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Ethical behaviour is more than just following the rules

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Ethical breakdowns. Many Bermuda residents will remember (and many invested in or lost money in) WorldCom, the highflying telecommunications firm of the late 1990 tech stock era. As you may also recall, WorldCom went bankrupt. Summarised later, in a report to the United States Securities Exchange Commission, BY THE SPECIAL INVESTIGATIVE COMMITTEE OF THE BOARD OF DIRECTORS OF WORLDCOM, INC. March 31, 2003

“From 1999 until 2002, WorldCom suffered one of the largest public company accounting frauds in history. As enormous as the fraud was, it was accomplished in a relatively mundane way: more than $9 billion in false or unsupported accounting entries were made in WorldCom's financial systems in order to achieve desired reported financial results.”

“Most of WorldCom's people did not know it was occurring. Rather, the fraud occurred as a result of knowing misconduct directed by a few senior executives centred in its Clinton, Mississippi headquarters, and implemented by personnel in its financial and accounting departments in several locations.”

The fraud was the consequence of the way WorldCom's chief executive officer, Bernard J Ebbers, ran the company. That the fraud continued as long as it did was due to a lack of courage to blow the whistle on the part of others in WorldCom's financial and accounting departments; inadequate audits by Arthur Andersen; and a financial system whose controls were sorely deficient.

… It was a serious corporate governance failure.”

WorldCom is an integral part of the Personal Story of Ms Cynthia Cooper, WorldCom Whistleblower and 2002 Time Person of the Year, an internationally recognised speaker on ethics and leadership. She is a featured keynote speaker at the Inaugural Financial Crime and Compliance Conference, October 17, 2013 at the Fairmont Southampton Hotel, Bermuda. www.ycseminars.com.

Ms Cooper wrote in the epilogue of her book, ‘Extraordinary Circumstances: The Journey of a Corporate Whistleblower', In many ways, the story is about human nature, about people and choices. It shows how power and money can change people, and how easy it is to rationalise, give in to fear, and cave under pressure and intimidation.

Her journey speaks of the importance of living a life of integrity and making decisions we can look back on without regret. It illuminates the value of developing strong boundaries, keeping our paths straight, and guarding against the temptations and trappings of material success.”

yCompliance all-day conference events story is the focus on our primary initiative: to continue to position Bermuda at the forefront of action against financial crimes, corruption, anti-bribery, IMF, FATF and AML compliance and the new threats of cybercrime.

The conference pays tribute implicitly to many individuals' human courage to do the right thing, tell the truth, and accept the consequences of personal convictions and to the compliance professionals charged with managing the risk of challenges to the financial integrity of industries, governments, and countries.

Fraud and other financially and socially unethical behaviour is prevented by the truth telling: truth in advertising, media and individual access to public information, truth in personal conduct, and truths revealed by personal sources.

But, what is truth? “Tell the truth, the whole truth and nothing but the truth”, our responsible parents and influential elders always said, raising us to be honest, to follow our conscience, and to have a personal moral code for our lives.

Implicit within that virtuous message was that somehow we would be rewarded for sticking to the righteous path. Little did we realise as children that always doing the right thing — the consequential results are often not what you expected and sometimes exacts a terrible price.

Nor, did our elders impart that the real truth is illusive, meaning different things to different people at different times.

We understood as we reached the age of wisdom (do we ever really attain that milestone?) that telling the truth sometimes involves avoidance of total truth, often couched in shades of grey, for the sake of politeness, wounded feelings, attitudes of “not my problem or responsibility”.

Sometimes, there is no original cheating intent — the ethical lapses start as a slow downward slippage eventually uncontrollable. According to the Harvard Business Review, Ethical Breakdowns — see below, there are five barriers to an ethical organisation. “We set goals to promote desired behaviour but it encourages negative results, such as padding invoices to boost profits; we overlook or don't hold accountable unethical behaviour in others if it is in our best interest to stay ignorant, or if it is carried out by a third party; we don't see the lack of ethics when it is gradual over time; and will accept the poor behaviour if the results are good.”

Many individuals have a very hard time being honest when confronted with huge personal risk and losses: hunger, shelter, redundancy, penniless, destroyed relationships, and personal tragedies. It is in these extreme survival circumstances that telling the truth, the whole truth, and nothing but the truth, can involve supreme personal courage.

Personal Truth is bound up within business codes of behaviour, the adherence to ethics monitoring and enforcement by compliance divisions (internal and external auditors, fraud and compliance specialists) within an organisation that keeps corruption at bay.

But the temptation is always there — at the right moment, given the opportunity to pursue, accept, or ignore unethical and illegal behaviour, a perpetrator will act.

More often, outright criminal behaviour inside an organisation can be located anywhere on the corporate food chain, although senior management tend to commit the more serious crimes. As one highly placed Chief Compliance Officer told me when setting up new sophisticated employee transaction tracking software for a large financial institution, “Statistically, in any organisation three to five percent of employees are criminally-intent at all times. One to two percent are thinking about committing a crime and formulating action plans, while two to three percent are actively involved in stealing from a company, a government, a municipality and so on.

According to the Ethics Resource Center in the 2011 National Business Ethics Survey, STATISTICS on ethical behaviour in the workplace have improved, while those reporting bad behaviour has reached a record new high of 65 percent. However, retaliation against employee whistle-blowers has also risen and takes place in many formats, some intimidating and others seriously egregious. More than 22 percent of whistle-blowers reported being verbally abused by management, excluded from decisions, experienced physical harm to person and property, harassment online and at home, eliminated from raises and promotions, relocated or reassigned, demoted, hours and pay cut with many leaving that job in short periods of time.

Source: ‘Retaliation: When Whistleblowers Become Victims', a supplemental report of the 2011 National Business Ethics Survey.

Summary: Businesses, municipalities, governments, countries with the experienced help of compliance professionals must be every vigilant in preventing corruption and criminal behaviour. Those who do the right thing must also be protected with appropriate legislation, legal and physical security, if necessary.

Bottom Line. There is no marching band at the end of the game for “telling the truth and doing the right thing” for any individual. Ethical behaviour comes from the core of your humanity. When you do the right thing, you know that you can always, always live with yourself and your conscience.

MAKE a note: the Inaugural Financial Crime and Compliance Conference, October 17, 2013 at the Fairmont Southampton Hotel, Bermuda. Contact www.ycseminars.com

This is a must-attend conference for professionals in many related fields, and senior executives concerned with increasing ethical compliance within their firms:

Attorneys, trust officers, government internal and external auditors, investment advisers, pension administrators, private bankers, corporate financial and information officers, accountants, insurance agents and related professionals, government permanent secretaries and civil servants, estate planning professionals, portfolio managers, real estate agents and executives, and construction professionals.

Martha Harris Myron JP CPA PFS CFP is a Bermudian journalist and a cross border financial planning specialist focused on offshore financial perspectives for international citizens living, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle: United States, Canada, United Kingdom, Europe, and the island of Bermuda, the premier international finance centre.

President of Pondstraddler? Life™ Consultancy.

Publications, Presentations and Seminars. www.pondstraddler.com inquiries to info@pondstraddler.com

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Published October 05, 2013 at 9:00 am (Updated October 05, 2013 at 9:33 am)

Ethical behaviour is more than just following the rules

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