Published by the Ethics Resource Center 
   October 10, 2003   Volume 2, Issue 2

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** A Word from the President: Service and Transparency
** Sarbanes-Oxley: When Accountability Comes Knocking
** Teleseminar: The Ripple Effect of the Sarbanes-Oxley Act
** The Impact of Recent Reforms and Legislation on Nonprofits
** Potts, Ledkovsky Lecture on Ethics in Nonprofits
** The Ethics of Nonprofit Management
** Developing an Ethics Program: A Case Study for Nonprofit Organizations
** Creating a Workable Code for Nonprofits and Associations
** Internet Resources on Ethics for Nonprofits
** Ask the Expert: Should a Husband and Wife Sit on the Same Board?
** Panel On The Sentencing Guidelines For Organizations Issues Final Report
** Puerto Rican Government Ethics Office To Seek Better Ways to Discourage Unethical Behavior
** Opinion Poll: How important is corporate social responsibility?
** Publications and Media Coverage
** News from the ERC
** Offering Our Thank

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** A Word from the President: Service and Transparency - Ethical Obligations of Nonprofit Organizations

The activities of nonprofits make our lives rich in a variety of ways. They make our communities safer and healthier, more secure and more beautiful, fairer and more just. They fill the gap between what the private sector can provide and what government should provide. Nonprofits come in the form of community orchestras, homeless shelters, blood banks, after school programs, and even ethics centers.

These tens of thousands of organizations, supported by donations of money, time, products and services, provide the backbone for much of the social framework in western societies. Having worked with many countries in the developing world, I have noticed that this is often the missing ingredient. It is no wonder, then, that "NGOs" are becoming the focal point for developing sustainable democracies.

Because these organizations are so critical to our social health, people contribute to them in good faith, with the expectations that the nonprofit will have capable stewardship of both resources and responsibilities. Corruption in the nonprofit sector, therefore, is not only illegal, but undermines the fabric of - and faith in - the societies in which we live. From the ethics meltdown of the U.S. Olympic Committee to the 9/11 Fund controversy at the American Red Cross, from the misuse of funds in local organizations to the ignoring of evidence of sexual abuse by religious organizations, we are confronted with images that shake the foundations of our culture. It is critical, then, that nonprofits take action to demonstrate that they are deserving of the public trust. At a minimum, nonprofits must be transparent - about the sources and uses of their revenue, the scope of their activities, and any problems in either administration or governance. Much like organizations in the private and government sectors, a nonprofit should have:

1. A clear articulation of organizational values, as well as a code of conduct, that is regularly revised and updated;
2. A governance structure with an independent board that regularly reviews both finances and programs;
3. A board that actively engages staff to ensure avenues of reporting ethical concerns or ethical misconduct;
4. Financial openness beyond the Federal "990" form to clearly show revenues and expenditures for those who are investing their resources;
5. An annual report to the public that reports on programs and budget;
6. Training of both volunteer and paid staff to ensure that they not only respect the purpose of the organization, but also understand its values.

Some of these recommendations are obvious. Some are actually required by law, but have become a paper exercise. Nonprofits have been mostly excluded from recent corporate governance reform legislation, such as the Sarbanes-Oxley Act. That does not mean that they can, or should, ignore the motivation behind that legislation or the implications it may have for nonprofits both now and in the future. Nor should they wait for the legislation to include them. It is time for those of us affiliated with nonprofits to take a serious look at the transparency of our organizations and make sure that they reflect the spirit and purpose of the nonprofit sector.

Stuart C. Gilman, President

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** Sarbanes-Oxley: When Accountability Comes Knocking

"The Sarbanes-Oxley Act, ostensibly aimed at cracking down on publicly traded companies in the wake of security and corporate boardroom scandals, for the most part left nonprofits alone. Or did it? With states like New York already contemplating nonprofit versions of Sarbanes-Oxley, it's becoming apparent that enacting voluntary accountability standards may be in the best interests of the nonprofit sector." That is why BoardSource and Independent Sector have released a new report entitled "The Sarbanes-Oxley Act and Implications for Nonprofit Organizations", says "Berit M. Lakey, PhD, a senior consultant with BoardSource. That publication, which assesses the relevance of Sarbanes-Oxley to nonprofit organizations and offers recommendations for how nonprofit leaders should implement various provisions of the new laws, will be available to BoardSource members after October 17 and to non-members later in the month. In this related article, Ms. Lakey discusses the key points of the Sarbanes-Oxley Act, which provisions apply now to nonprofits, and how nonprofits can adopt or adapt the other provisions to establish, maintain - or restore -- public trust in a nonprofit organization.

Read the rest of this article at:
/resources/article_detail.cfm?ID=833

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** Teleseminar: The Ripple Effect of the Sarbanes-Oxley Act

BoardSource, in conjunction with Independent Sector, is hosting a teleconference seminar on addressing the Sarbanes-Oxley Act in the nonprofit boardroom. The one hour discussion with live Q & A features Marcus Owens, Attorney at Caplin & Drysdale and former Director of the Exempt Organizations Division of the IRS, and Ian Benjamin, Managing Director of the New York Not-for-Profit office of American Express Tax and Business Services. The seminar will be held October 14th at 10:00 A.M. EST, October 15th at 1:00 P.M. EST, and October 16th at 10:00 A.M. EST. The cost is $35.00 for BoardSource members and $46.00 for nonmembers. Registrants will also receive a copy of the BoardSouce/Independent Sector authored report on the implications of the Sarbanes-Oxley Act for the nonprofit sector.

Get more information and register for this event at:
http://www.boardsource.org/Events.asp#164

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** The Impact of Recent Reforms and Legislation on Nonprofits

The following is a sampling of recent articles that discuss the relevance of and implications for nonprofits of the recent corporate scandals and resulting reforms.

-- Recent Reforms in Corporate Governance: Should Foundations Change Too? (October 2002)
"Although Sarbanes-Oxley does not apply to them, some charities are asking whether they should adopt similar rules voluntarily to bolster public confidence in their financial integrity," writes Janne G. Gallagher, Deputy General Counsel, Council on Foundations. "The Coalition for Nonprofit Health Care ("CNHC"), an umbrella organization for nonprofit hospitals, believes that it is only a matter of time until some of these corporate reforms are applied to nonprofit organizations." In fact, by the time this article was published in October 2003, several state assistant attorneys general had already indicated that their nonprofit oversight would include corporate governance. This article lists and discusses Sarbanes-Oxley reforms that could be adopted voluntarily by charitable nonprofit organizations. Not all of these reforms will be appropriate for all charities, says Gallagher. "However, as the current "gold standard" for corporate responsibility, charity executives and boards would be well-advised to consider whether some reforms are appropriate for voluntary adoption." Attached at the end of the document are the nine steps that the Coalition for Nonprofit Health Care has recommended its members take voluntarily.
http://www.cof.org/files/Documents/Legal/CorporateDisclosureAct/
CorporateReform.pdf

-- Revisiting the Duty of Care of the Nonprofit Director
Journal of Health Law, Volume 36, No. 2 (Spring 2003)
According to authors Michael W. Peregrine and James R. Schwartz, the current corporate responsibility environment has prompted interested stakeholders, including legislators and state charity law officials, to more closely evaluate what constitutes the proper exercise of the "duty of care" by the director of a nonprofit corporation. The two attorneys review the duty of care owed by the nonprofit director, analyze how that duty has been applied in recent legislative, judicial, and administrative developments, and offer courses of conduct that corporate counsel may recommend to clients to enhance satisfaction of the duty of care. The article also identifies a number of recent instances raising issues related to the proper exercise of directors' oversight obligation.
http://www.gcd.com/db30/cgi-bin/pubs/RevisitingTheDutyOfCare.pdf

-- Enron, Lessons Learned: Renewed Emphasis on Basic Principles
"Is Enron relevant to nonprofits?" asks attorney David B. Goch in this article discussing what nonprofits can learn from the Enron scandal. Much of what makes the alleged conduct of former Enron officials, accountants, and attorneys legally objectionable is the fact that it is a public company with numerous shareholders, he writes. However, the Enron scandal and the similar difficulties faced by other public companies do have some concrete lessons for nonprofit organizations and their boards. First, he says, the obligation of association directors to be informed about the association's activities and operations is of primary importance. "From a fiduciary standpoint," he says, "Informed and reasoned decisions are more important that wise decisions." The board of directors or one of its committees should have meaningful contact with the association's outside auditor. Conflicts of interest should be closely scrutinized and generally discouraged, even if legally permissible. Mr. Goch discusses these and other points in this paper that was presented to the December 2002 Winter Conference of the American Society of Association Executives.
http://www.softconference.com/asae/mandt02/papers/339365.pdf

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** Potts, Ledkovsky Lecture on Ethics in Nonprofits

While ERC's board member, Sara Melendez, accompanied ERC President Stuart Gilman to Puerto Rico for a press conference on the government ethics survey ERC conducted for the employees of the government of Puerto Rico, Fellows Chairman Steve Potts and Development Director Gigi Ledkovsky served as substitute lecturers for Ms. Melendez's graduate class on Nonprofits and the Policy Process at George Washington University. They introduced the concepts of organizational ethics in the nonprofit sector and discussed how to create effective organizations and ethical advocacy on behalf of their nonprofit organizations. Mr. Potts, former director of the US Office of Government Ethics, provided the students with an overview of how ethical dilemmas are resolved and corruption is prevented in the executive branch of the federal government, where the intent is to encourage ethical behavior by creating rules of conduct and clearly delineating prescriptive actions and prohibitions. Mr. Potts also talked about his experience with the US Olympic Committee, where he served as a member of the USOC ethics advisory committee during the recent scandal, developing it as a case study of a nonprofit caught in an unfortunate ethical dilemma.

Ms. Ledkovsky provided information about resources available to nonprofits who want to implement standards and codes of conduct, including some that discuss the implications for nonprofits of contemporary legislative, regulatory and corporate governance requirements. She touched on the ethical implications of nonprofit executive pay and compensation in light of the Internal Revenue Service's intermediate sanctions rules and also covered, fundraising, IRS lobbying regulations for nonprofits, and obedience to the unenforceable - the importance of maintaining the public's trust (especially that of contributors and volunteers) in the nonprofit sector by always making an ethical commitment beyond the law. Many of these resources are listed in this newsletter.

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** The Ethics of Nonprofit Management

In May 2003, ERC Fellows Chairman Stephen Potts spoke at the Boys & Girls Clubs of America's 97th Annual National Conference on "The Ethics of Nonprofit Management". He noted that nonprofits often feel that the problems of the private sector don't relate to them, that the "good people" who populate the nonprofit world are, by nature, more trustworthy and less susceptible to ethical gaffes. Citing the examples of the USOC and the United Way of the National Capital Area, he reminded the Boys & Girls Clubs leaders that, like other organizations, nonprofits are made up of people -- people who make mistakes and, in some cases, deliberately make unethical choices. He said organizations must try to prevent ethical crises from occurring and be ready to deal with issues that arise regardless of preventive measures. For leaders of youth organizations, he said, "Your role as a leader is even more of an opportunity and is an even greater responsibility because your organization has, at its heart, the mission of supporting, caring for, and nurturing youth."

Read Steve's speech to the BGCA leaders at:
/resources/speech_detail.cfm?ID=821

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** Developing an Ethics Program: A Case Study for Nonprofit Organizations

In late 1991 and early 1992, the United Way system was rocked by scandal involving the president and CEO at United Way of America (UWA), the national body providing leadership to independent community based organizations.. After the CEO was ousted, the board of governors made several changes in UWA's governance structure, including forming an ethics committee. Current ERC Fellow Ira A. Lipman, President and CEO of Guardsmark, LLC, was named chair of the committee and immediately set about the task of drafting an ethics code for UWA. Current ERC Board Member Charles E.M. Kolb, who is now President of the Committee for Economic Development, drew on his experience as general counsel and secretary at UWA from November 1992 to June 1997 to develop this 1999 case study designed to instruct nonprofits how to create and instill ethics programs.

In the introduction to "Developing an Ethics Program", Mr. Kolb notes that UWA's code was significant for five critical reasons:

• It was developed with significant early input from staff;
• It applies to both staff and board volunteers;
• Staff and board members are asked to sign the code annually;
• Staff and board members are invited to review the code annually and recommend new language in light of recent experience; and
• The code is reaffirmed annually and reflects any changes recommended by the staff and members of the board.

In the rest of his report, Mr. Kolb works through how to implement an ethics program, discussing the reasons for having a code of ethics as well as some of the critical components of an ethics program. Some excerpts follow:

• On why to have a code of ethics -- "The principle rationale for having a code of ethics, regardless of what your business is, is to express a shared vision of the organization's beliefs, culture, and values."
• On annual review -- "This critical step assures your organization that the language will continue to serve the expectations and needs of the organization."
• On internal Implementation -- "An effective code of ethics reflects shared organizational values and, as such, expresses norms of conduct; it is not designed to be the organizational equivalent of a criminal code... careful thought should be given to how the code should be enforced..."
  
• On governance review -- "No organization should tolerate what might be called the "no exit" situation -- when an employee feels trapped because he or she knows or believes that no one inside the organization is likely to hear his or her concern objectively. To address this situation, it is recommended that the organization's ethics program include an outside, independent audit, either annually or periodically."
  
• On senior staff conflicts statements -- "Each year senior staff and key volunteers should be asked to sign a brief statement affirming that there are no conflicts of interests involved in carrying out their professional responsibilities."
  
• On ethics Training -- "While staff may collaborate in developing the code, their work should be supplemented with formal training that explains the rationale behind having a code ... in the first place and explains how the specific language of the code relates to real-life problems experienced within the organization."

Mr. Kolb concludes by saying that for an ethics code to work, it must be taken seriously at all levels. "Taking the code seriously also means integrating its principles and rules into everyday behavior so that all people connected to the organization are guided by the code in their daily decision making." It is also important, he notes, to tell individuals outside the organization about the code.

This study, which was published by BoardSource in 1999, is currently out of print.

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** Creating a Workable Code for Nonprofits and Associations

Just as every organization is unique, so too are the codes that different organizations develop. There are distinct variations in both the process and the outcome of code development for different kinds of companies. The ERC's 2003 publication "Creating a Workable Company Code of Ethics", which includes a variety of tools for code development in all organizations, also offers advice for specific entities, such as small organizations, nonprofits, boards and associations.

For Nonprofits: Given the nature of their work and their shelter from many regulations, nonprofit codes tend to be more aspirational than compliant. But as they are more likely to be shorter and emphasizing values, it is important that codes for nonprofits not omit mechanisms for reporting misconduct, ramifications for inappropriate behavior, and available resources for more information.

Read the advice for nonprofits included in "Creating a Workable Company Code of Ethics" at:
/ercbooks_workablecode_excerpts2.html#npo

For Associations: Association codes not only address the conduct of members within the context of their volunteer work, but also as individuals representing a profession in their own workplaces. Again, the information gathering process becomes extremely important to the code -- not only is it important to understand the needs and values of a diverse membership, but it is also critical to ascertain the extent to which members already have codes in their home organizations.

Read the advice for associations included in "Creating a Workable Company Code" at:
/ercbooks_workablecode_excerpts2.html#assn

Read more about and order, "Creating a Workable Company Code of Ethics" at:
/ercbooks_workablecode.html

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** Internet Resources on Ethics for Nonprofits

The following websites offer a wealth of information on ethics, accountability, governance and standards for nonprofit organizations.

-- Independent Sector: http://www.independentsector.org
Independent Sector (IS) is a coalition of nonprofits, foundations and corporations whose mission is to promote, strengthen, and advance the nonprofit and philanthropic community to foster private initiative for the public good. Resources on their website include:

• Compendium of Standards, Codes, and Principles of Nonprofit and Philanthropic Organizations: A comprehensive, web-based compilation of the standards, organized by subsector, of more than 60 nonprofit organizations from charity watchdog groups and nonprofit associations to professional associations and foundations. http://www.independentsector.org/issues/accountability/standards.html
  
  
• Obedience to the Unenforceable: Ethics and the Nation's Voluntary and Philanthropic Community (PDF): A revised 2002 edition of the statement on ethics originally issued by IS in 1991 that addresses the need for organizations to promote sound ethical behavior and ensure that trust in America's nonprofit and philanthropic organizations is strengthened. The document urges all nonprofit and philanthropic organizations to adopt an organizational code of ethical practices, conduct an annual ethics audit, abide by a set of standards, and involve their constituencies in the ethics process. It also provides sample language for an organizational code and tools to resolve ethical dilemmas. The statement emphasizes nine essential values and ethical behaviors for all organizations, including commitment beyond self, obedience of the laws, commitment beyond the law, and accountability to the public.
  http://www.independentsector.org/PDFs/obedience.pdf
  
  
• Accountability Tools: Donor Bill of Rights, Checklist of Accountability and Accountability Audit.
  http://www.independentsector.org/programs/leadership/
  accountability_resources.htm#Tools

-- BoardSource: http://www.boardsource.org
BoardSource, formerly the National Center for Nonprofit Boards, is dedicated to increasing the effectiveness of nonprofit organizations by strengthening their boards of directors. Their website contains practical information, tools and best practices, training, and leadership development for board members of nonprofit organizations worldwide. Resources on this site include:

• Board Essentials and Nonprofit Essentials: Answers to frequently asked questions specific to nonprofits in such as:
  o How are nonprofits monitored, regulated, and governed?
  o What is the auditor's role in ensuring financial propriety?
  o What is a conflict of interest?
  o What constitutes excessive pay for chief executives?
  http://www.boardsource.org/QnA.asp?Class=NonprofitEssential
  
  
• How should the board be structured?
  o How do we safeguard against conflict of interest?
  o What are the basic responsibilities of nonprofit boards?
  o What are the legal responsibilities of nonprofit boards?
  o What are the responsibilities of individual board members?
  http://www.boardsource.org/QnA.asp?Class=BoardEssential
  
  
• Board Briefs, Q&A and publications on more than 20 topics. Other types of items, including BoardSource and board member authored articles as well as topic papers are available to members only. The legal issues topic includes information on legal obligations, risk management, accountability, ethics, conflict of interest, lobbying and bylaws.
  http://boardsource.org/catSearch.asp?SuperCatID=12
  
  
• "Governance in the News" which abstracts and comments on news items related to nonprofit boards and governance.
  http://www.boardsource.org/GovernanceList.asp

-- Maryland Association of Nonprofit Organizations Standards for Excellence: http://www.mdnonprofit.org

• Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector: From the Maryland Association of Nonprofit Organizations, the Standards for Excellence Program is designed to promote excellence and integrity in nonprofit organizations. The program is based on a code of conduct called The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector and provides a wide array of services to help nonprofit organization implement the Standards in an effort to improve their work. As part of the Standards certification program, organizations voluntarily submit to a rigorous review of all aspects of their program operations. Organizations that have earned the Seal of Excellence have passed this review and found to be exemplary. In 2001, the Maryland Association of Nonprofit Organizations received two grants totaling over $1.3 million to help it replicate its nationally acclaimed Standards for Excellence Program in five states: Delaware, Louisiana, North Carolina, Ohio and Pennsylvania.
  http://www.standardsforexcellence.org

-- Council on Foundations: http://www.cof.org
The Council on Foundations (COF) is a membership organization of more than 2000 grantmaking foundations and giving programs. One of the five priorities of the Council's 2000 - 2004 Strategic Plan is accountability with the specific aim to "promote the development and application of the highest standards in the practice and reporting of philanthropy so that grantmakers may fulfill their responsibilities to serve the public good." Resources on this site include:

• Accountability and Standards section, with Council documents and publications, articles from Council columns on "Principles & Practices for Effective Grantmaking", information on the National Standards for Community Foundations and articles on accountability from the COF publication Foundation News and Commentary.
  http://www.cof.org/index.cfm?containerID=68&menuContainerID=0
  &crumb=2&navID=0
  
  
• National Standards for Community Foundations: Guidelines approved by COF in late 2000, and adopted and implemented by community foundations across the country. http://www.cof.org/Content/General/Display.cfm?contentID=146

-- BBB Wise Giving Alliance: Standards For Charity Accountability: http://www.give.org/standards

• Standards for Charity Accountability: Developed to assist donors in making sound giving decisions and to foster public confidence in charitable organizations. The standards seek to encourage fair and honest solicitation practices, to promote ethical conduct by charitable organizations and to advance support of philanthropy. Their overarching principle is full disclosure to donors and potential donors at the time of solicitation and thereafter. The standards recommend ethical practices beyond the act of disclosure in order to ensure public confidence and encourage giving. As voluntary standards, they also go beyond the requirements of local, state and federal laws and regulations.
  http://www.give.org/standards/newcbbbstds.asp

-- Association of Fundraising Professionals: http://www.afpnet.org/ethics
The Association of Fundraising Professionals (AFP) is a professional association of individuals responsible for generating philanthropic support for a wide variety of nonprofit, charitable organizations. The ethics portion of this site includes:

• Code of Ethical Principles and Standards of Professional Practice
  http://www.afpnet.org/tier3_cd.cfm?folder_id=897&content_item_id=1068
  
  
• The Accountable Nonprofit Organization: A statement of principles for charities which outlines the operations and procedures a nonprofit undertakes to show it is accountable to donors, the people it serves, and the general public.
  http://www.afpnet.org/tier3_cd.cfm?folder_id=898&content_item_id=9988
  
  
• Donor Bill of Rights
  http://www.afpnet.org/tier3_cd.cfm?folder_id=897&content_item_id=1072
  
  
• Frequently asked questions about ethical fundraising and AFP's standards.
  http://www.afpnet.org/ethics/guidelines_code_standards

-- The Nonprofit Good Practice Guide: http://www.nonprofitbasics.org
This free resource directory provides nonprofits with good practice information to assist in improving efficiency and effectiveness. This well-organized, easily navigable site lists preferred practices and pitfalls, featured articles, trends, and other print and web resources in each of nine subject areas, such as "Governance" and "Accountability and Evaluation". The Nonprofit Good Practice Guide is a project of the Philanthropic and Nonprofit Knowledge Management Initiative (PNKM) at the Dorothy A. Johnson Center for Philanthropy & Nonprofit Leadership.

-- Nonprofit Ethics: Ethics in the Not-for-Profit Sector: http://www.nonprofitethics.com
This site is intended to serve as a starting point for those interested in ethical challenges faced in the world of nonprofit organizations. It includes organizations, articles, books and news about nonprofits.

-- NPAction.org: http://www.npaction.org/
NPAction.org is an online resource to support capacity building for nonprofit advocacy by collecting the best practices of seasoned advocates and engaging newcomers with a wide range of updated topics and tools. The site lays out the laws and ethics of advocacy and lobbying and provide links to locate government entities and guidelines, ethics codes, regulations and legislation. The site includes articles and research on a range of topics, including capacity building, nonprofit advocacy, and the laws and regulations governing lobbying and voter education, as well as other tools to help nonprofits engage in public policy.

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** Ask the Expert: Should a Husband and Wife Sit on the Same Board?

A reader seeks information on the ethics of a husband and wife serving on a board at the same time, saying "There seems to be an underlying uneasiness on the issue but we can't seem to put our concerns into words.

Principal Consultant Frank Navran and Programs Manager Jerry Brown combine to respond. "My immediate reaction is that this is the governance equivalent of nepotism - there is, at minimum, the perception of a lack of independence in this relationship. "

Read the rest of this answer at:
/ask_e13.html

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** Panel On The Sentencing Guidelines For Organizations Issues Final Report

On October 7, 2003, the Ad Hoc Advisory Group on the Organizational Sentencing Guidelines delivered its final report to the United States Sentencing Commission. This report is the culmination of an 18-month process to review the effectiveness of the organizational guidelines and solicit suggestions for their improvement.

Included in the proposed amendments are changes that:

• Promote an organizational culture that encourages a commitment to compliance;
• Require compliance training at all levels of the organization;
• Define high-level personnel's responsibilities for compliance programs;
• Require programs to provide anonymous reporting mechanisms for potential violations of law; and
• Require ongoing risk assessments as an essential component of the design, implementation, and modification of an effective program.

Read the rest of the press release at:
http://www.ussc.gov/PRESS/rel100803b.htm

In its report, the Advisory Group recommends that the Sentencing Commission promulgate a stand-alone guideline defining an "effective program to prevent and detect violations of law." Among the modifications and additions recommended by the Advisory Group for that guideline are the following:

• Emphasize the importance within the guidelines of an organizational culture that encourages a commitment to compliance with the law
• Provide a definition of "compliance standards and procedures"
• Specify the responsibilities of an organization's governing authority and organizational leadership for compliance
• Emphasize the importance of adequate resources and authority for individuals within organizations with the responsibility for the implementation of the effective program
  
• Include training and the dissemination of training materials and information within the definition of an "effective program"
  
• Add "periodic evaluation of the effectiveness of a program" to the requirement for monitoring and auditing systems
  
• Require a mechanism for anonymous reporting
  
• Include the phrase "seek guidance about potential or actual violations of law" within the criteria in order to more specifically encourage prevention and deterrence of violations of law as part of compliance programs
  
• Provide for the conduct of ongoing risk assessments as part of the implementation of an "effective program."

The committee also recognizes that the issue of waivers of the attorney-client privilege and the work product protection doctrine is one of some contention. Accordingly, the Advisory Group recommends adding clarifying language regarding the role of waiver of such privileges and protections for purposes of receiving sentencing credit based on cooperation with the government during the investigation and prosecution of an organization.

The report, executive summary and an appendix showing the proposed amendments are available at:
http://www.ussc.gov/corp/advgrprpt/advgrprpt.htm

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** Puerto Rican Government Ethics Office To Seek Better Ways to Discourage Unethical Behavior

Director Hiram Morales, Executive Director of Puerto Rico's Government Ethics Office (GEO), recommended Wednesday that local agencies develop a mechanism to inform public employees what actions constitute unethical or illegal behavior in the workplace and encourage them to report any such actions without fear of reprisal. "This must include the general feeling of the employees of these agencies," Morales said during a press conference in Hato Rey. The recommendations were made following the results of a study that conducted by the Ethics Resource Center and the GEO from February to March among public employees of the government's executive branch. The purpose of the study was to sound out the perceptions of employees regarding ethical practices in their work environment. (This story, reported on PRWOW.com, is no longer available online)

The Spanish language press release is available at:
http://www.oegpr.net/documents/OEG_presenta_resultados_Estudio
_sobre_el_servicio_publico.doc

Look for an English translation coming soon in the Press section of the ERC website.

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** Opinion Poll: How important is corporate social responsibility

What do you think is the impact for corporations that get involved with and align their values with those of the communities they touch?

-- No impact
-- They get good public relations but that's all.
-- They are generally more competitive and successful than companies that do not do so.
-- Negative impact: They only risk damage to their reputations and to their bottom line.

Take our September poll at:
/cfpoll.cfm

Last Month's Poll: In September, we asked: Should there be Sarbanes-Oxley type regulation of nonprofits?

-- 19% of respondents said nonprofits should not be subject to Sarbanes-Oxley type legislation.
-- 42% said nonprofits should voluntarily adopt the principles of the Sarbanes-Oxley act.
-- 38% said the Sarbanes-Oxley Act should be expanded to apply to nonprofits.

See the results of last month's poll at:
/cfpollresults.cfm?QuestionID=24

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** Publications and Media Coverage

-- On October 2, 2003, ERC President Stuart C. Gilman joined with Joseph Kale, Jr., from Lockheed Martin Corporation, and Tom White, Center for Ethics and Business at Loyola Marymount University, in a presentation at the Ethics Officer Association Annual Conference on "School to Work: Managing the Transition from Student to Employee." Dr. Gilman introduced the topic by discussing the findings from the ERC's National Business Ethics Survey 2003 that show younger employees feel more pressure to compromise ethics standards and are the least likely to report misconduct. He mentioned several ways in which business schools and business leaders can combat the problem.

He next discussed a number of existing programs that can prepare students to face these vulnerabilities as they enter the workforce. In Turkey, students ethics clubs exist or are planned in nine universities. Through panel discussions, seminars and a planned "Ethics Bowl", the clubs spread awareness of the importance of business ethics and develop ethical leaders for the future. The ERC's MAXIMize the Moment programs for elementary and secondary schools and for families provide weekly curriculum material on ethics issues, revolving around a maxim. Student ethics offices, modeled after effective corporate ethics offices, help to create ethical infrastructures in school communities, provide students with opportunities to practice ethical leadership, and nurture an ethical workforce. The prototype for the student ethics office was developed at Lake Braddock Secondary School in Virginia with the guidance of the ERC and the generous assistance of Lockheed Martin Corporation's ethics office.

Mr. Kale of Lockheed Martin expanded on this discussion with more details on the Lake Braddock relationship, noting that there is tremendous similarity between ethics / values in the workplace and character education in school. A solid core of values to help guide one's decision making is an essential skill in the workplace, he said.

Mr. White concluded the presentation with a discussion of his Center's Business Ethics Fortnight, which involves a team business ethics presentation competition. The teams choose an ethical issue in business, prepare a 20-30 minute presentation describing the legal, financial and ethical issues, and presents a solution. They are questioned by judges and receive immediate feedback.

Dr. Gilman also presented a report on the ERC's National Business Ethics Survey 2003 at the EOA conference.

-- On September 22, at Annual Conference of the Council on Governmental Ethics Laws (COGEL), ERC President Stuart Gilman spoke on "What does it mean to have a good ethics program? Successes and vulnerabilities of government ethics programs". After discussing how to measure the effectiveness of an ethics program, Dr. Gilman noted several areas of increasing vulnerability for government employees, including "contracting out" and the ethical pressure created for employees dealing with public vs. private functions. As responsibilities are diffused to the private sector, he said, government employees must hold these entities to the same ethical standards and integrate private sector organizations into government integrity programs.

-- On September 4, ERC President Stuart C. Gilman participated along with attorney Jeff Kaplan in a panel discussing "Corporate Ethics and Compliance Programs" at the ALI-ABA Second Annual Advanced Sarbanes-Oxley Institute on Corporate Governance, Financial Disclosure, Auditing, and Other Issues. Noting that the majority of companies, including Enron, had a code of ethics before 2000, Dr. Gilman emphasized that codes are not enough. Having an ethics office, a hotline and training, however, in addition to a carefully considered code, does make a difference.

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** News from the ERC

-- In September, principal consultant Frank Navran visited the Turkish Ethical Values Center (TEDMER) in Istanbul to pilot a ten-day ethics officer training course, which will form one of the key components of the global ethics centers. The class consisted of 24 individuals sent by their organizations to learn how to be ethics officers. The course first introduces the fundamentals of organizational ethics and the elements of an ethics program and then moves on to practical training such as how to do an organizational assessment and how to write a values statement, code of ethics, communications plan, and training plan. Participants learn how to create the supporting systems within an organization -- an ethics office, helpline/hotline, oversight and monitoring functions, and an investigatory function. They learn how to gather data necessary for continuous improvement, how to develop a strategic plan for ethics, how to create, fund and staff an ethics office, and how to integrate ethics into the business plan. Throughout the course, the participants practice what they learn by applying it first to hypothetical situations and then to their own organizations. At the end of the session, the class conducts a mock press conference and takes a final exam consisting of real life case studies. Mr. Navran was pleased with the outcome of the course, noting that the participant's performance on the final exam demonstrated their knowledge and the press conference demonstrated that they can communicate that knowledge.

During the next six months, Mr. Navran will be teaching the course in South Africa and in Dubai. He will also be working with participants who have successfully completed the first course to develop their ability to teach the course, a process that includes their taking the course again while making notes on how to teach it and then co-teaching it with another trainer before being certified to teach the course. The course itself is an essential part of the ERC's goal of establishing independent self-sustaining ethics centers, helping them to build not only internal capacity but also external resources.

-- On Friday, September 26, six student leaders from different universities in Kyrgyzstan visited the ERC under the auspices of the U.S. State Department's International Visitor Program and with assistance from the Meridian International Center. They were accompanied by interpreters and an official from the US Embassy to Kyrgyzstan. Each student visitor shared the successes and challenges he/she has experienced in the effort to implement student ethics programs in universities throughout Kyrgyzstan, and how he/she plans to draw on these experiences after graduation. ERC Associate Consultant Mary Frances Ford presented an introduction to the ERC Fellows Program and focused on its efforts to implement ethics programs in US business schools. Associated Consultant Katie Sutliff discussed ERC character education initiatives in the US and abroad and Associatd Consultant Abby Davidson shared the ERC's approach to building ethics institutions and ethics capacity in developing countries.

-- On Tuesday, October 7, ERC convened a meeting on incorporating ethics in trade capacity building initiatives in current and prospective FTA-partner countries. Delegates from the U.S. Department of State's Anticorruption and Governance Initiatives, the United States Trade Representative's (USTR's) Office for Trade Capacity Building, nine multinational corporations and two NGO's attended the meeting. ERC Board Member Frank Vogl chaired the meeting and Alex Zalami, ERC's Director of International Programs, gave a presentation on the role of organizational ethics in trade capacity building. Participants focused on forming a public/private partnership to support these initiatives.

-- The Ethics Resource Center and its partner centers in United Arab Emirates, South Africa, Columbia, and Turkey, together with our partners at the World Bank and with support from the Merck Company Foundation, will present the Forum for a Global Integrity Alliance in Istanbul on December 5 and 6, 2003. The Forum will bring together representatives from ethics and anti-corruption NGO's from over 20 countries to promote a better understanding of the role of ethics and values in enhancing integrity in both the public and private sectors. Participants will begin networking towards the establishment of a global alliance. Delegates at the Forum will attend by invitation only; they will be joined by observers from the international donor community, including multilateral organizations and multinational corporations. The conference will consist of five roundtable discussions, each facilitated by a moderator and initiated following brief presentations by three invited facilitators.

Get more information about this forum at:
/i_forum.html

-- The ERC has hired four new employees:

Jeff Salters joined the ERC in September 2003 as a Senior Consultant for Advisory Services. He will work with the Managing Director of Programs to deliver consulting services to for profit and nonprofit organizations, helping them minimize employee misconduct by creating ethical cultures. Mr. Salters received his B.B.A in Management from Howard University and his MBA in Organizational Behavior and Development from The George Washington University. Mr. Salters has over eight years of consulting experience and has worked for leading consulting firms such as Booz Allen Hamilton, Arthur Andersen, and Accenture.

Patricia Jones took over the position of Director of Operations in October 2003. Ms. Jones was founder, owner and manager of accounting firms providing financial services to nonprofit organizations from 1982 to 2003. She has a B.S. in Business Management from the University of Maryland and is working on her M.S. (currently on break) in nonprofit management. She is a Native Washingtonian and loves tennis. Ms. Jones will fill the position previously held by Moira McGinty Klos, who will continue to work with the ERC on a part time and consulting position after assisting ERC with the transition.

Scott Wennermark joined ERC in October of 2003 as a Senior Consultant. He is the owner of Wennermarketing, a consultative marketing company that specializes in helping organizations increase revenues and expand market share. Scott has worked with over 25 associations and numerous well-known companies such as National Geographic, MCI, Kraft Foods, and the Internet Society. He received his B.S. degree in Organizational Communications from Southwest Missouri State University and attended the University of London. Scott has been married for almost four years and has a one-year-old daughter.

Kalima Drga-Abreu was hired to fill the Coordinator for Program position in October 2003. She will be working primarily with the consulting and programs staff on a variety of projects. Ms. Drga-Abreu received her B.A. in International Relations from The College of Wooster in 1998. After college Ms. Drga-Abreu served as a volunteer with the U.S. Peace Corps and lived in a remote region of the Dominican Republic. She spent the previous three years as Coordinator of Grants and Foundations for the National Mental Health Association. Ms. Drga-Abreu is a world traveler and is fluent in Spanish.

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** Offering Our Thanks

As a nonprofit organization, the Ethics Resource Center depends on contributions from many generous donors. Without their dedication and trust, many of the programs and projects highlighted in this newsletter would not be possible.

The ERC thanks the following for their contributions of general support:

** Eugene Ludwig
** Schering-Plough

FEDERAL EMPLOYEES: Federal employees participating in the 2003 Combined Federal Campaign fund-raising drive may contribute to the ERC by marking number 2456. CFC contributions help students by providing schools with relevant, timely educational resources that encourage good character by modeling positive decision-making and creating healthy dialogue.

The ERC has also been accepted for participation in the Fall 2003 Hewlett-Packard/Compaq employee fund drive, the Chevron/Texaco employee campaign, and the Gannett Corporation fund drive, as well as continuing to participate in the Washington Post, Lockheed-Martin, and other corporate accounts that disaffiliated from United Way in Washington, DC, last year.

We invite you to join our loyal contributors in lending your support. To find out how to contribute or to donate online, go to:
/support_how.html

The Ethics Resource Center (ERC) is a non-profit, non-partisan educational organization exempt from taxation under the Section 501(c)(3) of the Internal Revenue Code. All gifts are tax-deductible to the fullest extent of the law.

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PLEASE NOTE: Ethics Today will be published 11 times this year, with the July and August issues combined into one. An index will be published at the end of August.

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