Developing an Effective Ethics Program

1
Chapter 8

• Developing an Effective Ethics Program

2
The Need for Organizational Ethics Programs

• Scandals in corporate America have lowered the
  publics trust of business.
• Employees are not legal experts and therefore
  need guidance with legal issues impacting
  their jobs.
• Helps ensure that all employees understand the
  organizations values and comply with the
  policies and codes of conduct that create its
  ethical climate

3
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
  employeesproviding 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.

4
The Sentencing of Organizations Under the
FSGO Is Governed by Four Considerations

• The organization must remedy the harm.
• Fines may be set sufficiently high to divest the
  organization of all assets if it is found to have
  operated with criminal purpose.
• Fines are based on the seriousness of the offense
  and the culpability of the organization.
• Probation is deemed appropriate when the
  organization will work to prevent further
  misconduct.

5
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

6
Codes of Conduct...

• are formal statements of what an organization
  expects in the way of ethical behavior
• will not solve every dilemma
• provide rules and guidelines
• reflect senior managements desire for compliance
  with values, rules and policies in support of an
  ethical climate
• should be specific enough to be reasonably
  capable of preventing misconduct

7
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

8
Manleys Six Steps to Implementing a Code of
Ethics

• distribute the code comprehensively employees,
  subsidiaries, and associated companies
• assist in interpretation and understanding
• specify managements role in implementation
• make employees responsible for understanding
• establish grievance procedures
• provide a conclusion or closing statement

9
Ethics Officers

• Ethics officers or committees are responsible for
  oversight of the ethics/compliance program
• coordinate program with top management
• develop, revise and disseminate the code
• develop effective communication
• establish audits and control systems
• provide consistent enforcement of standards
• review and modify the program to improve
  effectiveness

10
Ethics Training and Communication

• provides guidance for ethical standards and
  activities that integrate the functional areas of
  business
• helps employees identify ethical issues and
  provides a means to address and resolve them
• can help reduce criminal, civil, and
  administrative consequences
  including
• fines, penalties, judgments, etc.

11
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

12
Continuous Improvement of the Ethics Program

• If a company has determined that its ethical
  performance has not been satisfactory, management
  may want to recognize the way ethical decisions
  are made
• A decentralized organization may be centralized
  (perhaps temporarily) so that top-level managers
  can ensure that ethical decisions are made.
• A centralized organization may be decentralized
  (perhaps temporarily) so that lower level
  managers can make more decisions.

13
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 managements 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