Corporate Responsibility for Ethical Behavior Flashcards
What is a key document for understanding ethical concepts in an organizational context?
IMA’s Statement on Management Accounting “Values and Ethics: From Inception to Practice” is a useful document for understanding ethical concepts in an organizational context
What is the concept of an organization’s responsibility to instill a sense of ethics in its employees?
(Ethical concepts in an organizational context)
The organization has a responsibility to foster a sense of ethics in its employees and agents. All organizations need a code of conduct
The reasoning is that if no defined code of conduct and ethical behavior is developed, employees will act on their own beliefs and values or they will observe and emulate the behavior they see around them on a daily basis
What is the concept that a pervasive sense of ethical values can benefit an organization?
(Ethical concepts in an organizational context)
In the past, quality compliance and industrially engineered output expectations helped exert a high level of control over direct-production employees
In today’s service economy, control often involves developing management systems and tasks so that individuals know what to do on the job. This strategy works when thing proceed as anticipated
When things don’t go as anticipated, organization’s usually rely on the judgment of its people to make decisions based on what they feel is the policy. It is important for an organization to have a set of organizational values and code of ethics - since they create “touchstone” against which every unanticipated decision must be judged
Failure to establish a sense of ethical values in an organization can lead to inconsistent, unethical or fraudulent behavior
What is the concept that a sense of ethics requires an ability to distinguish between ethical and merely legal behavior?
(Ethical concepts in an organizational context)
This is saying that with the corporate scandals that have occurred, the perpetrators felt that they were innocent in their doings because they did not define their behavior by what most of society would deem as reasonable. Instead, they have their own code, limiting the definition of ethical behavior to require compliance with the law and nothing more
How does “leadership by example” or “tone at the top” play a role in determining an organization’s ethical environment?
(Ethical concepts in an organizational context)
This concept is saying that ethical behavior is not something that applies to someone else - every single individual is responsible for behaving ethically
In regard to an organization, it’s important for managers and supervisor to demonstrate ethical behavior in their work so the rest of the workforce can emulate the behavior
In order for a code of ethics to be effective, its application must be demonstrated by those in positions of power and leadership
Leaders must be seen living and managing by the code of ethics
What is the concept of human capital as it relates to ethics within an organization?
(Ethical concepts in an organizational context)
The concept of “human capital” is important to an organization in creating a climate where “doing the right thing” is expected
Given that labor cost is generally a company’s largest operating expense and it is difficult (and expensive) to monitor/control every detailed aspect of it’s workers; companies must entrust that their employees will make decisions that are in the best interest of the company
Human capital is a critical asset because humans create the innovation that generates new products/services and find ways to undertake projects in cost-effective ways. People bring knowledge to the workforce and develop relationship with suppliers, clients and others on whom the organization depends
Overall, an organizational code of ethics must be used as a benchmark for hiring decisions. This ensures candidates have a personal code that aligns with the organizational expectations
How does an organization’s culture impact its behavioral values?
(Ethical concepts in an organizational context)
Every organization has a culture. In smaller companies, the culture usually reflects the personal values and business methods of the owners and primary operators
In larger companies, it is more difficult to convey the proper culture from the top. Upper management’s perception of culture may not necessarily be reality
Step one in establishing an ethical culture must be an assessment of the existing organizational values and culture and the development of a set of statements that define the principles the organization believes in and should act upon
How is employee training important to maintaining an ethical organizational culture?
(Ethical concepts in an organizational context)
Even though most employees receive training when they onboard to a new company, it is not enough to maintain awareness and commitment to the application of a code of ethics in the workplace
Ethics training for employees should focus on covering ethical concepts, organization’s code and compliance
What is the human performance feedback loop?
Ethical concepts in an organizational context
The human performance feedback loop is one method for monitoring ethical compliance
Performance review and development systems must be fully aligned with the requirements for ethical conduct. Competencies, job descriptions and objectives should include ethical expectations and the regular employee review systems (conducted on an annual basis at minimum) must assess employees against the same criteria
What are survey tools?
Ethical concepts in an organizational context
Survey tools are one method for monitoring ethical compliance
Ongoing surveys are very valuable tools for assessing ethical performance, especially in areas such as management and leadership. Surveys can be created using the organization’s code of ethics and asking employees to rate how well the organization is following the contents
How is a whistleblowing framework an important component in maintaining an ethical organizational culture?
(Ethical concepts in an organizational context)
A whistleblowing framework (i.e. an ethics hotline) is an important component in maintaining an ethical organizational culture
An effective feedback system includes having a confidential framework for employees to report possible violations of the organization’s code of ethics and to receive advice on the ethical aspects of challenging decisions
Tracking and monitoring issues raised through a whistleblowing framework creates opportunities to enhance and improve internal controls. Management accountants need to ensure that such processes are in place, that they operate on a fully confidential basis and that they are capable of generating statistical or event-based reporting through which insight into ethical practice can be created
Why is it that organizations face challenges applying their values and ethical standards internationally?
(Ethical concepts in an organizational context)
Organizations face particular challenges in applying their values and ethical standards internationally because when group share the same cultural background, they tend to share the same values as well. Consequently, the basis for decision making and actions, including alignment with a code of ethical conduct will be similar
When immigration combines groups from dissimilar countries or backgrounds, the impact can be significant and the values and decision making processes may not be the same
Organizations have to make great effort to clearly define their expectations of ethical behavior and provide support and encouragement for complying with them
How is a comprehensive framework of corporate ethical behavior a prerequisite for an effective system of internal control?
(Ethical concepts in an organizational context)
A comprehensive framework of corporate ethical behavior is a prerequisite for an effective system of internal control because CEOs and CFOs have to place their own integrity on the line by attesting to compliance with an adequate level of internal controls (as well as all other certifications)
Creating a thorough, integrated system for developing, implementing, sustaining and monitoring ethical performance within the organization will allow executives to make such declarations with confidence that a code of ethics is the foundation of the organization’s culture and is fully integrated into the thinking process of every employee and business partner
What are 3 tools that can be used to identify process controls related to ethical and behavioral issues?
The 3 tools that can be used to identify process controls related to ethical and behavioral issues are:
- Business Process Reengineering (BPR)
- Quality Management
- Continual Process Improvement (CPI)
What is Business Process Reengineering (BPR)?
BPR is one of three tools that can be used to identify process controls related to ethical and behavioral issues
BPR provides a structured view of organizational processes and reveals the existence of tasks and activities that are carried out in order to transform inputs into outputs. At each task and activity level, there are potential risks that the management accountant will want to consider
In all cases, however, the behavioral aspects must provide a context for the risk and its control
