Chapter 9

Question 1

Name one of the five factors that can impact success of ethics programs

Answer 1

1. The content of the code of ethics
2. The frequency of communication regarding the ethics program
3. The quality of communication
4. Senior management’s ability to incorporate ethics into the organization
5. Local management’s ability to do the same

Question 2

Name one of the Process Controls for Ethics Programs

Answer 2

Proper selection of employees

Ethics training

Structural and communication systems
(ethics assistance line and help desk)

Comparing standards against actual behavior (with an ethics audit)

Management’s commitment to ethics program

Question 3

The process of accessing and reporting a business’s performance in fulfilling its economic, legal, ethical, and philanthropic responsibilities expected by stakeholders is a (Social/Ethics) Audit

Answer 3

Social. Broader than an ethics audit, in fact an ethics audit might be a component

Question 4

Define one of the benefits of an ethics audit

Answer 4

• Detects misconduct before it would become a major problem
• Identifies potential ethical issues and improves legal compliance
• Improves organiational performance
• Improves relationship with stakeholders who demand greater transparency. (eg investors, government)
• Sets goals against which to measure actual performence

Question 5

Define an Ethics Audit

Answer 5

A systematic evaluation of an organization’s ethics program and performance to determine whether it is effective. Most important part of program. Primary purpose is to identify risks and problems in activities and plan steps to adjust/correct/eliminate concerns

Question 6

Ethical d Management involves the following:

• Contingency planning
• Assessing organizational risks
• Planning for potential occurrences
• Providing tools to respond

Define Ethical Crisis Management

Answer 6

Plans to respond to and recover from disasters that can disrupt operations, destroy organizational reputation, and erode shareholder confidence

Question 7

One of the Top Challenges

For CEOs are

Answer 7

• Human Capital

Operational excellence

innovation

customer relationships

Global political/economic risk

Government regulation

Global expansion

corporae brand and reputation

sustainability

trust in business

Question 8

See examples of Improving Organizational Risk Management

Answer 8

Slide 11

Question 9

What are the three Stages of an Ethical Disaster?

Answer 9

1. Ethical Issue Recognition
2. The Decision to Act Unethically
3. Organization’s discovery of an response to the act

Anticipation of and intervention can stave off organizational disasters. Done through formal mechanisms in place to detect risk

Question 10

Define the Social Audit

Answer 10

Process of accessing and reporting a business’s performance in fulfilling its economic, legal, ethical and philanthropic responsibilities expected by stakeholders.

Question 11

True or False: An ethics audit is broader in scope than a Social audit.

Answer 11

False, ethics audit is less broader in scope. It may be a component of a social audit.

Question 12

Give an example of nonfinancial ethical performance measurements

Answer 12

Triple Bottom Line - “People, Places, Planet”

Balanced scorecard

Six sigma

Global reporting initiative

AccountaAbility AA1000 Frameword

open complience thics group

Question 13

What do nonfinancial performance measures do?

Answer 13

Measure wholeness and soundness of company - Return on Integrity (HAH). Crucial to a firm’s health

Question 14

See slide 13 for detailed examples of nonfinancial performance measures

Answer 14

slide 13

Question 15

Identify a risk in ethics auditing

Answer 15

• may uncover ethical problems a company does not wish to disclose
• may reveal a problem that cannot be remedied
• stakeholder dissatisfaction with information
• No guarantee that auditing is the solution
• Lack of standardization in auditing
• conducting ethics audits requires financial and record-keeping resources

Question 16

Ethics audits should be unique to each company - true or false?

Answer 16

True, but there’s a general framework to follow.

• Secure management and board commitment
• Establish an ethics audit committee
• Define the Scope of the audit
• review organizational mission, goals, and values
• Collect and analyze relevant information
• Verify the results through a third party agent
• report the findings to audit committee, and if approved, then to managers and stakeholders

Question 17

See slide 21 for an example of a Model CSR structure

Answer 17

Slide 21

Question 18

What is the first step in the ethics audit process?

Answer 18

Securing commitment of top management and the board. SOX requires that BOD provide oversight. They may initiate audits, or managers may request an ethics audits to improve confidence in a firm’s reporting process

Question 19

What is the second step in the auditing process?

Answer 19

To establish an ethics oversight committee within the BOD. They will oversee audit, while managers or ethics officers conduct it in most firms. Internal and external parties should be involved, given external are third-party and have no conflcit-of-interest or outside relationships with top managers or BOD

Question 20

The third step, defining the scope of the audit, is described as

Answer 20

The scope is established to monitor progress. Unique, determinable by type of business, risks faced, and opportunities to manage ethics

Question 21

The fourth step allows a firm to define its ethical priorities as well as examine all documents that make commitments to CSR. The step is idnetified as

Answer 21

Review Organization Mission, Values, Goals, and Policies

Question 22

What is the fifth step in the audit process?

Answer 22

to collect and analyze information. This is by identifying tools for measuring progress in improving ethical decisions by employees. Can be taken from internal and external documents as long as it’s relevant subject matter. A baseline level of compliance is also determined. For comparability, compare your performance to other organizations.

Question 23

The Sixth step is to verify the results. Further clarify

Answer 23

Have an INDEPENDENT party verify results. Verification is an assessment of quality, accuracy, and completeness of social report.

Question 24

True or False: Culture has little to no impact of the prevalence of misconduct?

Answer 24

False - Where cultures are weaker, Misconduct is much more prevalent.

Question 25

What is the last step of the audit process, similar to financial audits but different in form?

Answer 25

Reporting the findings. This report spells out the purpose and scope of audit, methods used, roles, and auditing and reporting guidelines. May be disseminated internally or externally, and has four types of opinions (Unqualified, Qualified, Adverse, and Disclaimer of Opinion)

Question 26

Why is ethics auditing strategically important?

Answer 26

If conducted regularly, would provide a benchmark of overall effectiveness of ethics initiatives. This can be important in program development and in asset allocation. Can also demonstrate the positive impact of ethical conduct and social responsibility initiatives on the firm’s bottom line.