Download Credit Union Fraud & Ethics

oescher & Associates
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Credit Unions with a Conscience:
Creating an Ethical Work Environment
Presented for the
Michigan Credit Union League
by
Barbara A. Loescher
Loescher & Associates
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oescher & Associates
Pro-Active Solutions
Session Objectives
• Discuss the current state of business ethics
• Discuss the importance of a code of ethics and
how it differs from a code of conduct
• Discuss situations that can occur and
appropriate responses
• Discuss how to develop and implement an
ethics program
• Discuss the role of the Board in shaping a credit
union’s culture
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oescher & Associates
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A Renewed Emphasis on Ethics
• Factors
– Number of highprofile ethical
scandals & trials
– Sarbanes-Oxley
legislation
– New federal
sentencing
guidelines
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oescher & Associates
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What Are Ethics?
• Basic definition:
– Learning what is right and wrong
– Doing the “right thing”
• Are based on values which guide how we ought
to behave
– Respect, honesty, fairness, social responsibility
• Ethical principles are statements on how values
are applied
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oescher & Associates
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What Are Business Ethics?
• Basic definition
– Knowing what is right or wrong in the workplace
– Doing what’s right
– Proper behavior may be translated to law
• Includes
– How services and products are delivered
– Relationships with internal & external entities
(stakeholders)
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oescher & Associates
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Areas of Business Ethics
• Managerial mischief
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Illegal acts
Unethical practices
Questionable behavior
Mishandling of ethical
situations when they arise
• Moral mazes
– “Gray areas”
– Includes:
• Conflict of interest
• Kickbacks
• Personal use of
resources
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oescher & Associates
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Ethics Case Studies
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oescher & Associates
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Myths About Business Ethics
• Ethics is a matter of religion, not management
• Our employees are ethical so we don’t need an
ethics policy
• Ethics is better handled by philosophers and
theologians than MBAs
• An ethics policy is redundant – we all know
that we should do what’s right!
• Ethics is no more than good guys preaching to
the bad guys
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oescher & Associates
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Myths About Business Ethics
• Ethics is just the latest fad – the latest
policeman on the block
• Ethics can’t be managed
• Ethics and social responsibility are the
same thing
• Our credit union is not in trouble, so we
must be ethical
• Managing ethics has no practical value
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oescher & Associates
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Benefits of Managing Ethics
• Business ethics have substantially improved
society
• Ethics programs help maintain a moral compass
in turbulent times
• Ethics programs promote strong teamwork and
productivity
• Ethics programs support employee growth and
meaning
• Ethics programs ensure that policies are legal
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oescher & Associates
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Benefits of Managing Ethics
• Ethics programs help avoid criminal acts
and can lower fines or damages
• Ethics programs help manage values
• Ethics programs promote a strong public
image
• Ethics programs can ultimately impact
the bottom line
• Ethics programs are the right thing to do!
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oescher & Associates
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Board Responsibility
• An ethics programs starts
at the top
• Board commitment sets
the tone for the entire
credit union
• Board involvement
makes it more likely that
other employees will
commit
• Board sets an example
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oescher & Associates
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Management Responsibility
• The CEO must fully
support the program
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Announcement
Development
Implementation
Monitoring
• The CEO must lead
by ethical example
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oescher & Associates
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Employee Responsibility
• Support the policies
and guidelines
• Participate in
developing and
operating the
program
• Report violations if
noted
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oescher & Associates
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Managing Ethics in the Workplace
• Recognize that managing ethics is a
process
• The most important outcome is achieving
desired behaviors
• The best way to handle ethics problems is
to avoid their occurrence in the first place
• Make ethics decision in groups and
publicize them, as appropriate
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oescher & Associates
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Managing Ethics in the Workplace
• Integrate ethics management with other
management practices
• Use cross-functional teams to develop
and implement the program
• Value forgiveness
• Remember that trying to operate ethically
and making a few mistakes is better than
not trying at all
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oescher & Associates
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Components of an Ethics Program
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Ethics codes
Codes of conduct
Ethics officers
Ethics committees
Policies and procedures
Guidelines and decision models for handling
ethical situations
• Employee training
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oescher & Associates
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Code of Ethics
• Definition:
– A code of ethics specifies the ethical rules of
operation
– It includes a list of “thou shalt nots”
• Codes should be developed by top-level
management with involvement from staff
• A large organization may develop codes
for specific areas of operations
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oescher & Associates
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Steps in Developing A Code of Ethics
• Identify areas subject to laws & regs
• Identify values that produce the top three
or four traits important to the success of
your credit union
• Identify values needed to address current
issues at your credit union
• Consider values prized by “stakeholders”
• Narrow the list down to 5-10
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oescher & Associates
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Steps in Developing A Code of Ethics
• Compose your code, including example
behaviors that reflect each value
• Include wording that all employees are
expected to conform
• Review with key members
• Review with your attorney
• Announce and distribute the new code
• Update at least once a year
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oescher & Associates
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Code of Conduct
• Definition:
– Specifies actions which are needed to adhere
to the ethical values proclaimed in the ethics
code
• Includes:
– Dress, drugs, insubordination,
confidentiality, gifts, discrimination, conflict
of interest, compliance with laws
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oescher & Associates
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Code of Conduct
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Proper dress
Avoiding drugs
Following instructions
Being reliable/prompt
Confidentiality
Not accepting gifts
Avoiding discrimination
Avoiding conflict of
interest
• Compliance with laws
• Not using resources for
personal use
• Not discriminating
because of age, sex or
race or religion
• Proper treatment of
members
• Reporting illegal or
questionable activity
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oescher & Associates
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Other Considerations
• Policies and procedures should also be
reviewed to ensure that they don’t conflict
• Appoint an ethics officer
• Establish a hotline or reporting structure
• Give rewards for ethical behavior and impose
consequences for unethical behavior
• Include a grievance procedure
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oescher & Associates
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Ethical Dilemmas
• Dilemmas result when:
– Real alternatives are
equally justifiable
– Value conflicts arise
– There are significant
consequences on the
“stakeholders”
• Employees should be
provided with examples
of complex ethical
problems
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oescher & Associates
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Resolving Dilemmas
• Appoint a committee comprised of board
members, management and staff
• Develop procedures for handling ethical
dilemmas
• Define a methodology
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Checklist with weighted values
Decision-making models
Questionnaires
“The Golden Rule”
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oescher & Associates
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Questions to Ask
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Have you defined the problem accurately?
How does it appear from the other side?
Whom could the decision injure?
Where do your loyalties lie?
Can you disclose your decision without qualms?
What is the potential if action is misunderstood?
Does it stand the test of time?
What would I tell my child to do?
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oescher & Associates
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Employee Training
• An ethics program is useless unless all staff
members are trained
• Training suggestions:
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Include in new employee orientation
Include in management training
Involve staff in policy and code reviews
Use real-life examples as a training tool
Include ethical performance in evaluations
• The best training is the behavior of your credit
union’s leaders
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oescher & Associates
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Ethical Warning Signs
• “Well, maybe this once…”
• “No one will ever know”
• “It doesn’t matter how it gets done, as long
as it gets done”
• “This sounds too good to be true”
• “What’s in it for me?”
• “What they don’t know, won’t hurt them.”
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oescher & Associates
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More Ethical Warning Signs
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“Everyone does it.”
“Shred that document.”
“We can hide it.”
“No one will get hurt.”
“This will destroy the competition.”
“We didn’t have this conversation.”
“You want me to WHAT?”
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oescher & Associates
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Handling Violations
• Treat the employee with
dignity & respect
• Protect the
confidentiality of the
information
• Allow for anonymity
• Assign an investigator
• Inform the person who
reported the violation of
the outcome
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oescher & Associates
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Some Final Thoughts
• An ethics code is
unique to each credit
union. There are no
boilerplate solutions.
• Employees in times
of crisis, confusion or
change need the
moral compass that
an ethics policy
provides
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oescher & Associates
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Thank You!!
Barbara A. Loescher
Loescher & Associates
6666 Odana Road, #136
Madison, WI 53719
Phone: (608) 278-0465
[email protected]
www.loescherandassociates.com