Having a written code of ethics did not stop Gallup employees from running into ethics issues when trying to hire a government official. Just having a written code is not enough, ethics and compliance experts said.
“Having a system in place and preventing these problems are two different matters,” said Bob Meunier, chief executive officer of Debarment Solutions Institute, a Washington, D.C.-area consulting firm working with Gallup to audit its programs. “You can drive a truck through what is a 'proper internal control system.' ”
Gallup has a written code of ethics dating to the 1980s, the company said. But government documents say Gallup fell short on educating employees on proper government contracting procedure.
Gallup also needed to have a formal compliance program, said Roy Snell, CEO of the Society of Corporate Compliance and Ethics. The company adopted a new internal control system in February and must maintain it under its agreement with the government. The program includes internal auditing and other procedures intended to find improper conduct.
“Ethical behavior is an outcome; a compliance program is a means to achieve that outcome,” Snell said. Requiring such a program, he said, is “a statement from the government that talking about ethics is not enough.”
Compliance expert Carole Basri, a professor at the Fordham University School of Law, said that for shareholders, having a strong compliance program “really allows you to sleep at night and feel comfortable that you're doing the right thing.”
Compliance breaches can affect a company's share price and damage its reputation.
“Especially a company like Gallup, that has reputational value, you want to trust what they're saying so you can do business with them,” Basri said.
The Gallup case has become a cautionary tale for government contractors seeking to hire former federal employees. The Washington, D.C., law firm Morrison & Foerster, which represents government contractors, in April issued a “client alert” brief using Gallup as an “example of what can go wrong” for contractors when they seek to hire government employees. They advised that corporate policy should require that a potential government employee recuse himself from any contractual matters involving the company before engaging in employment talks.
Omaha businesses looking to improve their ethics and compliance programs can turn to the Business Ethics Alliance housed in the Creighton University College of Business.
The alliance's most recent survey, from 2010, found that two-thirds of local businesses that responded said they did not have a formal ethics and compliance program. Most of those that did have an ethics policy talked to employees about it only during hiring or on an as-needed basis, not routinely. More than half of all businesses, and almost two-thirds of small businesses, said they did not need a formal ethics or compliance program.
Having a code of ethics doesn't go far enough, alliance Executive Director Beverly Kracher said.
“Enron had a really cool code of ethics,” she said.
Gallup was one of the organizations that helped found the alliance, and one of its employees serves as chairman of the alliance's governing board.
“They care deeply about trust and integrity and honor,” Kracher said. “Knowing them, they will want this situation to be able to be used as a learning experience for other business leaders and business people.”