Do the right thing...

Jude Curtis, chief ethics and compliance officer, PricewaterhouseCoopers US, tells Colette Steckel why ethics and compliance is the responsibility of everyone

If there is one thing that sums up the stance on ethics and compliance at PricewaterhouseCoopers US, it is the statement splashed on a corporate poster hanging in the office of the chief ethics and compliance officer. 'There is no chairman of ethics and compliance,' it says, 'there are 29,000.' Actually, says Jude Curtis, whose office we are in, the poster is a bit out of date; there are now over 30,000 staff and partners in PwC's US firm, which, by my reckoning, makes for a lot of chairmen. But, of course, that would be missing the point, which is that an organisation's strong ethical culture is not the responsibility of one individual but the responsibility of everyone. This, notes Curtis, is important. 'PricewaterhouseCoopers is a collaborative organisation with a staff of incredibly smart and well-intentioned finance professionals. If you have a number of people with different experiences and expertise who are able to consult with each other on ethical or compliance issues, I think the chances of getting the right answer are better.'

Curtis likens this workplace camaraderie to how one might act when faced with a difficult issue in one's personal life. 'I think a lot of us face situations where you have a choice whether to do the right thing,' he continues. 'If you face a difficult issue in your personal life, you consult your family, your trusted friends, maybe even a mentor. At the end of the day, those inputs will help you make the right decision. It's the same in business, only the stakes are much higher.'

He points to the devastating cascading effect of an ill-judged decision, which can potentially affect an individual, a firm, a client and, in the case of audit work, the capital markets. One of Curtis' perennial examples to illustrate this is the well-publicised story of Walter Pavlo, a former billings and collections manager at MCI, who served two years in federal prison for wire fraud and money laundering over a six-month period in 1996. Pavlo and associates defrauded MCI customers out of US$6m. Pavlo, now an author and speaker on white-collar crime, has since publicly expressed surprise at his own conduct. This, says Curtis, raises the question of why misconduct happens when individuals claim to abide by their own personal ethics.

Why misconduct occurs isn't clear-cut but, argues Curtis, a lack of an ethical culture can contribute to an ethical lapse in an individual. Research into workplace ethics and behaviour, conducted and published in 2007 by the Ethics Resource Center (1), a US non-profit research organisation, bears out the need for a culture where the personal integrity and professionalism of individuals are encouraged and supported. According to the research, which surveyed over 3,000 US workers, 98% of those in a weak ethical culture observed misconduct compared to 24% in a strong ethical culture, while 66% of those in a strong ethical culture who saw misconduct reported it compared to 35% in a weak ethical culture.

Curtis recognises that the accountancy profession, like other professions, is one that tends to have an inherently strong ethical culture. 'Being a professional is about being trusted. You trust your auditors and advisers, your lawyer, your doctor... Every profession will have some sort of ethical framework; for accountants it comes from the fact that people look to them as trusted financial advisers. My experience from working in PwC and in previous roles is that accountants have strong moral compasses.'

Difficult

That doesn't mean, of course, that accountants don't regularly encounter tricky issues that test their ability to take the right course of action. 'I think many of us try to see life as black and white,' continues Curtis. 'In that case, it's easy to distinguish between right and wrong. But when things get greyer, making a decision becomes more difficult. Being ethical, in my view, is doing the right thing in the circumstances; the right thing in relation to those who might be impacted.' Curtis notes that the accounting profession is heavily regulated in the US. He cites the complex rules governing auditor independence, state rules governing the practice of accountancy, and professional standards governing data protection and client confidentiality, all of which make compliance a challenge in today's fast-paced business environment. 'What we're doing at PwC is helping our people to chart their way through a difficult regulatory environment in the US. There are challenges they face and it can be difficult at times.'

This is where a chief ethics and compliance officer comes in. 'The principal role is to lead the effort within the organisation; to foster ethics and compliance and to make sure that everyone understands their importance,' says Curtis, who joined PwC three years ago. He notes that an ethics programme and various compliance functions were already in place when he arrived, but that his task was to bring ethics and compliance together and tailor a programme geared to the unique needs of the organisation.

The foundation of a strong culture of openness and professionalism is a tailored code of conduct, says Curtis; in PwC's case it's a pocket-sized booklet distributed to all staff, which articulates firm values and provides principles to guide individuals through difficult situations. But, acknowledges Curtis, while a code is essential it isn't effective on its own. 'A code of conduct is principles-based so the guidance should help but it won't give you explicit direction, so you need to have other resources in place, which will depend on the nature of the organisation.' A well-oiled professional firm like PwC has myriad resources at its disposal to assist staff, including a training programme for new recruits, entitled 'Navigating the Grey', which leads trainees through the maze of ethical dilemmas they may encounter, a call-centre to provide answers on ethical and compliance issues, ethical champions from specialist groups such as compliance, HR and risk management, tools that articulate and facilitate compliance requirements on a state-by-state basis, and an anonymous helpline.

Mentoring

Clearly, professionals working for smaller firms or sole practitioners won't have access to such resources, but Curtis argues that there is scope to nurture an ethical environment through the development of mentoring relationships within the organisation, or through professional bodies that offer guidance. 'A smaller accounting firm won't have the breadth of resources that we might have at PwC but they definitely have resources. In a smaller organisation there would tend to be more interaction. A junior staff person in the office would feel free to come up to the most senior employee and say, "I've got an issue, I'd like to talk about it." No matter how small or large the organisation, openness is key.'

Creating a strong ethical culture means that the leadership is visibly encouraging staff to speak up, adds Curtis. 'Leaders need to be role models, which is incredibly important. If you don't see the leaders setting the example, you could send the wrong message to staff.' His remarks are echoed in a report published last year by the Ethics Resource Center (ERC) in partnership with other non-profit organisations interested in ethics and compliance. The report, entitled Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer, concludes that an empowered chief ethics and compliance officer (CECO) with broad authority, access to the chief executive and the board, and sufficient financial and other resources is crucial to an organisation's integrity.

The report was a retort to a Forbes article published in 2006, which claimed that, in recent years, companies have become obsessed with ethics and compliance following highly-publicised corporate scandals and ethical lapses. CECOs have in fact been around for a lot longer, since 1991, when the Federal Sentencing Guidelines were put in place. The guidelines state that companies with ethics and compliance programmes could receive preferential treatment during prosecutions for white-collar crimes. But the real sting in the tail was the claim that CECOs have become trendy in recent years, yet some experts fear they are merely window dressing. Naturally, the ERC took umbrage. 'CECOs simply can't be window dressing if companies are to be truly committed to operating on a high ethical plane,' said Scott A Roney, co-chair of the CECO Definition Working Group, in a press release. 'Where appropriately designed and situated in an organisation, ethics programmes - and the officers who lead them - can and do make a difference. When the CECO's role is structured the right way, a proper tone is set from the top and an ethical culture grows and misconduct is reduced. Where that is not true, you can do more harm than good.'

Curtis responds to the window-dressing claims with an analogy: 'A chief financial officer is ultimately responsible for the finances of an organisation, but that does not eliminate the responsibility business leaders have for finances or the responsibility that everyone in the organisation should feel in following company policy in respect of financial matters. The CFO, much like the CECO, would be responsible for making sure the right policies are in place and that the right guidance and direction are there,' he says.

Curtis agrees that staff and partners look to him as the standard-bearer for ethics and compliance at PwC, but he argues that he wouldn't be doing his job well if he alone is responsible for assuring the firm meets the highest standards, which brings us back to that poster. 'There needs to be an expectation at the leadership level, at the junior level and everywhere in between. Everyone should be on board. Our ethics and compliance programme would be less successful if we didn't have that extent of collaboration.'