1. Developing an Effective Ethics Program
University of Bahrain
College of Business Administration
MGT 437 Business Ethics
Chapter 8
Developing an Effective Ethics Program
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2. The Responsibility of the Corporation as a Moral Agent
Increasingly, corporations are viewed not merely as profit-making entities but also as moral agents that are accountable for their conduct to their employees, investors, suppliers, and customers.
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3. The Need for Organizational Ethics Programs
Scandals in corporate America have lowered the public’s trust of business.
Understanding the factors that influence ethical decision-making can help companies encourage ethical behavior.
Employees are not legal experts and therefore need guidance with legal issues impacting their jobs.
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4. The Need for Organizational Ethics Programs
One reason why ethics programs are required is to help sensitize employees to the potential legal and ethical issues within their work environments
Five top recommendations to CEO’s for rebuilding trust and confidence in American firms
Making customers the top priority
Assuming personal responsibility and accountability
Communicating openly and frequently with customers
Handling crises more honestly
Sticking to the code of business ethics no matter what
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5. An Effective Ethics Program
Helps ensure that all employees understand the organization’s values and comply with the policies and codes of conduct that create its ethical climate
Diverse employee backgrounds (education, experience, family) make organizational socialization more critical.
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6. Values Versus Compliance Programs
Compliance orientation
Creates order by requiring that employees identify with and commit to specified conduct
Uses legal terms, statutes and contracts that teach employees the rules and penalties for noncompliance
Values orientation
Attempts to develop shared values
Focuses more on an abstract core of ideals such as respect and responsibility, although there are penalties for misconduct
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7. Ethics Programs Can Help Avoid Legal Problems
The Federal Sentencing Guidelines for Organizations encourage companies to assess their key risks and customize a program to address these risks.
The program must be communicated to all employees—providing a common understanding of organizational values, policies, and procedures.
Companies that act to prevent organizational misconduct may receive a “carrot” and avoid organizational penalties.
Those that do not may receive a “stick”— fines and penalties.
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8. Minimum Requirements for Ethical Compliance Programs
Standards and procedures, such as code of ethics, that are reasonably capable of detecting and preventing misconduct
High-level personnel who are responsible for an ethics and compliance program
No substantial discretionary authority given to individuals with a propensity for misconduct
Standards and procedures communicated effectively via ethics training programs
Establishment of systems to monitor, audit, and report misconduct
Consistent enforcement of standards, codes, and punishment
Continuous improvement of the ethical compliance program
Source: Adapted from U.S. Sentencing Commission, Federal Sentencing Guidelines Manual (St. Paul : West, 1994), Chapter 8.
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9. Copyright © Houghton Mifflin Company. All rights reserved. MGT437
Codes of Conduct
Codes of conduct
Formal statements that describe what an organization 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
Statement of values
Serves the general public and addresses stakeholder interests
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10. Copyright © Houghton Mifflin Company. All rights reserved. MGT437
Ethics Officers
Ethics officers or committees are responsible for oversight of the ethics/compliance program:
Assess the needs and risks that an organization-wide ethics program must address
Develop, revise, and disseminate the code
Conduct training programs for employees
Develop effective communication
Make sure the company is in compliance with government regulation
Establish audits and control systems
Take action on possible violations of the code
Review and modify the program to improve effectiveness
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11. Ethics Training and Communication
Keys to successful ethics training
Help employees identify the ethical dimensions of a business decision
Give employees a means to address ethical issues
Help employees understand the ambiguity inherent in ethical situations
Make employees aware that their actions define the company’s ethical posture both internally and externally
Provide direction for employees to find managers or others who can help them resolve ethical conflicts
Eliminate the belief that unethical behavior is ever justifiable by stressing that
Stretching the ethical boundaries results in unethical behavior.
Whether discovered or not, an unethical act is just that.
An unethical act is never in the best interests of the company.
The firm is held responsible for the misconduct of its members.
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12. Systems to Monitor and Enforce Ethical Standards
An internal system for employees to report misconduct is an opportunity to register ethical concerns:
Ethics hot lines
Questionnaires used to serve as benchmarks
Enforcement is also important:
Corrective actions to provide standards and punishment
Consistent enforcement critical
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13. Continuous Improvement of the Ethics Program
Always improve
Revisions are needed
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14. Common Mistakes in Designing/ Implementing an Ethics Program
Not having a clear understanding of the goals of the program from the beginning
Not setting realistic and measurable program objectives
Senior management’s failure to take ownership of the ethics program
Developing program materials that do not address the needs of the average employee
Transferring a domestic program internationally
Designing a program as a series of lectures
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