Effective Ethical Program

Development, Communication and Implementation

Outline
• Corporations as agent to the ethics
• Define EEP
• Establishing EEP
• Forms of EEP
• Importance of EEP
• Developing an EEP
• Implementing EEP
• Ethical Officer
• Ethical Training and Communication
• Enforcement and Monitoring of EEP
• Mistakes in developing EEP
Corporation as Moral Agent
• In business, many ethical issues are complex and require that
organizations reach an agreement on appropriate action. Top executives
and boards of directors must provide the leadership and a system to
resolve these issues.
• To promote Ethical and Legal conduct, organizations should develop
ethical program by communicating, and monitoring ethical values and
legal requirements that characterize the firms’ history, culture and
operating environment.
• Without such programs and such standards and policies of conduct, it is
difficult for employees to determine what behaviors are acceptable by
company.
Corporation as Moral Agent
• A company must have a responsibility to develop an Effective Ethics
Program to ensure that employees understand its values and comply
(go along with) with its policies and codes of conduct.
• Customized Ethics and Compliance Program help many businesses
and provide guidance to employees from diverse backgrounds in
understanding what behaviors are acceptable (or unacceptable)
within the organization.
• Business Ethics Programs have the potential to help top managers in
establishing an ethical culture and eliminate the opportunity for
unethical conduct.
An Effective Ethical program
• These ethics programs works as a control systems in an organization that
create predictability in employee behavior.
• There must be two types of program:
• Compliance Orientation program—which uses legal terms, laws, and
contracts that teach employees the rules and the penalties for
noncompliance. This program requires that employees identify and commit
to specific required conduct.
• Values Orientation program—which consists of developing shared values.
This program increase employees’ awareness of ethics at work, their
integrity, their willingness to deliver bad news to supervisors, and the
perception that better decisions must be made.
Establishing Ethics Program (forms)
• The process of establishing Organizational Ethics Programs begins by
developing formal ethical statements. Such statements can take different
form i.e.
• Codes of Conduct: formal statements that describe what an organization
expects of its employees. A code of conduct is a regulatory set of rules,
values and policies that support ethical culture .
• Code of Ethics: a comprehensive set of general statements about principles
and the rules of conduct. It specifies methods for reporting violations and
disciplinary action for violations. It also contain statements that specifies
acceptable or unacceptable types of behavior.
• Statement of Values: serves the general public and stakeholders interests.
Establishing Ethics Program
• These three statement can be used simultaneously and
interchangeably without making such distinction in practice.
• However, a code of ethics, conduct and values statement should
reflect upper managers’ and organizations desire for compliance with
the values, rules, regulations and policies that support, promote and
implement ethical culture.
• Along with detailed descriptions and examples of appropriate
conduct, the six values must be desirable for codes of ethics include
(1) trustworthiness, (2) respect, (3) responsibility, (4) fairness, (5)
caring, and (6) citizenship.
Importance of Ethics Program
• Codes of conduct will not resolve every ethical issue encountered in
daily operations, but they help employees and managers deal with
ethical issues by prescribing or limiting specific activities.
• Many companies have a code of ethics, but it is not communicated
effectively. A code that is placed on a website or in a training manual
is useless if it is not reinforced every day.
• The codes of conduct can restrict opportunities for unethical behavior
and thereby improve ethical decision making and promote ethical
culture if it is communicated to employees, what is expected of them
and what punishments they face if they violate the rules.
Developing a Code of Ethics/Conduct and
Value statement
• 1. Consider areas of risk/issues and state the values as well as
conduct necessary to comply with laws and regulations.
• 2. Identify values that specifically address current ethical issues.
• 3. Consider values that link the organization to a stakeholder
orientation. Attempt to find connection in organizational and
stakeholder values.
Developing a Code of Ethics/Conduct and
Value statement
• 4. Make the code understandable by providing examples that reflect
values.
• 5. Communicate the code frequently and in language that employees
can understand.
• 6. Revise the code every year with input from organizational
members and stakeholders.
Ethics Officers
• Having a high-level manager or committee who is responsible for an
ethical compliance program can significantly enhance program
administration and oversight.
• These officers are responsible for:
• (1) assessing the needs and risks that an organization- wide ethics
program must address,
• (2) developing and distributing a code of conduct or ethics,
• (3) conducting training programs for employees,
• (4) establishing and maintaining a confidential service to answer
employees’ questions about ethical issues,
Ethics Officers
• (5) making sure that the company is in compliance with government
regulation,
• (6) monitoring and auditing ethical conduct,
• (7) taking action on violations of the company’s code,
• (8) reviewing and updating the code.
• Ethics officers are also responsible for knowing thousands of pages of
relevant regulations as well as communicating and reinforcing values
that build an ethical corporate culture. Ethics officers often report
directly to the chief executive officer.
Ethics Training and Communication
• Successful ethics training is important in helping employees identify
ethical issues and in providing them with the means to address and
resolve such issues.
• Training can educate employees about the firm’s policies and
expectations, available resources, support systems, and designated
ethics personnel, as well as about relevant laws and regulations and
general social standards.
• Top executives must communicate with managers at the operations
level and enforce overall ethical standards within the organization.
Monitor and Enforce Ethical Program
• An Effective Ethics Program includes a variety of resources to monitor
ethical conduct and measure the program’s effectiveness.
• Compliance with the company’s ethical code and standards can be
assessed through:
1. observing employees,
2. performing internal audits and surveys,
3. instituting reporting systems,
4. conducting investigations,
5. external audits and review, as needed.
Monitor and Enforce Ethical Program
• If a company is not making progress toward creating and maintaining an
ethical culture, it needs to determine why and take corrective action, either
by enforcing current standards more strictly or by setting higher standards.
• If a company determines that its ethical performance has been less than
satisfactory, executives may want to change how certain kinds of decisions
are made.
• Corrective action involves rewarding employees who comply with company
policies and standards and punishing those who do not.
• Consistent enforcement and disciplinary action are necessary for a
functioning ethical compliance program.
Monitor and Enforce Ethical Program
• The existence of an internal system by which employees can report
misconduct is especially useful for monitoring and evaluating ethical
performance.
• Efforts to prevent unethical behavior are important for companies’
long-term relationships with their employees, customers, and
community. If the code of ethics is aggressively enforced and
becomes part of the corporate culture, it can effectively improve
ethical behavior within the organization.
Mistake in preparing EEP
• In implementing ethics and compliance programs, many firms make
some common mistakes including
1. Not having clear understanding of goal of such programs,
2. Not setting realistic and measurable program objectives,
3. Failing to have its senior management take ownership of the ethics
program,
4. Developing program materials that do not address the needs of the
average employee, and
5. Designing an ethics program as a series of lectures.
Concluding Comments
• An Ethics Program helps in reducing the possibility of penalties and
negative public reaction to misconduct, a company must want to be a
good corporate citizen and recognize the importance of ethics to
successful business activities.