P2F.3 Ethical Considerations for Organizations

Question 1

Corporate Responsibility for Ethical Conduct

Answer 1

1. Commitment to ethical standards
2. Incorporating ethical standards across the entire organization
3. Create, communicate and maintain
4. Addressing social responsibility and sustainability

Question 2

Four Levels of Social Responsibility

Answer 2

1. Economic: marketplace success of creating value for consumers and capturing some, as well as creating value for investors.
2. Legal: keeping legal responsibilities to the government like registration and taxation, as well as staying legally in-bounds with regard to business and employment practices.
3. Ethical: responsibility to stakeholders including those who are not direct counterparties to corporate business.
4. Philanthropic: positively benefitting society. It can mean anything from donating profits to creating shared value through strategic investments in the community.

Question 3

Differences between Ethical and Legal Behavior

Answer 3

Ethical

1. Broader scope
2. Based on company’s values, principles and values
3. Higher standard than legal compliance

Legal
1. Compliance with laws and regulations

Question 4

Importance of Code of Conduct and Ethical Values in an Organization

Answer 4

1. Credo for ethical behavior
2. Creates a harmonious environment in an organization
3. Prevent financial losses, lawsuits, fines, tax penalties, etc.
4. Gain a positive public image
5. Intrinsic value of ethical behavior

Question 5

Setting the Tone at the Top

Answer 5

1. Leadership by example
2. Tone at the top
3. Leadership traits: shared values, do what they say they’re going to do, shows respect to humanity, project equality of opportunity, doesn’t tolerate ethical lapses in others.

Question 6

Role of Corporate Culture and Core Values

Answer 6

1. Set of shared values and interaction models
2. Influences how people think and behave
3. Harmonizes decisions and actions
4. Should be based on core values

Question 7

Importance of Human Capital and Employee Training

Answer 7

1. Hiring process
2. Introducing ethical standards early on
3. Continual updating of ethical standards when necessary
4. Ongoing employee training
5. Consistent value based leadership

Question 8

Monitoring Ethical Compliance

Answer 8

1. Human Performance Feedback Loop: foster compliance to ethical expectations when used to measure how well employees comply with those expectations as well as operational goals.
2. Survey Tools: employees can rate how effective the organization is in terms of ethical performance.
3. Whistleblowing Framework: give employees a confidential channel to report suspect, ethical behavior.

All three are methods that measure and help improve ethical compliance.

Question 9

US Foreign Corrupt Practices Act

Answer 9

1. Enacted in 1977 in response to corrupt practices of US companies conducting business overseas
2. Anti-bribery provision: prohibits business-related bribes to government and public officials
3. Accounting provision: internal controls and accurate financial reporting that produces fair and accurate reports in all material aspects.
4. SEC responsible for civil enforcement.

Question 10

UK Bribery Act

Answer 10

1. Enacted in 2010 to combat domestic and international bribery
2. Applies to private sector bribes as well as foreign officials
3. Reiterates illegality of facilitating payments.

Question 11

Facilitating Payment

Answer 11

1. Financial payment that may constitute a bribe and is made with the intention of expediting an administrative process.
2. It is a payment made to a public or government official that acts as an incentive for the official to complete some action or process expeditiously, to the benefit of the party making the payment.
3. In some countries, these payments are considered normal, whereas in other countries, facilitating payments are prohibited by law and considered bribes.

Question 12

Corporate Social Responsibility

Answer 12

1. Largely private-sector movement to integrate sustainability into business decisions by promoting a broad set of social and environmental factors.
2. While views around corporate social responsibility are constantly evolving, there is a clear responsibility not to damage third parties via market externalities.

Question 13

Groupthink

Answer 13

1. Common habit of members of a group to tend to value harmony within the group over the effectiveness of group output.
2. This can create an echo chamber in which issues are simplified, and important outside views are not considered.