Chapter 9 Flashcards
Name one of the five factors that can impact success of ethics programs
- The content of the code of ethics
- The frequency of communication regarding the ethics program
- The quality of communication
- Senior management’s ability to incorporate ethics into the organization
- Local management’s ability to do the same
Name one of the Process Controls for Ethics Programs
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
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
Social. Broader than an ethics audit, in fact an ethics audit might be a component
Define one of the benefits of an ethics audit
- 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
Define an Ethics Audit
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
Ethical d Management involves the following:
- Contingency planning
- Assessing organizational risks
- Planning for potential occurrences
- Providing tools to respond
Define Ethical Crisis Management
Plans to respond to and recover from disasters that can disrupt operations, destroy organizational reputation, and erode shareholder confidence
One of the Top Challenges
For CEOs are
- Human Capital
Operational excellence
innovation
customer relationships
Global political/economic risk
Government regulation
Global expansion
corporae brand and reputation
sustainability
trust in business
See examples of Improving Organizational Risk Management
Slide 11
What are the three Stages of an Ethical Disaster?
- Ethical Issue Recognition
- The Decision to Act Unethically
- 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
Define the Social Audit
Process of accessing and reporting a business’s performance in fulfilling its economic, legal, ethical and philanthropic responsibilities expected by stakeholders.
True or False: An ethics audit is broader in scope than a Social audit.
False, ethics audit is less broader in scope. It may be a component of a social audit.
Give an example of nonfinancial ethical performance measurements
Triple Bottom Line - “People, Places, Planet”
Balanced scorecard
Six sigma
Global reporting initiative
AccountaAbility AA1000 Frameword
open complience thics group
What do nonfinancial performance measures do?
Measure wholeness and soundness of company - Return on Integrity (HAH). Crucial to a firm’s health
See slide 13 for detailed examples of nonfinancial performance measures
slide 13
Identify a risk in ethics auditing
- 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
Ethics audits should be unique to each company - true or false?
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
See slide 21 for an example of a Model CSR structure
Slide 21
What is the first step in the ethics audit process?
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
What is the second step in the auditing process?
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
The third step, defining the scope of the audit, is described as
The scope is established to monitor progress. Unique, determinable by type of business, risks faced, and opportunities to manage ethics
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
Review Organization Mission, Values, Goals, and Policies
What is the fifth step in the audit process?
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.
The Sixth step is to verify the results. Further clarify
Have an INDEPENDENT party verify results. Verification is an assessment of quality, accuracy, and completeness of social report.
True or False: Culture has little to no impact of the prevalence of misconduct?
False - Where cultures are weaker, Misconduct is much more prevalent.
What is the last step of the audit process, similar to financial audits but different in form?
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)
Why is ethics auditing strategically important?
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.
