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Avoiding integrity land mines.

Ben W Heineman1

  • 1Law Firm of WilmerHale, USA.

Harvard Business Review
|April 17, 2007
PubMed
Summary
This summary is machine-generated.

General Electric implemented systems combining clear expectations, oversight, and incentives to ensure employee integrity. This approach, focusing on embedding ethical standards and robust reporting mechanisms, proved effective in high-pressure global business environments.

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Area of Science:

  • Business Ethics
  • Corporate Governance
  • Organizational Behavior

Background:

  • Maintaining ethical conduct in multinational corporations with thousands of employees across diverse countries presents significant challenges.
  • High-pressure business environments can create incentives for employees to prioritize performance over ethical behavior.

Purpose of the Study:

  • To describe the systems and strategies employed by General Electric (GE) to foster and maintain ethical conduct among its global workforce.
  • To highlight the importance of embedding integrity at all corporate levels, beyond just board-level oversight.

Main Methods:

  • Implementation of a comprehensive system integrating clear communication of expectations, robust oversight mechanisms, deterrence strategies, and incentives.
  • Systematic development of uniform ethical standards exceeding current legal requirements and stakeholder expectations.

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  • Establishment of multifaceted auditing, assessment systems, and a mandatory ombudsman system for employees to report concerns.

    • Main Results:

    • Senior leaders were terminated for ethical lapses, irrespective of business impact or direct knowledge, demonstrating accountability.
    • Uniform ethical standards were embedded into GE's operating practices, with implementation responsibility at the field business leader level.
    • The ombudsman system and strict policies against non-reporting or retaliation reinforced ethical reporting and accountability.

    Conclusions:

    • Effective corporate integrity requires proactive systems that embed ethical expectations and accountability throughout the organization.
    • Shifting focus from board oversight of the CEO to infusing integrity at all levels is crucial for sustained ethical performance.
    • GE's experience demonstrates that a combination of clear standards, rigorous oversight, and strong incentives can successfully promote ethical behavior in a complex global business setting.