Developing an Effective Ethics Program

Developing an Effective Ethics Program

The Responsibility of the
Corporation as a Moral Agent

•      Increasingly, corporations are viewed not merely as profit-making entities but also as moral agents that are accountable for their conduct to their employees, investors, suppliers, and customers.

The Need for Organizational Ethics Programs

•      Scandals in corporate America have lowered the public’s trust of business.

•      Understanding the factors that influence ethical decision-making can help companies encourage ethical behavior.

•      Employees are not legal experts and      therefore need guidance with legal              issues impacting their jobs.

The Need for Organizational
Ethics Programs

•       One reason why ethics programs are required is to help sensitize employees to the potential legal and ethical issues within their work environments

•       Five top recommendations to CEO’s for rebuilding trust and confidence in American firms

–    Making customers the top priority

–    Assuming personal responsibility and accountability

–    Communicating openly and frequently with customers

–    Handling crises more honestly

–    Sticking to the code of business ethics no matter what

An Effective Ethics Program

•      Helps ensure that all employees understand the organization’s values and comply with the policies and codes of conduct that create its ethical climate

– Diverse employee                                                          backgrounds (education,                                                  experience, family) make                                      organizational socialization                                                      more critical.

Values Versus Compliance Programs

•      Compliance orientation

–    Creates order by requiring that employees identify                               with and commit to specified conduct

–    Uses legal terms, statutes and contracts that teach employees the rules and penalties for noncompliance

•      Values orientation

–    Attempts to develop shared values

–    Focuses more on an abstract core of ideals such as respect and responsibility, although there are penalties for misconduct

Ethics Programs Can Help Avoid Legal Problems

•       The Federal Sentencing Guidelines for Organizations encourage companies to assess their key risks and customize a program to address these risks.

•       The program must be communicated to all employees—providing a common understanding of organizational values, policies, and procedures.

–    Companies that act to prevent organizational misconduct may receive a “carrot” and avoid organizational penalties.

–    Those that do not may receive a “stick”—                                   fines and penalties.

Minimum Requirements for Ethical Compliance Programs

•              Standards and procedures, such as code of ethics, that are reasonably capable of detecting and preventing misconduct

•              High-level personnel who are responsible for an ethics and compliance program

•              No substantial discretionary authority given to individuals with a propensity for misconduct

•              Standards and procedures communicated effectively via ethics training programs

•              Establishment of systems to monitor, audit, and report misconduct

•              Consistent enforcement of standards, codes, and punishment

•              Continuous improvement of the ethical compliance program

Source:  Adapted from U.S. Sentencing Commission, Federal Sentencing Guidelines Manual (St. Paul : West, 1994), Chapter 8.

Codes of Conduct

•      Codes of conduct

–    Formal statements that describe what an organization expects of its employees

•      Codes of ethics

–    Most comprehensive document consisting of general statements that serve as principles and the basis for the rules of conduct

•      Statement of values

–    Serves the general public and addresses                                     stakeholder interests

Ethics Officers

•       Ethics officers or committees are responsible for oversight of the ethics/compliance program:

–    Assess the needs and risks that an organization-wide ethics program must address

–    Develop, revise, and disseminate the code

–    Conduct training programs for employees

–    Develop effective communication

–    Make sure the company is in compliance with government regulation

–    Establish audits and control systems

–    Take action on possible violations of the code

–    Review and modify the program to improve effectiveness

Ethics Training and Communication

•       Keys to successful ethics training

–     Help employees identify the ethical dimensions of a business decision

–     Give employees a means to address ethical issues

–     Help employees understand the ambiguity inherent in ethical situations

–     Make employees aware that their actions define the company’s ethical posture both internally and externally

–     Provide direction for employees to find managers or others who can help them resolve ethical conflicts

–     Eliminate the belief that unethical behavior is ever justifiable by stressing that

•     Stretching the ethical boundaries results in unethical behavior.

•     Whether discovered or not, an unethical act is just that.

•     An unethical act is never in the best interests of the company.

•     The firm is held responsible for the misconduct of its members.

Systems to Monitor and Enforce Ethical Standards

•       An internal system for employees to report misconduct is an opportunity to register ethical concerns:

–    Ethics hot lines

–    Questionnaires used to serve as benchmarks

•       Enforcement is also important:

–    Corrective actions to provide standards and    punishment

–    Consistent enforcement critical

Continuous Improvement of the Ethics Program

•      Always improve

•      Revisions are needed

Common Mistakes in Designing/ Implementing an Ethics Program

•       Not having a clear understanding of the goals of the program from the beginning

•       Not setting realistic and measurable                               program objectives

•       Senior management’s failure to take                           ownership of the ethics program

•       Developing program materials that do not                       address the needs of the average employee

•       Transferring a domestic program internationally

•       Designing a program as a series of lectures