Ethics bots and other ways to move your code of business conduct beyond puffery

Digital technologies such as artificial intelligence and robotics allow companies to create more effective codes of business conduct. But technology isn't the only solution

Published: Jul 29, 2019 07:05:03 AM IST

g_119165_code_of_conduct_280x210.jpgImage: Shutterstock

When health insurer Cigna Corp. appeared in front of a judge for allegedly misleading shareholders on Medicare regulations this spring, plaintiffs thought they had a strong case. After all, Cigna had published its own document titled “Code of Ethics and Principles of Conduct” that specifically required employees to uphold all regulations and “act with integrity in all that we do.”

When the panel of three judges took a look at the argument, however, they threw it out of court as irrelevant. “We think the statements in Cigna’s Code of Ethics are a textbook example of ‘puffery,’” the judges wrote. “They are too general to cause a reasonable investor to rely upon them.”

That’s typical of the way that many people and even employees view codes of conduct, says Eugene F. Soltes, Jakurski Family Associate Professor of Business Administration at Harvard Business School. “Company leaders often express a high-level set of principles that employees are expected to abide by, but what the court effectively said is, ‘This is akin to marketing material that people don’t take literally word-for-word.”

So do company ethics codes have any value? In a recent case study on a novel “ethics bot” created by consulting company Accenture, Soltes argues that such codes can be worth quite a lot to companies—but only if they go beyond generic platitudes to create a tool that employees can actually use.

Author of the book Why They Do It: Inside the Mind of the White-Collar Criminal, Soltes has spent his career examining how and why individuals commit fraud. In research forthcoming in Harvard Business Review, he has found that many employees see misconduct by co-workers, but only 30 to 50 percent admit to reporting that misconduct.

“Codes of conduct that employees sign typically require employees to report violations when they observe them, so they are actually violating their ethics code by not reporting violations,” Soltes says.

Companies have good reason to try and change that. For starters, firms that have an effective compliance program to prevent fraud and abuse can receive substantial benefits from regulatory and enforcement agencies if something goes amiss. For example, showing that a firm took pains to educate employees on legal regulations can potentially reduce fines by up to 95 percent.

Ideally, the code of ethics goes beyond just checking legal boxes for regulatory reasons to mitigate sanctions. “Perhaps even more important in today’s environment, you are also limiting reputational risk,” Soltes says, pointing to negative news stories or error-filled posts on social media that can undermine a company’s brand. “There are many actions that employees can undertake that may not be illegal, but can cause enormous amounts of reputational damage.”

A good code can also help workers do their jobs better. Most employees want to follow the rules and do the right thing, but may not understand how to comply with rules. “It’s not just about the legal exercise, it’s about impacting people’s behavior and underlying firm culture,” he says.

Accenture rethinks its code
Compliance can be difficult for employees when they are faced with a 50-page document filled with generic principles and discussions of regulation that fall outside their scope of work.

Take Accenture, whose lengthy document expressed six broad core values including “Client Value Creation,” “Integrity,” and “Respect for the Individual.” They sounded great, but in reality made it hard for its 400,000 global employees to search quickly and find answers to ethical dilemmas.

When executives analyzed ethics documents adopted by companies their compliance leaders admired, such as GE and Microsoft, they saw models that focused on specific steps employees should take when faced with difficult decisions. One result: Those examples inspired Accenture to think outside the box and create an app that would be interactive and intuitive.

The final result was COBE (Code of Business Ethics), an ethics chatbot on which employees could type their questions and get answers tooled to their specific concerns. Rather than providing simple “yes” or “no” answers to questions, the chatbot helped users locate information within the code of conduct efficiently and quickly.

The code has served another, perhaps even more important purpose by allowing firm leaders to anonymously capture data across its workforce in order to better identify where ethical concerns might be arising.

“If people in a particular geographical area are asking lots of questions about the policy on taking gifts from certain ministers, then this would help compliance leaders appreciate that maybe it’s time to go back and make sure people understand our gifts policy and obligations under the Foreign Corrupt Practices Act,” Soltes says.

Creating an ethics chatbot requires an investment of resources and technical capabilities that is likely to be beyond most firms’ capabilities. However, Soltes’ lab at Harvard Business School was able to create a functioning ethics chatbot in less than three months that captured many of the fundamental travel and expense policies for a large consumer products company.

Apps aren’t the only alternative
Even if not ready to develop or deploy such technologically advanced solutions, companies can still make their ethics codes more intuitive, interactive, and practical for day-to-day decision-making, Soltes says. That may mean reducing the number of broad-brush value statements and uninspired clip-art, instead making the document more concise in describing practical guidelines for the company’s employees.

He also recommends thinking beyond the legal department to bring in other areas of the company, such as marketing, communications, or consumer behavior specialists, to help design a code that will be understandable to employees. Uber, for example, rolled out a mobile app-focused version of its ethics code to better serve its employees, who are younger and more tech savvy.

Lastly, Soltes advises that firms not be afraid to experiment. An ethics code shouldn’t be a monolith, but rather a living document that can be adapted to the expanding needs of a firm and its employees. After rolling out a policy to a subgroup of employees, for example, companies should evaluate how the code is actually being used in practice and how it can be further refined and improved.

That kind of creativity can help companies stay away from the scrutiny of regulators and avoid negative headlines. “Ultimately, the goal should not simply be to just create a legal document, but instead a valuable tool that helps cultivate the kind of behavior and culture the firm wants to support on a day-to-day basis,” Soltes says. “That requires a different and more innovative approach than many firms are currently deploying.”

[This article was provided with permission from Harvard Business School Working Knowledge.]

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