Governance, ethics and compliance continues to be a growing concern for both business and government. It’s important for executives and other employers to understand that it’s becoming increasingly challenging to protect their company from a public ethics lapse. Even companies with the strongest ethics and compliance programs have faced lawsuits and allegations for violating policies and laws.

Many people often refer to the Enron example: before the collapse of Enron, the company had been recognized and praised for creating and implementing one of the most comprehensive ethics and compliance programs at that point in time. Former CEO and COO, Jeffrey Skilling, is now in prison and the company is no longer. So how could a company with an outstanding ethics and compliance program fall victim to ethical lapses?

 Ethics and compliance are extremely challenging tasks in the workplace, as it’s the responsibility of every single employee to uphold company values and make ethical choices.

On the Rebound

For many companies, ethics lapses are a wake-up call, drawing attention and focus back to compliance and ethics goals. In one of our previous posts, “Best Practices in Ethics Recovery: Tyco,” and an Ethisphere magazine article, “Ones to Watch: Developing a Strong Compliance Program After a Record Fine, both articles mention the introduction of Ed Breen as Tyco’s CEO. This introduction lead to sweeping changes at Tyco, including replacing the previous board of directors and letting go of 290 of the 300 corporate employees. Tyco was able to regain their reputation and public image thanks to the ethical overhaul conducted by Breen and his team. 

The article in Ethisphere magazine, “Ones to Watch: Developing a Strong Compliance Program After a Record Fine,” discusses the constant evolution of ethics and compliance. The article also discusses how some companies end up developing best in class programs or building on existing programs to create a competitive advantage within their respective industries. Ethisphere uses Pfizer as an example of a company rebounding from a very a public investigation- and fine,  related to ethics and compliance violations:

“One way Pfizer is working to get ahead of its peers is by increasing disclosure around payments made to doctors. Pfizer’s Corporate Integrity Agreement (CIA) required them to begin disclosing financial relationships with doctors. However, Pfizer announced it would go beyond the CIA requirements and will begin disclosing payments sooner than required. Pfizer also will be the first pharmaceutical company that discloses payments to researchers to perform clinical trials.”

The Pfizer example provided by Ethisphere demonstrates the approach taken by many companies that have suffered in the public eye. For fear of future failures, companies previously found guilty of ethics and compliance violations tend to go above what’s required of them. A lot of companies increase their efforts surrounding transparency, risk assessments and redesigning employee training programs, in order to minimize the opportunity for future ethics and compliance violations. Ethics and compliance programs require updates and regular evaluations in order to remain current with the issues faced by companies as times change.

Response time and actions taken to right the wrongs can influence the damage done to a company’s reputation. It takes a significant amount of time to build back public trust. Depending on the type of violation that occurred, it’s possible for some organizations to eventually overcome public backlash. I don’t like to keep making an example out of BP, however, it’s relevant to the point I am trying to make. Many people have criticized the company’s reaction time and tactics deployed in regards to capping the oil spill in the Gulf. Had the response by BP been quicker and initial techniques used to capture the leaking oil worked, BP may not be facing the level of scrutiny they are currently dealing with.

Ethics and Compliance Investigation Software

With the provisions outlined in the UK Bribery Act and US Foreign Corrupt Practices Act, legislation is being developed to hold companies responsible for the actions of their employees. These acts also include requirements for implementing adequate processes to prevent future offenses. In order to mitigate risk and catch policy/legal violations before they wind up in court, investigation software can be implemented to help HR departments and investigative units properly manage their case loads. i-Sight Investigation Software can be configured to meet the unique demands and reporting structures of any organization to ensure compliance.

To find out more about how businesses can use i-Sight to improve investigations and reporting, complete the form below:

Thomson Reuters is responsible for delivering current, accurate information to global decisions makers. Thomson Reuters is consistently recognized for commitments to ethics and social responsibility. Through securing spots on Ethisphere’s World’s Most Ethical Companies, Fortune’s World’s Most Admired Companies and Corporate Knight’s Best Corporate Citizens listings, Thomson Reuters demonstrates a commitment to developing innovative ways to improve business process through the use of information. Thomson Reuters brings information into emerging markets, helping breakdown social barriers.

Reuters Market Light

Thomson Reuters developed a set of “Trust Principles” during WWII. The Principles were created to guide the way the company conducts business- upholding integrity, maintaining independence and remaining free of bias, in order to relay news in a professional manner. Thomson Reuters has developed new ways to deliver media and information to rural communities to advance social needs and encourage better business. In 2007, Reuters Market Light (RML) was introduced to the farming community in India. In a press release from Thomson Reuters, they write:

“Since its launch in 2007, over 200,000 farmers in 15,000 villages across 10 states in India have subscribed to RML. It provides localized and personalized information via SMS text messages on weather, market prices, local and international agriculture and commodity news, and crop advisory tips enabling farmers to make informed decisions, reduce waste and maximize their profits.”

Previously, access to information in these remote areas was almost nonexistent. This makes it challenging for farmers to achieve success in their business. The information farmers are able to receive since the introduction of Reuters Market Light creates a fairer playing field for competitors, as it offers information about a variety of crops. RML increases transparency within the Indian agricultural community, mirroring the global shift towards transparency within businesses and their operations. Thomson Reuters also reports RML helps the agricultural industry in India save billions of dollars annually as:

“Before RML, farmers had very limited information on current and local market prices for their crops or timely information that would help them decide the best time to harvest their crops. This hindered market efficiency, reduced yields, increased wastage and could severely impact upon a farmer’s earnings and livelihood.”

Thomson Reuters Acquires ASSET4

Near the end of 2009, Thomson Reuters acquired ASSET4, a provider of environmental, social responsibility and governance information and tools for professional investors and corporate executives. Poor decision making impacts the state of the economy, the environment and overall image of a company. Providing businesses with information to help them make better decisions helps mitigate a number of risks faced by companies in the increasingly global business environment.

The CSR Press Release, “Thomson Reuters Invests in Environmental, Social Responsibility and Governance Content Through the Acquisition of ASSET4,” states:

“The global credit crisis, climate change, new regulation and other issues have highlighted the need for financial firms to assess the environmental, social responsibility, governance and reputational risks attached to the firms in which they invest. Through the acquisition of ASSET4’s leading ESG information and tools, Thomson Reuters clients worldwide will benefit from having direct access to this increasingly important information as part of their investment process.”

The importance of this acquisition is that the company can now deliver an extremely comprehensive database of consistent and transparent environmental, social responsibility and governance information to their clients. Thomson Reuters will also be able to provide clients with a wide range of analysis tools, helping them make improved, more informed decisions each day. According to the CSR Press Release,  as regulations, consumers and fellow organizations continue to require greater levels of transparency from companies, these tools:

“Allow investors to engage companies, improve investment performance, reduce risk and lower research costs, while corporate executives can reduce risk, enhance corporate governance and increase accountability, transparency and trust.”

FTSE4Good Index

Focusing on compliance with strict environmental and social criteria, companies can be added and removed from this list based on their actions. Thomson Reuters has met the criteria outlined to become listed on the FTSE4Good Index. The index is frequently used as a benchmarking tool, focusing on elements of good corporate citizenship. Companies fulfilling the FTSE4Good Index requirements are considered to be the companies to look to when developing responsible business practices.

At Timberland, they bring a new meaning to “walking the walk”. Timberland is a company known for its incredible corporate culture and commitment to corporate social responsibility. Timberland is one of only 20 companies to land a spot on the Fortune 100 Best Companies To Work For List since its inception. Timberland has also been included in Ethisphere’s 2010 list of the World’s Most Ethical Companies. At Timberland, they understand the value employees bring to the company.

Engaging in volunteer initiatives helps Timberland employees develop skills they can apply in the workplace, while contributing to a good cause and making a difference in the communities they operate in.

Making a Difference

At Timberland, CEO Jeffrey Swartz emphasizes the need for people to be good citizens—both in and out of the company. Timberland employees can receive up to 40 hours of paid leave each year to pursue volunteer projects and give back to the community. In the Fast Company article “Walking the Walk,” they write:

“What Swartz is really trying to do is to use the resources, energy, and profits of a publicly traded footwear-and-apparel company to combat social ills, help the environment, and improve conditions for laborers around the globe. And rather than using his company as a charity, he’s using the hard financial metrics of profit, return on investment, and shareholder return, to try to prove that doing good and doing well are actually self-reinforcing notions. The idea of helping others, Swartz believes, is a vision around which he is creating a more productive, efficient, loyal, and committed employee base, which in turn helps produce real results.”

These events are not only good for the community, but they also benefit Timberland’s employees. Taking part in events such as Serv-a-palooza and other volunteer initiatives enrich the culture at Timberland by brining employees together in an experience they may not receive elsewhere. Building and reinforcing relationships with co-workers is one of the many benefits gained by Timberland employees when attending these annual events. Timberland’s employees appreciate the actions taken by the company to follow through with their commitment to sustainability and corporate citizenship. It’s important to note these events take place in every country Timberland operates in.

In “Sustainability: sprucing up corporate social responsibility with Timberland,” a Personneltoday interview with Helen Whinfrey, Timberland’s senior manager for European HR, she stated:

“We have a philosophy about our employees doing well and doing good,’ she says. ‘People perform better in their job if they have a connection with their work that isn’t just about pay. It also means the local community knows who we are – we don’t want to be a faceless business with no connection to where we work and trade. Of course we’re a commercial enterprise, but we believe the way we generate profit, treat our people and work with the local community puts that profit in different light.”

Fair, Safe and Non-Discriminatory Workplaces

One of the four core values at Timberland is a commitment to life in the workplace. The company has developed a Code of Conduct Team comprised of 15 individuals responsible for developing the decisions, actions, choices, program design, and strategy at Timberland.

Here are the key areas of workplace improvement as identified by Timberland executives. The list can be found on their corporate website under ‘CSR Strategy’ in the ‘About Us’ section:

Track relevant Supply Chain indicators that influence global human rights

• Measure the average initial assessment score for new factories and set targets for improvement.
• Measure the percent of production in “High Priority” factories and set targets for improvement.

Use the assessment process to highlight issues and prioritize factories in our value chain

• Reduce “High Priority” factories to 20% of supply chain by 2015.
• Reduce working hours violations to 30% of supply chain by 2010.

Through remediation, work with factory management to enact sustainable change by focusing on the root cause(s) of issues

• Increase the percentage of continued business factories with an improved assessment score to 70% by 2015.
• Increase the percentage of continued business factories with an improved health and safety score to 70% by 2010.

Create a sustainable living environment for our workers.

Develop a better understanding of life skills, child care, access to capital, health and nutrition, housing and transportation through the assessment process.

Striving to better understand working conditions in every country of operation demonstrates the emphasis placed on supporting employees at Timberland. The unique culture at Timberland helps the company attract highly qualified individuals who share similar values and are passionate about their work.  Living conditions and the way of life are different across all borders, therefore, a single solution isn’t the answer—and Timberland executive get it. The volunteer projects and events taken on by Timberland employees helps achieve the goal of creating sustainable living environments for all employees. Understanding diversity and the benefits it brings to the company makes Timberland an employer of choice for many individuals.

Maintaining confidentiality during internal investigations is complex. If a company plans to bring in outside council, they must carefully plan out the investigation in order to uphold attorney-client privilege. To reduce confusion during investigation interviews, companies need to ensure “Upjohn warnings” are worded properly.

In order to preserve attorney-client privilege, evidence collected during the investigation needs to be labeled confidential, interviews must be well documented, the names of those in attendance during interviews must be recorded and limit the number of people granted access to investigation information.

Pre-Interview Warnings

As stated by Doug Cornelius in his blog article “Attorney-Client Privilege and Internal Investigations,” a “conflict of interest could arise when an attorney or law firm simultaneously represents an organization and one or more of its officers or directors.” These conflicts have become a growing concern, resulting in a ruling requiring lawyers to tell employees they represent the company, not the individual.

In the blog post “Miranda Warnings for Lawyers? Recent Rulings Highlight the Possibility,” on WSJOnline:

“Lawyers say it already is widespread practice to give some kind of notice in contacts with employees that the lawyer represents the company or its board of directors, not the employee. The Broadcom ruling is likely to make that warning even more precise. ‘We’re going to see the interview warnings turn into something akin to the Miranda warning the police give to suspects,’ said Steve Crimmins, a former SEC lawyer now at Mayer Brown.”

Upjohn and other similar warnings demonstrate best practices both in the US and internationally. To help protect the privacy of information related to the investigation, take this time to tell interviewees not to discuss the case with others. In the article “Supreme Internal Investigations: Important Lessons From Aguilar and Computer Associates,” they elaborate on the importance of Upjohn-style warnings at the beginning of investigation interviews. The article also emphasizes the importance placed on the wording of such warnings:

“In particular, it’s important to carefully consider the standard Upjohn warning given by company counsel at the commencement of an employee interview. The warning informs the employee that (a) counsel represents the company, not the employee; (b) the interview is covered by the attorney-client privilege; (c) the privilege belongs to the company; and (d) the privilege is therefore the company’s, and not the employee’s to waive. What is important, is that companies and their counsel realize the legal significance of the phrasing of warnings, and carefully consider the interests at stake in deciding how to approach this delicate issue.”

Legal Representation

Clarifying a lawyer’s representation helps avoid future lawsuits and accusations of unethical practices. In order to maintain fairness and conduct a bias free investigation, those who are interviewed need to know the facts before divulging information. In some states or countries, it’s required that lawyers receive written consent from both parties, should the lawyer represent both the employee and the corporation. Where there is potential for conflict of interest, written consent demonstrates each party’s acknowledgement of the lawyer’s representation.  If either group has an issue with being represented by the same lawyer, one party will have to seek a different legal counsel.

As discussed in the Ethisphere article “Traun’s Ten Commandments for Conducting Internal Investigations“:

“Ethical rules require counsel to make clear who they represent at the outset of interviews. While the warning may cause employees to refuse to talk (and to thus face discharge for refusing to meet and discuss company business), counsel must still give the Upjohn warning. If a company is cooperating with law enforcement authorities and there’s an agreement or expectation the company will share the substance of internal investigation interviews with them or the memoranda of interviews themselves, then counsel should advise employees that waiver of the privilege is likely, probable or near certain.”

When planning out the investigation, corporations should consider whether or not they plan on waiving the rights to attorney-client privilege, as they are the only ones with the authority to do so.

American Express employees are encouraged to make a difference in the lives of customers and give back to the communities they live in. At American Express there’s a company-wide commitment to best in class compliance and accountability, as the scrutiny and regulation of their entire industry continues to intensify. Examining the mission, values and tone at the top help create a better understanding of why American Express is continually recognized as an ethical leader within their industry.

Valuing the Team

In 2001, American Express was the recipient of a Catalyst Award, recognizing the company for their efforts in building a winning corporate culture and embracing workplace diversity. In 2010, American Express continues to receive awards and recognition for their philanthropic projects and their overall commitment to workplace ethics. At American Express, they understand that their employees communicate the company’s mission to the public each day. In an “Expert Corner” interview with Ethisphere, Leonard Shen, Senior Vice President-Chief Compliance & Ethics Officer at American Express, stated the following when asked if there was a specific piece of advice he wished he would have known when he first started in his position at American Express:

“Ensure that you spend the majority of your time understanding your team and the people and environments in which you work. For a compliance leader it’s a matter of knowing how to leverage the team and work with the business to drive change in a way that’s owned by and integrated with the business’s goals.”

Later in the interview, Shen was asked why he feels that American Express Compliance is a good place to work. In his response, he acknowledged the tone and the top and the leadership at the company for their commitment to being the best they can when it comes to enforcing ethics and compliance throughout the organization. It makes a world of difference when corporate leaders provide resources and spend time with their employees to ensure the mission of the company is understood by everyone. A strong mutual understanding allows employees at American Express to embrace the company’s corporate culture and commitment to ethical business practices.

Another key contributor to the strong corporate culture at American Express are the company values and the ability of top level executives to act in the same manner they expect their employees to act. Here are the eight values adopted by employees at American Express:

• Customer Commitment- develop relationships that make a positive difference in our customers’ lives.
• Quality- provide outstanding products and unsurpassed service that, together, deliver premium value to our customers.
• Integrity- uphold the highest standards of integrity in all of our actions.
• Teamwork- work together, across boundaries, to meet the needs of our customers and to help the company win.
• Respect for People- value our people, encourage their development and reward their performance.
• Good Citizenship-  in the communities in which we live and work.
• A Will to Win- exhibit a strong will to win in the marketplace and in every aspect of our business.
• Personal Accountability- for delivering on our commitments.

Philanthropy

Philanthropy is a significant component in the corporate culture at American Express. The company works with the Red Cross to provide relief to nations during disaster situations, created a (RED) American Express card to allow cardholders to donate to AIDS awareness through Project (RED) and provides  grants to individuals and groups that demonstrate commitments to cultural heritage, leadership and community service. American Express posts the names of grant recipients on their website under their “Corporate Responsibility” page. The mission behind the company’s philanthropic efforts is found on the first page of their “Corporate Responsibility” section:

“At American Express we believe that serving our communities is not only integral to running a business successfully, it is part of our individual responsibilities as citizens of the world. The mission of our program is to bring to life the American Express value of good corporate citizenship by supporting diverse communities in ways that enhance the company’s reputation with employees, customers, business partners and other stakeholders.”

Johnson & Johnson published their own form of an “ethics oath” entitled ”Our Credo“, as a way to communicate the mission, vision and accountability that Johnson & Johnson holds itself to for a variety of groups- doctors, nurses, patients, mothers, fathers, employees, those in the communities they operate in, as well as the global community and company stockholders.

Previously in our post, “Crisis Management and Ethics Best Practices: Johnson & Johnson“, we discussed the elements of the corporate culture at J&J and other practices they have adopted that have made the company a leader in corporate social responsibility.

Our Credo was created in 1943 by Robert Wood Johnson, a member of the founding family of the Johnson and Johnson Company. It was created just before the company became a publicly traded entity and long before the term “corporate social responsibility” was used for accountability in the workplace. On the Johnson and Johnson corporate website, they state that:

“Our Credo challenges us to put the needs and well-being of the people we serve first. Our Credo is more than just a moral compass- we believe it’s a recipe for business success. As a key player in the pharmaceutical and healthcare industry, Johnson & Johnson understands the responsibility they have when it comes to providing safe products to their consumers, as the risks tied to faulty products within this industry are particularly sensitive.”

The Ethics Oath

In an earlier post of ours, “Corporate Ethics Oath: A Tool For Understanding and Developing Workplace Ethics“, we discussed how creating and reciting a corporate ethics oath could be used as a tool to help strengthen the ethical culture within your company. As a refresher, here are some of the benefits of having your employees publicly recite an ethics oath:

• Positive Brand Value - According to this article about brand value on Ethisphere, making your commitment to ethics public means that you are showing an investment in your brand value. When businesses are perceived as committed to ethics, safety or another area of consumer importance, many consumers will disregard the cost of your service or product based on the fact that they feel they are buying the best.
• Increase in Commitment From Employees - When employees work for a company with a strong brand value, they are more likely to want to remain in as a part of your workplace and will usually end up promoting and endorsing the brand they work for because they truly believe in what their company offers.
• Perception + Expectation= Reality - Mistakes are sometimes unavoidable and when a company addresses an error head on, the perception and expectations set for that particular company now become a reality. When all both external and internal stakeholders in your company actually follow through on their commitments, the public develops even more respect for your brand image.
• EVERYONE is Accountable - Reinforcing the “tone from the top” concept- when lower level employees are with their bosses and managers standing in the same area and making the same commitment to ethics, employees at all levels are more likely to adopt and commit to making an ethical change because speaking the words of the pledge with everyone in their workplace has a much greater impact than a sign posted on the wall.

Many companies use storytelling and the mission of previous company leaders as a way to inspire employees and get them on board when working towards company goals. In the case of Johnson and Johnson, the importance of “Our Credo” has been evident since conception, and continues to play a signifiacnt role in the company today. When looking at the above benefits that an ethics oath can provide a company, Johnson and Johnson has been able to experience the rewards associated with each of these benefits.

The story of  Johnson and Johnson’s “Our Credo” is a great example of the positive impact a corporate ethics oath can have on a company. Here is the video version of “Our Credo”:

The effects of the economy impact companies in a variety of ways. In a recent survey conducted by Landor Associates, Penn Schoen Berland and Burson-Marsteller,evidence shows that the importance consumers place on transparency and corporate responsibility has increased. Consumers want to know more about the products and services that they pay for, as there has been a growing trend in consumer habits to purchase from brands that remain inline with one’s own personal interests and beliefs. The Corporate Social Responsibility Branding Survey finds that 77% of consumers feel that it’s important that companies are socially responsible.

The Corporate Social Responsibility Branding Survey- 2010

The survey discloses the fact that consumers feel that companies within industries where responsible behaviour is the most important factor tend to fall short of expectations. 19% of respondents define corporate responsibility as the level of self-regulation and accountability a company takes in governing themselves. The industries where respondents most highly value responsibility- financial services, healthcare, and media are perceived as performing worst when it comes to transparency and responsibility. The healthcare industry fared especially badly, as just 35% of consumers say that the industry has performed well on social responsibility over the last 5 years– a 10% point drop since 2009.

Scott Osman, global director of Landor Associates’ citizenship branding practice said:

“The Industries that consumers perceive as lacking in responsibility may have the greatest opportunity to benefit from authentically improving their image. Johnson & Johnson, a recognized leader in corporate responsibility, performed very well relative to the healthcare sector this year. The fact that consumers cite the poor performance of these industries shows that they care and are paying attention. By communicating real success in the area of corporate responsibility, corporations have the potential for considerable benefits.”

Many companies have not taken advantage of the fact that they have the ability to influence consumer perceptions of their brand through communicating their efforts surrounding social responsibility issues. Only 13% of survey respondents reported that they had actually read about a company’s social responsibility initiatives on a company’s website. Of that group, 75% of them indicated that it made them more likely to purchase products or services from that company.

Eric Biel, managing director for corporate responsibility at Burson-Marsteller said:

“Companies need to combine strong social responsibility programs with effective communication of what they are doing. While many consumers may not be precise in how they define terms like ‘corporate social responsibility,’ they have a clear sense of how they expect companies to behave. They expect companies to offer high-quality products at good prices and to explain how they treat their employees well, give back to their communities, and respect the environment.”

This survey suggests that companies go public with their social responsibility initiatives in order to communicate their mission and vision to the public. If consumers are making more of their purchase decisions based on a company’s commitment to social responsibility, it seems like a good idea to give consumer what they want and let them know that your company cares too- and for the healthcare and financial industries, it looks like it could do wonders for company reputation!

The actions taken to ensure responsibility will vary among industries, however, if your company establishes an ethics department, creates policies for stricter accounting and audit controls, installs an investigation software system for tracking internal issues, reduces its carbon footprint, or becomes involved in a charitable cause, these are all actions worthy of public recognition.

Ethisphere Ethics Inside Rating

Ethisphere has designed the Ethics Inside Certification, as they have observed that companies increasingly notice a correlation between ethical business practices and long-term market success. However, companies must also make sure that their actions actually back up the socially responsible message they choose to communicate, as word will travel quickly about any company that talks the talk but doesn’t walk the walk.

Publicly displaying awards or recognition for transparency, ethics or social responsibility cannot hurt a company. When these recognitions are made public by the company, it shows that a company has actually acted in a socially responsible manner, fully demonstrating their commitment to transparency, ethics and other responsible business practices.

When a company receives outsider acknowledgement for their responsibility efforts, it adds credibility to the company’s reputation as an industry leader in ethics. Ethisphere states that “being certified as “Ethics Inside®” means that your organization, whether public or private, cares about conducting business in an ethical and sustainable manner.” Some of the benefits of obtaining the Ethics Inside Certification, as outlined on the Ethisphere website are:

“More than $60 billion in public and private healthcare spending was lost to fraud each year. That’s more than the net worth of America’s eight largest private foundations. And it’s 33 times the amount of money that Avatar – now the highest-earning movie of all time- has made at the box office”- Attorney General Eric Holder, National Healthcare Summit.

As amendments continue to be made to the Healthcare Reform bill that was signed by US President Barack Obama, there continues to be discussion about the need for a crackdown on healthcare fraud in the US.

In a daily e-mail I receive from Ethisphere and Corpedia, they write that the bill will “dramatically boost fraud enforcement by increasing anti-fraud spending by $250M and even more importantly, it will now be easier to bring criminal and civil prosecutions forward. ” They also suggest that now is the time for healthcare companies to evaluate and improve their existing compliance and ethics programs in order to prepare for the coming changes. President Obama has suggested that the reduction in fraud costs could help pay for the national health care program.

Some Implications for Employers

The Society for Human Resource Management has created a “Healthcare Reform“ page on their website that follows the updates and issues surrounding the passing of the US Healthcare Reform Bill. The SHRM states some of the implications that the health bill will have on employers, consisting of:

“Penalties would be assessed on employers with 50 or more employees who fail to offer coverage to employees.  The penalty would be assessed if even one employee receives a subsidy to purchase coverage through a health insurance exchange.  Employers would also incur penalties if the coverage they offer is considered “unaffordable” to the employee or if the health plan has an actuarial value of less than 60% or pays less than 60% of covered health care expenses.”

Right now it’s approximated that the penalties will be $2000 per employee should the employer opt out of purchasing medical coverage plans for their workplace.  Another feature that affects the plans offered by employers is the change in dependent coverage. There has been an increase in the age of a child dependent- up to age 26, for which a parent or legal guardian can now provide medical coverage for. As it currently stands, placing lifetime limits on coverage will also be banned by law. Another component that is currently included in the bill is the use of automatic enrollment for businesses that employe more than 200 employees. Regarding automatic enrollment, hr.blr.com reports that:

“Legislation will require that employers with more than 200 employees automatically enroll full-time employees in health coverage. The legislation will allow employees to opt-out of the coverage after automatic enrollment.”

In the case of small businesses that choose to offer medical coverage to their employees, hr.blr.com reports that:

“Beginning in 2010, tax credits of up to 35% of premiums will be available to firms that choose to offer coverage. The full credit will be available to firms with 10 or fewer employees with average annual wages of $25,000, while larger small employers will see smaller tax credits. In 2014, tax credits will be up to 50% of premiums for the smallest employers.”

It’s expected that amendments will continue to be made to the bill, as there is a lot of debate over certain elements included in the original bill. As an employer in the US, it will be important to remain up to date on all of the changes made and gain a solid understanding of what your obligations are to your employees regarding the healthcare coverage changes.

“When employees are happy, they are your very best ambassadors.”- Jim Sinegal, CEO, Costco.

In 2008, Ethisphere named Sinegal to their list of the 100 Most Influential People in Business Ethics- he was ranked #37. The emphasis on employees at Costco is the key to the company’s success and ability to consistently provide a better shopping experience for its members. Jim Sinegal is the perfect example of how the tone at the top sets the tone for the entire company. Costco has developed a reputation as an employer of choice and has maintained a positive public image, all thanks to their brand ambassadors- their employees.

The Costco Way

There a many lessons learned when looking at the Costco story. Many executives once believed that it would be impossible to keep prices low if a company was paying employees high wages and paying for majority of the employee benefits package- Costco is proof that this isn’t always the case. Costco executives understand the impact and importance that good employees can have in an organization. In the Fast Company CEO Interview with Sinegal, they stated that:

“Wall Street grumbles that Costco cares more about its customers and employees than its shareholders; it pays workers an average of $17 an hour and covers 90% of health-insurance costs for both full-timers and part-timers. Yet revenues have grown by 70% in the past five years, and its stock has doubled.”

At Costco, there is a desire to always perform better. Perks such as higher wages, benefits and opportunity for growth allow Costco to attract a large pool of candidates that are of higher quality and are more committed to their job. In the Workforce article, “Welcome to the Club“, they reported that:

“In addition to offering some of the best wages and benefits in the retail industry, Costco rewards employees with bonuses and other incentives. It promotes from within, encourages workers to make suggestions and to air grievances and gives managers autonomy to experiment with their departments or stores to boost sales or shave expenses as they see fit.”

All About the Employees

Much of the emphasis on culture and values at Costco is attributed to the personal interests of Sinegal, their CEO. During the Fast Company interview, they asked Sinegal for his opinion on the rising gas prices- his response:

“Even employees who work at Costco- who make the type of wages that we pay- are being hit at the gas pump. We’re working very hard to schedule people from the same part of town so they can drive together. We’re encouraging van pools. We’re even testing 10-hour days, something we’ve never done in the past. If we can schedule some employees for four 10-hour days, that’s one day they don’t have to drive to work. They’ve got a 20% savings in their gas right there.”

His response to the question really shouldn’t be surprising- I think the shock factor is the fact that a CEO actually takes these types of external factors into consideration when planning for their business. These types of responses paint a clear picture of the culture at Costco. Costco focuses on putting their employees first, which has lead to low employee turnover rates. In the long run, this increased rate of retention has allowed Costco to save on labour costs while continuing to provide employees with significant wages and benefit packages.

When employees feel important and that there is value in the work that they do, it makes it harder to leave their current position and seek out new work. Front-line employees are the ones that interact with your company’s customers each day and are ultimately the ones that communicate the values and culture of your brand to the public. When employees are not passionate about their work or their brand, their attitudes have the ability to influence the customer’s shopping experience. Sinegal started out his retail career as a bagger, working through the ranks to VP Merchandising and Operations at FedMart- eventually co-founding Costco in 1983. Since he has worked in a variety of retail positions throughout his career, Sinegal understands the motivators and impact that every position has on the overall success of Costco.

Tech Crunch discusses the factors of success at Costco in the article “Integrating Ethics Into The Core Of Your Startups: Why And How“, stating that:

“The company’s per-employee sales are considerably higher than those of key rivals such as Target and Wal-Mart; customer service at the stores is phenomenal and fast; and Costco continues to expand, both in number of warehouses and in products and services for business and consumer customers.”

The Costco story teaches us all a few lessons that can be applied to our own workplaces: think of the long-term impact of your actions, reduce employee turnover and at all times- let your employees know they matter.

Yesterday Ethisphere released their list of the World’s Most Ethical Companies for 2010. The businesses that made the list for 2010 received recognition for being leaders in their industry when it comes to their ethics and compliance programs. The number of businesses that make the list varies each year- this year there are 100 listed to the World’s Most Ethical Companies. Ethisphere reports that “of these companies, 26 are new to the list in 2010 and 24 companies dropped off from the 2009 list. These “drop offs” generally occurred because of litigation and ethics violations, as well as increased competition from within their industry.” Click here to see the methodology for determining the rankings for 2010.

Here is the list of the World’s Most Ethical Companies for 2010: