2009 Most Influential in Business Ethics List

Last week I had the opportunity to spend a day with one of our newer clients, learning about their Compliance and Ethics program, goals for next year and overall philosophy on fostering a culture based on ethical decision making and caring for their customers. One of our topics for discussion was quantifying the return on their ethics and compliance programs, which is often a difficult number to ascertain. While it's somewhat straight forward to calculate time savings in various stages of the various business processes that are part of your GRC programs, it becomes more difficult to calculate the full impact. For instance, how do put a number on not being fined for FCPA violations, or not having a class-action lawsuit filed against you for bad labor practices, or increased sales from consumers who trust your business more than your competitors? It was a lively discussion, and one that I hope to have more often in 2010 as I visit more of our customers.

I was reminded of the conversation when I saw Ethisphere's 2009’s 100 Most Influential People in Business Ethics list last week. The list is comprised of people in eight different categories spanning government, non-profits, education and corporations. When you look at the names of the companies represented by these individuals and consider their market success, you can begin to get a good idea that while it may be difficult to exactly quantify the ROI of a culture of integrity, there clearly is a strong correlation between culture and business success.

I was especially pleased to see a number of EthicsPoint's customers represented on the list, and would like to congratulate the following people for their outstanding efforts and accomplishments in the field of business ethics over the past year:

• Peter Solmssen – General Counsel, Siemens
• Sharon Allen – Chairman, Deloitte
• Bill Gates – Founder, Bill and Melinda Gates Foundation
  
• Kathleen Edmond – Chief Ethics Officer, Best Buy
• Brian Martin– SVP and General Counsel, KLA-Tencor
• Pascal Bourdin – SVP, and GM of European Chocolate Business, Kraft

Congratulations to all the winners!

Lies, Damn Lies and Statistics

Seems to be the season for publishing the results of surveys and other research - I just got finished reviewing PricewaterhouseCooper's excellent report,

Image by TW Collins via Flickr

The Global Economic Crime Survey which contains some great data for those of us concerned about fraud and other financial misconduct to consider.

One of the things that stuck out to me - especially considering the results from the ERC's 2009 National Business Ethics Survey - was that PwC did not see any statistical difference in the level of economic crime for companies that had suffered during the economic downturn from those that did not suffer. Hence, they conclude that economic crime remains a pervasive business risk, which does not discriminate among its victims based on the relative degree of their financial performance. They do note, however, that organizations sufferng from the downturn did report higher levels of accounting fraud.

Among the other data I found interesting:

• Tips were the detection method in 34% of the cases - with the hotline system accounting for only 7% - reinforcing the need to both foster an environment in which your employees and others feel comfortable bringing issues forward in conversations as well as the need for a consistent approach to capturing and investigating these issues
• While internal audit is consistently detecting less of the reported frauds over time, the combination of anti-fraud controls and a strong ethical culture appears to be improving the detection of economic crime
• There is a correlation between reported frauds and the frequency of fraud risk assessments - In other words, if you look for it, you will find it.

Finally, and what should concern you if you hold a leadership position within your organization, respondents have consistently underestimated their exposure to fraud. Regardless of the research you're reviewing, the data is pretty compelling - fraud and other misconduct occurs in good economic times and bad. Having a strong ethical culture and good controls reduces the amount of fraud, and its associated losses. So what are you doing to reduce your risk?