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The Importance of Organizational Justice

justiceA company is its own world.  A culture of ethics and compliance cannot exist without organizational justice.  If company managers and employees perceive that the internal justice system does not work, the company will be unable to foster the critical values of integrity and trust.  The company’s culture will become stale, distrust and fear will grow, and ultimately serious misconduct is more likely to occur.

Some companies have faced extraordinary challenges in this area.  Many years ago BP suffered from a significant perception of distrust and employees were raising serious concerns directly to Capitol Hill.  Eventually, BP appointed an independent ombudsman, former Judge Stanley Sporkin, to address employee concerns.  A number of companies have employed this model — appoint an independent ombudsman to ensure organizational justice.  It can be a very good solution, but it is not always the right response for a particular company.

If a company faces serious questions as to its commitment to organizational justice, serious remedies have to be implemented.  If the internal justice system is viewed as unfair or unresponsive, managers and employees will not trust the system and will not report suspected misconduct.

A company’s internal justice system requires a serious commitment, not only from the board and top management but from various internal functions.  Legal, compliance, internal audit, and human resources have to coordinate and cooperate with each other.  They each play an important role in investigating and resolving potential violations of a corporate code or the law.   These four functions are often the first to learn of potential misconduct and to collect employee concerns. They need to communicate and establish working relationships to collect employee concerns, promote employee reporting of misconduct, and react fairly and efficiently in response to concerns requiring investigations or follow up.

A company that creates an effective program of organizational justice has an important asset that can be critical to the operation of an effective ethics and compliance program. Compliance information is the lifeblood of a compliance program. A company with a culture of ethics and compliance has trust and integrity as the cornerstones of its values. It is an important asset that sustains productivity, profits and employee morale.

The rules for an organization’s judicial system have to be publicly available to everyone within the company.  The guidelines have to be drafted clearly and followed.  A system without internal rules and guidelines is not a system at all.  The procedures and standards have to be applied equally across the organization.

A system of organizational justice depends on five important principles.account2

  1. Effective Reporting Avenues – A company has to offer a variety of reporting avenues for managers and employees. At least one has to offer anonymity. Whether one or multiple avenues are offered, senior executives have to encourage and communicate the importance of reporting misconduct or concerns. In the absence of a vibrant and credible reporting system, managers and employees will ignore misconduct, undermine corporate integrity and slowly erode any chance of creating a culture of ethics and compliance.
  2. Equal Discipline – Many companies establish a committee that reviews internal investigations and disciplinary actions. It is absolutely critical that the system impose discipline consistently without regard to the seniority of the offender. Unequal discipline undermines any chance for organizational justice.  A senior official who commits the same offense as an employee should receive the same discipline, unless there are good reasons to deviate one way or the other.
  3. Prompt Resolution – The old adage, justice delayed is justice denied, applies to organizational justice. Routine investigations have to be resolved within 60 to 90 days. Employee concerns should be acknowledged promptly and matters requiring investigation should be quickly identified and assigned. Investigative staff has to respond to communicate regularly with complainants to keep them informed as to the status of the investigation without discussing the details of the investigation.
  4. Non-Retaliation Against Whistleblowers – A company has to communicate at every conceivable opportunity its justice2commitment not to retaliate against complainants/whistleblowers. It is an important point to make. The message should be communicated in all policy documents relating to investigations, and should be communicated orally during meetings with employees and complainants.
  5. Compliance Program Improvements – The results of internal investigations should always be monitored and analyzed for potential compliance program enhancements. Internal investigations often reveal weaknesses in internal controls, especially in the financial area. A company has to take these important findings and then use them to design enhancements to the compliance program. If there is a disconnect between the investigation function and the ethics and compliance program review process, a company is ignoring a valuable source of information needed to monitor its compliance program.

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