Corporate Citizenship - Organizations The Ethics Resource Center: Setting Standards Of Corporate Conduct

Saturday, October 1, 2005 - 01:00

The Editor interviews Patricia J. Harned, Ph.D., President of the Ethics Resource Center, Washington, DC.

Editor: Dr. Harned, would you tell our readers something about your background and professional experience?

Harned: I have been in the ethics field for 15 years. I have worked primarily in the education field, where I developed an interest in how to teach adults to learn a sense of character. Following a Ph.D. from the University of Pittsburgh, I worked with a non-profit organization engaged in the development of curriculum materials for the teaching of ethics. This was something that the Ethics Resource Center wished to develop as well, as part of an initiative in character education. I was recruited for that undertaking. As I transitioned to the ERC, I began to learn a great deal about business ethics. In time, as my responsibilities at the ERC increased, I was able to translate much of my early training to the business ethics field.

Editor: Please tell us about the ERC.

Harned: The ERC is the oldest non-profit organization in the U.S. devoted to organizational ethics. It was created in 1922, and at the time was known as American Viewpoint. The organization devoted much of its time to helping immigrants to the U.S. understand and adapt to American values. It was affiliated with the New York public school system and helped the system with its night classes. Some time around the late 1970s an interest began to emerge on the part of for-profit corporations in corporate ethics and ethical behavior on the part of persons acting within and on behalf of the corporation. In response, American Viewpoint launched the ERC as a project. That initiative very quickly became the principal function of the organization, which was then renamed in the early 1980s.

Editor: And the mission today?

Harned: The ERC is dedicated to doing research around what is effective in teaching ethics for the purpose of setting an organization's standards of conduct. We also help organizations measure the effectiveness of their programs. Finally, we have a character education function, and we attempt to translate what we do with businesses for schools and the educational arena generally.

Editor: How about funding? How does the ERC generate revenues to accomplish its mission?

Harned: Our funding comes from several sources. As a non-profit organization we are able to receive contributions from both individuals and organizations to fund particular projects and the ERC mission. Some of our funding represents fees for services. We work with organizations to measure the effectiveness of their compliance programs, for example, and we have developed surveys and evaluation tools. We have an excellent data base that has been built over many years and against which organizations benchmark their behaviors. Finally, we conduct an annual campaign for individual and foundation donations.

Editor: Please tell us about the ERC Fellows Program.

Harned: The ERC Fellows Program was developed out of an interest on the part of ethics officers from various corporations in working together to address the major issues they faced. There are plenty of conferences which cover the various issues, but they tend to give a broad overview of a number of topics. A group of corporate ethics and compliance officers, together with their academic counterparts from business schools and disciplines such as philosophy or sociology, and representatives from non-profit organizations in business ethics, established an ongoing discussion accompanied by practical research projects. Twice a year the group comes together to identify the emerging issues before corporate ethics officers. The group also breaks down into subgroups to conduct research on the issues identified for the purpose of developing practical tools with which to address them. These twice-yearly meetings also involve reports from various working groups engaged in research projects. Each meeting identifies new issues and launches new investigations, hears updates on projects currently underway, and finalizes some aspect or another of projects that have been introduced at an earlier meeting. The ERC Fellows Program constitutes an amalgam of all of the groups concerned for the future of business ethics. The ERC coordinates the meetings, and offers research support where needed by the various working groups.

Editor: And the organization's overseas initiatives?

Harned: Some time ago we developed an interest in attempting to level the playing field for corporations desiring to conduct operations overseas. There are, of course, many countries where corruption is rife, and the conduct of business following the local customs entails a violation of U.S. law. With funding from Merck Foundation, we conducted a series of feasibility studies in developing countries, and we created a number of non-profit organizations similar to ERC but independent of us. These are located in Colombia, South Africa, Turkey and Dubai. Each ethics center is distinct - different from each other and from any ERC origin - and the issues they address are particular to the country in question and require a carefully-tailored and particularized approach. They are doing good work in addressing corruption and a variety of private and public sector issues that derive in some way from corruption. Their primary interest is in creating collaborations between business and government for the purpose of addressing these issues on terms that are validated within their particular business and social culture.

When we started this initiative only a few organizations were involved. Transparency International was one of them, and the ethics center in Colombia is partnered with Transparency International. Today, I am glad to say, the field has grown tremendously, and there are a great many NGOs working in the anti-corruption field.

Editor: Please tell us about the ERC's landmark 2000 National Business Ethics Survey.

Harned: In 2000 we resurrected a survey from 1994 that was designed to look at ethics in the workplace from the employee's perspective. It was our observation that there were many studies done to gauge the ethics of an organization based upon surveys of CEOs or the best practices literature, but that the perspective of the employee had not been incorporated. We had done the original survey in 1994, and it represented a cross section of employee views concerning the values of their organization. For 2000 we replicated this survey but with additional emphasis on the employee perspective. We were interested in how many companies were now attempting to address ethical issues and, at the same time, how their employees were meeting the ethical problems that we perceived. In redoing the survey we called employees at home, so it was not an organization-based undertaking. It was, however, a national study that was meant to cover a great number of organizations within a wide range of sectors.

Editor: How have the corporate scandals, Enron, WorldCom and so on, and the resulting statutory, regulatory and case law promulgations - most particularly Sarbanes-Oxley - affected the work of the ERC?

Harned: The scandals, and all that has ensued from them, have led to a great expansion of the ethics and compliance industry. For ERC, as a nonprofit, the increase in consultants, products, and resources available to organizations led us to have to take a long, hard look at how we continue to be relevant to our industry. Prior to the scandals there was a considerable number of players in the corporate ethics field, but since then, and particularly since Sarbanes-Oxley, the number of individuals and organizations in the field has grown exponentially. All kinds of organizations - corporate governance consultants, corporate compliance specialists, e-learning organizations, and so on - have begun to develop services that, if they existed at all in the past, were the province of a much smaller number of corporate ethics practitioners. This has led us to look at the history of the ERC and to evaluate the organization's contributions over a long period of time, an exercise that has enabled us to draw upon our strengths and, I believe, add extensive value to the field. We have returned to our strengths of research, measurement and evaluation. The shift in the field has also led us to think differently about corporate ethics. The role of the ethics officer has changed dramatically in recent years, and in order to develop the resources necessary for him or her to fulfill that role it is necessary to take a broader look at the organization and to get much deeper into an understanding of the values that inform it. Ten years ago we spoke to a single person about the ethical underpinnings of the organization. Today we must understand the organization at the level of the governing board, of the CEO and the senior management team, of the employees, and, indeed, of several external constituencies - such as the shareholders - if we are to make a meaningful contribution to its ethical foundations.

Editor: And the impact of the Federal Sentencing Guidelines for Organizations?

Harned: They have had a similar effect. Over the past 18 months we have undergone a rigorous strategic planning process. During that period revisions to the Guidelines were appearing, one of which was to suggest that companies measure the effectiveness of their ethics programs. For a very long time the ERC has collected data from organizations with which we worked, and now we are able to leverage that data to provide a means whereby companies can assess how they are doing. The Guidelines have served to give a sense of urgency to that effort. At the same time, we have looked to the Guidelines as a kind of framework by which we can identify a strong corporate ethics program.

Editor: Would you share with us your thoughts on how crucial it is that our corporations behave in an ethical fashion, particularly as the globalization of the world's economy accelerates?

Harned: It is critical on many levels. If executives and management are not committed to ethical conduct, it is likely that their employees aren't committed to ethical conduct either. Misconduct is a drain on corporate resources, and it's very costly for companies to have to endure allegations of wrongdoing. Where management is committed to ethical behavior, however, our research has shown that less misconduct takes place, employees are more willing to report misconduct they observe, and employee satisfaction overall is much higher. In that regard, it pays to be committed to ethics. Internationally, there are many pressures companies face to compromise their standards, just so they can do business. Facilitation payments, hiring standards, treatment of employees - these are just a few of the issues that are ever-present for organizations conducting business in some countries. The best way to combat these issues, and to help employees engage in ethical conduct in those environments is to develop and implement an ethics program that respects cultural differences, but upholds the standards of the organization. Global business is only going to happen if a sound ethics program is in place and is fully implemented.

Editor: And, closer to home, would you say something about responsible corporate behavior in the face of the tragedy in New Orleans? What kind of ethical response does such an event call for?

Harned: As a society, we have a responsibility to help people who are suffering as a consequence of an event such as Hurricane Katrina. Corporations, while geared to the generation of profits, are members of society to the same extent as individuals. Many of them do business with these people, and whether or not they are located in the area affected, they have a responsibility to take action if at all possible. As this tragedy evolves, I am encouraged by the generous response of a great many of our corporations.