impact, medium-impact or low- impact based on their impact on ethical culture.) To make this work, the E&C function must have access to decision-makers at the highest level, and thankfully, the vast majority do. It’s vital that E&C professionals report directly to the C-suite and have the ear of the board. Importantly, nearly two-thirds of respondents indicated that their boards took an active role in ensuring that misconduct by senior executives or top performers was addressed within the past year. Setting the tone from the top is vital, and such decisive actions against wrongdoing clearly signals an organization’s intent to take
of those we surveyed say their organizations have incorporated ethical behavior into their performance systems, major hiring decisions, promotion and bonuses. Further, a similar proportion have policies that allow an individual’s bonuses, incentives and compensation to be clawed back in the event of misconduct. In organizations we have rated as having “high-impact” E&C programs, this rises to almost three-quarters, and more than half of these companies have actually disciplined a senior executive or terminated their employment for unethical behavior in the past year. Of those cases, most did deploy their clawback policies. (For the purpose of analysis, LRN categorizes E&C programs as high-
83% of our survey respondents said their ethical culture has gotten stronger in the past year.) On the other hand, effective E&C programs do need an element of “carrot and stick” to prompt ethical behavior. This was underlined by U.S. Deputy Attorney General Lisa Monaco , who has said, “Going forward, when prosecutors evaluate the strength of a company’s compliance program, they will consider whether its compensation systems reward compliance and impose financial sanctions on employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.” A good number (over 60%)
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18 | April/May 2024
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