Barriers to Entry:
For instance, creating self-directed project teams shows interesting potential for building responsibility. Furthermore, ombudsmen and hotlines provide opportunities to raise issues in non-threatening processes.
OMOI also expects risk officers, compliance officers, and board members to improve their effectiveness by learning more about current compliance issues. In addition, regulators can improve effectiveness by learning more about actual markets and real-world business practices.
Several important, practical points emerged from the conference discussions. Nobel Laureate and George Mason University Professor Vernon Smith highlighted a point echoed in many discussions and presentations: It makes no sense to exhort participants to behave ethically and then penalize those who do so. Thus, one challenge is to remove real or perceived threats that individuals encounter when concerned about an ethics matter.
Empowering technical staff to advocate doing the right thing is preferable to having them become whistleblowers. Also, the identification and communication of best practices appear to help encourage positive peer pressure (and, sometimes, rating agency pressure) that leads to improved practices.
Several points relate to corporate leadership. Effective ethics/corporate-compliance programs require leadership, support "at the top," and effective follow-up. A responsible board member, for example, needs to know the right questions to ask management and the compliance team. A conscientious director should seek information about emerging issues in the energy marketplace regarding compliance and should insist on direct communications with internal auditors and the chief compliance officer. Management needs to "walk the walk;" simply "talking the talk" is not taken seriously. A corporate ombudsman helps when the ombudsman is a respected leader with independent power within a firm or organization. Similarly, a hotline (now essentially mandatory under Sarbanes Oxley) requires competent staffing to make a positive difference.
The conference illustrated a point often made regarding ethics: Much of the value in ethics training comes from the discussions rather than the proposed answers. Two gas industry leaders told me that listening to the power discussions led them to want similar discussions on some emerging gas topics.
Last, why is energy different? I think this can be answered with one word: Enron. By demonstrating a commitment to ethics and to continuous improvement in this area, energy companies can improve their business prospects and energy regulators can improve the prospects for the customers whose interests we protect.
Corporate ethics is not a competitive disadvantage. I hope this conference marks the end of the backward looking, second-guessing about ethical matters and the beginning of a focus on practical ethics problem-solving.
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