{"id":4070,"date":"2018-11-06T08:15:55","date_gmt":"2018-11-06T13:15:55","guid":{"rendered":"https:\/\/www.trustacrossamerica.com\/blog\/?p=4070"},"modified":"2019-01-24T13:33:14","modified_gmt":"2019-01-24T18:33:14","slug":"the-ethics-of-ethics-bonuses","status":"publish","type":"post","link":"https:\/\/www.trustacrossamerica.com\/blog\/?p=4070","title":{"rendered":"The Ethics of Ethics Bonuses"},"content":{"rendered":"

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(A condensed version<\/a> of this article first appeared on The FCPA Blog)<\/p>\n

Recently, the newly appointed CEO of Novartis, Vas Narasimhan, announced<\/a> that he would be linking employee bonuses to ethics as part of a strategy to rebuild the company\u2019s reputation. Specifics of the scoring system were not divulged. This raises some interesting questions in the trust, ethics and compliance community. Among them, is it ethical to pay people to act ethically or is it a form of bribery? Will these bonuses elevate ethical behavior? What is the minimum \u201cacceptable\u201d behavioral standard to receive a bonus? We asked Trust Across America\u2019s 12-member Trust Council<\/a> to weigh in. Some of their best answers from both a macro and micro perspective, are provided below.<\/p>\n

Ethics is a Company Wide Issue<\/strong><\/p>\n

At Datron, we spend a lot of time in the FCPA world as over 90% of our business is conducted outside the US. \u00a0We find that ethics is a company wide issue that encompasses not only your employees but also any organization that represents us in the marketplace. \u00a0We have not taken the route of rewarding ethical behavior at the employee level. \u00a0We spend the money on training, both in the compliance area and in the \u201cservant\u201d leadership area to ensure that everyone understands the company mission, purpose and how our behaviors (values) are reflected in the work we do. \u00a0In our multi-cultural company with over 80 representatives around the world we take compliance to all entities that interface with our customers at any level. \u00a0This means that our annual FCPA training is required and annual anti-bribery statements are completed by both employees and our representative companies. \u00a0In addition we require all of our representatives to hold current Trace International certifications. \u00a0If these items are not completed as required we don\u2019t do business with that organization and don\u2019t let our employee interface with the customer.<\/p>\n

In general I would recommend that leaders know what would work best for their organizations. \u00a0I personally would not take the approach Novartis has taken just because paying money for a required behavior is too much like a bribe and I believe it sends the wrong message to the organization. \u00a0It also says that it is ok to act unethically we just won\u2019t provide you a bonus if you do. \u00a0I think requiring behavior in accordance with the company values is a better long-term solution.<\/p>\n

I believe that a focus on culture, understanding why it is important for the organization to conduct itself in accordance with it\u2019s core values and spending training dollars to ensure this each and every day is a better investment than providing an annual bonus award. \u00a0Art Barter<\/strong><\/p>\n

Influencing Human Behavior<\/strong><\/p>\n

This approach is a good idea for Novartis. We can\u2019t change human nature\u2014there will always be some unethical people. But we can influence human behavior. We influence human behavior through many means: education and training, personal examples and role models, good leadership, shared norms and values, rewards and punishments, and more. Good companies reward (or punish) employees with scoring systems for both achieving goals (results) and \u201chow\u201d those goals are achieved. Scoring a 1 on values and behavior at Novartis (1 = below expectations) makes an employee ineligible to receive a bonus and likely signals they may face demotion or termination. It is a realistic way to grab people\u2019s attention that unethical behavior will no longer be tolerated at this firm. Bob Vanourek<\/strong><\/p>\n

Systematizing Ethical Practices<\/strong><\/p>\n

I applaud Novartis\u2019 efforts to encourage and systematize ethical behavior. Behaving ethically should be the \u201cticket of admission\u201d for even having a job, but many organizations don\u2019t view it that way. Novartis is taking proactive steps to enforce consequences for salespeople who don\u2019t meet expectations. Randy Conley<\/strong><\/p>\n

Innovation is Key<\/strong><\/p>\n

To determine the best ways to make progress on the trust, transparency and ethics road we have to innovate.\u00a0To develop proven, repeatable and scalable strategies we all have to be bold enough to try.\u00a0Novartis is trying. We don\u2019t know the context or risk appetite they are working from so it is hard to objectively review their strategy.\u00a0To innovate well we have to accept failure and partial successes, learn, pivot and go at it again.\u00a0The fact that organizations are trying is, in my mind, the thing of value. They will engage in many critical conversations around this project and that dialogue with their employees, partners and board is priceless in the fight for ethics. Deb Krizmanich<\/strong><\/p>\n

Discussing Ethics<\/strong><\/p>\n

Ethical performance \u2014 good or bad \u2014 is an intrinsic aspect of organizational culture,\u00a0While company value statements, codes of conduct and compliance training are essential components of an ethical culture, even more important is how organizations react to ethical dilemmas and lapses.\u00a0 When discussions about ethics are taboo, and individuals are rewarded for unethically achieved results, the culture quickly adapts to this reality without regard to official policy.\u00a0 In this respect, Novartis is on the right track by explicitly withholding rewards for employees who behave unethically.\u00a0 Even more telling will be whether discussion of ethics is normalized and unethical behaviors consistently derail careers at the company. Barton Alexander<\/strong><\/p>\n

Payments for Behaving Ethically<\/strong><\/p>\n

There is something prima facie anti-ethical about paying people money to behave ethically. If you have to be paid to be ethical, you\u2019re not. And by reducing ethics to behavioral inducements, the system devalues the ethicality of all actions, regardless of their objective desirability. This reduces ethics to the category of compliance and sales quotas.\u00a0Charles H.\u00a0Green<\/strong><\/p>\n

The Devil is in the Details<\/strong>\u00a0<\/strong><\/p>\n

Whether the Novartis plan is a good idea to resolve the ethical dry rot is debatable. The devil is in the details, but I would raise a caution flag.\u00a0 Essentially they are saying that meeting expectations or being a role model for ethical behavior will earn employees extra pay, while not meeting expectations means you get no extra pay, and it could lead to termination. I also do not agree that bringing in Klaus Moosmayer from Siemens to be the ethics tsar is going to make up for poor leadership at the top.\u00a0Bob Whipple <\/strong><\/p>\n

A further Internet search of the Novartis bonus \u201cplan\u201d revealed the following \u201canonymous\u201d comment:<\/p>\n

This has been in place for over two years. Probably just touting this in the news because of all the recent violations. Reps don\u2019t get an additional bonus. They have money withheld from each bonus period and if their manager sees fit and gives them a good rating, they may or may not get all the money back. So Novartis actually takes money and holds it for a year. Some reps get back more but a lot will actually get back less. The kicker is, they have to still be employed to get that money and it\u2019s only paid out once a year and it\u2019s supposed to be about values and behaviors but it\u2019s still tied to sales.<\/em>\u00a0<\/em><\/strong><\/p>\n

The Trust Council jury is split with regard to the ethics of ethics bonuses. To be meaningful ethics and trust must remain a top-down strategy built from the inside out, and only then will they have a long-term impact on organizational reputation.<\/p>\n

Trust Across America-Trust Around the World\u2019s Trust Council is an invitation-only advisory group comprised of global business leaders and consultants from a broad cross section of industries and functions who are rotated through membership in our Trust Alliance. The Council serves for twelve months.<\/p>\n

Barbara Brooks Kimmel<\/b>\u00a0is an award-winning communications executive and the CEO and Cofounder of\u00a0Trust Across America-Trust Around the World<\/span><\/a>\u00a0whose mission is to help organizations build trust. A former consultant to McKinsey and many Fortune 500 CEOs and their firms, Barbara also runs the world\u2019s largest global\u00a0Trust Alliance<\/span><\/a>, and is the editor of the award-winning\u00a0TRUST INC.<\/span><\/a>\u00a0book series and\u00a0TRUST! Magazine<\/a>.\u00a0In 2012 she was named one of \u201c25 Women who are Changing the World\u201d by Good Business International, and in 2017 she became a Fellow of the Governance & Accountability Institute. Barbara holds a BA in International Affairs and an MBA. Don’t forget to TAP into Trust<\/a>!<\/p>\n

For more information contact\u00a0barbara@trustacrossamerica.com<\/a><\/p>\n

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