How to teach ethics to CEOs

By Daniel Terris, The Boston Globe, March 20, 2005

US CORPORATIONS are spending millions of dollars a year on ethics and business conduct programs, so why are they losing so many CEOs to scandal? Last week, Bernard Ebbers was convicted on fraud charges stemming from his tenure as head of WorldCom. The week before, Boeing CEO Harry Stonecipher was ousted in the wake of revelations of improprieties. Stonecipher had been brought to Boeing to restore an aura of integrity; in December 2003, Boeing CEO Philip Condit resigned in the wake of disclosures of document theft and the improper hiring of a former US Air Force official.

What makes the Boeing story all the more puzzling is that the corporation has actually put a great deal of time and money into ethics. In the wake of bribery and overcharging scandals in the 1970s and 1980s, Boeing and the major defense contractors formed an industry consortium in 1986 to adopt common ethics standards and to share best practices in raising ethics awareness. In the intervening two decades, these corporations have invested millions of dollars and millions of hours in new programs, under the watchful eye of the US government.

The defense companies have gone out of their way to develop creative, broad-based approaches to spreading ethics throughout their far-flung enterprises. At Lockheed Martin, for example, the ethics division bought the rights to the Dilbert comic strip. Using the Dilbert characters, the corporation developed a board game, played each year by every employee, that encourages discussion of ethics issues through real-life case studies. Awareness and compliance programs are complemented by codes of conduct, online training modules, and teams of ''ethics officers" empowered to investigate allegations of misconduct. Boeing, Northrup Grumman, Halliburton -- the major players in the defense industry all have similar efforts in place.

As for WorldCom, the corporation has tried to do the right thing since its near-implosion. The company has reinvented its ethics program under the leadership of the former head of the ethics program at Boeing.

With all these programs in place, why have things gone wrong? The answer, in short, is that corporate ethics programs, extensive though they are, are not nearly as tough as the executives they are designed to restrain.

Programs on ethics and business conduct devote too little time and effort to the place where the most damage can be done: at the top of the corporate hierarchy. Ethics executives point proudly to the fact that senior executives undergo all the same training as their underlings. But corporations have done little to develop tough-minded, searching programs that force senior executives to confront the particular temptations and dilemmas faced by those in positions of power. As a result, the characteristics that have made corporate leaders successful -- drive, ego, ambition -- go unchecked.

Secondly, ethics programs get a lot of attention in company websites, but it is less obvious that ethics officers have the inside clout to develop truly challenging programs and to hold leaders accountable. Reporting to company executives and operating in a risk-averse environment, ethics officers can provide advice and awareness, but lack sufficient independence and authority to make meaningful changes in corporate culture.

Finally, ethics programs in the defense industry give virtually no attention to the largest issues -- the question of a corporation's impact on the larger world. When corporations duck tough questions about the ethical dimensions of their policies and products, they implicitly endorse the idea that their employees, as individuals, can also avoid a searching examination of the consequences of their actions.

Ethics officers, in my experience, are smart, sincere, and committed both to the idea of a values-based culture and to indemnifying their employers. But they are, in the end, at the mercy of the demands of the corporate culture of which they are a part. If corporate leaders are serious about ethics, they will have to empower their ethics officials to develop tough programs that challenge and monitor senior executives at a level of intensity commensurate with the power that they wield.

Done right, ethics is uncomfortable. But it's a whole lot better than the alternatives.