Corporate Ethics Programs What are they? A systematic approach to raise employees’ ethical awareness –By education –By providing resources to identify and resolve ethical issues

Components of Corporate Ethics Programs Code of ethics –Ethics training for employees –A reporting mechanism –An audit system –An investigation system Emphasis and components may vary

A Compliance Strategy Tries to prevent –criminal conduct –violation of government regulations, and self-interested behavior Imposes standards of conduct –to compel acceptable behavior Relies on lawyers and compliance officers

An Integrity Strategy Creates conditions to support right action Communicates the values and vision of the organization Aligns employee standards with those of the organization Relies on the whole management team –not just law and compliance personnel

Benefits of an Ethics Program Prevent ethical misconduct –Prevent monetary losses and losses to reputation Adapt the organization to rapid change –Regulatory changes –New technologies –Mergers & acquisitions Relationships with stakeholders –Suppliers play by the same rules –Reassures company’s intent

Corporate Codes of Ethics Three approaches Statement of specific rules or standards –Code of conduct Statement of core values or vision –Often called a credo or mission statement –Johnson & Johnson Policy on Business Conduct Statement of corporate philosophy –Describes beliefs guiding a company –“Winning the right way, every day” – HP computer systems

Corporate Codes of Ethics Who writes the codes? General Counsel 84% CEO 77% Senior HR Executives 75% Chairman 58% Senior Financial Executives 42% Employee Representatives 15% Consultants 8%

Corporate Codes of Ethics Problems Emphasizes rules over judgment –Employees might conclude that anything not forbidden is permitted Heavy focus on actions that harm the company –Leads to cynicism about the purpose of the code Other approaches –Focus on a strong corporate culture and leadership, rather than on a written code –Rely upon extensive government regulation and internal auditing

Problems with Ethics Programs Some misconduct because of organizational pressure and peer behavior, –NOT because of ignorance over ethical standards Ethics programs may be "window dressing" Small companies might invest too much in compliance programs when other approaches might be better