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EthicsEthics

John W. GreggJohn W. GreggDirector of Controls & AccountabilityDirector of Controls & Accountability

UC DavisUC Davis

Materials used with permission fromMaterials used with permission from

Josephson Institute of EthicsJosephson Institute of Ethics

www.josephsoninstitute.orgwww.josephsoninstitute.org

Western Region CSREESAdministrative Officers Meeting

Training GoalsTraining Goals

How ethics help you in How ethics help you in your job!your job! Ethics DefinitionEthics Definition Ethical PrinciplesEthical Principles Ethical Decision-MakingEthical Decision-Making Ethics ProgramEthics Program AdvantagesAdvantages ChallengesChallenges

Scenarios throughout Scenarios throughout this presentationthis presentation

ValuesValuesImportant Beliefs and DesiresImportant Beliefs and Desires

© 2000 Josephson Institute

Shape AttitudesMotivate Actions

Values Different Than EthicsValues Different Than Ethics

ValuesAll important beliefs (e.g., health, wealth)

EthicsBeliefs about moral right and wrong

(e.g., trustworthiness, respect)


EthicsEthics

Moral PrinciplesMoral Principles of duties and virtueof duties and virtue prescribe how we prescribe how we

should behaveshould behave

TrustworthinessRespectResponsibilityFairnessCaringCitizenship


Six Pillars of CharacterSix Pillars of Character

Trustworthiness

Respect

Responsibility

Fairness

Caring

Citizenship


Five Principles ofFive Principles ofPublic Service EthicsPublic Service Ethics

Public Interest – – advance public, not personal advance public, not personal interestsinterests

Objective JudgmentObjective Judgment – – Decisions on merits, free Decisions on merits, free of partiality, prejudice and conflict of interestof partiality, prejudice and conflict of interest

AccountabilityAccountability – – conduct business openly, conduct business openly, efficiently, equitably, honorably efficiently, equitably, honorably

Democracy – – Honor and respect democratic Honor and respect democratic principles; observe the letter and spirit of lawsprinciples; observe the letter and spirit of laws

Respectability – – Safeguard public confidence by Safeguard public confidence by avoiding appearances of impropriety and misconductavoiding appearances of impropriety and misconduct

© 2000 Josephson InstituteA

Ethics is not about words!Ethics is not about words!

It’s not about what we say or intend

It’s not simply awritten code or framed credo

It’s about actions!


When it comes to trust, When it comes to trust, perception is reality.perception is reality.

It is not enough that we do no It is not enough that we do no wrong, we must also try to wrong, we must also try to

assure that others believe we assure that others believe we have done no wrong.have done no wrong.

Perception is Reality


Rights

There is a big difference between what you have a right to do and what is right to do.

Ethics Transcends the Law


Most of the time, we know Most of the time, we know what we what we shouldshould do. do.

The real test of ethics and The real test of ethics and character is whether we character is whether we are willing to do the right are willing to do the right

thingthing

… even when it is likely to cost more than we want to pay. © 2000 Josephson Institute

B

The Ethical LandscapeThe Ethical LandscapeThe Ethical LandscapeThe Ethical Landscape

Post Enron EnvironmentPost Enron Environment

Turned Our World Upside Down!Turned Our World Upside Down!

Public CynicismIntensified Scrutiny

Burdensome RegulationBroader Accountability

Prosecution


Sarbanes-Oxley, NYSE rules and SEC Sarbanes-Oxley, NYSE rules and SEC regulations impose new requirementsregulations impose new requirements

Certification by CEO and CFO of financial statements.

New attorney reporting responsibilities. Comprehensive audit committee responsibilities. “Real time” continuous reporting of material events. Prohibition of loans to top executives. Requirement that accounting firms avoid certain

conflicts of interest. Documentation retention requirements. Codes of ethics/standards of conduct. Majority of independent directors.


It’s Not Over YetIt’s Not Over Yet

California adopts Nation’s first ‘Mini-Sarbanes-California adopts Nation’s first ‘Mini-Sarbanes-Oxley Act’ for non-profitsOxley Act’ for non-profits

Taxation of Exempts, May/June 2005Taxation of Exempts, May/June 2005

In May 2003, FBI indicated it is opening an In May 2003, FBI indicated it is opening an additional three to five investigations a month of additional three to five investigations a month of suspected fraud of $100 million or moresuspected fraud of $100 million or more

In all, the US Dept of Justice is conducting about In all, the US Dept of Justice is conducting about 200 ongoing investigations, about 10 times the 200 ongoing investigations, about 10 times the caseload before Enroncaseload before Enron

Boston Globe, 5/6/2003Boston Globe, 5/6/2003

© 2000 Josephson InstituteC

Public trust Public trust


… … is merely a state of mindis merely a state of mind

In cynical times, it is difficult to create and In cynical times, it is difficult to create and easy to destroyeasy to destroy

Youth & The Job PoolYouth & The Job Pool

““An increasing number of young people are An increasing number of young people are growing up without a firm understanding of or growing up without a firm understanding of or

commitment to the core ethical values needed to commitment to the core ethical values needed to inform and energize the conscience.”inform and energize the conscience.”

““As a result, they lack internal mechanisms to help As a result, they lack internal mechanisms to help them know right from wrong and to generate the them know right from wrong and to generate the

will power to exercise self-control and will power to exercise self-control and consistently do what is right.”consistently do what is right.”

- Michael Josephson- Michael Josephson


Job Pool - CheatingJob Pool - Cheating

In 2002, 74% of high school students In 2002, 74% of high school students surveyed admitted they cheated on an surveyed admitted they cheated on an exam exam within the past yearwithin the past year.. 48% cheated 2 or more times48% cheated 2 or more times 78% of varsity athletes cheated78% of varsity athletes cheated

In 1992, 61% admitted cheatingIn 1992, 61% admitted cheating

• Josephson Institute, 2002Josephson Institute, 2002

© 2000 Josephson InstituteD

Job Pool - TheftJob Pool - Theft

In 2002, 38% of high school students In 2002, 38% of high school students surveyed admitted they stole from a store surveyed admitted they stole from a store within the past yearwithin the past year.. Stole 2 or more times: 19%Stole 2 or more times: 19% Males 41%; Females 35%Males 41%; Females 35% In 1992, 33% admitted shopliftingIn 1992, 33% admitted shoplifting

In 2002, 28% said they stole from a parent In 2002, 28% said they stole from a parent or other relativeor other relative In 1992, it was 24%In 1992, it was 24%


Job Pool - LyingJob Pool - Lying

In 2002, 37% said they would be willing to In 2002, 37% said they would be willing to lie to get a good joblie to get a good job 46% said they sometimes lie to save money46% said they sometimes lie to save money 43% agree “a person has to lie or cheat 43% agree “a person has to lie or cheat

sometimes in order to succeed”sometimes in order to succeed”

• Josephson Institute, 2002Josephson Institute, 2002


Job Pool – “Book Cooking”Job Pool – “Book Cooking”

More than three-quarters (76%) of grad More than three-quarters (76%) of grad students in business say they would students in business say they would misrepresent write-offs to enhance profit misrepresent write-offs to enhance profit reportsreports

Nearly half of all CEOs (47%) and 41% of Nearly half of all CEOs (47%) and 41% of corporate controllers were also willing to corporate controllers were also willing to cook the bookscook the books

• Journal of Business Ethics, Feb. 1996Journal of Business Ethics, Feb. 1996

© 2000 Josephson InstituteE

Ethics in Recruitment - ExampleEthics in Recruitment - Example

Exec. Director and COO, Josephson Institute of EthicsExec. Director and COO, Josephson Institute of Ethics PositionPosition

“…assure that JI complies with all legal requirements and the highest ethical standards.”

“… assure that all … functions of the organization are performed at the highest level of proficiency and with complete integrity.”

CandidateCandidate“Be a person of exemplary character who cares about and is deeply

committed to JI’s mission.”“Have strong personal character and credibility.”

Application ProcessApplication Process“Includes a statement that you understand that character is of the

utmost importance to this position.”


Ethical Decision-MakingEthical Decision-MakingUsing Your Moral CompassUsing Your Moral Compass

Confucius: What you do not want done to yourself, do not do unto others.Aristotle: We should behave to others as we wish others to behave to us. Judaism: What you dislike for yourself, do not do to anyone.Hinduism: Do nothing to thy neighbor which thou wouldst not have him do to thee thereafter.Islam: No one of you is a believer unless he loves for his brother what he loves for himself.Buddhism: Hurt not others with that which pains thyself.Christianity: Do unto others as you would have them do unto you.

The Golden Rule

© 2000 Josephson InstituteF

Bell, Book & Candle Test

Listen for the bells warning you of an ethical issue.

Check to see if there are any laws,

regulations or rules which restrict your

choices.How will your decision look in the light? Could a reasonable fair-minded person conclude you acted improperly? © 2000 Josephson Institute

Developing a Comprehensive Developing a Comprehensive Ethics ProgramEthics Program

Advantages of EthicsAdvantages of Ethics

Competitive EdgeCompetitive Edge – people prefer to work with – people prefer to work with those they can trustthose they can trust

CredibilityCredibility – people believe you– people believe you

EfficiencyEfficiency – trust makes decision making faster and – trust makes decision making faster and more economicalmore economical

MoraleMorale – people feel better about their jobs and – people feel better about their jobs and themselvesthemselves

LoyaltyLoyalty – internal and external– internal and external

Personal SatisfactionPersonal Satisfaction – self respect, affection – self respect, affection of othersof others

© 2000 Josephson InstituteG

Characteristics of an Effective Characteristics of an Effective Ethics ProgramEthics Program

PurposefulPurposeful – articulate objectives and influence – articulate objectives and influence values and behaviorvalues and behavior

PervasivePervasive – Six Pillars should pervade all aspects– Six Pillars should pervade all aspects RepetitiveRepetitive – frequent messages about the meaning – frequent messages about the meaning

and importance of the Six Pillarsand importance of the Six Pillars ConsistentConsistent – attitudes, words and actions – attitudes, words and actions

consistently support the Six Pillarsconsistently support the Six Pillars ConcreteConcrete –values expressed in context of –values expressed in context of

concrete, realistic, relevant situationsconcrete, realistic, relevant situations ChallengingChallenging – challenge institutional – challenge institutional

obstacles and individual rationalizationsobstacles and individual rationalizations


Realistic Goals of an Ethics Realistic Goals of an Ethics ProgramProgram

Criminal ConductCriminal Conduct – It won’t make crooks honest but – It won’t make crooks honest but it can create an environment where criminal conduct is it can create an environment where criminal conduct is less likely and more risky.less likely and more risky.

Improper ConductImproper Conduct – It can provide knowledge and – It can provide knowledge and promote systems that significantly reduce a large promote systems that significantly reduce a large category of improprieties.category of improprieties.

Poor JudgmentPoor Judgment – It can create a heightened – It can create a heightened understanding of the kinks of conduct that generate understanding of the kinks of conduct that generate criticism and accusations of unethical conduct.criticism and accusations of unethical conduct.


Cost of Not Doing the Right ThingCost of Not Doing the Right ThingExamples of Research Noncompliance in Higher EducationExamples of Research Noncompliance in Higher Education

University of Alabama (2005)University of Alabama (2005) $ 3.4M$ 3.4M Mayo Foundation (2005)Mayo Foundation (2005) $ 6.5M$ 6.5M Univ. of Pennsylvania Children’sUniv. of Pennsylvania Children’s

National Medical CenterNational Medical Center (2005)(2005) $ 1.3M$ 1.3M East Carolina University (2004)East Carolina University (2004) $ 2.3M$ 2.3M Harvard/Beth Israel Deaconess Harvard/Beth Israel Deaconess

Medical Center (2004)Medical Center (2004) $ 3.3M$ 3.3M Johns Hopkins Univ (2004)Johns Hopkins Univ (2004) $ 2.6M$ 2.6M Northwestern University (2003)Northwestern University (2003) $ 5.5M$ 5.5M Thomas Jefferson Univ (2000)Thomas Jefferson Univ (2000) $ 2.6M$ 2.6M University of Pittsburg (1999)University of Pittsburg (1999) $15.5M$15.5M

$43.0M$43.0M

H

Developing a Comprehensive Developing a Comprehensive Ethics Program – 11 StepsEthics Program – 11 Steps

1.1. DiagnosisDiagnosis

2.2. Strategy Strategy DevelopmentDevelopment

3.3. Standards of Standards of ConductConduct

4.4. Recruiting & HiringRecruiting & Hiring

5.5. Education & TrainingEducation & Training

6.6. Performance Performance ReviewsReviews

7.7. Support SystemsSupport Systems

8.8. Dissent / Reporting Dissent / Reporting ChannelChannel

9.9. Monitoring Monitoring ComplianceCompliance

10.10. Continuous TrainingContinuous Training

11.11. CommunicationCommunication


Challenges to an Ethics ProgramChallenges to an Ethics Program

Increasing Ethical Conduct in Increasing Ethical Conduct in Organizations – Institutional FactorsOrganizations – Institutional Factors Culture and TraditionCulture and Tradition Organizational Self-identityOrganizational Self-identity Leadership’s ValuesLeadership’s Values Hiring and TrainingHiring and Training Compensation and IncentivesCompensation and Incentives Approval and DisapprovalApproval and Disapproval Business Plan ObjectivesBusiness Plan Objectives

© 2000 Josephson InstituteI

What is Work Culture?What is Work Culture?

““200 years of tradition, 200 years of tradition, unimpeded by unimpeded by

progress!progress!””Department of DefenseDepartment of Defense

Shared HistoryExpectations

Unwritten RulesSocial Mores

Underlying beliefscolor perceptions

of actions andcommunications

Factors Influencing Individual ValuesFactors Influencing Individual Values

Upbringing (family values, religion, culture)Upbringing (family values, religion, culture) Self-ConceptionSelf-Conception MotivationsMotivations

Need for ApprovalNeed for Approval Need for SecurityNeed for Security Need for Money or PositionNeed for Money or Position

Ethical Consciousness/AwarenessEthical Consciousness/Awareness Moral Courage/Strength of CharacterMoral Courage/Strength of Character

© 2000 Josephson InstituteJ

U.S.S. Integrity

Enemies of IntegrityEnemies of Integrity

ComplacencyComplacency Self DelusionSelf Delusion RationalizationsRationalizations Survival SyndromeSurvival Syndrome Win-at-Any-CostWin-at-Any-Cost Misplaced LoyaltyMisplaced Loyalty Undervaluing IntegrityUndervaluing Integrity UnaccountabilityUnaccountability Short-Term ThinkingShort-Term Thinking Arrogance of PowerArrogance of Power


The T.E.A.M. StrategyThe T.E.A.M. Strategy

TTeacheach

EEnforcenforce

AAdvocatedvocate

MModelodel

ETW – Public Service Ethics© 2004 Josephson InstituteK

“People behave in an unethical way because they are either responding to signals sent by top management or because the only way that they can meet expectations is to cheat.”

Tone from the TopTone from the Top

- James O’Toole, USC Graduate School of Business


When you decide to fight fire with fire ...

… all you get is the ashes of your

own integrity.— Michael Josephson


The problem with the rat race is that even if you win, you’re still a rat.

The Rat Race

—Lily Tomlin


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