Ethics Risks

by Jeff Kaplan

A recent court decision in a shareholder lawsuit against Goldman Sachs is yet another reminder that when it comes to liability often there is no firebreak between the “merely” unethical and the clearly unlawful. (Among the many other examples of this phenomenon are various of the conflict-of-interest-based cases brought several years ago by the New York Attorney General against investment banks and the insurance brokers.)

For C&E professionals the takeaway from this history – which is unknown to many business people – should be that assessing and addressing ethics risks may be necessary to reducing legal exposure.

Reputational Compliance

Reputational Compliance

Ways to assess ethics risks include:

  • Examining whether a company has any relationships (with customers or others) where the need for good faith and candor might not be sufficiently understood by employees or third parties acting on its behalf. Relationships such as these – which tend to involve a high degree of trust but not necessarily a formal fiduciary duty – may be rife with ethics risk potential.
  • Seeking to learn whether there are business activities where the pursuit of admirable ends might lead to wrongful means.
  • Asking employees in interviews, focus groups or otherwise: What types of conduct has occasioned criticisms that the company has acted unfairly? Do they have particular concerns that the company has acted wrongfully?

Indeed, the very process of gathering information of this sort will itself send a message that “ethics counts.”

Other ways to address ethics risks include:

  • Offering training on methods for ethical decision making.
  • Deploying values-based communications.
  • Providing, in training and communications, real-life examples of the company showing a willingness to walk away from business opportunities that, while lawful, were not ethical.
  • Building ethics criteria into personnel evaluations.
  • Training managers on how to recognize and encourage ethical actions by their subordinates and colleagues.


Jeffrey Kaplan, a partner in the Princeton, New Jersey office of Kaplan & Walker LLP, has practiced law in the compliance and ethics field since the early 1990s.


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