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
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research for all divisions. UTC holds all their employees 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 UTCs history. UTC has woven its Code of Ethics and
Corporate Policy Manual into the fabric of its culture. From the companys CEO all
the way to front line management, social responsibility, performance, pioneering
innovation, personal development and shareowner value were five commitments
for guiding UTCs 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, Chubbs 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 Chubbs ethics and compliance priorities were not on the level of
UTCs. 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 Chubbs global decentralized structure.
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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 companys 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.
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During the acquisition all employees are subject to education and training of
UTCs 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
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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 Chubbs 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.
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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 BUs.