United Technologies Corporation: Running a Global Ethics and Compliance Program
Major Case Analysis T. Joel Vance
Dec. 3, 2013
Introduction United Technologies Corporation (UTC) is a $31 billion global corporation made up of seven business units and a stand-alone research center, which supports
United Technologies Corporation research for all divisions. UTC holds all their employee’s and business units to a high compliance standard, over and above what is regulated within the industry. As a major government contractor their industry has been plagued with scandals, fraud and wasteful spending early in UTC’s history. UTC has woven its Code of Ethics and Corporate Policy Manual into the fabric of its culture. From the company’s CEO all the way to front line management, social responsibility, performance, pioneering innovation, personal development and shareowner value were five commitments for guiding UTC’s business practices and decisions. UTC had distinguished itself from many other companies by institutionalizing its ethics and compliance programs, with a firm commitment to their success from top-level management. Identify the Problem UTC must simultaneously integrate 46,000 new employees from the acquisition of Chubb, a multi continental security and fire protection corporation. Like UTC, Chubb’s was global and in a variety of different cultures. This would be a monumental task for Pat Gnazzo, vice president of Business Practices for UTC, especially since Chubb’s ethics and compliance priorities were not on the level of UTC’s. Gnazzo wondered where he should start? Source of the Problem UTC has been successful managing compliance programs and ethical standards across multiple product lines. With its acquisition of Chubb however this seamless integration of corporate culture and ethical standards would be far more difficult due to Chubb’s global decentralized structure.
United Technologies Corporation When it acquired Chubb, UTC obtained not only security and fire protection systems, but also security guard employees who were widely dispersed in various buildings in the regions where Chubb operated, and who often had little affiliation with the central organization. These employees have weaker allegiances to Chubb than the typical UTC employee since the security guards report directly to their assigned buildings, and have little interaction with a central office. These employees also have no access to the company’s intranet or computer system making communication of policies and programs far more distant. In addition to a lack of existing corporate culture, employees and managers of Chubb had little tenure. Since Chubb has no existing compliance programs, little to no established ethic guidelines and corporate culture; UTC must start from the very beginning. With prior acquisitions UTC focused on strengthening current infrastructures by adding energy and resources to existing programs. However, with the acquisition of Chubb, UTC must create an infrastructure across multiple countries and languages. Reasonable Alternatives to Solve the Problem At this time UTC must develop a list of reasonable alternatives, weight their pros and cons, mitigate their risk, select an alternative and implement its chosen solution. The consideration and analysis of alternatives is key to the process of developing a recommended course of action. The alternative courses of action are as follows:
There will be no action during or after the acquisition of Chubb.
United Technologies Corporation
During the acquisition all employees are subject to education and training of UTC’s policies and Code of Ethics.
After acquisition of Chubb, UTC restructures Chubb to a more centralized focused company that allows for easy communication of company policies and ethics.
After acquisition of Chubb, UTC keeps the current decentralized infrastructure, but opens more communication channels to UTC.
Recommended Best Course of Action To create buy-in from Chubb employees, and integrate UTC compliance programs the course of action must be soon after acquisition, communicate effectively and execute decisively. The recommended course of action is the restructure Chubb to a more centralized focused company that allows for easy communication of company polices and ethics. Develop an Implementation Plan The implementation plan details the activities, for each business unit stream. The goal of implementation is to ensure all employees of Chubb know their roles, responsibilities, and expectations of a partnership with UTC. UTC will work with Chubb employees to clearly articulate the following elements: Restructuring of Chubb First, UTC will restructure Chubb and rename the entity under ‘UTC Security and Fire Safety.’ The new BU will operate as an extension of UTC and enhance the bond between current employees and new employees. All new employees will
United Technologies Corporation undergo training, education and visit to their regional office. In addition to restructuring the alignment with UTC, new BU division directors will oversee, monitor, enforce and manage all appointed security divisions. Recruitment and Retention Strategy To help new employees with the transition, and to promote longevity within UTC, an extensive retention strategy will be in place that includes ongoing education, benefits and relocation/job opportunities. UTC must combat Chubb’s lack of internal structure and low tenure among managers. To create a strong allegiance to UTC, all benefits and opportunities will be extended to new employees under UTC Security and Fire Safety. Team Member Training Within 1 year of the Chubb acquisition all new UTC Security and Fire Safety employees must undergo training in company policies, procedures, Code of Ethics, review UTC company manual and five commitments to stakeholders. Part of the team member training will be education into the new employee Intranet for all new employees. Monitoring Ethical and Compliance Fidelity With the restructure of the new BU, UTC Security and Fire Safety will report to regional directors. These regional directors will be employees of UTC management team and will directly oversee compliance programs, internal communication, BU assignments and proper ethical guidelines are being followed. The UTC BU directors will report to UTC leadership within their designated regional territory.
United Technologies Corporation Addressing Lack of Ethical Fidelity Lastly, after the restructure of Chubb, training and new hires, UTC will promote and enforce a campaign of zero tolerance for ethical fidelity. All decisions from security officers to all business units will be held responsible for day-to-day actions. A fundamental part of zero tolerance policy will be immediate termination following an investigation into incidents by current regional ethical officers. All incidents can be reported through anonymous reporting channels across all BU’s.
