive ethics, compliance and reputational risk assessment.
  • Put Meaningful Program Measurements in Place: Consider a variety of metrics to determine the effectiveness of the program as there is no one metric or indication that will provide complete insights. A combination of useful metrics could include whistleblower-hotline benchmarks, feedback on training sessions, leadership feedback, employee surveys and focus group data, exit interview feedback, and legal actions.
  • Train Middle Managers and Supervisors: First- and second-level managers are culture carriers — the strongest link senior management has to employees. These managers need to be trained on communicating organizational expectations to employees — and trained on how to respond when issues arise. Investing in these managers will pay dividends in terms of creating a strong culture of integrity and compliance.
  •  Engage Leadership and Your Board of Directors: Both best-practice frameworks and regulatory bodies around the world have defined a clear oversight role for the board of directors. Neglecting this duty could mean putting the organization, and board members themselves, at risk. A regular reporting cadence — with high-quality data put into context — will help keep the board and leadership engaged.
  • Do More With Less: Make good use of systems and processes that will improve the efficiency and accuracy of their programs. There is still opportunity for further automation in many areas of respondents’ E&C programs.
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How Much Are Caustic Workers Costing You?

There’s been a lot of research dedicated to studying the havoc wreaked by jerks at work.

Some of these studies focus on the noxious influence that abusive, bullying bosses have on their teams, and what employees can do to cope with an out-of-control supervisor.

Some find that being a bit boorish can actually work to one’s advantage in certain situations, and share advice for recognizing when the circumstances call for flipping the jerk switch.

Some even provide tips on how to self-correct if you are the work jerk, or are in danger of becoming one.

A new working paper from Harvard Business School, however, is taking a more pragmatic look at the workplace jerk, attempting to put a price—in actual dollars and cents—on what employees who are destructive in one way or another can cost an organization.

Spoiler alert: It’s steep.

Economist Dylan Minor and Michael Housman, chief analytics officer at Cornerstone OnDemand, explored a dataset of close to 60,000 workers across 11 different firms. The goal of the ongoing study, the authors say, is to document various aspects of workers’ characteristics and circumstances that lead them to engage in “toxic” behavior, defined by the paper as conduct that’s harmful to an organization’s property or people.

“I wanted to look at workers who are harmful to an organization either by damaging the property of the company—theft, stealing, fraud—or other people within the company through bullying, workplace violence or sexual harassment,” Minor recently told the Harvard Gazette.

Housman and Minor, a visiting assistant professor of business administration at HBS, also analyzed the relationship between productivity and the ripple effect that a toxic employee has on his or her peers.

While finding those defined as toxic are “much more productive” than their less-troublesome colleagues, the authors determined that the former actually diminish the productivity of those around them, and often drive co-workers to leave organizations faster and more frequently, generating sizable turnover and training costs. Ultimately, these caustic workers are so damaging from a financial standpoint that “avoiding them or rooting them out delivers twice the value to a company that hiring a superstar performer does,” according to the Gazette.

More specifically, the paper states that, “while a top 1 percent worker might return $5,303 in cost savings to a company through increased output, avoiding a toxic hire will net an estimated $12,489.”

And that figure, the authors say, doesn’t even include the money that could be saved by avoiding the litigation, regulatory penalties or decreased productivity that a devious or disruptive employee may leave in his or her wake.

These bad seeds come in all shapes and sizes, of course. But the paper identifies a few key predictors to help find them lurking within your workforce.

Toxic workers, for example, tend to demonstrate very high levels of self-regard or selfishness and overconfidence.

As Minor points out, this kind of hubris can lead one to take unnecessary chances, riding high on the belief that he or she is too smart to ever get caught engaging in questionable conduct, or is too valuable to be hit with any real consequences if that day does eventually come.

This paper also reiterates an uncomfortable truth unearthed in past studies: These folks are often high performers, which means that many employers grudgingly tolerate their antics rather than let them go. But few studies have attempted to quantify the actual cost of keeping them on, according to Minor.

And, while many managers may be more apt to look the other way when the offending employee is, say, putting up gaudy sales numbers, an organization literally can’t afford to ignore—and, in effect, reward—corrosive workers’ bad behavior any longer, he says.

“The worst thing to do is to not do anything, which happens a lot, unfortunately.”

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Das Deception: VW Probe Deepens

When a corporate scandal hits, it typically takes a while to identify all the key players.

So, it probably shouldn’t be shocking to learn that the ongoing investigation involving Volkswagen is now expanding to include managers who may have looked the other way as engineers installed software designed to manipulate emissions controls during laboratory tests in roughly 11 million Volkswagen diesel vehicles since 2009.

As the New York Times reports, “a person briefed on the inquiry” says the probe—being conducted by law firm Jones Day, at the behest of the Volkswagen supervisory board—could soon see as many as 10 Volkswagen employees being suspended.

While some of these individuals were engineers “directly involved in programming cars to cheat on emissions tests,” the Jones Day investigation is now taking a closer look at “managers [who] may have learned of the deception and failed to take appropriate action,” according to the Times.

So, it seems the seat could start to get pretty hot for some Volkswagen managers in the days and weeks to come. But the organization’s leadership is already under heavy fire for the part it played—or didn’t play, as it were—in gaming the emissions testing process for more than five years, and its top executive has already toppled from his perch.

On Sept. 3, Volkswagen opted to explain to federal regulators why many of its diesel automobiles were emitting more toxic emissions on the road than they did in the test lab. (The automaker’s alternative was losing Environmental Protection Agency certification for all of its 2016 diesel models.)

Michael Horn, CEO of Volkswagen’s U.S. business, appeared before Congress earlier this month. Horn testified that he was aware of potential issues as far back as spring 2014, but claimed he didn’t know for sure until this past September that the company had been using illegal software to deceive emissions testers.

At least three members of Volkswagen’s supervisory board “have said they learned of the illegal software from media reports on Sept. 18,” the Times reports. Now-former Volkswagen chairman Martin Winterkorn claims to have been in the dark all along, however. In a Sept. 23 statement announcing his resignation, Winterkorn said he was “ ‘shocked’ to learn of the deception and had committed no wrongdoing,” according to the Times, which notes that shareholder representatives have criticized Winterkorn’s failure to keep them informed as the controversy unfolded.

Former employees have joined the chorus as well, condemning “what they said was a culture inside Volkswagen that centralized decision making at company headquarters in Wolfsburg, Germany, and discouraged open discussion of problems, creating a climate in which people may have been fearful of speaking up,” the Times reports.

It may be months before this web is untangled, and we have a better sense of who knew what and when they knew it. But it’s probably safe to go ahead and classify the Volkswagen emissions saga as yet another reminder of just how wrong things can go in organizations that don’t effectively communicate with their people, and in cultures where employees are afraid to blow the whistle on unethical behavior.

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CEOs Pay the Price for Scandal

CEO payWhether it’s a companywide pattern of unseemly actions or one rogue employee’s dirty deeds, corporate misconduct happens.

And, when it does, the chief executive has to answer for it.

Theoretically, anyway. But how do you hold CEOs accountable for ethical breaches—and deter future lapses—that occur on their watch?

One way is to hit them in the wallet, in the form of reduced salaries or forfeited bonuses, for example.

Earlier this week, the Wall Street Journal suggested that more boards are taking that route, in a piece highlighting a few prominent examples of CEOs who have recently seen their compensation cut in the wake of scandal (subscription required).

For instance:

  • The board of directors at GlaxoSmithKline cited the settlement of bribery charges in China (and the company’s sinking profits) when it slashed CEO Andrew Witty’s pay nearly in half.
  • Rolls-Royce Holdings chief executive John Rishton saw his salary cut last year amidst a series of bribery and corruption scandals that continue to plague the company.
  • Faced with sliding profits and a spate of compliance issues, soon-to-be former Standard Chartered CEO Peter Sands recently announced he would forego a bonus reportedly in the neighborhood of $6 million.

Richard Leblanc, an associate professor of governance, law and ethics at York University, told the Journal that affecting executives’ pay incentives is “the best way to control management” in terms of preventing bad behavior and unsavory business practices.

In the same piece, Leblanc says boards are taking an increasingly unforgiving stance on such transgressions, withholding CEO pay and vesting of equity as part of a broader trend of “risk-adjusted” compensation.

In some cases, chief executives may be forced to fall on their swords even if untoward behavior took place before he or she took over the top spot.

In fact, CEOs should be prepared to do just that, according to Alan Johnson, managing director of compensation consulting firm Johnson Associates.

“It may not be your fault,” Johnson told the Journal. But “the lesson for executives is to expect it.”

Johnson urges CEOs to “get out ahead of the board” and actually volunteer to have their pay cut or to waive a bonus in such a situation.

“It’s probably going to happen anyway,” he said, “so why go through the pain of [the board] having to agonize over it?”

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Liar Liar, You’re Still Hired

liarWe all know lying is wrong. But we’ve all done it. And those who say they’ve never told a lie—not even a tiny little white one—well, they’re probably not being truthful.

That goes for job seekers too. It’s not uncommon for hungry applicants to embellish their skills and experience a bit, in order to pump up their resumes and increase their odds of getting a foot in the door.

But what happens when a candidate gets caught trying to put one over on a hiring manager? That may depend on the severity of the lie, and the potential an employer sees in the person who told it, according to a recent CareerBuilder survey.

In a poll of 2,188 hiring managers and HR professionals, 51 percent of respondents said they would automatically dismiss a job candidate if they uncovered a lie on his or her resume. Interestingly though, 40 percent said their decision to move forward with an applicant who lied on a resume would depend on what the candidate lied about. Another 7 percent said they would be willing to overlook a lie if they liked the candidate.

Dave Ulrich, professor of business at the Ross School of Business at the University of Michigan, was “surprised” at the number of hiring managers willing to look past an applicant’s stretching of the truth, however small the fabrication may be.

“I tend to be quite strongly in the 51 percent who believe that, if someone lies [about] little things, he or she might lie [about] bigger things.”

Some may contend that not all information on a resume—titles or job duties, for instance—is of equal importance, says Ulrich.

“But I would argue that even these less significant facts signify an attitude of integrity,” he says. “The messages on the resume signify the candidate’s style. Applicants would be better served demonstrating candor and transparency to build relationships of trust.”

Indeed, many hiring managers (more than half, according to the aforementioned survey) wouldn’t exactly rush to put their faith in would-be employees they saw as being dishonest right off the bat. And there are some fibs—or flat-out, obvious lies—they may not be so inclined to forgive. Enjoy this sampling of some of the most unusual lies employers reported catching on resumes:

• A candidate’s job history included a stint as the assistant to the prime minister of a foreign country. (Just one problem—the country in question does not have a prime minister.)

• One hopeful boasted on his resume that he was a high-school basketball free throw champion. (Not sure how Kevin Durant-like consistency from the charity stripe would even apply to the workplace, but he fessed up to his lie in the interview nonetheless.)

• A 32-year-old applicant indicated having 25 years of professional experience. (He or she must have been one smart, hard-working baby.)

• And, speaking of babies, one job seeker claimed to have worked for 20 years as a babysitter for celebrities such as Madonna and Tom Cruise.

I actually feel for the prospective employer in this last case. It’s too bad this candidate was lying, because I’d think an employee with that kind of experience could be a big help in dealing with divas and difficult bosses in the workplace.

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Early Birds vs. Night Owls: Which is More Ethical?

77741160 -- worker and clockDespite what you may have heard, the likelihood that an employee will make an ethical decision in the morning more than the evening has as much to do with his or her “chronotype” as it does the actual time of day.

In a forthcoming article in the journal Psychological Science titled, “The morality of larks and owls: Unethical behavior depends on chronotype as well as time of day” (downloadable), co-authors Brian Gunia of Johns Hopkins University, Christopher Barnes of the University of Washington and Sunita Sah of Georgetown University’s McDonough School of Business quash the existing theory that individuals are more likely to be unethical as the day wears on due to a loss of energy and effort to exert self-control and behave ethically.

Instead, they say, their research proves ethical behavior has more to do with the fit between an individual’s chronotype, or best/preferred time of day, and the actual time of day. The study shows morning people working in a night shift were more likely to be unethical than morning people in a morning shift, and night people in the morning were more likely to be unethical than night people at night. This suggests people may be more likely to act unethically during the “mismatched” time of day.

“Ethics is not a stable trait in people,” says Sah. “Instead, people exhibit dynamic patterns of unethical behavior across the day based on their circadian [cyclical fluctuations in sleep propensity] rhythms. By understanding their chronotypes, people can help predict when ‘the better angels of their nature’ will appear.”

The study, according to this release, challenges the existing “morning morality effect” that claims ethical decisions are mentally taxing and normal daytime activities deplete our limited cognitive resources as the day goes on.

In addition, the researchers found sleep “can have a significant impact on ethical decisions,” Sah says.

“Our research suggests that early-rising owls or late-working larks will be more likely to make seemingly small, unethical decisions that could have larger consequences.”

So what are managers and HR professionals supposed to do with this information? How can they mitigate this risk? Sah suggests learning the chronotypes of employees and creating work structures, schedules and hours that match individuals.

Requiring morning folks to make challenging, ethical decisions at night or vice versa could “run the risk of encouraging unethical behavior,” the release states. “Employers should also carefully consider overtime, shift work, flextime and requirements during Daylight Savings Time clock changes.

“By understanding chronotypes and the significance of the time of day,” says Sah, “individuals can become more ethical in the way they work, the quality of their work and the decisions they make at any moment.”

And employers, the researchers claim, can help make that happen.

Who knew?

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Corporate Misconduct: Everyone Loses

financial misconductTalk about one bad apple spoiling the whole bunch.

A new Penn State University study finds the announcement of one public firm’s misconduct can have negative consequences for other public companies in the same industry, in the form of decreased investor confidence.

Srikanth Paruchuri and Vilmos Misangyi, associate professors of management and organization at PSU’s Smeal College of Business, studied accounting irregularities that resulted in financial restatements, in which the company in question had to revise and publish one or more previous financial statement. The pair focused on a sample of 725 Standard & Poor 1500 firms, covering 219 industries. They analyzed 84 financial restatement events that took place in 2004, as captured in the U.S. General Accountability Office’s Financial Restatement Database.

When one firm announces that wrongdoing has occurred within its organization, Paruchuri and Misangyi found “a generalization of culpability ensues,” to an extent that investors fear others within the industry “are also likely to have engaged in similar misconduct,” they wrote in the study, which is slated to appear in the Academy of Management Journal.

And, the more recognizable the company doing the dirty deeds, the worse the fallout, it seems.

“In other words,” the study authors wrote, “bystander firms are more negatively valued based on another firm’s misconduct if the offending firm is larger, and therefore more familiar to the investor.”

In the context of how investors perceive financial transgressions, “investors will see those perpetrator firms with which they are familiar as being representative of the industry as a whole, and this familiarity therefore makes the culpability of the perpetrator more potent for generalization,” according to the researchers.

These findings come just a few months after we reported on the release of an Ethics Resource Center study indicating corporate misconduct is on the decline. In a poll of 6,400 U.S. employees, the Arlington, Va.-based ERC found 41 percent of respondents saying they observed misconduct in 2013; a 14 percent dip from 2007.

So, that’s encouraging. But, as this new PSU study demonstrates, the implications of bad corporate behavior are far-reaching, extending well beyond your organization’s walls. Taken together, these studies seem to also offer another reminder of HR’s responsibility to conduct solid ethics training, promote a principled corporate culture, and, hopefully, keep the organization from becoming that one bad apple.

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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.”

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