ETHICAL COMPANIES

Techniques and strategies may vary among ethical companies; there are
a handful of tenets, however, common to all ethical companies. Those
tenets include:

Free information flow to board: organizations should strive to have
their top compliance officer designated as a C-suite position. Board
directors should ensure that direct lines of communication exist for
the top compliance officer.
Anonymous reporting mechanisms: Anonymous tips are the leading
detection tool for fraud, with the 40 percent of frauds are initially
detected through tips.
Leadership by example: Employees watch top management very closely.
When top management does not exemplify the highest ethical standards
such conduct plants the seeds of rationalization for committing fraud.
Enforce superb ethics policies: Non-enforcement of known violations or
inconsistent, seemingly surreptitious enforcement of company policies
breeds confusion and possibly discontent strong enough to fuel
rationalization for committing fraud.
Inspired training programs: Orientation and ongoing training programs
educate, empower and motivate the workforce to report fraud.
Alignment of incentives with organizations values and goals: ‘buy-in’
mechanisms such as stock options and bonus pools can benefit
organizations by reducing conflicts between personal gains and
corporate success. However, incentives can illicit dysfunctional
business processes and financial statement fraud. Organizations should
look for ways to use incentives to reward acts of integrity as well as
revenue-generating business activity.