week 3 Flashcards
explain The Responsibility of the Corporation as a Moral Agent
Increasingly, corporations are viewed not merely as profit-making entities but also as moral agents
They are accountable for their conduct to their stakeholders
Have same rights and responsibilities as individuals
explain the need for organisational ethics programs
It is nearly impossible to know all relevant laws
Ethics programs increase ethical awareness
Organizations can become bad barrels
Pressures to succeed create opportunities rewarding unethical decisions
Established ethics programs help employees determine what behaviors are acceptable
Top management must integrate these codes, values and standards into the corporate culture
A strong ethics program includes
Written code of conduct Ethics officer to oversee the program Care in the delegation of authority Formal ethics training Auditing, monitoring, enforcement, and revision of program standards
explain compliance orientation (compared to value orientation)
Compliance orientation
Requires employees identify with and commit to specific conduct
Uses legal terms, statutes, and contracts to teach the rules and penalties for noncompliance
explain values orientation
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
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what is a code of conduct
Codes of conduct
Formal statements that describe what an organization expects of its employees
what are codes of ethics
Most comprehensive document consisting of general statements that serve as principles and the basis for the rules of conduct
Contains 6 core values: trustworthiness;
Respect;
Responsibility;
Fairness;
Caring;
Citizenship
explain statement of values
Serves the general public and addresses stakeholder interest
to implement a good code
Write it Tailor it Communicate it Promote it Revise it Live it Enforce/reinforce it
explain ethics officer
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
explain ethics training and communication
Ethics training can
Educate employees about policies, expectations, laws, regulations, and general social standards
Raise awareness of resources and support systems
Empower employees
Top executives must communicate and enforce ethical standards
Employees need to know whom to contact for guidance when encountering gray areas
explain systems to monitor and enforce ethical standards
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
explain continous improvement
Improving a system differs little from implementing any other business strategy
To improve its ethical performance, a company may change how it makes decisions
Centralize decisions, or decentralize them
The key is to delegate authority carefully so the organization can achieve ethical performance
Revisions are required
Implementing ethics programs - Five factors 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
explain process controls for ethics programs
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
define ethics audit
Ethics audit - systematic evaluation of an organization’s ethics program and performance to determine whether it is effective
define social auditing
process of accessing and reporting a business’s performance in fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders
Broader in scope than an ethics audit
An ethics audit might be a component of a social audit
benefits of an ethics audit
Detect misconduct before it becomes a major problem
Identifies potential ethical issues and improve legal compliance
Improve organizational performance
Improve relationships with stakeholders who demand greater transparency
Sets goals against which to measure actual performance
explain ethical crises management
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
explain measuring non financial ethical peformance
Nonfinancial performance measures are crucial to a firm’s health Measure wholeness and soundness of a company “Return on integrity” Many organizations and regulatory frameworks offer a means of capturing ethical performance Structural Behavioral Few methods: Six Sigma Balanced Scorecard Triple Bottom Line Global Reporting Initiative ISO 19600 Open Compliance Ethics Group
explain risks in financial auditing
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
explain the auditing process
- Secure top management and board commitment.
Board members may initiate audits based on specific stakeholder concerns or in response to corporate governance reform.
Management could be held responsible for the ethical and legal compliance programs of their company.
As a way to benchmark their ethical performance.
2.Establish an ethics audit committee to oversee the audit process.
Ideally, the board of directors’ financial audit committee would oversee the ethics audit.
However, in most companies managers or ethics officers conduct the audits.
Individuals within the firm should be involved as well as external auditors.
- Define the scope of the audit.
Defined by the ethics audit committee and monitor progress.
Scope is determined by the type of business, risks faced, and the opportunities to manage ethics.
Subject matter definition: Environmental, Privacy, Discrimination, Product liability, Financial reporting, Employee rights. - Review current organizational mission, goals, and values
Review all formal documents that make explicit comments about ethical, legal, or social responsibilities.
Define the organization’s ethical priorities - Collect and analyze relevant information.
Identify the tools or methods for measuring progress in improving employee’s ethical decisions and conduct.
Collect internal and external documents.
Determine a baseline level of compliance.
Determine commitments met and unmet - Verify the results through an outside agent.
Social/ethics audit consultant
Financial accounting firm
Nonprofit special interest group
Report the findings to:
Audit committee, managers, and stakeholders
Issue the ethics audit report to the board of directors and top executives until approved; and then submit it to external stakeholders.
The report should identify the purpose and scope of the audit, methods used, role of the auditors, and guidelines followed
Ethics audits are similar to financial audits, but forms are different
Unqualified opinion
Qualified opinion
Adverse opinion
Disclaimer of opinion
. Imagine that it’s your responsibility to select an ethics officer for your organisation.What qualities, backgrounds, and experience would you look for? Would you ever be interested in such a position? Why or why no
Generally, insiders who have held line management positions, who are thought to be fair, trustworthy, and credible, and who have a good relationship with the top management team are thought to make the best ethics officers. The General Council (eg., lawyers) may not be the best choice because a lawyer is trained to, first and foremost, protect the company. Employees may not feel that they can go to this person with a problem, especially, if it involves misconduct at higher levels. An ethics officer needs to have an internal as well as an external focus. She or he must be concerned about fairness to employees and customers, as well as protectingthe organisation from outside attack
