The following article was prepared by Mike Taylor, C.P.M., for distribution to ISM affiliate newsletters

Compliance & Ethics Policy

Why should a company implement a standard set of compliance and ethics policies?
Why do I care if my company has a published set of ethics policies?


The United States Sentencing Commission :

Of particular interest is this overview of the Federal Sentencing Guidelines for corporations:  Overview of the Organizational Guidelines

Organizations, like individuals, can be found guilty of Criminal conduct, and the measure of their punishment for felonies and Class A misdemeanors is governed by Chapter Eight of the sentencing guidelines.

Here is a link to the whole guide on corporations


Corporations can be found guilty of wrong doing and can receive fines and sentences. Corporate leaders and personnel can go to jail. Just ask some of the Enron people.

Employees acting within their defined scope and company procedures can still cause a corporation to be found guilty. An employee defense might be successful if the employee can claim they were only acting as directed.

Employees acting outside of their defined scope "rogue employees" still cause corporations to be found guilty, particularly if the corporation should have known what was going on. In this case the 'rogue employee" might have a much harder time avoiding jail.

Corporations can defend themselves by cutting an employee loose - blaming the employee and claiming that they didn’t know about it or that the employee was violating company policy? 

Corporations can also mitigate fines and penalties by having an effective compliance and ethics program.

Examples of employee wrongdoing:

What kinds of illegal actions could an employee take which could get the company (or the individual) in trouble?

What constitutes an effective ethics program?

§8B2.1. Effective Compliance and Ethics Program

What kinds of guidelines should we have?

It doesn’t have to be fancy. In a small company I can imagine a one page document of simple text and bullets, signed by the president and distributed to all employees. Here are some suggestions for subjects which are worth including:


Surprisingly, there are many companies who offer compliance and ethics training programs and advice. Here are a couple of examples:

Bottom Line:

If I am the purchasing manager in a small company without a formal policy, would it be worth trying to identify and develop some ethics  guidelines? Yes!  My primary risk as an employee is that the company could claim I had gone "rogue", acting outside of company policy. The risk for the company - is that they have no guidelines and policy preventing employees from unethical - and potentially illegal conduct.

Don’t burn your bridges with the boss – he could take it the wrong way – but I’d start trying to document company ethics policies in a non-confrontational way.  It could save both of you a little jail time.

Good luck!

Mike Taylor

(Disclaimer: I am not a lawyer and this isn’t legal advice – not enough big words – just common sense)

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