Nancy Higgins started her ethics career as a lawyer at The Boeing Company. She helped to design their first companywide Ethics and Business Conduct program, and then left the legal department to run it. Six years later she joined Lockheed Martin to head a well-established ethics program that was in need of revitalization. In the fall of 2003, she joined the MCI team where she stayed until the company was acquired by Verizon in January. She now advises companies and their boards of directors on how to build an effective Ethics and Compliance program.
When she arrived at MCI, the company was in Chapter 11. Approximately $9 billion in fraud had been uncovered. Four former executives had already pled guilty to criminal charges, WorldCom stock had been de-listed from NASDAQ, and all legacy WorldCom board members had been asked to resign. Their former CEO, Bernie Ebbers, is now serving a 25-year prison sentence. Employees were so demoralized they actually referred to the time they were owned by WorldCom as “the Occupation” or “When we were abducted by aliens.” So why did she join?
New CEO Michael Cappelas invited her to become his chief ethics officer and a member of the executive leadership team reporting to him and to the board of directors. Capellas personally wrote MCI’s 10 Guiding Principles, which includes things like “Build trust and credibility,” “Create a culture of open and honest communication,” and “Do the right thing because it’s the right thing to do.” Together, they established a meaningful code of conduct and put in place an ethics program to assure that every employee understands the company’s expectations for ethical business conduct. Leadership from the top was her major reason for joining MCI.
Ms. Higgins was in Seattle in Fall 2005 for a meeting of the Global Council on Business Conduct. These comments were taken from her presentation to the Seattle Rotary.
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Global Code of Conduct
One of the challenges in building an ethics program in a global company such as MCI is figuring out how to roll it out internationally. You can’t just translate your code of conduct and send it out to all of your employees. You need to take into consideration the cultural norms of the countries in which you do business.
Our MCI guiding principles are the same wherever we are around the world, but we recognize that behavior that would be against those principles in one country, may not be against those principles in another. For example, in Japan it is customary to exchange gifts at business meetings. So accepting a gift may not be a conflict of interest in Japan. However, in the U.S., where this is not a common custom, the same gift could give rise to the appearance of conflict of interest.
Following International Laws
Customs aren’t the only area where U.S.-based corporations can be tripped up. One of our guiding principles is “uphold the law.” That means that in addition to complying with U.S. law, we follow the local laws in the countries where we do business. But what if the local law prohibits something that U.S. law protects? For example, our laws and company policies prohibit employment discrimination based on gender, but a local law could prohibit the hiring of women as professionals. Our latest ethics training course, for example, has a case where a customer wants to have a meeting about a new project. The project manager decides to send his best engineer, a woman, to the meeting. The customer is furious, and says he wants “a good engineer, not a woman!” To avoid telling the woman she was unwelcome, the manager tells her that the meeting was cancelled and attends the meeting himself.
At a recent diversity council meeting at MCI, we had a guest speaker who told us of a friend, a female, who went to work in Japan. She was a telecommunications account executive to a Japanese customer, who did not like — nor did he want to work with — women. In this situation, the account executive confronted him, without being confrontational. She said, “I know you are not comfortable dealing with me because I’m a woman and that is not common in your culture. But I’ll work hard and hope that over time, you will come to respect me.” And according to our speaker, he did! But if the customer actually refused to do business with the woman executive, should the company walk away from the business rather than change the account executive?
It’s important to be respectful and tread carefully when rolling out a code of conduct internationally. We must not act like we think the U.S. has cornered the market on values and ethics. It is easy to offend if we come charging in with a “holier than thou” attitude. We need to understand the perspective of those employees who are in country.
I recall one business ethics professor telling the story of a multinational company that conducted a survey of its employees around the world to find out how many people had accepted or paid bribes. It turned out that their Latin American subsidiary reported, by far, the most instances of improper payments. While some in the company were pointing out how unethical they were in comparison to others, the Latin American managers had a different perspective. Compared to the average of what was going on in their country, where petty bribes were commonplace, they were much less involved, therefore making them above average or more ethical than the norm. In the U.S., it was average to not accept or pay bribes. It’s easy not to pay a bribe when no one asks for one!
Sarbanes-Oxley led the SEC, NASDAQ, and the NYSE to adopt rules that require corporations to have codes of conduct and ethics “hotlines.” These rules apply to U.S. public companies doing business around the world, as well as to foreign corporations whose stock is listed on American exchanges.
For many years — before Sarbanes Oxley — most of our global council’s U.S.-member companies issued their codes of conduct in Europe and publicized international toll-free numbers for their corporate ethics hotlines. These numbers didn’t get a lot of business.
We often heard that this was for cultural reasons. France and other countries seem to have a deeply rooted and inherent distrust of anonymous whistle-blowing, apparently based on the horrors of denunciations during WWII. That this feeling continues today was made clear to me recently when I was testing our new ethics-training program with two groups in Paris. One employee wrote in her comments, “I believe in good business ethics and I support the ethics program. But as a Frenchwoman, I would never denounce a fellow employee and I will never call the ethics line to report on one of my coworkers.”
It used to be that the problem faced by ethics officers was “How do you get international employees to call the hotline when they observe misconduct?” Well, things just got even dicier. Decisions in May and June by France and Germany invalidated hotlines and certain ethics policies put in place by U.S. multinationals to comply with Sarbanes-Oxley. These countries have privacy laws prohibiting the transfer of personal data across international borders.
France’s top privacy watchdog (CNIL), announced this past June it will refuse to authorize proposed whistle-blower initiatives at the French subsidiaries of two American firms finding the initiatives ran contrary to French privacy law.
Germany has just ruled that common code-of-conduct provisions — things considered best practices that can now be found in most multinational company codes — cannot be implemented in Germany until the company obtains the consent of its Works Council.
Wal-Mart’s establishment of an ethics hotline did not go over well in Germany either. Der Speigel, a respected news magazine, wrote Wal-Mart employees “are expected to paint their colleagues in black colors,” referring to a code provision requiring employees to report any observed misconduct by fellow employees.
Corrupt Practices Act
I couldn’t speak about international business ethics without touching on the Foreign Corrupt Practices Act (FCPA). This is the U.S. law passed in 1977 that prohibits payment of bribes to foreign government officials to gain business advantage. You would think that would have been pretty noncontroversial, but I once attended a conference on Corruption in the Official Arms Trade where I heard representatives of European defense contractors say that no country, other than the United States, could have gone it alone like that. But because we had superior technology and incredible political influence, we were still able to compete without paying bribes.
By the way, those same representatives justified making improper payments to government officials involved in defense procurements by saying that they had to pay bribes in order to level the playing field. They said the U.S. companies have an unfair advantage because our government puts incredible pressure on countries to buy from U.S. manufacturers and these countries agree because they need U.S. support.
At this same conference I discovered that it was a generally held belief that the money U.S. corporations donate to political candidates and parties are themselves corrupt payments made to get business advantages. They said we should not be so sanctimonious. They totally rejected my arguments that political contributions are different because they are legal, heavily regulated and subject to public disclosure.
We don’t need to agree with these views, but it is important that we understand their perspective.