Week THREE: Developing Effective Ethics Programs Flashcards
Why is there a need for an ethics program in an organisation?
- As nearly impossible to know all relevant laws - these programs increase ethical awareness
- Organisations may feel pressure to succeed, creating opportunities that reward unethical decisions
- Established ethics programs help employees determine what behaviours are acceptable
- Top management must integrate these codes, values and standards into the corporate culture
What are the aims of an ethics program?
Effective ethics programs help ensure that all employees understand the organisation’s values and comply with the policies and codes of conduct that craete its ethical climate
- Diverse employee backgrounds (education, experience, family) make organisational socialisation more critical
- Help reduce firm’s liability
What does a strong ethics program look like?
- Written codes of conduct
- Ethics officers to oversee programs
- Care in delegation of authority
- Formal ethics training
- Auditing, monitoring, enforcement and revision of program standards
Moral management
- corporate transparency
- codes of conduct
- whistle blowing mechanisms
What is the difference between a code of conduct and code of ethics
Codes of conduct
= Formal statements that describe what an organisation expects of its employees
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
What does an ethics officer do?
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 employee questions
- Ensure government compliance
- Monitor and audit ethical conduct
- Take action on possible code violations
- Review and update the code
What are some measures used to measure effectiveness of ethics programs?
Effective programs employ various methods to measure effectiveness
- Observing employees
- Internal audits and investigations
- Surveys
- Reporting systems
- External audits
What are some design/implementation mistakes with ethics programs?
- Failure to understand and appreciate goals
- Setting unrealistic/immeasurable objectives
- Unsupportive top management
- Ineffective or incomprehensible content
- Transferring ‘American’ program to firm’s international operations
- Designing a program that is little more than a series of lectures resulting in low recall
What are some factors that impact the success of an ethics program
- Content of the code of ethics
- Frequency of communication regarding ethics program
- Quality of communication
- Senior management’s ability to incorporate ethics into the organisation
- Local management’s ability to do the same
What are some controls to ensure successful ethics programs.
What are benefits of an ethics audit?
- Proper selection of employees
- Ethics training
- Structural and communication systems eg. ethics assistance line/help desk
- Management’s commitment to the program
- Compare standards against actual behaviour -> ethics audit
- > Ethics audit = systematic evaluation of an organisation’s ethics program and performance to determine whether it is effective
- Provides 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
Benefits ->
- detect misconduct before it becomes major problem
- Identify potential ethical issues and improve legal compliance
- Improve organisational performance
- Improve relationships with stakeholders who demand greater transparency
- Set goals against which to measure actual performance
-> Social audit = process of accessing and reporting a business’s performance in fulfilling the economic, legal, ethical and philanthropic responsibilities expected by stakeholders
Broader in scope than ethics audit, which may be a component of a social audit
What does ethical crisis management encompass?
Plans to respond to and recover from disasters that can disrupt operations, destroy organisational reputation and erode shareholder confidence, includes;
- Contingency planning
- Assessing organisational risk
- Planning for potential occurrence
- Provide tools to respond
What are some of the ways of measuring ethical performance?
Six sigma
- Balanced scorecard
- Triple bottom line
- Global reporting initiative
- ISO 19600
- Open compliance ethics group
What are some threats to the auditor’s independence
Self-Interest
- may benefit from financial interest in client
Familiarity
- too friendly with client by working with them for a number of years
Self-Review
- position of reviewing work they’re responsible for
Intimidation
Advocacy
- promotes audit client’s position or opinion
What are some of the risks of ethics 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 standardisation
What are the six steps in 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
- Way to benchmark ethical performance - Establish an ethics audit committee to oversee the audit process
- Ideally, the board of directors financial audit committee would oversee the audit
- In most companies though, 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 opportunities to manage ethics
- Subject matter definition: environmental, privacy, discrimination, product liability, financial reporting, employee rights - Review current organisational mission, goals and values
- Review all formal documents that make explicit comments about ethical, legal or social responsibilities
- Define organisations ethical priorities - Collect and analyse relevant info
- Identify tools or methods for measuring progress in improving employee’s ethical decision and conduct
- Collect internal and external documents
- Determine baseline level of compliance
- Determine commitments met and unmet - Verify the results through outside agent
social/ethics audit consultant
- Financial accounting firm
- Nonprofit special interest group
