ELEMENTS AND CORE ACTIVITIES OF AN EFFECTIVE INTEGRITY AND COMPLIANCE PROGRAM
The values and integrity standards of a company give a clear sense of direction and support for employees in their daily work. However, the reality is that the transformation of ethical principles into the daily business of a company will not be realized just because integrity and compliance standards are formally established and codified. Execution requires rather more, including the effective integration of these standards into the systems and processes that are influencing the behaviors of individual employees despite the competitive pressures created by the external environment. We will now describe the key elements and activities that we recognize as being critical for the success of an effective integrity and compliance management program. As a practical road map for this approach we apply Novartis's integrity and compliance program,45 which has been developed by one of the authors of this chapter.46 Novartis is a world-leading Switzerland-based health care company that operates globally.
In order to achieve effective integrity and compliance management, it makes sense to establish a values-based and behavioral-based integrity and compliance program. The basic purpose and role of such a program is to support the management of a company in "giving life" to its values and standards. Such a program should be process driven. It should focus on the processes that influence the key behavioral drivers and it should consist of three core elements, including establishing, promoting, and enforcing the integrity standards of a company. This is achieved through specific processes that include elements required by U.S. sentencing guidelines but go clearly beyond the ones mandated. Such an approach is conceptually and materially very different compared to the "traditional" rules-based, static compliance approach. The specific processes include responsible leadership; pertinent incentive schemes; training of skills for responsible and ethical decision making; legal-, integrity-, and economic performance-based thinking when making decisions; and a speaking-up culture in which employees can safely raise concerns or bring up innovative solutions to the integrity or compliance challenges of the organization. The conceptual core of such a program is that the success and the decrease in the number of misconducts is not just a function of the management of specific issues such as anticorruption, antitrust or privacy, activities involving communication, or whistle-blowing.
Although these processes and activities are important, it is critical to understand that the management of the organizational context and the main behavioral drivers are crucial elements when promoting and enforcing ethical behaviors successfully. It should be an integrated capability that drives processes toward higher performance through values-based management.
Establishing Integrity Standards
The task of generating and building trust can only be mastered successfully if the behavior in specific transactions is based and guided by high integrity standards. Such standards are relevant for encouraging employees to behave responsibly and in line with the values of a company. This is especially true in gray areas that are characterized by ambiguous facts, high economic or financial pressures, and different cultural paradigms.
It is recommended that integrity standards, such as a code of conduct or issue-specific policies and guidelines, are developed from and linked with the mission and the core values of the organization. In addition, it is paramount (while today still not necessarily reality) that these policies and guidelines are not phrased in an extremely technical, complex, and too-detailed language that cannot be understood easily by employees. They should be written in simple language that can be comprehended quickly while providing issue-specific principles that can be applied directly but with enough managerial discretion and that guide behaviors in different local situations or circumstances. On the highest level, a code of conduct should provide answers to two questions:47
1. How can the company meet the growing ethical and legal expectations in increasingly dynamic societies and markets?
2. What are the key behavioral strengths than can improve competitive advantage and differentiate the company from competitors?
A code of conduct clarifies to all relevant internal and external stakeholders that standards guide behaviors. It communicates the commitment of the firm toward responsible business practices. A code of conduct reduces the likelihood of systemic misconduct by clearly framing behaviors that are not allowed and by linking behavioral expectations and conduct with performance management. It stimulates positive behaviors and it supports the positive branding of a company, both internally and externally. A code of conduct helps employees to understand and manage cultural diversity, which then leads to higher levels of cross-cultural collaboration. In addition, a code of conduct enables operating with simplicity since fewer layers of control and supervision are needed.
Whereas the first question is mainly referring to the risk management, the second question addresses performance impact. Both provide a clear sense for the purpose of a code of conduct. We call this the "commonly agreed frame of action" that reflects ethical and legal expectations of all stakeholders. It aids in reducing risks caused by misconduct and drives performance. However, the sheer existence of standards does not guarantee that such standards are relevant and applied. Therefore, code of conduct and integrity standards have to be incorporated into all critical management processes in order to drive and foster responsible behaviors and the values-compliant execution of daily routines.
