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September/October 2008 - By Andrew Singer
As GM Struggles, Its Ethics and Compliance Office Motors On
General Motors Corporation (GM) has its hands full with a host of business issues these days, and perhaps the last thing the company needs is a lot of talk about business ethics and compliance.
This makes things difficult for the organization’s ethics
director. With the company’s very survival at stake, how does one persuade the rank-and-file that issues of ethics and integrity are still a major concern?
“I understand that you’re working harder than ever, but this is important, too,” Samina R. Schey tells them.
Still, “people get frustrated,” acknowledges Schey, GM’s executive director for Global Ethics and Compliance. Their attitude is often, “Here we go again,” she says. “The toughest thing is persuading people to
make time for this.”
Office created in 2005
Schey came to her position in 2005 when GM’s Board Audit Committee created its Global Compliance department. The idea was to manage compliance in a way that made sense for a company that was not only enormous—GM has long been one of the world’s largest corporations—but also far-flung, operating in dozens of countries, including many parts of the developing world. In 2004, with the revisions to the Sentencing Guidelines for
Organizations, the company recognized the need for a more centralized compliance function.
“There has always been an emphasis on compliance, but it was decentralized,” Schey told us in a recent interview. There was a compliance program for “quality,” another compliance program for “health and safety,” and so on.
When one mentioned compliance, one used to hear something like, “‘So and so’ handles environmental compliance, ‘so and so’ handles health and safety compliance….”
In fact, “it belongs to everyone,” says Schey. “It starts with integrity. You can’t pass that off to someone else.”
Over the past 12 months her title was changed from executive director for Global Compliance to executive director of the Global Ethics and Compliance program.
More recently Schey has undertaken a re-branding of the program. She has been focused on revising the code of conduct, developing more comprehensive training, and conducting risk assessments.
Revising the code
In the code area, GM first began years back with several small booklets that addressed different aspects of the code of conduct. Later they consolidated these into a single code of conduct booklet—120 pages long.
With a document of that size, “You know you have a problem,” says Schey. “No one is going to read through 120 pages.”
With the help of a consulting firm, The Ethical Leadership Group, the company reduced the code to19 pages. The idea
was to develop one document that could be presented to anyone in the company, anywhere in the world—and be easily understood. There are now many links and examples.
A lot of legalese was removed, much of it replaced by links. Where before the document offered eight pages on insider trading, that topic is now covered in half a page. If a reader needs more detail on the subject, a hyperlink takes that employee to the company’s eight-page insider-trading policy.
Lawyers have a
tendency “not to want to leave a single word out,” observes Schey. But developing a code of conduct is not the same thing as drafting an agreement or contract. Things don’t have to be quite so airtight.
The code revisions took more than a year to complete. The ethics and compliance office still receives calls asking for further clarification in this area or that, and the office continues to “tweak” the document, says Schey.
Like other corporations with an international
presence, General Motors has become something of a multi-cultural institution. (The company manufactures its cars and trucks in some 35 different countries.) This presents some challenges. Harassment in the workplace has become a key issue at GM as it is at other companies. Historically, this matter has been dealt with differently in separate parts of the world. “You need to be careful in the Middle East, for instance, where it can be viewed as offensive even to talk about the subject,” notes
Schey. In Latin America, by contrast, not commenting on how a woman is dressed can be deemed an insult.
‘Integrity,’ too, can be viewed differently in different cultures. “It’s not an ethical issue here—but a cultural norm” is something that Schey hears often overseas with regard to sexual harassment. In many countries, sexual harassment is not a violation of the law. “But we are a company that will not tolerate that,” says Schey. Somehow that message must be disseminated.
Schey is well suited for dealing with these sorts of anomalies. She describes her background as “hybrid”: she is half (Asian) Indian and half Swiss.
Several years back she did an assignment for the company in India. It convinced her that in global enterprises like GM there needs to be more “give and take” between headquarters and employees working in emerging markets.
Local, live employee training is one way that headquarters transmits the ethics and
compliance message. One must tread softly, though. “You just can’t come in with a club, and say, ‘We’re from the U.S., and this is how we do it.’”
The Foreign Corrupt Practices Act (FCPA), a U.S. law that makes it a crime for businesses to bribe officials of foreign governments, for example, is often not understood in the developing world. General Motors tries to explain to its overseas employees how and why the FCPA was adopted, and how General Motors’ policies often go beyond what
local law requires. Asked if the company was doing more FCPA training now, Schey answered, “Absolutely.”
General Motors does much web-based training, too, although much of this is being re-worked. The original training modules were developed by attorneys, and the content tended to be “very dry—it included everything but the kitchen sink,” Schey recounts. Past a certain point, “people just start tuning out.” There’s just too much in there.
She has been trying to cut the training
modules down from 60 minutes to 30-40 minutes. Instead of having ten questions at the end of each module, she’d prefer to have questions and answers interspersed throughout. It’s an attempt to make the training more interactive.
The two main training modules that they’re working on now are:
“Winning with Integrity” — basic code training that is
mandatory for every salaried employee. General Motors has 38,000 salaried employees in North America alone—and might have as many again outside North America, Schey says.
“Leading with Integrity” — a new training module for managers and supervisors. It deals with leadership issues, such as how to handle employees who report misconduct, and how to support a non-retaliatory workplace.
The key to any ethics and compliance program is training and communication, Schey observes. If
you don’t have that, “all the other stuff falls apart.”
People often ‘fearful to speak up’
In the course of her duties, Schey likes to get out and talk to people in the field. Senior managers have told her: “We don’t have a retaliatory workplace.” But often they don’t really know what’s going on in the work force, especially in developing countries. Often, “people are really fearful to speak up.”
That’s why live training is so important. It educates employees in
the use of reporting mechanisms in countries where employees may not have access to telephones or computers.
How does one report misconduct without a telephone or computer? An employee can write a letter. “It’s amazing how many letters come in to our CEO,” observes Schey.
Human resources has a crucial role to play in these emerging markets, too. Schey tells the company’s human resources officers: “You have a huge network. You are really on the front line. You need to emphasize
to these folks that they can report things to you” in places like India and Thailand. “You will have a better chance getting that message out than me.”
Schey is here today, gone tomorrow, after all. But the human resources officers are stationed in the developing countries.
The company has stepped up its risk assessment activities. Last year GM conducted an Emerging Markets risk assessment in which 70 employees participated. They identified the
highest risks in the company’s emerging markets and asked if appropriate ‘risk mitigants’ were in place. The top risks were found to be:
•Accounting and financial controls
Among these different risk areas, FCPA/anti-corruption has been absorbing the most time and effort. “It’s an area that we have been very vigilant with for years, but there are no guarantees in this area.”
People often violate the FCPA unknowingly. “This is how we do business in this country,” they say. General Motors has been conducting more live training globally in ‘anti-corruption’ these days.
The company has identified specialized compliance teams in its emerging markets area. Some teams—like those in ‘health and safety,’ and ‘quality’—are relatively savvy when it comes to compliance. Others are less so. The idea is that best practices can be shared among the different sectors
and teams; in this way, teams that are lagging can be brought up to speed.
A robust investigations group
After the Global Compliance office was formed in 2005, there were to be two co-executive directors—one for investigations and one for prevention. Schey, a lawyer who worked earlier in GM’s litigation group, was designated for the latter post.
This proved an “awkward” structure, however. You really need one person to go to in reporting wrongdoing. “You can’t
let investigations drive the compliance function,” says Schey. It’s too late at that point. The damage is already done. You need to nip problems in the bud. So now there now is one office—Global Ethics and Compliance—with the “ethics” added recently to help emphasize the importance of integrity.
Schey works closely with the investigations team (which runs the company hotline, among other things). They hold weekly meetings in order to identify recurring problems.
Schey has four
full-time people in her office and “leverages” other functional experts. Investigations, for its part, has two lawyers, a legal assistant, a security officer and an audit officer.
From her years of experience within the organization, Schey concludes that GM has “such a passion for integrity—from senior managers on down.” But in emerging markets employees often have little notion what senior managers even mean by integrity. That is where a centralized ethics and compliance office can
make a difference.
Andrew W. Singer is publisher and co-editor of Ethikos.
Reprinted from the September/October 2008 issue of Ethikos
© 2009 Ethikos, Inc. All rights reserved.
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