Chapter 8 Flashcards
Increasingly, corporations are viewed not merely as profit-making entities, but also…
As moral agents accountable for the conduct to their stakeholders
Society holds companies accountable for the conduct and decision making of their employees through:
Legislation and court precedents
A reason why ethics programs are required in one form or another
To sensitize employees to the potential legal and ethical issues within their work environment
Studies show ethics programs can:
- Increase employee’s ethical awareness
- Increase participation in ethical decision making
- Increase ethical behavior
A “Bad Apple”
A person who will always do things in their self-interest regardless of their organization’s goals or accepted standards of conduct
A “Bad Barrel”
An organization can become one, because the pressures to succeed create opportunities that reward unethical decisions
To promote legal and ethical conduct
An organization should develop a program by establishing, communicating, and monitoring ethical values and legal requirements that characterize its history, culture, industry, and operating environment
A strong ethics program includes:
- A written code of conduct
- An ethics officer to oversee the program
- Careful delegation of authority
- Formal ethics training
- Management of program standards
Normative Myopia
The tendency of managers to overlook ethical issues
A Culture of Short-term performance as a company’s highest priority can:
Diminish ethical decision making
____ is a key component of an engaged workforce
Trust
An effective risk assessment involves examining:
- Legal issues
- Environmental issues
- Health & Safety
Justifications for unethical and illegal behavior:
- Survive an economic downturn
- Meet financial targets
- Improve financial performance
Top Unethical/ Illegal Actions CFO’s would justify:
1) Offering entertainment
2) Change assumptions: valuations/reserves
3) Cash Payments
4) Personal gifts or services
The ultimate “Stick”
Is the possibility of being fined or put on probation if convicted of a crime
Foreign Corrupt Practices Act
Guidelines recommend incorporating incentives into the firm’s corporate culture to encourage ethical behavior
U.S. Sentencing Commission
Evaluates the organizations responsibility for the individual’s behavior during the process of an investigation
Compliance Orientation
Creates order by requiring employees to identify with and commit to specific required conduct
Values Orientation
Strives to develop shared values
Advantage of a Value’s Orientation
It gives employees a clearly defined basis on which to make decisions
Values-based programs
Increase employees’ awareness of ethics at work, integrity, willingness to deliver information to supervisors, use of reporting mechanisms, and perception that ethical decisions are being made
Compliance-based programs
Are linked to employee’s awareness of ethical risks at work and a clear understanding of rules and expectations that facilitates decision making
Codes of Conduct
Formal statements that describe what an organization expects of its employees
Code of Ethics
The most comprehensive and consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rules of conduct.
Key Reasons why Code 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
Statement of Values
Serves 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.
Benefits of having an Ethics Code:
1) Guide employees in situations where the ethical course of actions is not obvious
2) Help the company reinforce its culture and values
3) Help the company communicate its expectations for its staff to suppliers, vendors, and customers
Ethics Officers
Responsible for managing their organizations’ ethics and legal compliance programs.
Behavioral Simulation
Gives participants a short, hypothetical ethical issue situation to review
A key component of managing an effective and efficient ethics program
Is a firm grasp of techniques that clearly communicate the company’s values, culture, and policies for dealing with ethical issues to employees
First Goal of Successful Ethics Training Programs
Identify key risk areas employees will face.
Ways to help determine the effectiveness of a firm’s ethics training.
Employee surveys and the incorporation of ethics measurements in performance appraisal systems
4 ways a company can assess compliance with its ethical code and standards.
- Observing employees
- Conducting internal audits
- Circulating surveys
- Instituting reporting systems
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
Hotlines
Provide support and give employees the opportunity to ask questions or report concerns. The most effective ethics hotlines operate on an anonymous basis
Two major reasons for why employees do not report observed misconduct include:
1) Fear of retaliation
2) Making personal value judgments about whether it would be worthwhile to report the misconduct
Implementation
Requires designing activities to achieve organizational objectives using available resources and given existing constraints
Centralizing key decisions
Centralization may reduce the opportunities lower-level managers and employees have to make unethical decisions
Decentralizing key decisions
Allows lower-level managers, who are familiar with the local business environment and local culture and values, to make more decisions
First Common mistake in designing/ implementing an Ethics Program
Failure to understand and appreciate the goals of an Ethics Program
Second Common mistake in designing/ implementing an Ethics Program
Not setting realistic and measurable program objectives
Third Common mistake in designing/ implementing an Ethics Program
Senior management’s failure to take ownership of the ethics program; Board should have the ultimate responsibility and oversight
Fourth Common mistake in designing/ implementing an Ethics Program
Developing program materials that do not address the needs of the average employee
Fifth Common mistake in designing/ implementing an Ethics Program
Transferring an “American” program to a firm’s international operations
Sixth Common mistake in designing/ implementing an Ethics Program
Designing an ethics program that is little more than a series of lectures
