Chapter 5

8-1

Chapter 8

Developing an EffectiveEthics Program

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The Responsibility of theCorporation as a Moral Agent

Increasingly, corporations are viewed not merelyas profit-making entities but also as moralagents that are accountable for their conductto their employees, investors, suppliers, andcustomers.

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The Need for OrganizationalEthics Programs

Scandals (newspaper) in corporate Americahave lowered the public’s trust of business.

Understanding the factors that influence ethicaldecision-making can help companies encourageethical behavior.

Employees are not legal experts and thereforeneed guidance with legal issues impacting theirjobs.

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The Need for OrganizationalEthics Programs

One reason why ethics programs are required is to helpsensitize employees to the potential legal and ethicalissues within their work environments

Five top recommendations to CEO’s for rebuilding trustand 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

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An Effective Ethics Program

Helps ensure that all employees understand theorganization’s values and comply with the policiesand codes of conduct that create its ethicalclimate

– Diverse employeebackgrounds (education,experience, family) makeorganizational socializationmore critical.

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Values Versus CompliancePrograms

Compliance orientation

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

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

Values orientation

–Attempts to develop shared values

–Focuses more on an abstract core of ideals such as respectand responsibility, although there are penalties formisconduct

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Ethics Programs Can Help AvoidLegal Problems

The Federal Sentencing Guidelines for Organizationsencourage companies to assess their key risks andcustomize a program to address these risks.

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

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

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

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Minimum Requirements forEthical Compliance Programs

1.Standards and procedures, such as code of ethics, that arereasonably capable of detecting and preventing misconduct

2.High-level personnel who are responsible for an ethics andcompliance program

3.No substantial discretionary authority given to individuals witha propensity for misconduct

4.Standards and procedures communicated effectively via ethicstraining programs

5.Establishment of systems to monitor, audit, and reportmisconduct

6.Consistent enforcement of standards, codes, and punishment

7.Continuous improvement of the ethical compliance program

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

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Codes of Conduct

Codes of conduct

–Formal statements that describe what an organization expectsof its employees

Codes of ethics

–Most comprehensive document consisting of generalstatements that serve as principles and the basis for therules of conduct

Statement of values

–Serves the general public and addressesstakeholder interests

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Ethics Officers

Ethics officers or committees are responsible for oversightof the ethics/compliance program:

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

–Develop, revise, and disseminate the code

–Conduct training programs for employees

–Develop effective communication

–Make sure the company is in compliance with governmentregulation

–Establish audits and control systems

–Take action on possible violations of the code

–Review and modify the program to improve effectiveness

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Systems to Monitor and EnforceEthical Standards

An internal system for employees to report misconductis an opportunity to register ethical concerns:

–Ethics hot lines

–Questionnaires used to serve as benchmarks

Enforcement is also important:

–Corrective actions to provide standards andpunishment

–Consistent enforcement critical

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Continuous Improvement of theEthics Program

Always improve

Revisions are needed

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Common Mistakes in Designing/Implementing an Ethics Program

Not having a clear understanding of the goals of the programfrom the beginning

Not setting realistic and measurableprogram objectives

Senior management’s failure to takeownership of the ethics program

Developing program materials that do notaddress the needs of the average employee

Transferring a domestic program internationally

Designing a program as a series of lectures