Straightening the Crooked Road of Ethics
in Risk Management
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• Lance J. Ewing, IPG Leader Real Estate and Hospitality
& Leisure, AIG
Former RIMS President, Risk Manager of the Year
Over 20 years in risk management and insurance
Bald guy
• Carter E. Boardman, Director of Contracts & Risk
Management, Merrick & Company
Over 17 years in risk management and insurance
Past President of RIMS Rocky Mountain Chapter
Guy with the great hair
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What to Expect
• What is ethics and ethical behavior in the
insurance and risk world
• How to establish an ethics program
• Conflicts of Interest
• One risk management company approach to
ethics training
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“In school we learn that mistakes are bad,
and we are punished for making them. Yet, if
you look at the way humans are designed to
learn, we learn by making mistakes. We
learn to walk by falling down. If we never fell
down, we would never walk. Then we would
never run.”
― Robert T. Kiyosaki, Rich Dad, Poor Dad
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Ethics
PERSONAL
PROFESSIONAL
COMPLIANCE
I do not feel good about it!
I have damaged my reputation!
I am going to lose my license!
LEGAL EXPOSURE
I am getting sued!
CRIMINAL EXPOSURE
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What is Ethics in Risk Management?
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Defining the “It”
“Ethics”– the moral principles or compass of a group or
individual. Ethics is solely developed over time and
influenced by work and life histories.
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Where in Risk Management Do Ethical
Problems Arise?
Causes of ethical dilemmas evolve from two social flaws:
GREED AND IGNORANCE
Most RMs can clearly delineate GREED in most dilemmas
presented
Most RMs struggle with IGNORANCE dilemmas that they face due
to conflicts of interest
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Real Life Ethics
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What Really is a Conflict of Interest
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Where Do Conflicts Come From?
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CONFLICT OF INTEREST
A conflict of interest (COI) occurs when an individual or
company/organization is involved in multiple interests and must
make a decision, which could possibly taint the motivation.
Some Sample Questions to Ask:
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Is there a financial, social or personal gain?
Can you influence the outcome?
Are family, friends, social acquaintances or personal associations involved?
Have you made any promises or commitments (quid pro quo)?
Have you checked with your company policy?
Would you be comfortable if your colleagues and/or boss became aware of your
involvement/decision?
What if it appeared on the front page of the local paper?
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Cases: What do you as the Risk Manager
or the Broker Do?
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Ethical Case #1
Rachel, is the VP of Risk Management for a major hotel chain. She has heard some rumors about
one of her property risk managers, Russ. Russ is her risk best manager, by any performance
measure. His hotels have the best safety record and positive financial growth, below average claims,
excellent customer feedback and consistently does well on audits/inspections. In fact, Russ
consistently is rated higher than the other hotel risk managers of the chain. Because of this, Russ is
often mentioned as a candidate for promotion.
Rachel was concerned, however, about reports that Russ was padding his budget and using the
money to pay his two employees additional money since the company had made major reductions
in force and cutting bonuses in half. Russ was not pocketing the money himself, but was using it as
unrecorded disbursements to his crew as performance bonuses, overtime incentives, and off the
clock wages. Clearly in violation of the company’s policies, he wasn’t actually taking the money out
for personal gain, but was using it as an incentive for his team. On the other hand, because the
funds are not accounted for as income, the extra “wages” to Russ's employees have no payroll taxes
taken out. The company would have to answer to the taxing authorities.
What action should Rachel take related to Russ?
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Ethical Case #2
Andy is a sales representative for a large insurance company. He just started with the
company 9 months ago. A major concern he has is about a product he sells most. The
product is insurance and savings plan together under one policy. It provides protection for
death, savings that can be used for retirement, or an emergency fund that can be retrieved
quickly.
The problem Andy faces is that this insurance product is more expensive to purchase, and
for young families it provides the least amount of protection in case of premature death of
the breadwinner. Another drawback is the low return on savings. The company drives sales
of this product because it is more profitable. The commission Andy earns is 125 percent of
the first year’s annual premium, so it is very profitable for Andy.
There is another product that is significantly cheaper, that provides much greater
protection, and at the same time would let the client invest the difference in any other
product that provides a greater return. But the commissions paid by the company are
exceptionally low (30%), and management is not overly thrilled when these policies are
sold.
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Ethics Case #3
Terry has been the Vice President of Risk Management for a
large Entertainment Company for two years. His new broker
has asked Terry to dinner to discuss this coming year’s
casualty renewal with the incumbent carrier underwriter. His
broker said that after dinner he would take Terry to the
Monday Night Football Game where his company has box
seats.
Should Terry go? To dinner? To the game?
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How do Risk Managers Help Their Company
with Ethics
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Managing Ethical Behavior in the Workplace
1.
Code of Ethics
2.
Ethics Policies and Procedures (including investigation)
3.
Travel, Entertainment, Gift, Nepotism, Dating Policy
4.
Hotlines...Compliance and Ethics
5.
Ethics Committee
6.
Training
7.
Communications (newsletter, email blast, safety meetings)
8.
Table Top Exercises…What if?
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You Cannot have an ANSWER/SOLUTION for
EVERY Ethical Dilemma.
EXPECT THE UNDEXPECTED
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Ethical Behavior in the Workplace
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Merrick & Company Background
• Merrick & Company is an employeeowned $100 million engineering,
architecture, design-build, surveying, and
geospatial solutions professional services
firm.
• Founded in Denver, Colorado in 1955
• In the beginning, Merrick was primarily a
civil engineering and surveying company
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Merrick & Company Background
• The firm steadily expanded to embrace all of
the traditional engineering disciplines as well as
architecture
• Merrick presently has 480 employees across 19
offices in Alaska, Colorado, New Mexico,
Georgia, Pennsylvania, Tennessee, Texas,
Washington DC, Canada and Mexico
• Performs services internationally
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Before Merrick’s Ethics Policy
Before Merrick prepared its own Ethics
Policy it relied on its Corporate Values,
which includes ethics:
• Ethics: “We demonstrate qualities of integrity,
responsiveness, and professionalism.”
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What Brought Merrick to Have an Ethics Policy
• Merrick did not prepare an ethics policy due
to concerns with ethical behavior of its
employees
• In 2006 Merrick’s New Mexico offices
advised that New Mexico PE licenses would
require 4 hours of ethics training every 2
years
o
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Merrick hired a consultant to prepare and provide 2 hours
of ethics training
1st ethics training class was provided in December 2006
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What Brought Merrick to Have an Ethics Policy
• In 2007 Merrick prepared its own ethics
training “Ethical Dilemmas – What
Should I Do”
• In 2008 Merrick prepared its 1st Business
Ethics Policy
Was not aware that Merrick did not have a policy
o It seemed important and appropriate to have a
policy if we were going to provide ethics training
o
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WHY ETHICS?
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WHY ETHICS?
• Merrick performs over 70% of its
services for federal, state and county
governments
• Merrick also performs its services for
foreign governments
• Cannot afford to lose this business due
to unethical behavior
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The Honest Engineer
"I consider the honest engineer the most valuable asset of
this Government. These are the reasons: dishonesty in any
other branch of the service can be overcome in some way.
In some way we can recover from it: in some way we can
rally from it. But dishonesty on the part of the engineer is
always so far reaching, in the loss of property, of money, of
time, of human lives, that dishonesty on the part of the
engineer is irreparable.”
– President William Howard Taft at Georgia Tech, May 11, 1911.
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The Three Questions to Ask Yourself Whenever You Face
an Ethical Dilemma
1.
Is it legal?
In other words, will you be violating any
criminal laws, civil laws or company
policies in this activity?
2.
Is it balanced?
Is it fair to all parties concerned both in the
short-term as well as the long-term?
Is this a win-win situation for those
directly as well as indirectly involved?
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The Three Questions to Ask Yourself Whenever You Face
an Ethical Dilemma
3.
Is it right?
Most of us know the difference between right
and wrong, but when push comes to shove,
how does this decision make you feel about
yourself?
Are you proud of yourself for making the
decision?
Would you like others to know you made the
decision you did?
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“The Power of Ethical Management”, Kenneth Blanchard and Norman Vincent Peale
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Merrick & Company
Business Ethics Policy
• A living document and was updated on
March 7, 2013
• The purpose of Merrick’s policy is to
emphasize standards of business ethics to
be met in all business transactions.
• These standards are especially stringent in
doing business with the U.S. Government
because even the “appearance” of
impropriety can erode confidence in
Merrick.
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Merrick & Company
Business Ethics Policy
• The policy provides guidance to all
employees with respect to business
ethics where improper activities could
damage the Merrick’s reputation and
result in adverse consequences to the
Merrick and its employees.
• Merrick’s policy has been drafted with
the federal government requirements
in mind.
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Merrick & Company
Business Ethics Policy
BUSINESS CONDUCT
• Merrick shall conduct its business
activities and relations with clients,
suppliers, employees and
governmental agencies in accordance
with the highest degree of integrity
and honesty.
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Merrick & Company
Business Ethics Policy
EMPLOYEE’S COMMITMENT
• Every individual employee is to
adopt and have a personal
commitment to this business
conduct.
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Ethics Hotline Poster
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Merrick & Company
Business Ethics Policy
RETALIATION PROHIBITED
• Merrick prohibits retaliation against
an employee for making a good-faith
report of a violation under this policy
or for assisting in a complaint
investigation.
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Merrick & Company
Business Ethics Policy
• Merrick has chosen not to define a dollar
amount that is or is not acceptable to the
Company
• Employees are to use their own judgment and
not do anything or accept anything that makes
them uncomfortable
• Employees are to use the policy as a guide how
Merrick interacts and treats its clients, vendors
and associates
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New Mexico Code
of Professional Conduct
Merrick adheres to the following
definition of “valuable consideration”:
“Any act, article, money or other
material possession which is of such
value or proportion that its acceptance
creates a clandestine obligation on the
part of the receiver or otherwise
compromises his ability to exercise his
own judgment.”
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Annual Business Ethics Training
• Merrick provides Business Ethics
Training in its offices on an annual
basis
• All employees are invited to attend
• Try to make a dry subject into an
interactive and fun experience
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Other Merrick Policies that Deal With Ethics
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Anti-Harassment Policy
Drug-Free Workplace Policy
Travel Policy
Expense Reporting Policy
Time Reporting Policy
Use of Vehicles on Company Business Policy
Proprietary and Confidential Information Policy
Anti-Corruption Policy
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Ethical Behavior
“No man can always be right. So the
struggle is to do one’s best to keep the
brain and conscience clear; never to be
swayed by unworthy motives or
inconsequential reasons, but to strive to
unearth the basic factors involved and then
to do one’s duty.”
– Dwight D. Eisenhower, former U.S. President
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Is It Ethical? Suggested Tests for
Evaluating Actions
Harms Test - Do the benefits outweigh the harms, short term and long
term?
Reversibility Test - Would I think this was a good choice if I traded
places?
Colleague Test - What would my professional colleagues say? What
does my professional code of ethics say?
Legality Test - Would my choice violate a law or policy of my
employer?
Publicity Test - How would my choice look on the front page of
tomorrow’s newspaper?
Common Practice Test - What if everyone behaved this way?
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Is It Ethical? Suggested Tests for
Evaluating Actions
Wise Relative Test - What would my wise old aunt or uncle do? Would
I want them to know what I am doing?
The Hiding Test - Do I want people to know what I am doing?
The Self-Respect Test - How will I feel about myself after making this
choice?
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QUESTIONS?
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