Business Ethics Final

Who is to blame for misconduct?

Some corporate outcomes cannot be tied to one individual or even a group, and misconduct can be the result of a collective pattern of decisions supported by a corporate culture.

Why do people engage in misconduct?

The key reason why people seem to engage in misconduct is because they feel pressured to do "whatever it takes to meet business targets."

Companies' values and ethics must exceed what?

The minimum requirements.

Code of Ethics

The most comprehensive, consisting of general statements that are sometimes altruistic or inspirational that serve as principles and as the basis for rules of conduct. A Code of Ethics generally specifies methods for reporting violations, disciplinary action for violations, and a structure of due process.

Who should the development of a Code of Ethics involve?

The president, board of directors, and chief executive officers who will be implementing the code, as well as legal staff to ensure that the code has correctly assessed key areas of risk and that it provides buffers for potential legal problems.

What four questions does the "after-action review" process ask?

What did we set out to do? What happened? Why did it happen? What are we going to do about it?

Statement of Values

Serve the general public and also addresses distinct groups such as stakeholders. Values statements are conceived by management and are fully developed with input from all stakeholders.

What should a Code of Ethics reflect?

Upper managers' desires for compliance with the values, rules, and policies that support an ethical culture.

What is an ethics officer responsible for?

1) Assessing the needs and risks that an organization-wide ethics program must address. 2) Developing and distributing a code of conduct or ethics. 3) Conducting training programs for employees. 4) Establishing and maintaining a confidential service to answer employees' questions about ethical issues. 5) Making sure that the company is in compliance with government regulation. 6) Monitoring and auditing ethical conduct. 7) Taking action on possible violations of the company's code. 8) Reviewing and updating the code.

How to Develop and Implement a Code of Ethics:

1) Consider areas of risk and state the values as well as conduct necessary to comply with laws and regulations (values are an important buffer in preventing serious misconduct). 2) Identify values that specifically address current ethical issues. 3) Consider values that link the organization to a stakeholder orientation and attempt to find overlaps in organizational and stakeholder values. 4) Make the code understandable by providing examples that reflect values. 5) Communicate the code frequently and in language that employees can understand. 6) Revise the code every year with input from organizational members and stakeholders.

Benefits of Having an Ethics Code:

1) Guides employees in situations where the ethical course of action is not immediately obvious. 2) Helps the company reinforce--and acquaint new employees with--its culture and values (creates a climate of integrity and excellence). 3) Helps the company communicate its expectations for its staff to suppliers, vendors, and customers. 4) Minimizes subjective and inconsistent management standards. 5) Helps a company remain in compliance with complex government regulations. 6) Builds public trust and enhances business reputations. 7) Offers protection in preempting or defending against lawsuits. 8) Enhances morale, employee pride, loyalty, and the recruitment of outstanding employees. 9) Helps promote constructive social change by raising awareness of the community's needs and encouraging employees and other stakeholders to help. 10) Promotes market efficiency, especially in areas where laws are weak or inefficient, by rewarding the best and most ethical producers of goods and services.

Minimum Requirements for Ethics and Compliance Programs:

1) Standards and procedures, such as codes of ethics, that are reasonably capable of detecting and preventing misconduct. 2) High-level personnel who are responsible for an ethics and compliance program. 3) No substantial discretionary authority given to individuals with a propensity for misconduct. 4) Standards and procedures communicated effectively via ethics training programs. 5) Systems to monitor, audit, and report misconduct. 6) Consistent enforcement of standards, codes, and punishment. 7) Continuous improvement of the ethics and compliance program.

What are some of the key reasons that codes of ethics fail?

1) The code is not promoted and employees do not read it. 2) The code is not easily accessible. 3) The code is written too legalistically and therefore is not understandable by average employees. 4) The code is written too vaguely, providing no accurate direction. 5) Top management never refers to the code in body or spirit.

What determines whether or not an ethics program is successful?

1) The content of the company's code of ethics. 2) The frequency of communication regarding the ethical code and program. 3) The quality of communication. 4) Senior management's ability to successfully incorporate ethics into the organization. 5) And local management's ability to do the same.

Codes of Ethics usually contain 6 core values or principles:

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

Compliance Orientation

A control system that creates order by requiring that employees identify with and commit to specific required conduct. It uses legal terms, statues, and contracts that teach employees the rules and penalties for noncompliance.

Values Orientation

A control system which strives to develop shared values (where personal and organizational values are compatible with one another).

Ethics Help Desk

A point of contact within an organization where employees and managers can bring their concerns and receive assistance from the most appropriate person in the firm to handle the situation. For this model to be successful, the help desk must be supportive of employees, be easily accessible, and have simple procedures for employees to follow when they express concerns.

What should an audit provide?

A systematic and objective survey of the firm's ethical culture and values.

Ethics Audit

A systematic evaluation of an organization's ethics program and performance to determine whether it is effective. Includes "regular, complete, and documented measurements of compliance with the company's published policies and procedures."

What can a Code of Ethics address?

A variety of situations, from internal operations to sales presentations and financial disclosure practices.

What does a strong ethics program include?

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

Ethics Audit as a Precursor

An audit can even be a precursor to setting up an ethics program because it identifies the firm's ethical standards as well as existing policies and risk areas.

Why is the auditing process important to businesses?

Because it can improve a firm's performance and effectiveness, increase its attractiveness to investors, improve its relationships with stakeholders, identify potential risks, and decrease the risk of misconduct and adverse publicity that could harm its reputation.

Why do companies with formal ethics codes and programs still experience ethical and legal difficulties?

Because top managers have not integrated these codes, values, and standards into their firms' corporate cultures where they can provide effective guidance for daily decision making.

Why can it not be assumed that everyone knows how to behave appropriately when entering a new organization or job?

Because we all come from diverse business, educational, and family backgrounds.

How should an organization promote legal and ethical conduct?

By developing an organizational ethics program by establishing, communicating, and monitoring the ethical values and legal requirements that characterize its history, culture, industry, and operating environment.

How do most companies attempt to improve ethical decision making?

By establishing and implementing a strategic approach to improving their organization's ethics.

What happens as misconduct increases in a company?

Employees will feel less trust toward the organization and turnover has the potential to increase.

Codes of Conduct

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

Business ethics programs have the potential to do what?

Help top managers establish an ethical culture and eliminate the opportunity for unethical conduct.

Advantages of Compliance Orientation:

Helps employees understand rules of conduct when there are identified risks.

Formal Controls

Include input controls such as the proper selection of employees, effective ethics training and strong structural systems (including communication systems).

Process Controls

Include management's commitment to the ethics program and to the methods or system for ethics evaluation. These methods might involve daily coaching for managers and employee reminders regarding appropriate ethical conduct.

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 their perception that better ethical decisions are being made.

Ethics Officers

Individuals that are responsible for managing their organizations' ethics and legal compliance programs.

Output Controls

Involve comparing standards with actual behavior. One of the most popular methods of evaluating ethical performance is an ethics audit.

Organizational Probation

Involves using on-site consultants to observe and monitor a company's legal compliance efforts as well as to report the company's progress toward avoiding misconduct to the U.S. Sentencing Commission.

Advantages of Values Orientation:

It gives employees a clearly defined basis on which to make decisions, one in which fairness, compassion, respect, and transparency are paramount.

What is the FSGO's recent amendment about ethics audits?

It suggests that the results of an ethics audit be reported directly to the board of directors because such direct reporting would prevent the CEO or another top officer from covering up misconduct.

Compliance-based Programs

Linked to employees' awareness of ethical risks at work and to a clear understanding of rules and expectations that facilitates decision making.

What are corporations viewed as?

Not only profit-making entities but also moral agents that are accountable for their conduct to their stakeholders, including employees, investors, suppliers, government, and customers.

What does the FSGO encourage (companies)?

That companies assess their key risk areas and customize a compliance program that will address these risks and satisfy key effectiveness criteria.

What makes an ethics program "effective"?

The effectiveness of a program is determined by its design and implementation: it must deal effectively with the risks associated with a particular business and it must become part of the corporate culture.

Social Audit

The process of assessing and reporting on a business's performance in fulfilling the economic, legal, ethical, and philanthropic responsibilities expected of it by its stakeholders. Social reports often discuss issues related to a firm's performance i the four dimensions of social responsibility as well as specific social responsibility and ethical issues such as employment issues, community economic development, volunteerism, and environmental impact.

What consequences do ethics scandals have?

They destroy employees' trust in top management and significantly lower the public's trust of business.

Why are ethics programs required?

To help sensitize employees to the potential legal and ethical issues within their work environments.

What is the primary purpose of an ethics audit?

To identify the risks and problems in outgoing activities and plan the necessary steps to adjust, correct, or eliminate these ethical concerns. An ethics audit is critical to the program's success.

What does the FSGO encourage (federal judges)?

To increase fines for organizations that continually tolerate misconduct and to reduce or eliminate fines for firms with extensive compliance programs that are making due diligence attempts to abide by legal and ethical standards.

What do employees have a moral obligation to do?

To responsibly think through complex ethical issues to contribute to the ethical conduct of the corporation as a whole.

What is the difference between Financial Auditing and Ethics Auditing?

While financial auditing focuses on all systems related to money flow and on financial assessments of value for tax purposes and managerial accountability, ethics auditing deals with the internal and broad external impact of an organization's ethical performance.

How do you foster ethical decision making within an organization?

You have to terminate unethical employees and improve the firm's ethical standards.