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Ethics Today Online Published
by the Ethics Resource Center ======================================================= This issue marks an important shift for the Ethics Resource Center--our president Stuart Gilman announced his resignation in mid May, and is now moving onward from the ERC. We wish him great success and every happiness. For me, having been at the ERC for almost six years, it is both a great honor and a humbling task to follow Stu, and to lead the organization. Certainly with the new revisions to the Federal Sentencing Guidelines calling for evaluation of ethics program effectiveness, continued discussion of Sarbanes-Oxley 404, heightened interest by multi-national corporations in developing global ethics programs, and the ever-pressing challenge of ensuring the next generation of ethical workers, there is much more work to be done for the ERC. We look forward to the days ahead. Patricia J. Harned, Ph.D. ****************************************************************************
**************************************************************************** ** A Word from the President: Conflicts of Interest Can Destroy Reputation In our work with companies, conflicts of interest is one of the most frequent topics of conversation, especially as we write codes of conduct or develop training programs. Tension always exists for an employee between representing oneself and representing one's organization. The more employees are given authority to make decisions, the more conflicts of interest become a matter of concern. Recently ERC's Fellows Program Chairman, Steve Potts, served on the NIH Blue Ribbon Panel on Conflict of Interest Policies--a group that received a great deal of public attention as they investigated and addressed the scope of activities that can appropriately be undertaken by NIH researchers in and outside of the organization. In their final report, the Panel offered some helpful definitions of conflicts of interest, particularly for the broader world of public service. However, their definition has salience for many other forms of business. The panel found that "avoidance of conflicts of interest is based on a clear set of principles: (1) employees should not engage in financial transactions that conflict with the conscientious performance of duty; (2) employees should not use public office for private gain; (3) employees should act impartially and not give preferential treatment to any private organization or individual; and (4) employees should not engage in outside employment or activities, including seeking or negotiating for employment, that conflict with official government duties and responsibilities."(1) In the business world, conflict of interest issues that make the news are most often related to the financial missteps of top executives or the questionable activities of high-ranking government employees. However, they are certainly not confined to top government officials or corporate executives. Conflicts, or the appearance of conflicts, are at the heart of many ethics dilemmas throughout the organization. Employees who own stock in other companies, those who serve on community nonprofit boards, individuals who make speeches outside the organization, and even those who apply for loans all wade into the gray areas that conflicts of interest policies address. The first step in avoiding real or perceived conflicts is for an organization to define conflict in a way that makes sense in the real world. According to an ERC sample code provision, employees should, "Act in the interest of the organization and avoid activities that conflict or appear to conflict with one's responsibilities and duties to that organization and its stakeholders." Employees, and to the extent that it's appropriate, subcontractors and volunteers should:
The ERC encourages organizations to provide examples of conflicts of interest to their employees. For instance, an organization might describe conflicts of interest as:
It is also good practice for an organization to require that employees give written notice to supervisors and/or the organization's ethics officer whenever they believe they are in a situation where a conflict of interest might arise. Parties who are one step away from the actual conflict are often more able to discern whether there is actual or even an appearance of undue influence. Ethical prohibitions on conflict of interest, or the appearance of conflict of interest, foster the ability of employees and volunteers to protect their own best interests and reputation as well as the best interests and reputations of their organization and its stakeholders. These provisions help protect those who have developed relationships with the organization -- clients, stakeholders, and the public -- from abuse of power motivated by personal or financial gain. In addition, provisions that require reporting of potential conflicts create a level of openness and transparency that allows all of the involved parties, including the organization and the employee, to continue operating with a high level of trust. Perhaps most importantly, avoidance of conflict is a behavior that is modeled. While company and public policy go to great lengths to offer definition of a conflict of interest, corporate culture is what communicates to employees how important the rules really are. Employees adopt the behaviors that they perceive as being acceptable. If conflicts of interest are to be avoided, the effort must begin from the top, and be communicated as a priority throughout the organization. Reputation lost is exceedingly difficult to regain. Patricia J. Harned, Ph.D. 1. These principles of ethical conduct are set forth in Executive Order 12674 (April 12, 1989). ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Report of the National Institutes of Health Blue Ribbon Panel on Conflict of Interest Policies The Blue Ribbon Panel on Conflict of Interest Policies, a group of the Advisory Committee to the Director of the National Institutes of Health (NIH), presented its recommendations on May 6 in Bethesda Maryland, at the 88th Meeting of the Advisory Committee to the Director, NIH. The Panel was charged with reviewing the existing conflicts of interest and financial disclosure laws, regulations, policies, and procedures under which NIH currently operates and making recommendations for improving them. The panel was co-chaired by ERC Founding Fellow Norman R. Augustine and Bruce Alberts, Ph.D., President of the National Academy of Sciences. ERC Fellows Chairman Stephen D. Potts also served on the panel. According to the final report, the Panel found an "extremely complex" set of rules governing conflicts of interest at NIH, which are "widely misunderstood by some of the very people to whom they are intended to apply, thereby creating uncertainty as to allowable behavior and adversely affecting morale." In developing its recommendations, the Panel said, it "adhered to one guiding principle: NIH employees must avoid conflicts of interest incompatible with the proper exercise of their authority and the proper performance of their duties." The report provides background information on the structure and culture of NIH and addresses the requirements and policies for reporting of financial interests by NIH staff, such as which interests should be subject to public disclosure and who should be required to publicly disclose such information. It also explores the issue of outside activities, focusing on the adequacy of existing laws, regulations, policies, and procedures. Finally, it provides a summary of the Panel's views and its 18 recommendations on these issues. Read the final report from the Blue
Ribbon Panel at: The entire meeting is available for
remote viewing at: Related articles: "AAMC Urges Speedy Adoption of NIH Conflict of Interest Reforms" On May 6, Jordan J. Cohen, M.D., president of the Association of American Medical Colleges (AAMC), issued the following statement on the panel's report: "These recommendations would help create a robust, credible, and more transparent system to monitor potential financial conflicts of interests. While the implementation of these proposed reforms will be a challenging task for NIH and the Department of Health and Human Services, their speedy adoption will help sustain and strengthen the public's essential trust in the NIH's intramural research programs, and more broadly in the extramural biomedical science enterprise." Read the rest of this press release
at: "NIH Panel Backs Tighter Limits on Outside Income: Conflict-of-Interest Rules Drafted" A May 7 article in the Washington Post said, "High-level employees at the National Institutes of Health should be subject to greater limitations on the amount and type of compensation they receive from pharmaceutical and biotechnology companies and should be required to disclose more details about those arrangements than under current rules, a blue-ribbon panel on NIH conflict-of-interest policies has concluded." Read this article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Guest Column: Conflicts of Interest Brian Sears, Director, Ethics Awareness, for Lockheed Martin Corporation, poses three scenarios in which an employee might create an actual or perceived conflict of interest and examines the questions and concerns that might arise in each. The situations include:
"Steering clear of conflicts of interest," he concludes, "helps ensure fair treatment to all stakeholders of the organization." Read this discussion at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Conflicts of Interest: Balancing Appearances, Intentions and Values Democracies and free markets absolutely rely on the integrity of their systems for the free flow of information and objective decision-making, write the authors of this paper. Conflicts of interest act as a cancer that eats away at those institutions. Any society that cannot effectively address or prevent conflicts of interest will soon find its democracy and its free markets in states of collapse. Prepared by Stuart C. Gilman, Joshua Joseph and Cheryl L. Raven for the April 2002 OECD meeting, "Conflicts of Interest: Ensuring Accountability and Transparency in the Public Service" attempts to refine the conflict of interest concept by looking at its various facets - contextual, historical, legal, perceptual and societal - and highlighting some of the challenges in its application to pragmatic, day-to-day activities. In addition to identifying and reviewing relevant issues, this paper provides concrete examples throughout the discussion. This paper was one of several that formed the basis of the OECD's monograph on Managing Conflicts of Interest in the Public Sector. Read this paper at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Managing Conflicts of Interest in the Public Sector: OECD guidelines and country experiences In June 2003, the Organisation for Economic Co-operation and Development (OECD) Council approved the Guidelines for Managing Conflict of Interest in the Public Sector in the form of a Council Recommendation. A subsequent report includes the Recommendation, highlights trends, approaches and models across OECD countries and presents examples of innovative and recent solutions. The Guidelines provide a unique instrument for reviewing existing policy measures as well as assisting future policy-design and implementation for governments. The report is available in paper or
electronic format from the OECD at: In May 2004, the OECD, Inter-American Development Bank (IDB), Government of Brazil and Organization of American States (OAS) organized a forum on "Implementing Conflict of Interest Policies in the Public Service". This high-level Forum in Rio de Janeiro brought together policy makers and experts from OECD member countries and Latin America. Participants shared their experiences in designing and implementing conflict-of-interest policies, explored practical approaches to management of conflict of interest situations and identified methods for putting conflict of interest policy into practice. The organizers agreed on a set of Conclusions regarding ways in which to manage conflict of interest. The OECD website provides copies of the agenda, conclusions, background documents, a comparative study on current practices in the Americas as well as the "Guidelines for Managing Conflict of Interest in the Public Service" and a draft "Management Toolkit" for managing conflict of interest in the public sector. Read more about the Forum and get copies
of the documents at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** How Do We Safeguard Against Conflict of Interest? "Nonprofit board members are likely to be affiliated with many organizations in their communities, both on a professional and a personal basis, so it is not unusual for actual or potential conflict of interest to arise," states this article from BoardSource's website section on "Board Essentials." The article provides short answers to the following questions as they relate to non-profit boards:
Read this article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** No Virginia, There Is No Such Thing as Independence In this previously published article, ERC Principal Consultant Frank Navran considers the issues of independence, conflict of interests, individualism and transparency, using Boards of Directors and auditors as timely examples. He posits that independence can never be absolute because any decision is made in a societal context and society has standards and expectations. "We cannot escape the reality that every pragmatic, altruistic or idealistic action and decision has the potential for personal impact," he says. "Therefore absolute independence is a myth." Frank does not suggest that individualism is necessarily bad. Indeed, he says, "when personal goals are congruent with idealism, pragmatism and altruism it strengthens one's resolve to do the right thing" Read the rest of this article, including
a few solutions proposed for discussion, at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Public Exposure Draft of Open Compliance and Ethics Group (OCEG) Framework Now Available The Open Compliance and Ethics Group (OCEG) released a Public Exposure Draft of the OCEG Framework - guidelines for developing and managing integrated compliance and ethics programs. This groundbreaking project, undertaken by a multi-industry, multi-disciplinary coalition, created universal guidelines that companies can use to integrate the principles of effective governance, compliance, risk management and integrity into tangible everyday business practices. By establishing guidelines, rather than standards, says OCEG, it provides a tool that each organization can use as it sees fit - given its size, scope of activity, structure, industry and other factors that create individualized needs. Over 200 reviewers participated in the review of an earlier controlled exposure draft of the Foundation. OCEG addressed their comments and is making the Public Exposure Draft available for approximately 60 days of public comment from May 12, 2004 to July 12, 2004. Following the public review period, the Steering Committee will review all public comments and provide a recommendation to an Advisory Board composed of senior leaders from the corporate and academic communities. OCEG is a not-for-profit organization with a mission to help organizations align their governance, compliance and risk management activities to drive business performance and promote integrity. Acting ERC President Patricia J. Harned is a co-chair of the Steering Committee. Download a free copy of the Public
Exposure Draft at: Read a condensed narrative of the Draft
at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Ask the Expert: What are some tools an organization can use to measure the success or failure of an implemented ethics program?
Try an Ethics Program/Office Assessment, suggests ERC Programs Manager Jerry Brown. These assessments (such as the one offered by ERC) help organizations further develop and improve an effective infrastructure to ensure maximum effectiveness and sustainability. Read the rest of this answer at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Changing the Game Forum June 10-12 The Center for Corporate Change is sponsoring a "Changing the Game Forum" on June 10-12 in Vail, Colorado. The purpose of the Forum is to find the systems, programs and ethics to re-establish confidence in American capitalism, re-confirm the responsibility of business to society and develop remedies to the causes of misconduct. According to the Center, participants will help to develop strategies to promote and recognize ethical and effective leadership, to engage other organizations as partners in the reform effort, and to direct funding for further empirical research. The Center for Corporate Change, a component of the Vail Leadership Institute, is based on the premise that business is not a game but an integral component of our nation's democratic capitalistic society. Read the program brochure and register
at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Publications and Media Coverage -- "Cheney Aide Now Lobbyist on Energy," Boston Globe, April 25 According to this article, Andrew Lundquist, the former executive director of Vice President Dick Cheney's energy task force and his energy policy director, became an energy lobbyist just months after leaving the White House. ERC past President Stuart Gilman said the Lundquist case raises concern about appearances, regardless of the legality. "I think you always, as a public official, need to worry about the appearance," he said. "Being insensitive to that ultimately leads to a great deal of cynicism on the part of citizens." Read this article at: -- "La Corrupción Era la Manera De Negociar, Ahora Es un Cáncer", Semana.com, May 2004 Dr. Stuart Gilman was interviewed for a story on the Spanish language website Semana.com about the fight against corruption in Colombia. Read this article at: -- "OCEG Releases Guidelines and Establishes '20/20 Panel' to Evaluate Corporate Compliance and Ethics Failures," Market Wire, May 13 The Open Compliance and Ethics Group (OCEG), a not-for-profit organization that is developing a framework for integrating governance, compliance, risk management, and integrity into everyday business, issued the initial draft version of its universal guidelines for compliance and ethics programs. "Most compliance and ethics experts would agree that it is not enough to establish corporate compliance programs based on the points set out in the Federal Sentencing Guidelines for Organizations," said ERC Acting President Pat Harned, co-chair of the Steering Committee. "To be successful, organizations must ensure ethical conduct and establish effective compliance programs beyond minimum legal requirements. Until now, there has been no best practice model for organizations seeking to establish this capability. OCEG has filled that void." Read this article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -- Patricia Harned Appointed ERC Acting President The Board of Directors of the Ethics Resource Center (ERC) is pleased to announce the appointment of Dr. Patricia J. Harned, formerly Vice President, to the position of Acting President. Dr. Harned has been with the organization since 1999, and her new appointment is effective immediately. ERC's former President, Dr. Stuart Gilman, has resigned after two years of service to pursue other interests. Dr. Gilman will remain at the ERC until May 28, 2004 to assist with the transition. Questions can be directed to Moira McGinty Klos at 202-737-2258. -- On April 30, Dr. Stuart Gilman presented on "Ethics in Public Service: A National and International Perspective" to the National Academy of Public Administration. He provided substantial background about a number of notable international anti-corruption conventions that took place within the last decade. After explaining the OECD's three dimensions of an ethics infrastructure -- control, guidance, and structure -- he concluded by discussing the growth of ethics and integrity systems globally. -- On May 6, Dr. Gilman spoke at Transparencia por Colombia's Annual General Meeting on, "The Private Sector's Responsibility in Building Integrity." He discussed the importance of the public and private sectors working together, along with the NGO community, in establishing a strong integrity system, as well as addressing what each of these segments of society can, and ultimately must, contribute to creating an ethical environment. In conclusion, he focused on why ethics is important in the fight against corruption and how this movement is understood globally. Read this speech at: -- Dr. Gilman also presented on "Ethics within the Media" at the May 5 Plenary Session of the Transparencia por Colombia meeting, touching on current ethics issues for journalists. The positives, he said, are free and independent media, transparency, honesty, integrity and openness. The problem areas, however, include plagiarism, lying, distortion, fabrication, and business aspects of the media, such as advertisers dictating content and a preference for publishing "what sells." After citing several recent examples of misconduct, he discussed the role of ethics in the newsroom -- Two interns are working with the ERC this summer: Rielle Miller is conducting research on moral courage, with specific objectives to define moral courage, determine if/how it can be developed, and determine the role of the organization in this development. She is also working with the character education department and assisting with the Student Fellows Program. Ms. Miller is working on her M.A. in Philosophy and Social Policy at American University and interning at the ERC as part of her course requirements. She graduated from Washington College in 2002 with a dual major in Philosophy and Psychology. Ms. Miller will be working full time with the ERC during the summer and part time in the fall. Katlyn Donohue has interned with the ERC during the summer of 2003, January of 2004, and is back again for the summer of 2004. She has worked on Maximize the Moment, co-written the Student Ethics Office manual, and is helping with some business ethics projects this summer in addition to continuing with character education projects. Ms. Donohue served as the first Student Ethics Office President at Lake Braddock Secondary School, the SEO prototype program. She attends Mary Washington College where she serves on the Judicial Review Board and sings in an all-female a cappella group, BellACappella. She will graduate in 2007. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ As a non-profit 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: We invite you to join our loyal contributors
in lending your support. To find out how to contribute or to donate
online, go to: 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. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ======================================================= Copyright (c) 2004 Ethics Resource
Center. All rights reserved. Please contact ethics@ethics.org for information about reproducing any of the information contained within this newsletter or on our web site. Back issues of Ethics Today are available online at: /today/et_archives.html For questions about your subscription, please email ethicstodayonline@ethics.org The Ethics Resource Center, 1747 Pennsylvania
Ave., NW, Suite 400 ======================================================= =======================================================
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