Developing an Effective Ethics Program

Question 1

Corporations As Moral Agents

Answer 1

Corporations have the same rights and responsibilities as individuals
All employees must obey laws and regulations defining acceptable business conduct
Corporate culture without values and appropriate communication about ethics can facilitate individual misconduct
Ethical corporate culture does not evolve, but requires ethical polices
Implementing a corporate ethics program promotes the corporation as a moral agent

Question 2

Components of a Strong Ethics Program

Answer 2

A strong ethics program includes
Written codes of conduct
Ethics officers to oversee the program
Careful delegation of authority
Formal ethics training 
Rigorous auditing, monitoring, enforcement, and revision of program standards

Question 3

Benefits Of Having An Ethics Code

Answer 3

A Comprehensive Code of Conduct Can…

1. Guide employees in situations where the ethical course of action is not immediately obvious.
2. Help the company reinforce—and acquaint new employees with—its culture and values. A code can help create a climate of integrity and excellence.
3. Help the company communicate its expectations for its staff to suppliers, vendors, and customers.
4. Minimize subjective and inconsistent management standards.
5. Help a company remain in compliance with complex government regulations.
6. Build public trust and enhance business reputations.
7. Offer protection in preempting or defending against lawsuits.
8. Enhance morale, employee pride, loyalty, and the recruitment of outstanding employees.
9. Promote constructive social change by raising awareness of the community’s needs and encouraging employees and other stakeholders to help.
10. Promote market efficiency, especially in areas where laws are weak or inefficient, by rewarding the best and most ethical producers of goods and services

Question 4

Developing/Implementing a Code of Ethics/Conduct

Answer 4

1. Consider areas of risk and state the values as well as conduct necessary to comply with laws and regulations. Values are an important buffer in preventing serious misconduct.
2. Identify values that specifically address current ethical issues.
3. Consider values that link the organization to a stakeholder orientation. Attempt to find overlaps in organizational and stakeholder values.
4. Make the code understandable by providing examples that reflect values.
5. Communicate the code frequently and in language that employees can understand.
6. Revise the code every year with input from organizational members and stakeholders.

Question 5

Creating a Climate of Integrity

Answer 5

Set an example through strong leadership
Set realistic goals
Distinguish between compliance and ethics
Provide training
Systems to Monitor and Enforce Ethical Standards
Ethics Officers

Question 6

Ethics Officers

Answer 6

Ethics officers are responsible for managing the ethics and legal compliance programs
Assess needs and risks 
Develop and distribute the code
Conduct training programs for employees
Confidentially answer employees’ questions
Ensure government compliance
Monitor and audit ethical conduct
Take action on possible code violations
Review and update the code

Question 7

Goals Of Successful Ethics Training

Answer 7

1. Identify key risk areas employees will face.
2. Provide experience in dealing with hypothetical or disguised ethical issues within the industry through mini-cases, online challenges, DVDs, or other experiential learning opportunities.
3. Let employees know wrongdoing will never be supported in the organization and employee evaluations will take their conduct in this area into consideration.
4. Let employees know they are individually accountable for their behavior.
5. Align employee conduct with organizational reputation and branding.
6. Provide ongoing feedback to employees about how they are handling ethical issues.
7. Allow a mechanism for employees to voice their concerns that is anonymous, but provides answers to key questions (24-hour hotlines).
8. Provide a hierarchy of leadership for employees to contact when they are faced with an ethical dilemma they do not know how to resolve

Question 8

Systems to Monitor and Enforce Ethical Standards

Answer 8

Effective programs employ various methods to measure effectiveness
Observing employees
Internal audits and investigations
Surveys
Reporting systems
External audits

Consistent enforcement and necessary disciplinary action are essential to a functional ethics or compliance program

Question 9

Key Attributes of a Fully Integrity Based Organization

Answer 9

Employees feeling a sense of responsibility and accountability for their actions and the actions of others
Employees freely raising issues and concerns without fear of retaliation
Managers modeling the behaviors they demand of others
Managers communicating the importance of integrity when making difficulty decisions
Leadership understanding the pressure points that drive unethical behavior
Leadership developing processes to identify and remedy the areas where the pressure points occur

Question 10

Common Design and Implementation Mistakes

Answer 10

Failure to understand and appreciate goals
Setting unrealistic/immeasurable objectives
Unsupportive top management
Ineffective or incomprehensible content
Transferring an “’American” program to a firm’s international operations
Designing a program that is little more than a series of lectures resulting in low recall

Question 11

Implementing Ethics Programs

Answer 11

Five factors can impact success of ethics programs

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 12

Process Controls for Ethics Programs

Answer 12

Proper selection of employees
Ethics training
Structural and communication systems
Ethics assistance line
Help desk
Management’s commitment to the program
Comparing standards against actual behavior
Ethics audit

Question 13

Process Controls for Ethics Programs

Answer 13

Proper selection of employees
Ethics training
Structural and communication systems
Ethics assistance line
Help desk
Management’s commitment to the program
Comparing standards against actual behavior
Ethics audit

Question 14

The Ethics Audit

Answer 14

A systematic evaluation of an organization’s ethics program and performance to determine whether it is effective
Regular, complete, and documented measurements of compliance with policies and procedures
Can be a precursor to establishing an ethics program
Should be the most important part of an ethics program
Primary purpose is to identify risks and problems in activities and plan steps to adjust/correct/eliminate concerns
Recent legislation encourages greater ethics audits

Question 15

Ethical Crisis Management

Answer 15

Plans to respond to and recover from disasters that can disrupt operations, destroy organizational reputation, and erode shareholder confidence
Involves...
Contingency planning
Assessing organizational risks
Planning for potential occurrences
Providing tools to respond

Question 16

Risks in EthicsAuditing

Answer 16

May uncover ethical problems a company does not wish to disclose
May reveal a problem that cannot be remedied
Stakeholders may be dissatisfied with the information
Conducting ethics audits requires financial and record keeping resources
No guarantee that auditing is the solution
Lack of standardization in auditing

Question 17

The Auditing Process

Answer 17

Audits should be unique to each company
The following steps provide a general framework…
1.Secure management and board commitment
2.Establish an ethics audit committee
3.Define the scope of the audit
4.Review organizational mission, goals, and values
5.Collect and analyze relevant information
6.Verify the results through an outside agent
7.Report the findings

Question 18

Strategic Importance of Ethics Auditing

Answer 18

Should be conducted regularly
Provides a benchmark of overall effectiveness of ethics initiatives
Can be important in asset allocation and program development
Can demonstrate the positive impact of ethical conduct and social responsibility initiatives on the firm’s bottom line

Question 19

Compliance orientation

Answer 19

Requires employees identify with and commit to specific conduct
Uses legal terms, statutes, and contracts to teach the rules and penalties for noncompliance

Question 20

Values orientation

Answer 20

Strives to develop shared values; focuses on ideals, such as accountability and commitment
Is more effective at creating ethical reasoning, the foundation of an organizational ethical culture

Question 21

Balanced Scorecard

Description of Measuring Tools

Answer 21

Developed by Drs. Robert Kaplan and David Norton, the Balanced Scorecard incorporates nonfinancial performance indicators into the evaluation system to provide a more “balanced” view of organizational performance. The system uses four metrics—financial, internal business processes, learning and growth, and customer—to measure the overall performance of the firm.

Question 22

Six Sigma

Description of Measuring Tools

Answer 22

Six Sigma focuses on improving existing processes that do not meet quality specifications or that need to be improved as well as developing new processes that meet Six Sigma standards. To meet Six Sigma specifications, the process must not produce more than 3.4 defects per million opportunities.

Question 23

Triple Bottom Line

Description of Measuring Tools

Answer 23

This approach to measuring social, financial, and environmental factors (or people, places, and planet) recognizes that business has a responsibility to positively influence a variety of stakeholders, including customers, employees, shareholders, community, and the natural environment. The challenge is how to evaluate a business’s social and environmental impacts, since there are