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**************************************************************************** ** A Word from the President: Focus on Small Organizations This month, Ethics Today focuses on ethics initiatives in smaller organizations. More often than not, resources and new insights for organizational ethics are assumed to have universal appeal. However, our research and experience have revealed that organizations with fewer than 500 employees represent a very different mix when it comes to effective ethics program efforts. On the one hand, small businesses exist as streamlined examples of the impact of organizational leadership on a company's ethical culture. In a small business, the business owner or leader is usually a highly visible figure whose conduct is observed by a large portion, if not all, of the employees. As a result, these leaders have a stronger perception among employees that they are either committed to ethical behavior -- or not. That perception, in turn, has critical influence on how the workforce feels about ethics and how employees act and react when faced with ethical dilemmas. Where leadership sets the tone for ethics and encourages the development of an ethics program, our research indicates that employees feel less pressure to commit misconduct, are more likely to report incidents they see in the workplace, and are generally more positive about the importance of ethics in making decisions. All of this is to say, then, that in some ways, smaller organizations have a stronger ability to positively influence employee behavior directly from the top. On the other hand, smaller organizations are much less likely than larger ones to have in place what we now consider to be "formal elements" of an ethics program, namely written ethics standards, ethics training, a dedicated ethics office/advice line, and a means to report misconduct anonymously. There are a number of possible reasons for this. The costs in time and resources for developing a formal ethics program may be prohibitive for some smaller organizations. Additionally, having specific functions (for example, an anonymous reporting line) may not make much sense, if the organization is small enough. But this logic may be penny-wise and pound-foolish. Our research shows that employees are more likely to report misconduct when sufficient forms of ethics program elements are present. Specifically, employees are most likely to report misconduct in organizations that have all four program elements in place, no matter what size the organization may be. Similarly, employee reporting declines steadily in organizations when fewer program elements are present. In addition, employees in organizations with more ethics program elements are more satisfied with their organization's response to reported misconduct. So how does a smaller organization make an ethics program work? For starters, it can use some of its natural advantages. Smaller organizations often rely heavily on informal means for communicating ethics messages, which can make them seem more personal. As noted above, leaders of small organizations have an even greater impact on their employees than leaders of larger companies, so it is critical that these leaders exemplify ethical values. Additionally, in our latest survey, respondents in smaller organizations were more likely to feel valued than those in larger organizations, sparking loyalty that may make employees more likely to be bound by even informal standards because they represent the culture of the organization. While it may not be feasible for smaller organizations to have the same level of formal infrastructure as a larger one, it is possible, and indeed, critical for this group to create an ethics structure that fits their culture. In this issue, we share a couple examples, including one very close to home - the ERC itself, of how smaller organizations are attempting to do just that. Patricia J. Harned, Ph.D. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Business Ethics Infrastructure for Small to Medium-sized Enterprises In May 2004, the U.S. Department of Commerce published a manual for corporate responsibility programs that integrates corporate governance, organizational ethics, and social responsibility. "Business Ethics: A Manual for Managing a Responsible Business Enterprise in Emerging Market Economies" was co-authored by ERC Principal Consultant Kenneth W. Johnson and Igor Y. Abramov, Senior Advisor, Market Access and Compliance, International Trade Administration, Department of Commerce. Because the bulk of businesses in all economies, especially emerging market economies, consist of small to medium-sized enterprises (SMEs), note the authors, most chapters discuss specific issues facing SMEs. Some chapters have tables comparing the best practices of large, complex enterprises and cost-effective solutions for the SME. Chapter 6 (pages 129-140) examines business ethics infrastructure -- the structures and systems that help enterprise owners and managers address issues of responsible business conduct. The manual details the best practices that have been developed by large, complex enterprises (LCEs). While valuable for similarly situated enterprises in emerging market economies, they can also serve as models for small to medium-sized enterprises (SMEs). By considering the best practices that have been generated over countless hours by larger organizations, SMEs can design business ethics infrastructure that meets world-class standards but is tailored to the requirements of an SME. According to the authors, leading enterprises, government agencies, and NGOs have found that an effective business ethics program addresses functions at seven levels of responsibility. Table 6.1 describes how a typical SME might staff these seven responsibility functions. Also in this chapter is a box that lists "Ten Ways Small Business Owners can Prevent and Detect Fraud." The book contains numerous practical examples, worksheets and checklists, a bibliography, a glossary, and-in its nine appendices-numerous examples of business ethics policies adopted by various countries and organizations. The document can be downloaded for
free at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Comprehensive Ethics Programs for Small and Medium Enterprises in Colombia Transparencia por Colombia, the ERC's partner center in Bogotá, has developed a methodology for implementing ethics programs in small and medium enterprises (SMEs). The program, titled Rumbo Pymes, consists of a self-directed survey methodology for assessing the ethical culture in SMEs and a series of training modules for addressing challenges identified in the assessment. Training modules address topics such as ethical leadership for owners of SMEs, ethical decision-making models, Transparency International's Entrepreneurial Principles for Combating Bribery customized for the SME context and ethical governance in family-owned enterprises. In developing the Rumbo Pymes program, Transparencia considered several factors that shape the organizational context of SMEs in Colombia. They next developed a survey question set that measures five aspects of organizational culture: ethics of leadership; communication about ethics; rewards and sanctions; employees' understanding of ethical values; and frequency of observed misconduct. Based on the survey findings, SME leaders identify areas for training and offer several training modules based on the same "best practices" employed in large organizations, but customized for the needs of SMEs SMEs account for 92% of the country's commercial establishments and 40% of the total production of the country, making ethics programs critical to Transparencia's mission to "lead systematic corruption fighting efforts focused on transforming our public and private institutions so we may have effective and reliable organizations in Colombia, with upright citizens and companies." Read this article by ERC Associate
Consultant Abby Davidson (ERC) with contributions from the Rumbo
Pymes team at Transparencia por Colombia, including Alma Rocio Balcazar,
Henry Gil and Jenny Martínez at: Learn more about Transparencia por
Colombia at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** TEOCO Corporation: Successful Ethics in a Small Company TEOCO Corporation, which funds ERC's Student Leadership in Ethics Award, has not only enjoyed financial success, but has received accolades from the business ethics community, including winning the 2002 National Capital Business Ethics Award in the small company category. In this article, Development Manager Allison Pendell-Jones takes a look at some of the policies that set TEOCO apart and suggests possible lessons for other small companies. Read the rest of this profile at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** The Challenges of Being an Ethics Officer for a Small Organization When Character Development Manager Katie Sutliff was appointed ethics officer for the ERC, she saw it as a unique opportunity to apply what she had learned about organizational ethics at ERC while also helping ERC fulfill its mission as a non-profit by doing some action research. "The ERC has led the way in creating, sustaining, and evaluating ethics initiatives, especially in large companies," she says. "From our own research including the National Business Ethics Survey (SM) we know that small organizations are much less likely to have the sort of formal ethics systems than larger organizations do. Whether the reason is that culture change occurs through less formal channels or because there are fewer resources in smaller organizations, the result is the same: the "ethics program elements" that are so common in big companies and that are called for by the Federal Sentencing Guidelines for Organizations (FSGO) are lacking in small organizations. And we at the ERC want to develop strategies that will work for smaller organizations, taking advantage of the benefits of a small organization and taking into account the challenges. We went into this phase of our endeavor with the idea that we would develop a system that works for us and that could work for other organizations as well." In this original article, Ms. Sutliff discusses the foundations of the ERC's ethics program as well as personal observations about the challenges and rewards of being an ethics officer for a small organization. Read Ms. Sutliff's article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Why Small Organizations Need Our Help (Ethics Today Reprint) In this 2003 Ethics Today article, former ERC Research Analyst Leslie Altizer discusses the gaps between large and small organizations in the existence of formal ethics programs, as indicated by the ERC's 2003 National Business Ethics Survey (NBES) After considering some potential causes for differences between large and small organizations, the article focuses on these four elements of the seven elements of effective ethics programs that are required by the Federal Sentencing Guidelines: written standards of ethical conduct, training on standards of conduct, an ethics office or ethics hotline and a means to anonymously report misconduct. The results of the survey, especially the differences found by the NBES, demonstrate the need for more attention to be shifted onto smaller organizations, especially in the for-profit sector. Read this article at: Learn more about or order the 2003
NBES at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Codes of Ethics: Special Challenges for Small Organizations 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, including small organizations. For instance, research indicates that smaller organizations (consisting of less than 500 employees) are less likely to have key elements of ethics programs in place than larger ones, and they are therefore less likely to have formal codes of conduct. While the need for a code is no less significant, the process -- and the resources -- may differ substantially. In small business enterprises (SBEs), drafting, editing and implementing a code may be the responsibility of one person who carries out the entire process as a small part of his or her regular job tasks. Also, in SBEs, the business owner or leader is usually a highly visible figure whose conduct is observed by a large portion, if not most, of the employees. If that is the case, these leaders enjoy a stronger perception by employees that they are either committed to ethical behavior, or not. When a code is requested in a smaller organization, leaders tend to have a heavy hand in the process. Read more advice for small businesses
included in "Creating a Workable Company Code of Ethics"
at: Read more about and order, "Creating
a Workable Company Code of Ethics" at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Building Values, Business Ethics and Corporate Social Responsibility into the Developing Organization Authors Brenda E. Joyner, Dinah Payne and Cecily A. Raiborn published this research article in the Journal of Developmental Entrepreneurship (April 2002) in order to try to identify the early decisions that start organizations on the road to ethical behavior over time. According to the abstract, "Little research has been conducted on the ways that smaller organizations establish and maintain their ethical standards as they grow. In this study, the development of business ethics and corporate social responsibility in growing firms is studied using ten successful entrepreneurial organizations. Both the 'legal compliance strategy' and the 'integrity strategy' have been used by these firms to guide their policies with respect to the stakeholders of the organization. The values of the leader in each of these organizations have been inculcated into the business via written policies and by the patterns of ethical behavior established and modeled by the founders." Read this article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** The Small Business Administration on Business Ethics This article from the Small Business Administration website notes that there are advantages to owning your own business when you want to establish an ethics policy, specifically because ethics come from the top. "Without setting an example at the top," says the article, "It is often difficult, if not impossible, to convince your employees that they too should be ethical in their business dealings. A well-defined ethics policy along with an outline of related standards of conduct provides the framework for ethical, moral behavior within your company." While citing higher employee moral and commitment as one benefit to developing an ethics policy, the author says, "An ethics policy should look at the bigger picture of how we relate to society as a whole and what our responsibility is to the greater good." The article also briefly discusses developing a company's ethics policy, stating, "When you are developing your ethics policy, you must decide what it is you want your company to stand for, put it in writing, and enforce it." It concludes with an Integrity Self-Test entitled "How Honest Are You?" Read this article at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Next Steps: Designing an Outcomes-based Ethics and Compliance Program Evaluation (4th in the FSGO Series) This series, by ERC Principal Consultant Kenneth Johnson describes and comments upon the US Sentencing Commission's amended requirements for an "effective program to prevent and detect violations of law." In the fourth article in this series, Mr. Johnson explores how an organization might approach evaluating its ethics and compliance program. "Evaluating an ethics and compliance program has always been recognized as a good practice, though few organizations evaluated their programs in any comprehensive sense," he notes. "Few ethics and compliance programs have been able to demonstrate that their programs achieved expected program outcomes. For most, moreover, it was enough that they could argue that their programs met the minimum requirements of the 1991 Federal Sentencing Guidelines for Organizations. Ethics and compliance conferences, as a result, tended to concentrate on sharing "best practices," without seriously questioning whether the practices actually contributed effectively, efficiently, and responsibly to achieving expected program outcomes." Now, however, "periodic program evaluation" is a minimum requirement for an effective ethics and compliance program under the 2004 revisions to the Federal Sentencing Guidelines for Organizations (2004 FSGO). As noted in the first article in this series, this is one of the profound changes of the revised guidelines, along with the requirements for risk assessment and attention to organizational culture, which are themselves inextricably linked to program evaluation. "The issue is no longer whether to evaluate one's ethics and compliance program, but rather how to go about designing and implementing a plan for periodic program evaluation," says Mr. Johnson. To aid the reader in understanding this broad topic, he divides his discussion of program evaluation into the following segments:
Read Mr. Johnson's extensive discussion
of program evaluation at: Read the previous articles in this
series at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** CUNA Ethics Summit for Executives ERC President Patricia Harned and Character Development Manager Katie Sutliff will be participating as instructors in the Credit Union National Association (CUNA) Ethics Summit for Executives eSchool in May 2005. Each of three sessions will explore a different ethics issue and will show how ethical standards can work to enhance and protect the reputation of a credit union. The courses will help participants understand the link between ethics and corporate excellence, develop an appreciation for the simplicity of ethics, acquire the knowledge to lead ethics in your corporate culture, identify action plans for long term success and understand how to spot and avoid trouble The three sessions are:
All take place at 2:00-3:30 p.m. Central Time Read more about or register at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Publications and Media Coverage "Dishonesty in the Workplace Isn't Limited to Executive Suite," Detroit News, March 28 Detroit News reprinted a Wall Street Journal article that said some studies show that rank-and-file employees are lying more often at work. The article mentions a variety of surveys on sick leave abuse, false academic credentials, personal use of computers, and dishonest excuses for absence from works, and then cited ERC's National Business Ethics Survey when discussing possible reasons. Read the article at: Find the original article at:
Published in March 2005, this second edition of a classic text for public administrators is filled with practical tools and techniques for making ethical choices in the ambiguous, pressured world of public service. It explores the day-to-day ethical dilemmas managers face in their work, including what to do when rules recommend one action and compassion another, and whether it is ethical to dissent from agency policy. The book also considers managers' accountability to different stakeholders and how to balance the often competing responsibilities. Read comments about "The Ethics
Challenge in Public Service" at: Order this book at: Order this through Amazon at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -- On April 26, ERC Chairman of the Board Stephen D. Potts, Esq., gave the luncheon address for the "Fraud Summit" at the MISTI Super Strategies Audit Best-Practices Conferences in Las Vegas, NV. The one-day summit was intended to help auditors hone in on key challenges and learn how internal audit departments at leading organizations are decreasing risk and taking control. In his presentation, Mr. Potts shared stories of organizations that have successful ethics programs and also discussed the evolution from compliance-focused programs to values-oriented initiatives. He encouraged those attending to "ask the challenging questions and give honest opinions, even if they will be unpleasant and unpopular." The role of the auditor is not just to detect the wrong, he said, but also to identify and encourage the right. "You can provide support for people trying to do what's right," he continued. "Your work is the backbone, the foundation, a mandate that gives people the courage to do the right thing and stops them from doing what is unethical." Mr. Potts concluded by urging the attendees to support efforts to do what is legal and what is right, telling them they had the opportunity to do enormous good and make a huge difference if they would "seize the responsibility for ethical leadership."
The ERC Fellows Program is now accepting nominations for the 2005 Stanley C. Pace Leadership in Ethics Award. The Pace Award is presented annually by the ERC Fellows and honors an organization, individual or group of individuals displaying excellence in the ethics field and recognizes the recipient's accomplishments and contributions to ethical business conduct. Nominations are due by June 1, 2005 and will be voted on at the July 2005 ERC Fellows meeting. Read more about the Pace Award or get
a nomination form at: -- NBES Notification Research for the National Business Ethics Survey 2005 is underway, with the final published report due out later this year. If you would like to be notified by email and receive a free copy of the executive summary when the report is available for purchase, please follow the link below to submit your name and email address. Submit your name for NBES notification
at: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ** Support Organizational Ethics Research (and get NBES 2005) The National Business Ethics Survey (NBES)SM has proven to be of great value to organizations, as it identifies the issues and challenges facing our nation's employees that must be addressed in order to create and sustain an effective ethics program. The 2005 version of the study will undertake additional analysis of compliance practices, communications efforts by corporations, and industry-specific measures. We are in need of sponsors to enable us to expand the survey to allow for increased representation of prominent industries. Sponsors of this effort will help create a widely used and highly respected resource that business leaders, educators, and researchers like yourself can use to advance ethics and integrity in your workplace, schools and society. Donors of a tax-deductible contribution of $50 or more will receive a complimentary copy of our 2005 NBES and acknowledgment as a sponsor in the publication. Make a contribution to the 2005 NBES
at: For more information or to make a major contribution, contact Development Manager Allison Pendell-Jones at allison@ethics.org. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 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. ERC thanks TEOCO Corporation for sponsoring the Student Leadership in Ethics Award. ERC also thanks the following for their contributions of general support:
ERC is extremely proud to report that we've again achieved our goal of 100% giving by our Board of Directors. We are grateful to each of them for their hard work, dedication, and commitment to ERC. We invite you to join our loyal contributors
in lending your support. You can make a tax-deductible credit
card donation online at: To find out about other ways to contribute,
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 10 times this year, with the July and August issues combined into one. ======================================================= Copyright (c) 2005 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
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