Elaine Nissley, Principal with McKonly & Asbury, will provide an overview of ethical style and perspectives. During the webinar, she will present ethics from a macro, corporate, and individual level and discuss social contracts within organizations. She will also discuss how our personal ethical perspective, the ethical perspective of others, and the organization’s ethical perspective influence social contracts and behavior in the workplace. Elaine will then look at a self-assessment tool which you can use to assess your ethical leadership style and a balanced scorecard to measure and track the corporate ethical environment, as well as some frameworks to help you to make balanced ethical decisions. The webinar will conclude with a review of the state of ethics in the workplace in 2017 and a summary of the Federal Sentencing Guidelines related to the key components of an effective ethics program to protect both the organization and their employees.

1. Business Ethics &
The Three Monkeys in the Room
Elaine Nissley, Principal, MBA, CISA, PMP, CRMA, CRISC
McKonly & Asbury, LLP
www.macpas.com

4. Business Ethics &
The Three Monkeys in the Room
Elaine Nissley, Principal, MBA, CISA, PMP, CRMA, CRISC
McKonly & Asbury, LLP
www.macpas.com

5. Introductions
Elaine Nissley, MBA, CISA, PMP, CCSA, CRISC, CRMA
• Principal with McKonly & Asbury
• Leader of the firm’s Internal Audit & Management
Consulting group
• Over 30 years experience
• Risk management, internal audit, internal controls
assessments, and project management

6. Learning Objectives
• Understand the theory of ethics, ethical perspectives, and the social contract.
• Relate ethics and the social contract to behavior.
• Understand ethical decision making frameworks.
• Gain insight into the state of ethics in the workplace.
• Understand the key components of an effective ethics program.

7. Theory of Ethics
Religion Based
A general pattern or “way of life”.
Professional Ethics
A set of rules of conduct or
“moral code”.
Branch of Philosophy
Inquiry about ways of life and
rules of conduct.
“One swallow does not
make a summer,
neither does one fine day;
similarly one day or brief
time of happiness
does not make a person
entirely happy.”
- Aristotle

8. Justice vs. Care
enissley@macpas.com

9. Justice vs. Care
Justice Character/Obligation
• Fairness
• Equality
• Authority
• Logical
• Impartial
Care Results/Equity
• Responsibility
to reduce harm or suffering
• Social justice
• Work to change bad rules

10. Theory of Ethics
Character/Virtue
“We do not act rightly because
we have virtue or excellence,
but rather have those because
we have acted rightly.”
Aristotle

11. Theory of Ethics
Rights and Obligations
“In law a man is guilty when he violates the rights of others. In ethics he is
guilty if he only thinks of doing so.” - Immanuel Kant
• Categorical Imperative
I ought never to act except in such a way that I can also will that my maxim
should become a universal law.
• Practical Imperative
Act in a way that you always treat humanity, whether in your own person or
in the person of any other, never simply as means, but always at the same
time as an end.

12. Theory of Ethics
Results or Consequences
“The creed which accepts as the
foundation of morals, Utility, or the
Greatest Happiness Principle, holds that
actions are right in proportion as they tend
to promote happiness, wrong as they tend
to produce the reverse of happiness.”
- John Stuart Mill

13. Theory of Ethics
Equity/Fairness
“Fairness does not mean everyone
gets the same. Fairness means
everyone gets what they need.”
- Rick Riordan

14. Theory of Ethics
Self Interest
“There are two levers to set
a man in motion, fear and
self-interest.
- Napoleon Bonaparte

15. Case Study
Anne Greely, CEO
• Believes she manages the company
effectively
• History of 22-25% growth in sales,
profit & EPS
• Wants to raise expansion capital
• Current year 35% gain
• Concerns
‒ May appear that CEO does not have a
handle on company activity
‒ May attract takeover artist
‒ Short in profits next year
‒ Bank may not loan expansion capital
Joe Fault, CFO
• CEO suggested solutions
‒ Reduce % complete on construction
jobs to lower profits
‒ Expense $124,000 in R&D costs
• CEO Rationale
‒ Joe is an employee
‒ Anne is his boss
‒ Joe should provide revised figures
ASAP

16. Application of Ethics
Systemic Corporate Individual

17. Macro/Systemic Ethics
Operating Environment
• Political pressures
• Economic conditions
• Societies attitude toward type
of business
• Business regulations

18. Corporate Ethics
Organizational Ethics
The principles, standards, and
values by which businesses operate.
Code of Ethics
Set of principles that guide the
organization.
Employee Ethics
Ethical behavior of the organization's
workers.

19. Individual Ethics

20. Behavior Assessment Tools
Leadership Ethics Self-Assessment
• Successes
• Opportunities for Improvement
• Action Plan
Balanced Scorecard for Ethics
• Measure Corporate Ethics
• Self-Assessment
• Independent Third Party Assessment

21. Leadership Ethics
• How do you demonstrate that ethics is a
priority?
• How do you communicate your expectations
for ethical practices?
• Do you practice ethical decision making?
• Do you support your local ethics program?
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22. Corporate Ethical Behavior
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23. Social Contracts

24. Social Contracts & Ethical Decisions
• Ethical Values
• Significant Stakeholders
• Stakeholder Impact Analysis
‒ Modified Five Questions
‒ Modified Moral Standards
‒ Modified Pastin

25. Modified Five Questions
• Is it profitable?
• Is it legal?
• Is it fair to all stakeholders?
• Is it right? What are the impacts?
‒ Stakeholders
‒ Environment
• Does it uphold the organizations virtues?

26. Modified Moral Standards
• Will it provide a net benefit
to society?
• Is it fair to all stakeholders?
• Is it right?
• Does is demonstrate the
virtues expected by the
organization’s stakeholders?
• Is it the truth?
• Is it fair to all concerned?
• Will it build goodwill and better
friendships?
• Will it be beneficial to all
concerned?

27. Modified Pastin Approach
• Ground rule ethics
• End-point ethics
• Rule ethics
• Problems of the commons

28. Case Study
Anne Greely, CEO
• Believes she manages the company
effectively
• History of 22-25% growth in sales,
profit & EPS
• Wants to raise expansion capital
• Current year 35% gain
• Concerns
‒ May appear that CEO does not have a
handle on company activity
‒ May attract takeover artist
‒ Short in profits next year
‒ Bank may not loan expansion capital
Joe Fault, CFP
• CEO suggested solutions
‒ Reduce % complete on construction
jobs to lower profits
‒ Expense $124,000 in R&D costs
• CEO Rationale
‒ Joe is an employee
‒ Anne is his boss
‒ Joe should provide revised figures
ASAP

30. State of Ethics in the Workplace
• Ethics and Compliance Initiative since 1994
• March 2018 Outcomes When Integrity is a Priority Employees are:
‒ Less likely to feel pressure to violate ethics standards
‒ Less likely to observe misconduct
‒ More likely to report misconduct they observe
‒ Less likely to experience retaliation for reporting
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

31. State of Ethics in the Workplace
Key Trends 2013 - 2017
• Observed misconduct on the decline
‒ Lying to employees and external stakeholders
‒ Abusive Behavior
‒ Internet abuse
‒ Conflicts of interest
‒ Health violations
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

32. State of Ethics in the Workplace
Key Trends
• Reporting of suspected wrongdoing at historic high
‒ Misuse of confidential information
‒ Giving or accepting bribes or kickbacks
‒ Stealing
‒ Failed specifications
‒ Sexual harassment
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

33. State of Ethics in the Workplace
Key Trends
• More employees feel pressure to cut corners
• Why is this important? Because pressure
‒ Leads to misconduct
‒ Twice as likely to accept questionable business practices
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

34. State of Ethics in the Workplace
Key Trends
• Rate of retaliation for reporting wrongdoing doubled
• Highest rates of retaliation for reporting
‒ Accepting gifts/kickbacks or bribing public officials
‒ Improper political contributions
‒ Retaliation against a reporter
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

35. State of Ethics in the Workplace
Key Trends
• Number of organizations with strong cultures has not changed
Behavior Strong Culture Weak Culture
Reported misconduct 88% 52%
Experienced retaliation 43% 55%
Observed misconduct 28% 83%
Experienced pressure 12% 34%
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

36. State of Ethics in the Workplace
• Employees in Weak Culture
‒ Pressure to compromise (3 times more)
‒ Observe misconduct (3 times more)
‒ Report observed misconduct (41% less)
‒ Experience retaliation (27% more)
• Workplace Conduct Changes with Market
‒ Downturn - less pressure to compromise
‒ Improvement - more pressure to compromise
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

37. State of Ethics in the Workplace
What Do the Trends Show Us?
• Trouble ahead
• Pressure to Compromise Standards
‒ Pressure leads to misconduct
‒ Questionable business practices accepted
• Increases in Retaliation
‒ 100% increase
‒ Happens quickly
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

38. State of Ethics in the Workplace
• What Should Organizations Do?
‒ Implement an Ethics & Compliance Program
‒ Statement of Values
‒ Performance goals for senior leaders and managers
• Already Have an Ethics & Compliance Program?
‒ Monitor pressure and reinforce integrity
‒ Evaluate your program
‒ Reinforce importance of culture
State of Ethics & Compliance in the Workplace, March 2018, Ethics and Compliance Initiative, www.ethics.org

39. Federal Sentencing Guidelines
Culpability Score
• Factors that reduce punishment
‒ Effective ethics and compliance program
‒ Self-reporting, cooperation, or acceptance of responsibility
• Factors that increase
‒ Tolerance of criminal activity
‒ Prior history
‒ Violation of an order
‒ Obstruction of justice

40. What is an Effective Program?
Due Diligence to Prevent and Detect Criminal Conduct
• Established standards and procedures
• Responsible for compliance and ethics program
‒ Oversight by knowledgeable governing authority
‒ High-level personnel assigned responsibility
‒ Specific individuals with day-to-day operational responsibility and report to
high-level personnel
‒ Responsible individuals have not engaged in illegal activity

41. What is an Effective Program?
Due Diligence to Prevent and Detect Criminal Conduct
• Organization shall
‒ Communicate all aspects of the program
‒ Train appropriate to individual’s roles and responsibilities for all employees
• Monitor
‒ Audit to detect criminal conduct
‒ Evaluate effectiveness
‒ Anonymous or confidential reporting

42. What is an Effective Program?
Due Diligence to Prevent and Detect Criminal Conduct
• Promote
‒ Use appropriate incentives
‒ Disciplinary action
• Respond to criminal conduct
‒ To prevent further similar conduct
‒ Modify ethics program as needed
• Periodically assess risk of criminal conduct

43. What is an Effective Program?
The culture encourages ethical conduct
• Code of Conduct
‒ Written and available to everyone
‒ Up to date and applicable
• Business Ethics Training
‒ At least annually for all
‒ Requires agreement to abide by Code of Conduct
‒ Meaningful for all based on roles and responsibilities
• Ethical Environment Audits
‒ Conducted by an independent third party
‒ Assess the ethical environment at all levels
‒ Provide reasonable assurance

44. In Short
• Limit Opportunity
• Instill Fear of Consequences
• Eliminate Corporate Motivation

45. Conclusion

46. Questions
Elaine Nissley, MBA, CISA, PMP, CCSA, CRISC, CRMA
Principal
enissley@macpas.com