The following article was prepared by Mike Taylor, C.P.M.,
for distribution to ISM affiliate newsletters
Compliance & Ethics Policy
December 2006
(Disclaimer: I am not a lawyer and this isn’t legal advice – not enough big
words – just common sense)
Why should a company implement a standard set of
compliance and ethics policies?
- A: Because corporations and senior officers can
be held responsible for the actions of their employees.
- A2: Because corporations can refuse to defend
employees who are acting beyond the scope of their authority and outside of
company guidelines.
- A3: Because having a good set of compliance
policies and a training program can be a protection for both the company and
the employee.
- A4: Because having a clear set of ethical
guidelines can lead to consistent employee behaviors regardless of the
organization or responsibility. Example: marketing has to live by the same
rules as procurement.
- A5: Because having published guidelines and
policies will make it easier to communicate expectations to suppliers and
market company strengths to customers.
- A6: Because having published guidelines will
make it easier to train new employees and discard the bad ones.
Reference:
The United States Sentencing Commission :
www.ussc.gov/index.html
Of particular interest is this section in the
Federal Sentencing Guidelines for corporations:
www.ussc.gov/corp/ORGOVERVIEW.pdf
Organizations, like individuals, can be found guilty of
Criminal conduct, and the measure of their punishment for felonies and
Class A misdemeanors is governed by Chapter Eight of the sentencing
guidelines.
Risks:
Corporations can be found guilty of wrong doing and
can receive fines and sentences. Corporate leaders can go to jail. Just ask some
of the Enron people.
Employees acting within their defined scope can
cause a corporation to be found guilty. Employees acting outside of their
defined scope still cause corporations to be found guilty, particularly if the
corporation should have known what was going on.
Corporations can defend themselves by cutting an
employee loose - blaming the employee and claiming that they didn’t know about
it or that the employee was violating company policy? Corporations can
also mitigate fines and penalties by having an effective compliance and ethics
program.
Examples of employee wrongdoing:
What kinds of illegal actions could an employee take
which could get the company (or the individual) in trouble?
- Anti-trust and collusion with competitors
- Accepting bribes or kickbacks on government funded work
- Lying to investigators (even if you are trying to protect a company
official) [I’ve seen a training course with an example of this where
an employee trying to protect his boss, lied to federal investigators and
got a harsher sentience than his boss]
- Committing financial fraud; impacting shareholders in a publicly
traded company (SOX violation)
- Consumer fraud (knowingly supplying counterfeit materials to
consumers)
- Criminal negligence – endangering public safety by knowingly
producing or selling unsafe products
What constitutes an effective ethics program?
www.ussc.gov/2005guid/8b2_1.htm
What kinds of guidelines should we have?
It doesn’t have to be fancy. In a small company I
can imagine a one page document of simple text and bullets, signed by the
president and distributed to all employees. Here are some suggestions for
subjects which are worth including:
- Do not accept bribes, gifts, gratuities and other improper influences
on decisions which can affect the financial health of the company
- Do not bribe or try to inappropriately influence government officials
- Disclose and mitigate conflict of interest situations
- Avoid collusion and anti-trust violations with suppliers, customer
and competitors
- Honesty, integrity and cooperation with auditors, regulators, and
investigators
Resources:
Surprisingly, there are many companies who offer
compliance and ethics training programs and advice. Here are a couple of
examples:
Bottom Line:
If I am the purchasing manager in a small company
without a formal policy, would it be worth trying to identify and develop some
guidelines? Yes. Don’t burn your bridges with the boss – he could take it the
wrong way – but I’d start trying to document policies in a non-confrontational
way. It could save both of you a little jail time.
Good luck!
Mike
Taylor
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