How can an organization achieve high performance while maintaining high integrity?
Day Family Ethics Lecturer and former SVP and General Counsel at General Electric, Ben Heineman Jr. , on incentivizing ethical behavior in a large corporation
Businesspeople encounter ethical dilemmas every day. At times, these dilemmas are clear-cut or obvious, as when choosing the wrong path could be discovered and result in punishment. At other times, the question is more ambiguous, as in cutting corners that probably would not get noticed, anyway. What can a large, iconic corporation such as General Electric do to prevent both kinds of ethical slippage? Ben Heineman presented his theories, backed by cases from his long career as a corporate lawyer and GE’s general counsel, and sparked a vibrant discussion of ethics in the modern workplace when he addressed both Johnson and Law School students as the 2013 Day Family Ethics Lecturer on April 16.
Heineman asserted that the first prerequisite to high integrity in an organization is public compliance with all laws and financial rules. There are enough ambiguous ethical situations, especially when dealing with international markets and regulations, that the baseline of legal compliance is a must. Then he went on to explain the intangible, behavioral messaging required by the board, CEO, and management of an organization to hone integrity within their ranks.
- Promote a strong corporate culture. Any top-down messaging can only be effective if the organization has strong, shared norms and processes. Employees must want to be part of the organization in order to buy in to its ethical change agenda.
- Manage performance integrity as a business process. Managers need to understand that they can’t cut corners for commercial reasons. You can miss the numbers and keep your job, but any breach of integrity should be treated with a one-strike-you’re-out policy.
This was the case at GE. Heineman mentioned the example of a high-profile Israeli GE official who was involved in a $15 million corruption scandal with the Israeli Air Force over an aircraft engines contract. Although the 30-year GE executive had no awareness of the acts committed, he was still asked to leave, due to GE’s one-strike policy.
- Prevent, detect and remedy. Business leaders should drive the effort to prevent ethics violations. They should map risks at the business level and proactively identify ethical dilemmas before they arise.
Heineman also spoke of the finance function’s dual role within a corporation, as both a partner and a guardian. The CFO needs to be the anchor to the CEO, as a representative of the company and the board of directors, and at times that means saying no to the CEO. In organizations with powerful leaders, the role of a finance person is intertwined with his or her ethical obligation to the shareholders.
- — Gleb Drobkov, ILR ’12, MBA ‘13