Barbara Brooks Kimmel: Are ethics bonuses ethical? 
Monday, October 8, 2018 at 8:08AM
Barbara Brooks Kimmel in Trust, trust bonuses

The newly appointed CEO of Novartis, Vas Narasimhan, announced last month that he would be linking employee bonuses to ethics as part of a strategy to rebuild the company’s reputation.

Specifics of the scoring system weren't divulged.

Novartis' plan raises some interesting questions in the trust, ethics and compliance community. Among them, is it ethical to pay people to act ethically or is it a form of bribery? Will these bonuses elevate ethical behavior? What is the minimum “acceptable” behavioral standard to receive a bonus?

We asked Trust Across America’s 12-member Trust Council to weigh in.

Here are some of their answers:

Art Barter wouldn't pay ethics bonuses . . . 

I personally would not take the approach Novartis has taken just because paying money for a required behavior is too much like a bribe and I believe it sends the wrong message to the organization.  It also says that it is ok to act unethically we just won’t provide you a bonus if you do.  I think requiring behavior in accordance with the company values is a better long-term solution.  

I believe that a focus on culture, understanding why it is important for the organization to conduct itself in accordance with its core values and spending training dollars to ensure this each and every day is a better investment than providing an annual bonus award.  

Bob Vanourek likes the Novartis plan . . . 

This approach is a good idea for Novartis. We can’t change human nature—there will always be some unethical people. But we can influence human behavior. We influence human behavior through many means: education and training, personal examples and role models, good leadership, shared norms and values, rewards and punishments, and more. Good companies reward (or punish) employees with scoring systems for both achieving goals (results) and “how” those goals are achieved. Scoring a 1 on values and behavior at Novartis (1 = below expectations) makes an employee ineligible to receive a bonus and likely signals they may face demotion or termination. It is a realistic way to grab people’s attention that unethical behavior will no longer be tolerated at this firm. 

Randy Conley is on board with ethics bonuses . . .

I applaud Novartis’ efforts to encourage and systematize ethical behavior. Behaving ethically should be the “ticket of admission” for even having a job, but many organizations don’t view it that way. Novartis is taking proactive steps to enforce consequences for salespeople who don’t meet expectations. 

Deb Krizmanich likes the innovative approach . . .

Novartis is trying. We don’t know the context or risk appetite they are working from so it is hard to objectively review their strategy. To innovate well we have to accept failure and partial successes, learn, pivot and go at it again. The fact that organizations are trying is, in my mind, the thing of value. They will engage in many critical conversations around this project and that dialogue with their employees, partners and board is priceless in the fight for ethics. 

Barton Alexander thinks Novartis is on the right track. . . .

When discussions about ethics are taboo, and individuals are rewarded for unethically achieved results, the culture quickly adapts to this reality without regard to official policy. In this respect, Novartis is on the right track by explicitly withholding rewards for employees who behave unethically. Even more telling will be whether discussion of ethics is normalized and unethical behaviors consistently derail careers at the company.

Charles H. Green said, Hmm -- this doesn't sound right. . . .

There is something prima facie anti-ethical about paying people money to behave ethically. If you have to be paid to be ethical, you’re not. And by reducing ethics to behavioral inducements, the system devalues the ethicality of all actions, regardless of their objective desirability. This reduces ethics to the category of compliance and sales quotas. 

Bob Whipple has doubts too. . . .

Whether the Novartis plan is a good idea to resolve the ethical dry rot is debatable. The devil is in the details, but I would raise a caution flag. Essentially they are saying that meeting expectations or being a role model for ethical behavior will earn employees extra pay, while not meeting expectations means you get no extra pay, and it could lead to termination.

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So the Trust Council jury is split about whether ethics bonuses are ethical.

But it's clear that to be meaningful, ethics and trust must remain a top-down strategy built from the inside out. Only then will they have a long-term impact on organizational reputation.

 

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Barbara Brooks Kimmel is the CEO and Cofounder of Trust Across America-Trust Around the World whose mission is to help organizations build trust. She also runs the world’s largest global Trust Alliance and is the editor of the award-winning TRUST INC. book series. In 2017 she was named a Fellow of the Governance & Accountability Institute, and in 2012 she was recognized as one of “25 Women who are Changing the World” by Good Business International.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
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