Business Ethics Chapter 8 and 9

ISO 19600 (3)

A key part of _____________ is the adoption of compliance objectives and the assignment of accountability throughout the entire organization.

A code of conduct

is a formal statement that describes what an organization expects of its employees

benchmarks of compliance

An external audit and review of company activities may sometimes be helpful in developing __________________________.

Many business leaders recognize that they need to have an ethics program, but few take the time to answer fundamental questions about the goals of such programs.

(1) Common Mistakes in Designing and Implementing an Ethics Program

A second mistake is not setting realistic and measurable program objectives.

(3) Common Mistakes in Designing and Implementing an Ethics Program

Senior management's failure to take ownership of the ethics program is a third mistake. Maintaining an ethical culture may be impossible if CEOs do not support an ethical culture

(4) Common Mistakes in Designing and Implementing an Ethics Program

Developing program materials that do not address the needs of the average employee is the fourth mistake

(5) Common Mistakes in Designing and Implementing an Ethics Program

respond to concerns.

Being viewed by the public as needing an audit can motivate companies to conduct one in order to signal their intention to ____________

The first mistake is a failure to understand and appreciate the goals of an ethics program.

(2) Common Mistakes in Designing and Implementing an Ethics Program

Transferring an "American" program to a firm's international operations is the fifth mistake. a. In multinational firms, executives should involve overseas personnel as early as possible in the process.

(6) Common Mistakes in Designing and Implementing an Ethics Program

A final mistake is designing an ethics program that is little more than a series of lectures. In such cases, participants typically recall less than 15 percent the day after the lecture

(7) Common Mistakes in Designing and Implementing an Ethics Program

coherent ethical corporate culture

A ________ ________ ________ __________ does not evolve through independent individual and interpersonal relationships.

strong ethics program

A ________________ includes a written code of conduct, an ethics officer to oversee the program, careful delegation of authority, formal ethics training, and auditing, monitoring, enforcement, and revision of program standards.

effective ethics program

A company must have an ___________________ to ensure that all employees understand its values and comply with the policies and codes of conduct that create its ethical culture

how it structures resources and activities to achieve its ethical objectives

A firm's ability to plan and implement ethical business standards depends in part on _______________________.

non financial measures & compensation

A greater number of investors are considering ________________ —such as the existence of ethics programs, legal compliance, board diversity and independence, and other corporate governance issues like CEO _______________ —when they analyze the quality of current and potential investments.

an individual employee is charged with misconduct

A legal test of a company's ethics program is possible when _________________.

a training program and communication system

A major step in developing an effective ethics program is implementing_____________ and _______________ to educate employees about the firm's ethical standards

various stakeholders

Although ethics and social responsibility are defined and perceived differently by ___________, a core of minimum standards for ethical performance is evolving.

nonfinancial areas

Although much of the regulatory focus of corporate ethics and compliance is driven by financial measures, to have integrity, the organization also has to focus on _________________ of performance

chief executive officer

Although recommended as best practice, it is not common for ethics officers to report directly to the board of directors. Ethics officers often report directly to the _____________________ and may have some access to the board

ethics audit (5)

An ________________ can be a component of a social audit. _______________ is similar to financial auditing in that it employs similar procedures and processes to create a system of integrity that includes objective reporting.

external auditor

An ________________ should not have other consulting or conflict-of-interest relationships with top managers or board members.

unique to each company

An ethics audit should be _______________________ , reflecting its size, industry, corporate culture, and identified risks as well as the regulatory environment in which it operates.

civil liability

An ethics program can help a firm avoid _____ ____________, but the company bears the burden of proving that it has an effective program.

Contingency planning

Anticipation of and intervention during these situations can stave off organizational disaster. _________________________________________assesses risks, plans for these potential occurrences, and provides ready tools for responding to ethical crises.

"carrot-and-stick" "carrot" "stick"

At the heart of the FSGO is a _________________ philosophy. Companies that act to prevent misconduct by establishing and enforcing ethical and legal compliance programs may receive a _________ and avoid penalties should a violation occur. The ultimate ________ is the possibility of being fined or put on probation if convicted of a crime.

an ethics program will not be effective

Ethics is not something to be delegated to lower-level employees. a. If a company's leadership fails to provide the vision and support needed for ethical conduct, then _____________________________

a. assessing the needs and risks an organization-wide program must address b. developing and distributing a code of conduct or ethics c. conducting training programs for employees d. establishing and maintaining a confidential service to answer employees' questions about ethical issues e. making sure the company is in compliance with government regulation f. monitoring and auditing ethical conduct g. taking action on possible violations of the company's code h. reviewing and updating the code.

Ethics officers are responsible for managing their organizations' ethics and legal compliance programs. They are usually responsible for:

One reason is to detect ethical misconduct before it becomes a major problem.

First reason why companies choose to understand, report on, and improve their ethical conduct.

corporate culture and the ethical stance

Full awareness of a company's philosophy of management, rules, and procedures can strengthen both the _____________ and ___________ of peers and supervisors

legislation and court precedents

Through _________________ , society holds companies accountable for the conduct of their employees as well as for their decisions and the consequences of those decisions.

organizational ethics program

To promote legal and ethical conduct, an organization should develop an ______________________ by establishing, communicating, and monitoring the ethical values and legal requirements that characterize its history, culture, industry, and operating environment.

corporations

are increasingly viewed as moral agents that are accountable for their conduct to stakeholders.

compliance orientation

creates order by requiring that employees identify with, and commit to, specific required conduct

Ethical disasters

follow recognizable phases of escalation, from ethical-issue recognition and the decision to act unethically to the organization's discovery of and response to the act.

Process controls

include management commitment to the ethics program and the methods or system for evaluation.

Output controls

involve setting standards against actual behavior. One of the most popular methods of evaluating ethical performance is an ethics audit

ethics audit

is a systematic evaluation of an organization's ethics program and performance to determine whether it is effective.

statement of values

is conceived by management and fully developed with input from all stakeholders

A code of ethics

is the most comprehensive and consists of general statements, sometimes altruistic or inspirational, that serve as principles and the basis for rules of conduct.

social audit

is the process of assessing and reporting a business's performance in fulfilling the economic, legal, ethical, and philanthropic responsibilities expected of it by its stakeholders.

The next step is to establish a committee or team to oversee the audit process.

second step in ethics audit process

stakeholders

One of the greatest benefits of the auditing process is improved relationships with _________________

ethics officers

Organizational ethics programs also must have oversight by high-ranking persons known to respect legal and ethical standards called

Consistent enforcement and necessary disciplinary action

_____________________ and ______________________ are essential to a functional ethics or compliance program

Implementation

_____________________ requires designing activities to achieve organizational objectives using available resources and given existing constraints.

Open Compliance Ethics Group

_______________________ created a universal framework for compliance and ethics management.

GRI

Businesses can use the ______ to come up with a more standardized method of reporting nonfinancial results in a way that users of the reports can understand.

ethics audit (3)

Can be a precursor to setting up an ethics program. It identifies the firm's current ethical standards, policies, and risk areas so that an ethics program can effectively address problem areas.

GRI (2)

Companies benefit because the ______ provides tools for improving their implementation of the triple bottom line, the disclosure of their progress in this area, the ability to compare their sustainability efforts to those of other companies, and the chance to enhance their reputation in the eyes of stakeholders.

board members

Court decisions related to the FSGO hold __________________ responsible for the ethical and legal compliance programs of the firms they oversee.

a. the content of a company's code of ethics b. the frequency of communication regarding the ethical code and program c. the quality of communication d. senior management's ability to successfully incorporate ethics into the organization e. local management's ability to do the same.

Five items have a significant impact on whether an ethics program is successful:

enforcing current standards more strictly or setting higher standards.

If a company is not making progress toward creating and maintaining an ethical culture, it needs to determine why and take corrective action, either by _________________________________.

ethics audits (4)

In contrast, ______________ focus on more narrow issues related to assessing and reporting on a firm's performance in terms of ethical and legal conduct.

ethics audit (2)

It includes regular, complete, and documented measurements of compliance, measuring conformity to the firm's desired ethical standards.

crisis management plans

Just as companies develop _______________________________________ to prepare to, respond to, and recover from natural disasters, they should also prepare for ethical disasters, which can result in substantial legal and financial costs, disrupt operations, reduce productivity, destroy organizational reputation, and erode stakeholder confidence.

i) the code is not promoted and employees do not read it ii) the code is not easily accessible iii) the code is written too legalistically and is not understandable by employees iv) the code is written too vaguely, providing no accurate definition v) top management never refers to the code in body or spirit.

Key reasons codes of ethics fail are:

predictability

No matter what their goals, ethics programs are developed as organizational control systems to create _______________ in employee behavior.

compliance with the company's ethical code and standards

Observing employees, internal audits, surveys, reporting systems, and investigations can assess ________________________________.

bad barrels

Organizations can become "_____________ ," not because individuals are bad, but the pressures to succeed create opportunities that reward unethical decisions

top managers

Pressure for an audit may come from __________________ looking for ways to track and improve ethical performance, and to give their firm an advantage over competitors that are facing questions about their ethical conduct.

Sarbanes-Oxley Act

Pressure for an ethics audit may come from the board of directors in response to stakeholder concerns or legally mandated corporate governance reforms related to the _______________ , which suggests that boards of directors should provide oversight for all auditing activities.

1. How broad the audit should be 2. What standards of performance should be applied? 3. How often the audit should be conducted? 4. Whether and how the audit's results should be reported to stakeholders 5. What actions should be taken in response to audit results?

Questions to be addressed during an audit:

upper managers'

Regardless of its degree of comprehensiveness, a code of ethics should reflect ____________ desires for compliance with the values, rules, and policies that support an ethical culture.

top management

Regardless of where the impetus for an audit comes from, its success hinges on the support of _____________________

1. Trustworthiness 2. Respect 3. Responsibility 4. Fairness 5. Caring 6. Citizenship

Research has found that corporate codes of ethics often contain six core values or principles. What are they?

values orientation (2)

Research has shown that a ___________ creates ethical reasoning among employees. Values-based programs increase employees' awareness of ethics at work, their integrity, their willingness to deliver information to supervisors, their use of reporting mechanisms, and the perception that better ethical decisions are made.

a. A firm may uncover a serious ethical problem that it would prefer not to disclose until it can remedy the situation. b. It may find that one or more of its stakeholders' criticisms cannot be dismissed or easily addressed. c. The process of conducting an ethics audit may foster stakeholder dissatisfaction. d. The auditing process imposes burdens (especially with regard to record keeping) and costs for firms that undertake it. e. The process of auditing and reporting a firm's ethics programs is no guarantee that it will avoid challenges related to its efforts. f. Because this type of auditing is relatively new, there are few common standards to judge disclosure and effectiveness or to make comparisons.

Risks and Requirements in Ethics Auditing

ethics officer

Some companies have established an _____________ in conjunction with an ethics program, and the ethics officer may campaign for an ethics audit as a way to measure the effectiveness of the firm's ethics program.

the company has failed to comply with the minimum requirements of the FSGO

Some corporate cultures provide opportunities for unethical conduct because their management lacks concern or ____________________, which can result in penalties and loss of public confidence

FSGO

The __________ encourages companies to assess their key risk areas and customize a compliance program to address these risks and satisfy key effectiveness criteria.

first step

The ____________ in conducting the audit is to secure the commitment of the firm's top management and, if it is a public corporation, its board of directors.

triple bottom line

The _________________ captures an expanded spectrum of values and criteria for measuring organizational (and societal) success—economic, environmental, and social impacts of decisions made within the organization.

Global Reporting Initiative (GRI)

The __________________, which advances sustainability reporting, has become a prominent framework that companies have adopted to report their social and sustainability progress.

FSGO's seven steps for effective ethical compliance, the Sarbanes-Oxley Act, and the Dodd-Frank Act

The _____________________ provide standards that organizations can use in ethics auditing.

Sarbanes-Oxley Ac

The _______________________ has focused on questionable accounting and the metrics that destroy shareholder value. On the other hand, models exist (Six Sigma, the Balanced Scorecard, and the Triple Bottom Line) to capture structural and behavioral organizational ethical performance.

current mission statement and strategic objectives

The audit process should include a review of the ______________ & _______________. The company's overall mission may incorporate ethics objectives, but these may also be found in separate documents, including those that focus on social responsibility.

scope

The ethics audit committee should establish the ________ of the audit and monitor its progress to ensure that it stays on track. a. The _____________ depends on the type of business, the risks faced by the firm, and available opportunities to manage ethics. b. This step includes defining the key subject matter or risk areas that are important to the ethics audit as well as the bases on which they should be assessed.

internal system

The existence of an ____________________________ that allows employees to report misconduct is especially useful for monitoring and evaluating ethical performance (e.g., anonymous hotlines).

generic approach

The framework in this text encompasses a wide range of business responsibilities and relationships. There is no ______________ that will satisfy every firm's circumstances.

the greater the turnover will likely be

The more misconduct occurs at a company, the less trust employees feel toward the organization—and _____________________.

ethical disaster recovery planning

The process of _________________________________ involves assessing the organization's values, developing an ethics program, performing an ethics audit, and developing contingency plans for potential ethical disaster

nonfinancial measures

The purpose of ______________ is to determine the wholeness and soundness of the many aspects of a business that enhance ethics and profits without increasing ris

integrity

The word ____________ implies a balanced organization that not only makes ethical financial decisions but is also ethical in the more subjective aspects of its corporate culture.

no universal standards

There are _______________ for organizational ethics programs

hands on experience or behavioral simulations

There are many different training methods that organizations can use, such as _________________ or ________________

core minimum standards for ethical performance

These standards represent a fundamental step in the development of minimum ethics requirements that are specific, measurable, achievable, and meaningful measurements in terms of business impact on communities, employees, consumers, the environment, and economic systems

corporate culture

These values will not be effective without distribution, training, and the support of top management in making these values a part of the _____________. Codes of conduct will not resolve every ethical issue encountered in daily operations, but they help employees and managers deal with ethical dilemmas by prescribing or limiting specific activities

formal controls process controls output controls

Three types of controls are involved with implementing and managing an ethics program.

codes of conduct

Today, society expects to see organizational members adhere to ethical principles and standards specified through company ethics programs. Most companies begin the process of establishing organizational ethics programs by developing ____________________.

ethical risks

Unfortunately, ________________ are often given the lowest priority.

Global Reporting Initiative (GRI) (2)

Users benefit because this standardized sustainability reporting provides them with a benchmark to compare companies' sustainability initiatives.

moral agents

Viewed as __________ ____________ , companies are required to obey the laws and regulations that define acceptable business conduct. However, because companies are not human, laws and regulations are necessary to provide formal structural restraints and guidance on ethical issues

Strategic planning and management activities

Viewing a business ethics program as a part of blank and blank is critical to the success of any firm

compliance orientation

What are the two types of control systems.

1. It can educate employees about the firm's policies and expectations, relevant laws and regulations, and general social standards 2. It can make employees aware of available resources, support systems, and designated personnel who can assist them with ethical and legal advice 3. It can empower employees to ask tough questions and make ethical decisions 4. Ethics training can influence (and be influenced by) corporate culture, coworkers and supervisors, and the opportunities available to engage in unethical behavior

What can implementing a training program and communication system do?

A the content of a company's code of ethics

What five items have a significant impact on whether an ethics program is successful?

employees

When measuring the effectiveness of an ethics program, it is important to get input from _________________

how their coworkers and superiors behave

Without uniform standards and policies of conduct, it is difficult for employees to determine what behaviors are acceptable within a company, and they may make decisions based on _______________________.

Top executives

_____ ________ must communicate with managers at the operations level and enforce overall ethical standards within the organization

CEOs and CFOs

_______ & ________ may face prosecution if they knowingly certify misleading financial statements.

Six Sigma

_____________ is a methodology to manage process variations that cause defects, defined as unacceptable deviation from the mean or target, and to systematically work toward managing variation to eliminate those defects.

ISO 19600 (2)

_____________ was based on an Australian compliance standard and emphasizes a "principles" approach to compliance management based upon commitment, implementation, monitoring and measuring, and continual improvement.

ISO 19600

______________ provides international guidelines for compliance management.

Questionnaires

_______________ can serve as benchmarks in an ongoing assessment of ethical performance by measuring employees' ethical perceptions of their company, their superiors, their coworkers, and themselves, as well as serving as a means of developing ratings of ethical or unethical practices within their firm or industry

Regular audits

_______________ permit shareholders and investors to judge whether a firm is achieving the goals it established, and whether it abides by the values that it specified as important.

Balanced Scorecard

_________________ is a management system that focuses on all of the elements that contribute to organizational performance and success, including financial, customer, market, and internal processes.

Implementation (2)

___________________ translates a plan for action into operational terms and establishes a means by which an organization's ethical performance will be monitored, controlled, and improved

Open Compliance Ethics Group (2)

a. Focus on nonfinancial compliance and qualitative elements of internal controls. b. Guidelines that companies can utilize as they see fit. c. Offers tools and certification procedures.

shared values

among employees are the "glue" of successful management and control of business ethics programs. When the business ethics program helps to align and direct activities toward an ethical culture, there will be a commitment to the long-term ethical progress of the firm.

Ethics training

must start with a foundation, a code of ethics, a procedure for airing ethical concerns, line and staff involvements, and executive priorities on ethics that are communicated to employees

Social reports

often discuss issues related to a firm's performance in the four dimensions of social responsibility as well as to specific social responsibility and ethical issues such as staff issues, community economic development, volunteerism, and environmental impac

formal controls

or business ethics include input controls that provide the proper tools and resources (proper selection of employees, ethics training, and structural systems, including communication systems).

Accounting scandals and legal and ethical transgressions have encouraged companies to better account for their actions in a wide range of areas including corporate governance, ethics programs, customer relationships, employee relations, environmental policies, and community involvement.

second reason why companies choose to understand, report on, and improve their ethical conduct.

values orientation

strives to develop shared values, with a focus on core ideals such as accountability and commitment

Measuring the ethical work climate is one way to learn about the ethical culture of an organization. The auditing process can highlight trends, improve organizational learning, and facilitate communication and working relationships

third reason why companies choose to understand, report on, and improve their ethical conduct.