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HR Magazine, October 2003 - Cover Story

By Robert J.Grossman  10/1/2003

HR Magazine, October 2003

Vol. 48, No. 10

The Five-Finger Bonus

Government Steps In

In 1994, the U.S. Sentencing Commission enacted guidelines to encourage organizations to appoint an ethics officer and develop a plan to promote ethical behavior. "It's a carrot and stick approach to building more ethical organizations," explains W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass.

The stick: If you don't have an effective compliance program-which would include an ethics officer, a training program and a proper communications system (a help line)-you're subject to harsh penalties if the company is convicted of any criminal offense.

The carrot: If you've put into place an effective ethics and compliance program, you might not get prosecuted if an employee does something wrong.

Though many larger organizations have accepted the lure of the carrot, many small and mid-size ones have opted to take their chances. Hoffman estimates that 10 percent of these organizations are managing ethics as the Sentencing Commission envisioned. For those who do, the HR head has assumed the ethics officer title with HR becoming the de facto ethics office.

Added impetus has been provided by the Sarbanes-Oxley Law, enacted by Congress in the wake of Enron and other highly publicized scandals. It requires each of the 14,000 publicly traded companies under the jurisdiction of the Securities and Exchange Commission to establish a mechanism by no later than October 2004 that enables employees to present information about wrongdoing without facing reprisals. Most companies are meeting the requirement with hotlines, administered by outside suppliers.

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