Meet Ronald Berenbeim - Society of Corporate Compliance and Ethics

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feature article Meet Ronald Berenbeim Principle Researcher, Business Ethics at The Conference Board Editor’s Note: José A. Tabuena is with the Center for Corporate Governance at Deloitte & Touche LLP and serves on the Advisory Board for Compliance & Ethics. He conducted the following interview in March 2007 with Mr. Ronald Berenbeim, Principle Researcher, Business Ethics at The Conference Board. An authority on business ethics and corporate governance issues, Mr. Berenbeim has written 44 Conference Board studies. He can be reached at ronald. berenbeim@conferenceboard.org JT: Tell us about The Conference Board and its involvement in the field of ethics and compliance, and how you ended up in your current role with The Conference Board RB: Since the organization was founded in 1916, the need to address business ethics and compliance (E&C) issues has been fundamental to The Conference Board’s mission. The current involvement which focuses on company ethics programs and practices began in 1986-87 with the confluence of two important events: (1) insider trading scandals and (2) defense procurement irregularities. Insider trading irregularities focused public interest on business ethics in a way that had not been seen at least since Watergate and The Church Committee hearings on Foreign Corrupt Practices, but it was the defense contracting issues that had the more lasting effect. These revelations spawned the Defense Industry Initiative (DII) which led to the voluntary—and in some cases, not so voluntary (pursuant to a settlement agreement)—development and implementation of company ethics programs. I am glad to say that some of the original DII people are still active in The Conference Board’s Ethics research, councils, conferences, and working groups. Up to that time my own work on employee relations and global management practices had discussed some ethics issues, but it was a piece that I did on the transition from owner to professional management in U.S., European, and Latin American companies that made the ethics sale for me. In every case, I found that a well-articulated code or statement of ethics was the key to an effective transition, so in 1986-87, I did a research project on ethics codes and practices. The member response was very favorable, and we now have a full service program with research, executive councils, live and internet conferences and seminars, and Research Working Groups in which senior executives work with us on specific research questions that are of special interest to them. I joined The Conference Board in 1977. At the time, I was a recovering lawyer who had spent my early career in labor relations. I continued to look at how companies dealt with labor relations-type problems through studies of employee complaint systems and plant closing case studies, and I did some work on international management organizations and how companies in the U.S., Europe, Latin America, and Japan dealt with external pressure groups. All of these projects have served me well in developing our ethics research and working groups, and it has been good preparation for the contributions that I have been able to make to our councils and conferences. JT: I think you will agree that there can be confusion with the term “governance.” How do you define corporate governance, and how does it relate to ethics and compliance RB: I do agree. Outside of the United States, the terms are often used interchangeably. The short-form answer is that ethics is to such areas as governance and corporate social responsibility (CSR) as mathematics is to physics and chemistry. Good physicists and chemists need to be literate and competent in mathematics, and governance and CSR specialists need a comparable facility in ethics. Operationally, the boundaries between ethics and governance (the subject with which the definitions most often describe much the April 2007 18 Society of Corporate Compliance and Ethics • (888) 277-4977 • www.corporatecompliance.org
José Tabuena same thing) can be understood by describing the way in which work in is typically divided in a university political science program. Governance is akin to “government” – a descriptive term that focuses on governmental structure and processes, the division of authority, and the most efficient and effective operation of its constituent elements. Ethics is comparable to “political theory” in that it addresses the optimal approaches to political organization, with full consideration given to the rights and responsibilities of stakeholders. Compliance addresses the body of rules that emanate from and are limited by the organization’s ethical superstructure – much as our laws have evolved from the Constitutional principles on which the country was founded. A good governance system will devise and administer these rules (and enforce compliance with the laws to which the sovereign entity is subject) fairly and with full respect for the rights of all affected parties. JT: But what about the board’s role Are there practical ways that boards of directors can provide oversight to the ethics and compliance program and its activities RB: Directors bring to their task a broad range of expertise, not just with respect to operational issues, but in many instances, from their service as members of other boards. This collective experience gives the company the advantage of a great variety of oversight perspectives. They ought to be the best protection a company has against the routine design and implementation of a cookie cutter, onesize-fits-all approach to company ethics programs. And, of course, directors are possibly the most important resource a company has in an ethics crisis. Unfortunately, some companies don’t bring their boards into the ethics discussion and boards do not seek to be part of the dialogue until a crisis stage. The Revised U.S. Sentencing Guidelines mandate the need for ethics discussion at all levels within the company (including the board). It is a bit early to be critical, but thus far, our surveys have shown that board discussion has focused largely on the company’s program and how it works. At least according to our data, boards that have had discussions about the ethical dimension of areas where the company may be exposed to risk are not as common as one would like to see. And ethics and compliance risk assessments tend to focus on program policies, structure, and communications rather than on the behavioral threats (e.g., employee intent/incentives) that can actually cause ethics problems. JT: What about the relationship of governance to corporate responsibility or CSR RB: As is the case with any sovereign entity, a company has the responsibilities of citizenship in the community, and today (in contrast with 30 years ago when I started with The Conference Board), the community is for most companies the entire world, not just the country of incorporation. Thirty years ago, business ethics was pretty much defined in the four corners of the contract. A typical business ethics formulation was the one articulated by Shylock who said “my word is my bond.” Throw in some charitable gifts—a few checks presented by the CEO at high school science fairs—and you had a pretty good definition of an ethical company: honesty, high-quality products, and a little bit of philanthropy. Today companies are challenged to show moral restraint in market failure situations which they can, if they so choose to exploit to their advantage. It becomes a sustainability issue—the greatest benefit comes from the cultivation of long-term relationships of trust. “Sustainability” is a popular buzz word today, but it is not a new concept. Henry Ford may have been its earliest proponent. He said that he paid his workers more than he had to, so they would be able to buy his cars. The key issue now is that the relationship between the developed and the developing world is one of persistent market failure, and the way in which the developed world deals with that problem will determine, quite likely, the planet’s long-term sustainability. JT: I know that The Conference Board has been studying and surveying ethics and compliance programs for some time. What are the major trends that you’ve seen regarding such programs RB: The structural elements of a good ethics program are now widely accepted. For example, in the 1987 study, relatively few companies had any kind of ethics training, and today at least some training (in many cases, of all employees) is nearly universal in medium size companies and above. The question may now be whether or not the training is sufficiently focused on the particular ethics exposure of individual employee groups. In companies with revenues of more than $500 million a year, you are likely to find a formally designated program with a person in charge, resources dedicated, a code of conduct, a training program, and some sort of whistle blowing system. So it makes less sense than it did in the past to use these elements as benchmarks for good practice. In any event, my reading of the 2004 Revised Continued on page 20 Society of Corporate Compliance and Ethics • (888) 277-4977 • www.corporatecompliance.org April 2007 19
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