Building Character

Building Character Ethics and Accountability Presented byDan E. ShackelfordAssociate Director for Small BusinessU.S. Army Medical Command

What Is Character? • The complex of mental and ethical traits marking and often individualizing a person, group, or nation • The main or essential nature that serves to distinguish a person, thing, or group • Moral excellence and firmness • REPUTATION

Define the traits that make up desired character Put those traits into action Tell the community how you have done Defined Values and Leadership Roles Code of Conduct and Conflict of Interest Policy Accountability and Reporting How Do Companies Build Character? Actions Documentation

Problem With Ethics The only time some people think about ethics is after they have been caught.

Topics To Be Covered • Ethics • What is it? • Why is it important? • Code of Ethics • What is it? • How do we develop it? • Accountability • Who is accountable? • What needs to be done?

What is “Ethics” • General rules of acceptable conduct • Societal norms for proper behavior • Concepts of right and wrong behavior • A system of principles and rules concerning duty • The “stuff” our reputation is based on • Ethics is the foundation by which we live our lives and conduct our business

Why is this important? • Would you do business with a company you don’t trust? • Would you expect your customers to do so? • Unethical behavior is often illegal behavior! • It Is The Right Thing To Do!

Why is this important? • Poor Ethics • Damages reputation and pride • Reduces effectiveness and productivity • Suppresses openness and communication • Increases risk • Good Ethics • Enhances reputation and pride • Improves effectiveness and productivity • Encourages openness and communication • Reduces risk

What Do We Need To Do? Develop and Implement: • Statement of Values • General principles we, as an organization (and as individuals), believe in. • Code of Conduct • What we do to put those values into practice. • Conflict of Interest Policy • How we avoid or resolve conflicts of interest.

Statement of Values • Start with the Mission Statement • What behavioral characteristics or standards must we demonstrate to accomplish this mission? • List the characteristics/standards • Develop a brief written explanation what each means and why it is important

Sample List of Values • Commitment to the public good; • Commitment beyond the law; • Integrity and honesty; • Accountability to the public; • Respect for the worth and dignity of individuals; • Inclusiveness; • Transparency, being open to scrutiny; • Responsible stewardship of resources; and, • Commitment to excellence and to maintaining the public trust.

Sample List of Values • Trustworthiness • Responsibility • Respect • Fairness • Caring • Citizenship • Openness

Code of Conduct • List of rules or statements governing behavior • How we put our values into practice

Sample Code of Conduct • Company assets are never used for unlawful or improper purposes; • No secret or unrecorded fund or asset is created or maintained; • All reports, vouchers, bills, and other essential data are prepared carefully and honestly and include accurate descriptions of the purpose of each entry; • Business transactions of all kinds are executed only by individuals authorized to engage in them; • Officers covered by this policy will neither authorize nor participate in transactions in which there is an actual or apparent conflict of interest; • All periodic reports required to be filed contain full, fair, accurate, timely and understandable disclosures; • All required financial filings made by the Company comply with the applicable regulations governing such filings; and • All of the Company’s financial policies and all applicable governmental laws, rules and regulations are closely followed at all times. From Toys-R-Us Code of Ethics

Conflict of Interest Policy • What constitutes a conflict of interest • How are conflicts handled Always best to avoid even the appearance of a conflict of interest if possible.

Conflict of Interest Examples A Wikipedia conflict of interest (COI) is an incompatibility between the purpose of Wikipedia to produce a neutral, verifiable encyclopedia, and the purposes of an individual editor. COI editing often involves contributing to Wikipedia in order to promote yourself or the interests of other individuals, companies, or groups. When an editor disregards the aims of Wikipedia to advance outside interests, they stand in a conflict.

Conflict of Interest Examples This policy establishes guidelines and procedures regarding fair dealing with third parties and timely and proper disclosure of possible conflicts of interests in connection with job duties and responsibilities. Company employees owe the Company honesty and loyalty including: • the duty not to engage in activities for personal gain in conflict with the interests of the Company; • the duty not to exploit their positions with the Company by converting to their own use money and other things of value that lawfully belong to the Company; • the duty to deal openly with and make full disclosure to the Company; and • the duty to act in good faith, with integrity and high standards of conduct. • the duty to deal fairly with the Company's customers, suppliers, competitors and employees. The Alamo Group

Conflict of Interest Examples A definition of what constitutes a conflict of interest is difficult. The minimum standard is that required by law. However, there are certain situations which the Company will always consider to be conflicts of interest. These occur if the employee or any other person having a close personal relationship with the employee: • obtains a significant financial or other beneficial interest in one of the Company's suppliers… • engages in a significant personal business transaction involving the Company for profit or gain…

Conflict of Interest Examples • accepts money, gifts of other than nominal value, excessive hospitality, loans or other special treatment from any supplier, customer or competitor of the Company; • participates in any sale, loan or gift of Company property…; • learns of a business opportunity through association with the Company and discloses it to a third party or invests in the opportunity without first offering it to the Company; • uses corporate property information or position for personal gain • competes with the Company; or • uses Company assets for other than legitimate business purposes.

What is “Accountability”? • Being Responsible • Keeping Accurate Records • Measuring Performance Quantitatively • Honest and Complete Disclosure • Responsiveness to the values of the community

Why does Accountability Matter? Without accountability the public has no reason to trust us. Without the public trust, could we stay in business?

Who Is Accountable? • The Board of Directors • The Officers • The Employees • The Community

Components of Accountability • Financial and regulatory compliance • Procedures and technology for consistent record keeping • Audits and financial reports • Stewardship • Defined Leadership Roles • Oversight and knowledgeable governance • Internal controls • Public Trust • Public disclosure and accessibility • Rapid resolution of questions and complaints

Accountability Action Items • Ensure those in leadership positions have written descriptions of their duties, responsibilities and authority. • Write down organizational policies and procedures. • Ensure that everyone who is expected to follow these policies and procedures has a copy of them and understands them. • Review and update at least annually. • Monitor compliance with policies and procedures • Develop procedures to ensure compliance.

Summary Businesses need written guidelines to govern corporate and individual behavior • Statement of Values • Code of Conduct • Conflict of Interest Policy Businesses and individuals are accountable • Detailed, accurate record keeping • Internal controls, policies and procedures • Public disclosure

-- Will Rogers So live that you wouldn't be ashamed to sell the family parrot to the town gossip.

Building Character