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Markkula Center for Applied Ethics

Sustaining Ernst & Young's Ethical Culture

Anne Federwisch

If ethical decisions were simply black and white, developing and sustaining a unified corporate ethics program wouldn’t be such a challenge, Susan Sweet pointed out in her presentation on Sustaining Ernst & Young’s (EY’s) Ethical Culture at a recent meeting of the Business and Organizational Ethics Partnership.

In her talk, she described EY’s four-year process developing their Americas ethics program, highlighting both the trials and successes in defining policies to cover over 35,000 employees in North, Central and South America, Mexico, Israel, and Canada. Key to the program’s success, Sweet said, was encouraging dialogue, buy-in, and commitment from all the stakeholders throughout the process.

Step one: gain agreement and sponsorship among the Executive Board

One of the major hurdles she faced as one of the chief architects of the ethics program, was winning over executive board members who felt a formal program was superfluous because Ernst & Young was already an ethical company. True, they had an ethical company as a whole, she countered, but what they needed was something more overt and proactive, a consistent way to educate all employees about EY’s values and ethical expectations, as well as clear and consistent procedures for reporting and rectifying ethical lapses.

In discussions with the Executive Board, “one of the things that we definitely acknowledged is that ethics really isn’t black and white. That’s really the core of the issue. Most of the ethical dilemmas that you face day-to-day are very gray,” she said. “We really needed to set the stage for an environment where you can discuss what really is the best possible solution for an ethical dilemma.”

By discussing with the Board common situations in which ethical dilemmas might arise, they were able to underscore the need for the project and foster buy-in. Examples included providing non-audit services for audit clients, representing clients whose ethical standards might not be in sync with EY, “eating time” in order to be within budget and allocated hours, shopping in employee-only discount stores at a client site.

Step two: develop global values

Although the firm already had a global values statement, it had been developed by a small regional group. Instead, they wanted values developed using input from all the global areas. That process took a year and a half.

“We spoke to internal folks, we spoke to clients, we spoke to other stakeholders, we gathered focus groups,” Sweet explained. “We really felt strongly that we needed to make sure that this was something that everyone could agree to because we really felt it was the foundation, the underpinnings of everything that we were trying to do.”

The process proved to be challenging, since many words have different connotations in other countries. But finally, she said, they were able to agree on the following to describe who they are as a company and what they stand for:

People who demonstrate integrity, respect, and teaming

People with energy, enthusiasm, and the courage to lead

 People who build relationships based on doing the right thing

A lot of discussion arose about what constituted “doing the right thing.” But the overall consensus was that the phrase should be part of the values because it would be a goal to strive for and would foster discussions about what it meant in different situations. “The ‘right thing’ is not decided in a vacuum,” she said.

Step three: develop Americas and global codes of conduct

Although Sweet and her team looked at examples of codes of conduct from about a hundred other organizations before developing their own formal code, they wanted to make sure that the guiding principles would be based on EY’s vision, mission, strategy, and values.

So they continuously sought input from EY employees as the code took shape. First, they wanted to make sure that the code remained principle-based and not rule-based. “Our industry has plenty of rules. We really wanted our code of conduct to be values-based,” she elaborated.

Second, they wanted to make sure that the code was more than just a piece of paper. They wanted to make sure that the code was built into the infrastructure of the company by developing it amidst an atmosphere that promoted open dialogue and debate. It wasn’t just about putting together a code of conduct, a paper, a brochure, she said. “It was about what happens beyond that. What is it that we need to do to make sure that this becomes embedded in our culture?”

Step four: develop an Ethics Oversight Board

Although prior to this process different people within the company oversaw ethical issues, EY wanted to formally develop a dedicated Ethics Oversight Board.

Working in conjunction with the Office of Ethics and Compliance, the newly created Oversight Board is comprised of senior firm leaders representing key functions of the firm, plus members elected by the firm’s partners and principals. Their primary roles are to monitor the practices and principles that guide the way the company does business, as well as to respond to emerging trends in the business environment.

But shaping their role is an on-going process, Sweet said. “We’re still working through the exact charter and how they can become more proactive.”

Step five: design and implement the organizational change plan

The goal in moving beyond the code of conduct was to shift from mere awareness through understanding and on to actively living out the code in every business decision.

To that end, EY employed a four-pronged strategy:

leadership and sponsorship strategy (aimed at impacting the tone at the top)

 communications strategy (information and context)

learning strategy (formal and informal)

 operational alignment (process and operations)

They brought in an outside facilitator to work with the Executive Board and the Ethics Oversight Board to discuss their understanding of the values and code of conduct, as well as how to be proactive in identifying potential ethical problems and how to close the gap between the code and business practices.

Throughout the company, they used team-based and Web-based learning materials, including meetings in a box, Web-based case studies, online updates, and FAQs.

On-going process

Sweet stressed the importance of persistence and patience in rolling out an ethics program for a company the size of EY. Often she felt like she was taking two steps forward and one step back.

To continue to succeed, she said, the company needs to engage in real-life storytelling, sharing stories of ethical and non-ethical behavior, tales of things that actually happened and how they were resolved.

Currently they are in the process of publicizing and encouraging use of their ethics Web site and Web-based hotline system with two campaigns: “You make the call,” and “We’ve got your back.”

Sweet said, “We’re really encouraging people to speak out and do what they need to do to continuously uphold the ethics of Ernst & Young.”

Anne Federwisch is a freelance writer.

Apr 1, 2007