Ethical Systems contributor Jeff Kaplan writes about two stories involving conflict of interest disclosures, waivers, and recusals. The key takeaway is that these measures are not sufficient to avoid ethical conflicts if they are treated solely as convenient formalities. Substantial efforts must be taken to ensure an organization’s ability to make independent decisions. For more information, please see our discussion of conflicts of interest.
Sometimes a chief compliance officer can be misled or deceived into overlooking evidence of unethical behavior, as in the case of Matt Keel, CCO of investment firm Sentinel Management Group, whose boss, chief executive Eric A. Bloom, was convicted last week of defrauding customers out of $500 million. The mere appearance of a culture of compliance is not enough if leaders do not also “walk the walk.”
New research by the CMI “warns that workplace cultures dominated by rules, bureaucracy and targets mean that managers are switching off their sense of care for others.” While having established codes of conduct is important, too many rules can lead to a crowding-out of conscience. Managing business ethics requires giving managers and employees a sense of personal responsibility, not simply a list of items to check off, which can make ethical implications fade out of decision-making. To help improve ethical standards in organizations, CMI is offering a toolkit that includes means for managers and non-managers to test their ethics and invite feedback from their Facebook friends about their moral mindsets.
The author outlines essential steps that a board of directors must take to duly perform its oversight responsibilities and to strengthen compliance, emphasizing that the most important responsibility of the board is to set the tone at the top to establish and preserve the firm’s reputation for ethics. See our pages on corporate governance and compliance and ethics programs for more research-driven ideas.