FEDERAL SENTENCING FEDERAL SENTENCING GUIDELINES FOR THE GUIDELINES FOR THE

ORGANIZATIONSORGANIZATIONS

NAZISH SOHAILNAZISH SOHAILfoxyzash007@gmail.comfoxyzash007@gmail.com

Business ethics

AGENDAAGENDA Why one should be Ethical?Why one should be Ethical? Ethical Issues in BusinessEthical Issues in Business Why do companies develop ethics Why do companies develop ethics

programs?programs? Federal Sentencing GuidelinesFederal Sentencing Guidelines Seven Elements of the ProgramSeven Elements of the Program Role of an Ethics Officer...Role of an Ethics Officer... Sustaining an Effective ProgramSustaining an Effective Program training training Modifications To the Guidelines Modifications To the Guidelines Impact of GuidelinesImpact of Guidelines ConclusionConclusion Questions and AnswersQuestions and Answers

Why one should be Why one should be Ethical?Ethical?

Corporate Ethics = Profits...Corporate Ethics = Profits... Improved financial performanceImproved financial performance Reduced operating costsReduced operating costs Enhanced corporate reputationEnhanced corporate reputation Increased ability to attract and retain Increased ability to attract and retain

employeesemployees

Ethical Issues in Ethical Issues in BusinessBusiness

Key Causes of Unethical Key Causes of Unethical Behavior...Behavior...

meeting overly aggressive meeting overly aggressive financial or business objectivesfinancial or business objectives

meeting schedule pressuresmeeting schedule pressures helping the organization helping the organization

survivesurvive rationalizing that others do itrationalizing that others do it resisting competitive threatsresisting competitive threats saving jobssaving jobs

Key Influences on Ethical Key Influences on Ethical Behavior...Behavior...

personal valuespersonal values supervisor influencesupervisor influence senior management influencesenior management influence internal drive to succeedinternal drive to succeed performance pressuresperformance pressures lack of punishmentlack of punishment friends/coworker influencefriends/coworker influence

Why Misconduct Is Not Why Misconduct Is Not Reported...Reported...

fear of not being considered a fear of not being considered a team playerteam player

did not think corrective did not think corrective action would be takenaction would be taken

fear of retribution (from fear of retribution (from management)management)

““no one else cares, why no one else cares, why should I”should I”

did not trust the organization did not trust the organization to keep report confidentialto keep report confidential

Causes of Ethical Causes of Ethical Disasters…Disasters…

failure to understand the role of failure to understand the role of business ethics in an business ethics in an organizational cultureorganizational culture

lack of effective leadershiplack of effective leadership focus on the bottom above all elsefocus on the bottom above all else short term focusshort term focus belief that it could happen to usbelief that it could happen to us downloading of responsibility to downloading of responsibility to

lawyers & accountantslawyers & accountants ineffective corporate governanceineffective corporate governance

Classification of Classification of Ethical Issues...Ethical Issues...

conflict of interestconflict of interest honesty and fairnesshonesty and fairness communicationscommunications organizational relationshipsorganizational relationships

Why do companies develop Why do companies develop ethics programs?ethics programs?

to allow employees and to allow employees and stakeholders to understand the stakeholders to understand the values of the businessvalues of the business

to comply with policies and to comply with policies and codes of conductcodes of conduct

TO CREATE THE ETHICAL TO CREATE THE ETHICAL CLIMATE OF THE BUSINESSCLIMATE OF THE BUSINESS

Federal Sentencing Guidelines for

Organizations...

Why Compliance Why Compliance Programs?Programs?

Why Ethical Programs Are Why Ethical Programs Are EssentialEssential Raise AwarenessRaise Awareness Mitigating FactorMitigating Factor Communicate Organization’s Communicate Organization’s

CommitmentCommitment Avoid InvestigationAvoid Investigation Reduce Threat of Qui-TamsReduce Threat of Qui-Tams

PurposePurpose

to exercise due diligence to to exercise due diligence to prevent and detect criminal prevent and detect criminal conductconduct

otherwise promote an otherwise promote an organizational culture that organizational culture that encourages ethical conduct encourages ethical conduct and a commitment to and a commitment to compliance with the lawcompliance with the law

Organizations under Organizations under FSGO FSGO 

CorporationsCorporations PartnershipsPartnerships AssociationsAssociations Joint stock companiesJoint stock companies Unions Unions TrustsTrusts Pension fundsPension funds & others& others

Original 7 HallmarksOriginal 7 Hallmarks of of FSGOFSGO

Prevention and Detection Procedures Prevention and Detection Procedures High Level Oversight High Level Oversight Due Care in Delegation of Authority Due Care in Delegation of Authority Communication, Training and Communication, Training and

Education Education Monitoring, Auditing and Reporting Monitoring, Auditing and Reporting

Systems Systems Enforcement and Discipline Enforcement and Discipline Appropriate, Consistent Response Appropriate, Consistent Response

FSGOFSGO Considerations if Considerations if Misconduct Is Determined...Misconduct Is Determined...

organizations must remedy any organizations must remedy any harm caused by the offenseharm caused by the offense

if criminal purpose, fines are if criminal purpose, fines are designed to put the firm out of designed to put the firm out of businessbusiness

fines are based on the fines are based on the seriousness of the offense as seriousness of the offense as well as culpabilitywell as culpability

probation may be assignedprobation may be assigned

Top Ten Unethical Behaviors Top Ten Unethical Behaviors Reported by Reported by EmployeesEmployees......

sexual sexual harassmentharassment

lying on reports lying on reports or falsifying or falsifying recordsrecords

conflicts of conflicts of interestinterest

thefttheft lying to lying to

supervisorssupervisors

discriminationdiscrimination drug or alcohol drug or alcohol

abuseabuse improper improper

accounting accounting proceduresprocedures

violation of violation of environmental lawsenvironmental laws

gift/entertainment gift/entertainment violationsviolations

Code of Ethics...Code of Ethics...

formal statement of what an formal statement of what an organization expects in the way organization expects in the way of ethical behavior (what of ethical behavior (what behaviors are acceptable or behaviors are acceptable or unacceptable)unacceptable)

reflects senior management’s reflects senior management’s organizational values, rules, and organizational values, rules, and policiespolicies

Six Steps in Implementing a Code of Six Steps in Implementing a Code of Ethics...Ethics...

distribute internally & externallydistribute internally & externally assist employees in assist employees in

understandingunderstanding specify management’s rolespecify management’s role make employee’s responsible make employee’s responsible

for understanding the codefor understanding the code establish grievance proceduresestablish grievance procedures provide a concluding statementprovide a concluding statement

How CEOs Support Ethics How CEOs Support Ethics Initiatives...Initiatives...

communicate directly with communicate directly with employeesemployees

use their own “phraseology”use their own “phraseology” tout successes and condemn failurestout successes and condemn failures use one standard for all employees use one standard for all employees

(regardless of level)(regardless of level) acknowledge & promote ‘ethically acknowledge & promote ‘ethically

aware’ managersaware’ managers survey employees about the survey employees about the

programprogram

Role of an Ethics Role of an Ethics Officer...Officer...

Step 1: Conduct a rigorous self-Step 1: Conduct a rigorous self-assessmentassessment

Step 2: Ensure commitment from Step 2: Ensure commitment from the top of the organizationthe top of the organization

Step 3: Publish and distribute Step 3: Publish and distribute Code(s) of Ethics and related Code(s) of Ethics and related guidance materialsguidance materials

Step 4: Communicate, Step 4: Communicate, communicate, and communicate communicate, and communicate once againonce again

Step 5: TrainingStep 5: Training Step 6: Provide confidential Step 6: Provide confidential

resourcesresources Step 7: Ensure consistent Step 7: Ensure consistent

implementationimplementation Step 8: Respond and enforce Step 8: Respond and enforce

consistently, promptly, and consistently, promptly, and fairlyfairly

Step 9: Monitor and assessStep 9: Monitor and assess Step 10: Revise and reformStep 10: Revise and reform

Sustaining an Effective Sustaining an Effective ProgramProgram

Employees are encouraged to Employees are encouraged to ask questions and get advice ask questions and get advice before taking action.before taking action.

Employees receive prompt, Employees receive prompt, useful, and accurate advice useful, and accurate advice about ethical workplace about ethical workplace behavior.behavior.

Employees receive, read, and Employees receive, read, and use ethics program materials.use ethics program materials.

Employees, managers, and board Employees, managers, and board members participate in regular members participate in regular training about ethics and training about ethics and compliance.compliance.

Sustaining an Effective Sustaining an Effective ProgramProgram

Information about ethics and Information about ethics and compliance is communicated to compliance is communicated to all internal and external all internal and external stakeholders.stakeholders.

The rules (both written and The rules (both written and unwritten) stay the same in unwritten) stay the same in good times as well as in bad good times as well as in bad times.times.

TrainingTraining Is Training Required?Is Training Required? How Does Ethics Training How Does Ethics Training

OccurOccurDevelopment of a code of Development of a code of ethics (79%)ethics (79%)

Lectures (63%)Lectures (63%)

Workshops and seminars (53%)Workshops and seminars (53%)

Case studies (46%)Case studies (46%)

Videos with discussion (41%)Videos with discussion (41%)

Examples of Examples of ReductionsReductions

An organization may obtain up to a An organization may obtain up to a five-point reduction in its culpability five-point reduction in its culpability score score

A two-point reduction is available for A two-point reduction is available for cooperation in the investigation and cooperation in the investigation and acceptance of responsibilityacceptance of responsibility

A one-point reduction will apply for A one-point reduction will apply for acceptance of responsibility alone.acceptance of responsibility alone.

Culpability reductions of up to five-Culpability reductions of up to five-points are available based on effective points are available based on effective compliance programs and are subject compliance programs and are subject to negotiationto negotiation

How to Avoid a Qui Tam or How to Avoid a Qui Tam or Whistleblower ActionWhistleblower Action

Create an atmosphere that Create an atmosphere that encourages complianceencourages compliance Carrying the TORCH Awareness Carrying the TORCH Awareness

ChampaignChampaign Non-Retaliation Policy for ReportingNon-Retaliation Policy for Reporting Provide training on why compliance and Provide training on why compliance and

each workforce member’s roleeach workforce member’s role Set up a hotlineSet up a hotline

Allows for anonymous reporting with Allows for anonymous reporting with follow-upfollow-up

Demonstrate action and/or Demonstrate action and/or acknowledgement of a concernacknowledgement of a concern

Listen to employeesListen to employees

What Are The 10 What Are The 10 Modifications To the Modifications To the

Guidelines?Guidelines? Tone At The TopTone At The Top Conduct And Internal ControlConduct And Internal Control Leadership AccountabilityLeadership Accountability Resources and AuthorityResources and Authority History of ViolationsHistory of Violations Conduct TrainingConduct Training Evaluate ProgramsEvaluate Programs Risk AssessmentRisk Assessment Encourage EmployeesEncourage Employees Whistleblower SystemWhistleblower System

Impact of GuidelinesImpact of Guidelines "...a clear picture of what a "...a clear picture of what a

compliance program should look like compliance program should look like and a set of instructions on how to and a set of instructions on how to construct a program." construct a program."

"…certainly, the guidelines are having "…certainly, the guidelines are having a significant impact on what a significant impact on what organizations are doing to prevent and organizations are doing to prevent and detect violations of law" detect violations of law"

ConclusionConclusion

Questions & AnswersQuestions & Answers

Slides Prepared by Nazish Slides Prepared by Nazish SohailSohail