Chapter 9 Flashcards
5 Items that have a significant impact on whether 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) local management’s ability to do the same
If an organization has a culture more focused on planning than on implementation…
Employees may come to view unethical conduct as acceptable behavior
Some companies still do not understand that ethics is a critical aspect of business strategy in action
This misunderstanding stems from a belief that the ethics of employees is primarily an individual matter, and not the responsibility of managers
The nature of ethics programs in corporate America
1) Is to determine risks
2) Develop policies and codes of conduct
3) Require specific standards of conduct.
Shared Values among Employees
The glue of successful management as well as of business ethics programs
Johnson Controls’ Four Spheres of Ethical Behavior
1) Employees and other team members
2) Company and shareholders
3) Customers, competitors, and suppliers
4) Public and communities.
The Center of John Controls’ 4 Sphere Model
Integrity
Symbolizing that the company must operate with integrity in each of these “spheres”
Formal Controls
Include the following input controls:
1) proper selection of employees
2) effective ethics training
3) strong structural systems (including communication systems)
Ethics Help Desk
Is 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
How Ethics Help Desk can be successful
1) Must be supportive of employees
2) Be easily accessible
3) Have simple procedures for employees to follow
Process Controls
Include management’s commitment to the ethics program and the methods or system for ethics evaluation.
Output Controls
Involve comparing standards with actual behavior
The primary purpose of an ethics audit is to:
- Identify the risks and problems in outgoing activities
- Plan the necessary steps to adjust, correct, or eliminate these ethical concerns
____ and ___ provided a guide that stressed the necessity for an ethical culture within the organization and the creation of an ethics and compliance program
U.S. Dep. of Justice and the SEC
Ethics Audit
A systematic evaluation of an organizations ethics program and performance to determine effectiveness
The recent addition of ISO 19600 lists global standards for compliance management systems (CMSs)
Companies that adopt this standard are expected to conduct periodic audits on their CMSs to identify weaknesses and ensure the ethics program is being implemented effectively
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
Deferred Prosecution Agreements (DPAs)
When companies admit wrongdoing (but not guilt), pay a fine, cooperate with the Justice Department, and agree to meet certain terms within a certain time frame
Measures of Ethical Climate Include
- Collective ethical sensitivity
- Collective character
- Collective judgment
- Collective moral motivation
One of the greatest benefits of the auditing process
Improved relationships with stakeholders who desire greater transparency
Top Challenges for CEO’s
- Political uncertainty
- Increased regulation
- Technological change
- Cybersecurity
- Management diversity
Ethical Disasters
Are the discovery of large-scale unethical activity and follow recognizable phases of escalation
The process of Ethical Disaster-Recovery Planning
- Assessing an organization’s values
- Developing an ethics program
- Performing an ethics audit
- Developing contingency plans for potential ethical disasters
1st Recommendation for Improving Risk Management
Review the nature and scope of the risk management function.
2nd Recommendation for Improving Risk Management
Develop a risk and compliance plan at the beginning of major projects
3rd Recommendation for Improving Risk Management
Improve performance by applying risk measures and dashboards
4th Recommendation for Improving Risk Management
Maintain a recovery plan for an ethical or compliance crisis
5th Recommendation for Improving Risk Management
Communicate risk frameworks and the effectiveness of internal and external controls
Integrity
Refers to being whole, sound, and in unimpaired condition
Six Sigma
a methodology designed to manage process variations that cause defects, and to systematically work toward managing variation to eliminate those defects
Defects
Unacceptable deviations from the mean or target
The objective of Six Sigma
Deliver world-class performance, reliability, and value to the end customer
Balanced Scorecard
A management system that focuses on all the elements that contribute to organizational performance and success
Goal of Balanced Scorecard
Is to develop a broader perspective on performance factors and to foster a culture of learning and growth that improves all organizational communication
The Triple Bottom Line
A perspective that takes into account the social, environmental, and financial impacts of decisions made within an organization
Global Reporting Initiative (GRI)
Advances sustainability reporting, which incorporates the triple bottom line factors of economic, social, and environmental indicators
ISO 19600
Published to provide international guidelines for compliance management
A key part of ISO 19600
The adoption of compliance objectives and the assignment of accountability throughout the entire organization
Open Compliance Ethics Group (OCEG)
Helps create a universal framework for compliance and ethics management.
The OCEG focuses on non-financial compliance and the more qualitative elements of internal controls
Risks of Ethics Audits
- Uncover problems that you don’t wish to disclose yet
- May find its stakeholders’ criticisms cannot be easily addressed
- Imposes burdens and costs
First step in conducting any audit
Secure Commitment of Top Managers and Board of Directors
Ethics Resource Center
A nonprofit engaged in supporting ethical conduct in the public and private sector, assists companies with assessments and audits
Framework for an Ethics Audit
1) Secure the commitment of top managers and the board
2) Establish an ethics oversight committee
3) Define the scope of the audit process
4) Review the organization’s mission, policies, goals, and objectives and define its ethical priorities.
5) Collect and analyze relevant info
6) Have results verified by an independent agent.
7) Report the findings to the audit committee
Scope of an Audit
Depends on:
- the type of business
- the risks it faces
- the opportunities it has to manage ethics
Verification
An independent assessment of the quality, accuracy, and completeness of a company’s social report
Unqualified Opinion
States that the financial statements are fairly stated
Qualified Opinion
Auditor believes the financial statements are fairly stated, but an unqualified opinion is not possible either because of limitations placed on the auditor or because of minor issues involving disclosure or accounting principles
Adverse Opinion
States that the financial statements are not fairly presented
Disclaimer of Opinion
States that the auditor did not have full access to records or discovered a conflict of interest.
