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ETHICS:. DON’T BE A FROG IN BOILING WATER. PRESENTERS. Laura Clark, CPA Risk & Regulator Consulting Director

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  2. PRESENTERS Laura Clark, CPA Risk & Regulator Consulting Director Laura has over 17 years of experience within the insurance industry. Currently, she performs statutory, risk-focused examinations on behalf of state insurance departments in accordance with the NAIC handbook. Additionally, she works on large complex assignments, including reviews of Form A filings and other Financial Analysis projects. Prior to joining RRC, Laura was a senior manager with PwC where she provided audit services to life, health, and property casualty insurance companies.

  3. PRESENTERS Matt Bjorkman, CPA Talcott Resolution Vice President and Chief Auditor As Vice President and Chief Auditor at Talcott Resolution, Matthew is responsible for developing the strategy of the internal audit department, executing the audit plan, and reporting key findings to the Audit Committee of the Board of Directors. He has over 15 years of experience within the insurance industry, and prior to joining Talcott, was a Director at Risk & Regulatory Consulting, LLC and a Senior Manager in the public accounting practice at Deloitte.

  4. SETTING THE STAGE Courtesy of the hit movie Billy Madison... https://www.youtube.com/watch?v=wRT62J80iyI • Three learning objectives: • Understand what is ethics, key elements of an ethics policy and applying ethical standards in the workplace • Understand the ethical framework • How to deal with ethical issues in the workplace

  5. REAL WORLD EXAMPLES Elon Musk, Chief Executive of Tesla Inc., and soon to be former chairman of the Board of Directors for the company ( as of October 10, 2018). The SEC alleged Mr. Musk misled investors with his messages posted via Twitter on August 7, 2018 where Mr. Musk claimed he had obtained funding to take Tesla private at a price of $420 a share. Settlement with SEC requires Mr. Musk to step aside from the chairman role for three years, and for he and Tesla to each pay a fine of $20 million without having to admit or deny any wrongdoing.

  6. REAL WORLD EXAMPLES In 2015 Volkswagen revealed as many as 11 million vehicles contain software allegedly used to cheat emissions standards and disclosed a $7.27 billion charge to earnings. In October 2018, three employees of the car unit Audi, owned by VW, are suspected of falsifying documents to obtain certifications needed to export vehicles to South Korea. Former Audi CEO, Rupert Stadler has been in jail since June of 2018 on allegations that he tried to tamper with witnesses in the emissions test scandal.

  7. REAL WORLD EXAMPLES In 2015 the largest scandal in modern sports history came to light that involved senior officials of the International Federation of Association of Football (“FIFA”) who had accepted more than $150 million in bribes and kickbacks that included the buying of votes for hosting World Cup events and for power positions within FIFA. Many of the officials involved have been charged in U.S. courts resulting in guilty pleas, convictions with jail time, and the forfeiture of bribes received.


  9. DEFINITIONS Ethics is “the discipline of dealing with what is good and bad or right and wrong, or with moral duty and obligation.” Webster’s Third New International Dictionary

  10. DEFINITIONS Ethics is “an organized way in which one goes about understanding whether human behavior conforms or fails to conform with a given set of rules or customs for acceptable behavior.” – Agent & Brokers Education Network

  11. DEFINITIONS Ethics is “a set of regulations that guide professionals in the performance of their duties. It is also known as code of conduct.” • Code of conduct - A compilation of set of rules or regulations to be adhered to. • Conduct is behavior, attitude and character exhibited by anyone within and outside the working environment


  13. GENERAL REQUIREMENTS OF AN ETHICS POLICY An Ethics Policy: • Establishes and organization’s values and expectations • Expresses the organization’s commitment • Provides a means/mechanism to report possible violations • Provides a monitoring process • Identifies ethical issues • Identifies supporting policies and documents

  14. KEY ELEMENTS OF AN ETHICS POLICY • Professional dress • Business expenses • Gifts and entertainment • Conflicts of interest • Confidentiality • Work/life balance • Security and data protection • Whistle blowing

  15. CODE OF ETHICS • Should be a resource for everyone, including officers, managers and employees, as well as the people with whom the company does business, such as agents, vendors, consultants and other business partners. • Serves as a guide for making good decisions and conducting business ethically. • Intended to prevent the use of individuals’ official position or authority for the benefit of themselves or another. • Addresses actual conflicts of interest, but also the “appearance” of such conflicts when performing official duties.

  16. WAYS TO SHARE CONCERNS An ethics policy should outline how a company’s personal can report or share concerns regarding violations of the code of ethics or the law. • Talk to a manager • Contact human resources • Contact law and compliance • Method to anonymously report violations

  17. ANONYMOUS REPORTING Use of an outside service provider for anonymous reporting is common. • Reporting can be performed via phone or internet • Policy should be established for the handling of report intakes, review and response • An internal designated system administrator should be appointed • Access to the system should be limited to key investigators, compliance officers, legal advisors and internal audit

  18. ETHICAL STANDARDS Ethical standards are developed using different approaches: Utilitarian: Do the least harm Fairness of Justice:Equal treatment of all Common Good: Improve the welfare of all Virtue: Improve individually

  19. ETHICS IS NOT Ethics is NOT: • About feelings • Based upon religious beliefs • Based on not breaking the law • Acceptable behavior • Doing what you “think” is “right” • Managed or trained

  20. ETHICAL STANDARDS A code of ethics is comprised of ethical standards that could include: • Policies on harassment and discrimination • Identifying and disclosing conflicts of interest • Protection of intellectual property and information security • Customer and employee privacy • Acceptable gifts and entertainment • Managing government relationships


  22. ETHICAL FRAMEWORK Moral Awareness Moral Decision Making Moral Intent Moral Action

  23. 1. MORAL AWARENESS Recognize ethical issues when you see them

  24. BARRIERS TO SEEING ETHICAL ISSUES • Pleasing authority • Fit in with the group • Blinded by bonus or quota • People see what they expect to see • Slippery slope

  25. WHEN FACED WITH A MORAL ISSUE • Take a few seconds to pause and reflect. • Listen to your “gut” – do you have any concern or guilt? • Would you be comfortable explaining?

  26. 2. MORAL DECISION MAKING Have the ability to reach a defensible resolution of the question as to what is the right thing to do in that setting

  27. 2. MORAL DECISION MAKING • Sometimes there is a clear right and wrong • Other times we may be unaware of the many influences on our thought process

  28. 3. MORAL INTENT Desire to do the right thing

  29. 3. MORAL INTENT While we may have the desire to do the right thing, we may rationalize to do the wrong thing.


  31. COMMON EXCUSES I’ll lose my job if I don’t. My boss told me to. I have to do it to get ahead. Everyone does it. It’s expected. The organization won’t notice What’s the big deal.

  32. 4. MORAL ACTION Be able to act on that intent


  34. ETHICS IN THE WORKPLACE According to Dilbert… https://www.youtube.com/watch?v=hIU38PTtD3k

  35. BENEFITS OF FOSTERING AN ETHICAL WORKPLACE • Creates a solid foundation • Cultivates an environment of teamwork • Creates consistency in standards • Ensures policies are in place and enforced • Cultivates growth


  37. HOW TO ACHIEVE AN ETHICAL WORKPLACE Communications Training Appraisals Monitoring and Reporting

  38. WHAT IF AN ETHICAL ISSUE ARISES? Make sure you.. • Have the facts • Have documentation • Have first hand knowledge What can you do? • Demonstrate ethical behavior • Lead by example • Find a common ground with those that may have acted unethically • Do not get pulled into the unethical behavior

  39. HANDLING AN ETHICAL ISSUE Question, question, question…and when you are done…question some more • What are the facts? • Who was involved / affected? • What are the primary causes? • What principles will be upheld? • What is the best case / worse case scenario? • What are the possible solutions? • What is your recommendation?

  40. RECAPPING WHAT WE HEARD TODAY From an episode of The Office… https://www.youtube.com/watch?v=V1Xk_w9PHyE

  41. THANK YOU Laura Clark, Director Laura.Clark@riskreg.com Matthew Bjorkman, VP & Chief Auditor Matthew.Bjorkman@TalcottResolution.com 302451

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