Ethics Exchange: Monitoring and Embedding Ethics and Compliance

By Ethics Exchange posted May 27,2014 10:54


Steve Priest: Jeff, in our last two Exchanges we discussed risk and program assessments. Both are important tools, but both use rear view mirrors to address current and future road conditions. Let’s turn today to tools that help monitor and embed ethics and compliance. 

Jeff Kaplan:  Good topic for all sorts of reasons, and just to break it down perhaps I can focus a bit more on the traditional forms of monitoring and you the more advanced topic of embedding.  To start, it is worth considering how broad the monitoring concept – which can be seen as any form of checking other than auditing – is.  In terms of the “what,” it includes checking of both risk area compliance (e.g., corruption risks) and general program measures (e.g., making sure everyone is getting required training), but also can encompass/overlap with such areas as program governance and tools such as employee surveys and exit interviews.  In terms of the “who,” monitoring includes both business personnel and staff – presumably other than auditors.   Finally, going back to your original comment, I need to acknowledge that most monitoring involves use of a rear view mirror – only the view is still closer than what one sees in auditing.

Steve: Perhaps most E&C monitoring currently is “rear view mirror,” but I don’t think it has to be. Let’s continue with my driving metaphor. The speedometer is a real time monitoring system that helps us self-monitor, and comply (or, in most cases, choose not to comply) with a speed limit. Diabetics have monitors that now can continuously monitor glucose levels. The compliance area that I believe is most advanced in this regard is workplace safety. At companies where safety is a high risk, terrific procedures—some a form of monitoring, some not—are embedded into work practices to improve compliance. Have you seen any monitoring practices that help embed E&C and thus might be valuable for our readers?

Jeff:   Yes – in the anti-corruption realm, one such process is that when a business person periodically meets with the third party (e.g., sales agent) for which she is responsible she needs to question him about his plans (as well as recent activities) not only from the perspective of business soundness but also from an anti-corruption one.  In the antitrust area, in some high risk industries sales people and others are required to fill out a form explaining their proposed pricing ideas – again, with both a business and also a compliance perspective in mind.    What things of this sort have you seen?

Steve:  “Know your customer” processes in firms with money laundering risks are quite effective. They force sales people and back office/administrative people to conduct due diligence before initiating a business relationship. A different kind of self-monitoring that I have not yet seen is for firms to begin expense reports (for employees) or claims (e.g. for insurance) with statements like “I promise that the information I include below is honest and accurate.” Dan Ariely’s research makes the compelling point that such a priori statements increase honesty dramatically.

Jeff:  There is a lot that one can do with the research you mention, and I’m surprised that more companies haven’t embraced it, as it could truly be “low hanging fruit” for many E&C programs.  Indeed, it is interesting to step back and ask, what are the broader implications of behavioral ethics – and its core message that we are not as ethical as we think - for E&C monitoring?  On the whole, I believe that this relatively new knowledge supports the need for more - indeed, maybe much more - monitoring, since it suggests that when it comes to shaping our behavior character counts for little and most forms of training for not much more than that.  On the other hand, behavioral ethics challenges us to develop monitoring protocols that are themselves resistant to human ethical frailties – which might be a daunting task.

Steve: Jeff, as usual you are right conceptually and practically. Speaking of practical steps to embed compliance in workplace behavior, I came across a great example while doing an assessment at a client a few weeks ago. I was in a downtown Chicago office building in which the bathrooms were near the elevators, shared by several tenants per floor. So the bathrooms are locked for security. I asked the receptionist for a key, and was amazed by their effort to ensure compliance in returning the key.

I took particular interest in the difference between the men’s keys and the women’s. Evidently women can be trusted more, even in this aspect of work life. So of course I asked the receptionist how this impressive system worked and she rolled her eyes. “You would be amazed at how many guys still forget the keys.” I guess one message from this story is that no means of embedding compliance into everyday practice is foolproof.

Jeff. Indeed, and your experience both reminds me that the first type of monitor most of us have experience with is the elementary school hall monitor … and suggests how little progress we have made in the decades since.

1 comment



Nov 18,2014 11:14

Jeff and Stetve, I found this topic very relevant from an E&C professional perspective. I have been working in compliance roles from 8 years so on, and I know that embedding compliance related matters into business is not so simple. I do believe that risk management programs are quite helpful to introduce compliance topics into day to day processes, I would like to have your comments regarding risk management and risk culture to Latam insurance market and the risk culture has a long breach to go.