Annual Business Meeting

"Ethics: A Leadership Perspective" Panel

Attendees heard a report on the Society's financial status, ratified the election of Society leaders, and saw the officers take the oath of office. In his first speech as the Society's new president, James L. Britt, CPCU, thanked his predecessor, Betsey L. Brewer, CPCU, for her leadership during the past year. Britt also talked about his focus during the next year. "Two words define where we're headed and my theme for the year, ending with the meeting in Philadelphia. They're the super 'hs'—heritage and horizons. We are an organization with almost seven decades of heritage. Founded in Philadelphia, we'll be returning to our roots next year." The Society has already begun working on the horizons ahead, such as the new shared vision approved by the Board, he said. As Baby Boomers look to retirement, there will be many leadership positions available for Generations X and Y members to "take this great organization to new horizons," Britt said.

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The panel began by defining ethics. "Ethics has to do with relationships," Baglini said. "And if there's any business that depends more on relationships than risk management insurance, I don't know what it is. We're also in the trust business. To me, trust is the overlooked principle in insurance. Any insurance transaction, any risk financing transaction, can't really operate effectively if the parties don't trust one another." He defined ethical values as honesty, promise keeping, respect, responsibility, and fairness. "All of those are called ethical values because they have a right and a wrong. It's right to be honest. It's wrong to be dishonest. The real gray areas are, where is that line drawn?" Baglini asked.

One of the challenges of adopting a code of conduct is to apply it, Matsumoto said. "Most companies distribute their code of conduct to their employees when they first get hired, and expect them to read it. People read it, but then put it on the shelf and forget about it. The challenge ... is to continue to use that code of conduct as a source of reference on an ongoing basis as situations arise, referring back to it on a periodical basis, having training around the code of conduct, so as to refresh peoples' recollection as to what the standards are, and to clarify applicability of those standards in particular situations," he said.

For Hall, there's no question where a company's commitment to ethics starts. "For me, it's pretty simple. It starts at the top," he said. Baglini urged companies to "keep revisiting that code of ethics. Keep going back. Make it alive."

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Companies communicate their code of ethics in two ways: through formal training programs and an informal communication network in the form of anecdotes, Matsumoto said. "I think it's very important within the organization that that kind of sharing occurs because I think those tend to be the most powerful and long-lasting examples for people within an organization," he said. Companies also need to make an investment in a structure that fosters ethical behavior, such as having an audit committee or a compliance function. "Some companies are investing in having an ethics officer who is basically supposed to be a beacon for holding up the standard of conduct for an organization," Matsumoto said.

Schmidt urged regulators and companies to work together to find the best solutions. "One of the things that I communicate to the industry is that I can understand it when people make mistakes because we're dealing with some very complex areas. When people make mistakes and they're not in compliance with the law, if they voluntarily come forward and tell me about it and report it, I'm going to mitigate any kind of action that I take," he said.

Hall also talked about the value of exit interviews. "Many times that's an opportunity to really understand a little more about your organization. When somebody's leaving, they tend to be very frank with you about how they feel about your organization," he said.

Brewer asked the panel if an entity should be responsible legally or morally for the unethical behavior of contractors or subcontractors. Although a company might not be legally responsible for the actions of its contractors and vendors, Matsumoto said, "we have a responsibility to pick who we do business with to make sure that they conduct their business in a manner that is consistent with the values that we say that we embrace. . . . The ethics of an organization cannot just stop at any one department's doorstep. It has to permeate the organization, and permeate the people that we do business with."

Panelists also discussed the public's perception of the insurance industry. "The public has a tendency to zero in and focus on the few negative cases and ignore the thousands of good cases," Schmidt said. He spends a lot of time talking with reporters to explain exactly what's going on in a particular story. "If I do take the time, the reporters usually are very thankful for it because they can write a better story. If they write a better story, then everybody gets better educated about what in fact is going on in the insurance industry," Schmidt said.

The insurance industry needs to work together to turn around the public's attitude, Keegan believes. "One of the flaws in the whole public relations campaign: it's very personal lines driven in the United States, where all the money is in commercial lines and the vast majority of commercial buyers are quite happy with their relationships. . . . The problem is everybody buys insurance in the United States, and everyone has a horror story, either personally or within their group, and that's the one you hear. And it creates the perception, rather than the commercial buyer. And somehow that message doesn't get out there that they're there when we need them. We wouldn't be in business without the insurance business," Keegan said.

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