This action might not be possible to undo. Are you sure you want to continue?
Corporate Governance and Social Responsibility STRATEGIC APPROACHES TO IMPROVING ETHICAL BEHAVIOR
Presented to: Jean V. Ramos, D.B.A Professor Presented by: Jeanica C. Joson MBM Student
THE NEED FOR ORGANIZATIONAL ETHICS PROGRAM
Organizational Ethics is the ethics of an organization, and it is how an organization ethically responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although, it is akin to both organizational behavior (OB) and business ethics on the micro and macro levels, organizational ethics is neither OB, nor is it solely business ethics (which includes corporate governance and corporate ethics). Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws.
Usually, an organization is held accountable for the conduct of its employees. Companies must assess their ethical risks and develop values and compliance systems to avoid legal and ethical mistakes that could damage the organization. Organizations are sensitive to avoid infringing on employees· personal freedoms and ethical beliefs. In cases where an individual·s personal beliefs and activities are inconsistent with company policies on ethics, conflict may develop. Fostering ethical decisions within an organization requires eliminating unethical behavior and improving the firm·s ethical interest regardless of organizational goals or accepted standards of conduct. Some people are ´bad applesµ who will always do things in their own self-interest regardless of organizational goals or accepted standards of conduct.
Eliminating such bad apples through screening and techniques and enforcement of the firm·s ethical standards can help improve the firm·s overall ethical conduct. Organizations can create unethical corporate cultures not because individual within them are bad but because the pressures to succeed create opportunities that reward unethical decisions. Most businesses attempt to improve ethical decision making by establishing and implementing a strategic approach to improving organizational ethics. To be socially responsible and promote legal and ethical conduct, an organization should develop an organizational ethics program by establishing, communicating, and monitoring ethical values and legal requirements that characterize its history, culture, industry,
care in the delegation of authority. formal ethics training. A strong ethics program includes a written code of conduct. an ethics officer to oversee the program. enforcement. auditing. it is difficult for employees to determine what behaviours are acceptable within a company. Without such programs and uniform standards and policies of conduct.and operating environment. monitoring. . and revision of program standards.
Communicating openly and frequently with customers 4. Ethics is not something to be delegated to lower level employees while top managers break the rules. (According to survey by Golin/Harris International) 1. Handling crises more honestly 5. Making customers the top priority 2.5 Top recommendations to CEOs for rebuilding trust and confidence in firms. . Assuming personal responsibility and accountability 3. Sticking to the code of business ethics no matter what.
which strives to develop shared values. It uses legal terms. . Although penalties are attached.Ethics programs are developed as organizational control systems. statutes. the aim of which is to crate predictability in employee behavior. Instead of relying on coercion. the company·s values are seen as something to which people willingly aspire. Two types of control systems can be created. and contracts that teach employee the rules and penalties for noncompliance. A compliance orientation creates order by requiring that employees identify with and commit to specific required conduct. The other type of system is a values orientation. the focus is more on abstract core of ideals such as respect and responsibility.
Research into compliance. Compliance-based programs are linked to employees· awareness of ethical issues at work and their perception that decision making is better because of the expectations of its employees. their willingness to deliver bad news to supervisors.and values-based approaches reveals that both types of programs can interact or work toward the same end. and the perception that better decisions are made. Values-based increased employees· awareness of ethics at work. . buta a values orientation can better help explain and influence employees. their integrity.
A code of ethics that does not address specific high-risk activities within the scope of daily operations is inadequate for maintaining standards that can prevent misconduct. Development of a code of ethics should involve the board of directors. These has to reflect the board of directors· and senior management·s desire for organizational compliance with the values. mission. rules. . Legal staff should be called on to ensure that the code has correctly assessed key areas of risk and that potential legal problems are buffered by standards in the code. and senior managers who will be implementing the code. and policies that support an ethical climate. president.CODES OF CONDUCT (codes of ethics) are formal statements that describe what an organization expects of its employees.
4. Values are an important buffer in preventing serious misconduct. Consider values that link the organization to a stakeholder orientation. 5. Revise the code every year with input from organizational members and stakeholders. 3. Attempt to find overlaps in organizational and stakeholder values.Developing and Implementing a Code of Ethics 1. Communicate the code frequently and in language that employees can understand 6. . Consider areas of risk and state values as well as conduct necessary to comply with laws and regulations. 2. Make the code understandable by providing examples that reflect values. Identify values that specifically address current ethical issues.
fairness 5. caring 6.6 Values that have been suggested as desirable elements in a code of ethics: 1. responsibility 4. respect 3. trustworthiness 2. Citizenship .
and reviewing and updating the code. establishing and maintaining a confidential service to answer questions about ethical issues. monitoring and auditing ethical conduct. conducting training programs for employees. .ETHICS OFFICERS are usually high-ranking person known to respect legal and ethical to respect legal and ethical standards who is responsible for assessing the needs and risks addressed in an organizational ethics program. developing and distributing a code of conduct or ethics. making sure that the company is in compliance with government regulation. taking action on possible violations of the company·s code. Ethics officers meet with company employees on a regular basis to provide training and updates on the company·s code of conduct and ethics policies.
implementing all disciplinary actions the company takes for violations of its ethical standards. Only with the involvement of top management and the board can an ethics officer earn the trust and cooperation of all key decision makers. employees may be asked to sign and acknowledgment that they have read the company·s current guidelines on its ethical policies. .The ethics or compliance officer is usually responsible for companywide disciplinary systems. needs to make a recommendation to senior management on how to deal with a particular ethical infraction. The appropriate company official. The company must also promptly investigate any known or suspected misconduct. often the ethics officer. During performance appraisals. Building an ethics program and hiring an ethics officer to avoid fines will not be effective alone.
ETHICS TRAINING AND COMMUNICATION Instituting a training program and a system to communicate and educate about the firm·s ethical standards is a major step in developing an effective ethics program. support systems. Such training can educate employees about the firm·s policies and expectations. Training programs can make employees aware of available resources. Training also can help empower employees to ask tough questions and make ethical decisions. . relevant laws and regulations. and general social standards. and designated personnel who can assist them with ethical and legal advice.Ethics officers are responsible for knowing the contents of thousands of pages of regulations as well as for communicating and reinforcing values that build an ethical corporate culture.
. policies. Communicate company codes. Identify the key ethical risk areas. Ethics training must be customized to the specific nature of the employees in the organization and the risk areas they face. Factors Crucial to Ethics Training 1. 2. Ethics training that is done only because it is required or reinforced or because ethics involvement is considered something that other companies do will not be effective. and procedures regarding ethical business conduct. Relate ethical decisions to the organization·s values and culture 3.The employee·s capacity to exercise judgements that result in ethical decisions must be effective.
and their own role in its implementation. . Establish manuals. Provide leadership training to model desired behavior.4. For ethics training to make a difference. and other communication to reinforce ethics training. 6. employees must understand why it is conducted. 5. 7. websites. the message is that ethics is not an Important component of decision making. 8. Provide directions for internal questions and reporting mechanisms. Evaluate and use feedback to improve training. If ethical performance is not a part of regular performance appraisals. how it fits into the organization. Engage in regular training events using a variety of educational tools.
penalties. employees must be offered direction on seeking assistance from managers or other designated personnel in resolving ethical problems. judgments. civil. including fines. In addition. . and administrative consequences. debarment from government contracts. An ethical disaster can do as much damage (or more) to a company than a natural disaster. An effective ethics program can reduce criminal. An ineffective ethics program that results in many unethical acts may cause negative publicity and a decrease in organizational financial performance.Top corporate executives must communicate with managers at the operations level and enforce overall ethical standards within the organization. and court control of the organization.
Managers from every department must be involved in the development of an ethics training program. Then. and executive priorities on ethics that are communicated to employees.To be successful. employees are able to base ethical decisions on their knowledge of choices rather than emotions. If ethics training is to be effective. a code of ethics. . business ethics programs need to educate employees about formal ethical frameworks and models for analyzing business ethics issues. Most experts on training agree that one of the most effective methods of ethics training is involvement in resolving ethical dilemmas that relate to actual situations that employees experience in carrying out their responsibilities. line and staff involvements. it must start with a foundation. and ethical concerns procedure.
and social dimensions of business decision making. According to recent research. The simulation recreates the complexities of organizational relationships and of having to address a situation without complete information. midrange. (2) development of analytical skills for resolving ethical issues.A relatively new training device is the behavioural simulation or role-play exercise in which participants are given a short hypothetical ethical issue situation to review. They then must interact o provide recommended course of action representing short-term. and (3) exposure to the complexity of ethical decision making in organizations. legal. The participants are assigned roles within the hypothetical organization and are provided with varying levels of information about the issue.µ . and long-term considerations. ´the simulation not only instructs on the importance of ethics but on the processes for managing ethical concerns and conflict. Learning objectives of the simulation exercise include (1) increased awareness by participants of the ethical.
and by the opportunity to engage in unethical behavior. and procedures can strengthen both the organizational culture and the ethical stance of peers and supervisors. All three types of influence can be affected by ethics training. . by co-workers and supervisors. ethics training can ensure that everyone in the organization (1) recognizes situations that might involve ethical decision making. and (3) is able to evaluate the impact of ethical decisions on the company in the light of its value structure.Ethical decision making is influenced by organizational culture. rules. If adequately and thoughtfully designed. Full awareness of the philosophy of management. (2) understands the values and culture of the organization.
. or help desks offer support and assist members of the company who wish to ask questions about regulatory compliance. policy. or business ethics. Although there is always some worry that people may misreport a situation or misuse a help line to retaliate against another employee. This also gives employees an opportunity to register ethical concerns. help lines. seek guidance about the policies or procedures.ESTABLISHING SYSTEMS TO MONITOR AND ENFORCE ETHICAL STANDARDS Ethics assistance lines. and employees do utilize them. help line have become widespread. or report suspected violations of law.
. their coworkers. seven days a week.A helpline or desk is characterized by ease of accessibility and simple procedures. and themselves. as well as ratings of ethical or unethical practices within the firm and industry. OBSERVATION AND FEEDBACK Questionnaires that survey employees· ethical perceptions of their company. This reporting approach increases the chance of detecting unethical conduct and enables responsible management to take adequate and timely measures to maintain compliance with standards. their superiors. can serve as benchmarks in an ongoing assessment of ethical performance. and it serves as a safety net that facilitates monitoring and reporting. Outside companies can provide help line services that enable employees and consumers to voice concerns twenty-four hours a day.
their efforts may be acknowledged and rewarded through public recognition. bonuses. management will have a better understanding of what types of unethical practices may be occurring and why. raises. suspended. Conversely. . if unethical behavior is perceived to increase. transferred. when employees deviate from organizational standards. Appropriate action involves rewarding employees who comply with company policies and standards and punishing those who do not. or even fired.Then. or some other means. A change in the ethics training within the company may be necessary. they may be reprimanded. docked. When employees comply with organizational standards.
Today. The Scandinavian ombudsman was appointed by Swedish King Charles XII in 1713 to watch over various government functions. universities. The purpose of the ombudsman was to ensure that public officials acted lawfully. including companies. and nonprofit firms.USE OF AN OMBUDSMAN TO RESOLVE ETHICAL CONFLICT The Chinese and the Romans were the first to use the ombudsman. governments. The king had been out of the country for several years and subsequently. the country and government had fallen into disarray. . and ombudsman may be employed by any organization. a position originally designed to safeguard ordinary citizens against crime and corruption by public officials. The word ombudsman is Scandinavian in origin.
regulations.Essentially. incompetence. inefficiency. and taking corrective action when needed. rules. and ineptitude in the discharge of duties and responsibilities. biased. process. recommendation. is a departure from established practice or procedure. or is perverse. or discriminatory 2. unjust. . delay. the ombudsman acts as a third party to help resolve disputes between two parties by receiving complaints from individuals. Ombudsman deals with two primary issues: 1. or act that is contrary to law. oppressive. arbitrary or unreasonable. inattention. a decision. investigating the complaints. neglect.
and take on other projects that ensure employee and stakeholder interests are fully respected. the ombudsman is not considered ´management. so the individual occupying this position must be highly respected and trusted. Employees will call upon the ombudsman when they have questions or concerns that. Company ombudsmen also track new issues within the organization or its environment.µ and employees must believe that he or she is neutral and reliable. an ombudsman offers an alternative for conflict resolution and essentially swerves as a third party. cannot be resolved by their supervisor or department. for some reason. make policy recommendations. However.Ethics ombudsmen are also very common in today·s business workplace and often serve an important role in developing an effective ethical compliance program. . Thus.
A whistleblower (whistle-blower or whistle blower) is a person who tells the public or someone in authority about alleged dishonest or illegal activities (misconduct) occurring in a government department. to the media or to groups concerned with the issues). Whistleblowers may make their allegations internally (for example. such as media or government regulatory agencies. and corruption. to other people within the accused organization) or externally (to regulators. law enforcement agencies. a public or private organization.WHISTLE ²BLOWING means exposing an employer·s wrongdoing to outsiders. rule. for example. regulation and/or a direct threat to public interest. health/safety violations. or a company. such as fraud. The alleged misconduct may be classified in many ways. . a violation of a law.
Have I exhausted internal anonymous reporting opportunities within the organization? 2. Is this a personal issue that should be resolved through other means? 4. Have I examined company policies and codes that outline acceptable behavior and violations of standards? 3. Can I deal with the consequences of resolving an ethical or legal conflict within the organization? . Can I manage the stress that may evolve from exposing potential wrongdoing in the organization? 5.Questions to Ask Before Engaging in External Whistle-Blowing 1.
CONTINOUS IMPROVEMENT OF THE ETHICS PROGRAM Improving the system that encourages employees to make more ethical decision is not very different from implementing other types of business strategies. and improved. . Implementation translates a plan for action into operational terms and establishes a means by which organizational ethical performance will be monitored. Implementation means putting strategies into action. Implementation in ethical compliance means the design of activities to achieve organizational objectives using available resources and given existing constraints. controlled.
displaying a fundamental respect for each other as well as our cultural diversity. Encouraging diversity of perspectives. and the empowerment of people within the organization helps to align the company·s leadership with its employees. Mutual of Omaha·s ´Values for Successµ Openness and Trust ² We encourage an open sharing of ideas and information. It guides the company in all of its actions. People·s attitudes and behavior must be guided by a shared commitment to the business instead of by obedience to traditional managerial authority. disagreement.A firm·s values statement is its foundation. .
. creating an environment that brings out the best in everyone. Honesty and Integrity ² We are honest and ethical with others. maintaining the highest standards of personal and professional conduct. Accountability/Ownership ² We take ownership and accept accountability for achieving end results.Teamwork (Win/Win) ² We work together to find solutions that carry positive results for others as well as ourselves. and empower team members to do the same. Sense of Urgency ² We set priorities and handle all tasks and assignments in a timely manner.
and recognition to achieve our vision. listening to our teammates and customers. encouragement. Innovation and Risk ² We question ´the old way of doing thingsµ and take prudent risks that can lead to innovative performance and process improvements. support. purpose. . Leadership ² We provide direction. and constantly challenge ourselves to meet their requirements even better. meet our objectives and our values. and caring enough to hear their concerns. Caring/Attentive (Be Here Now) ² We take time to clear our minds to focus on the present moment.Customer-Focus ² We never lose sight of our customers.
4. The spirit of great leaders who enjoy their jobs and approach them with an almost contagious tenacity. . Leaders should create a common goal or vision for the company. IMPLEMENTING ORGANIZATIONAL ETHICS PROGRAMS 4 Things that a leader must do according to John Kotter: 1. 3. Great leaders are also great motivators and know how to use the resources available to them. Leaders are also good in getting ´buy-inµ or support from significant partners. passion. and commitment. 2.Personal and Professional Growth ² We challenge ourselves and look for ways to be even more effective as a team and as individuals.
In an effort to keep earning high and boost stock prices. many firms have engaged in falsifying revenue reports.If a company is to maintain ethical behavior. Maintaining an ethical culture can be difficult if top management does not support such behavior. higher reported revenues meant larger executive payoffs. Top executives in these firms encouraged the behavior because they held stock options ² and could receive bonus packages ² tied to the company·s performance. . Along with strong ethical leadership. its policies and standards must be modelled by top management. a strong corporate culture in support of ethical behavior can also play a key role in guiding employee behavior. Thus.
Transformational Leadership Transformational leaders communicate a sense of mission.THE ROLE OF LEADERSHIP 2 Dominant styles of Leadership 1. Transformational leaders also build a commitment and respect for values that provide agreement on how to deal with ethical issues. transformational leaders have a stronger influence on coworker support and the building of an ethical culture than transactional leaders. Transformational leadership considers the employees· needs and aspirations in conjunction with organizational needs. Transformational ethical leadership is best suited for higher levels of ethical commitment among employees and strong stakeholder support for an ethical climate. and enhance as well as generate new learning experiences. stimulate new ways of thinking. . Therefore.
the compliance relationship is likely to be successful. conflicts. . Transactional leaders produce employees who achieve a negotiated level of required ethical performance or compliance. transactional leadership is best suited to quickly changing ethical climates or reacting to ethical problems or issues.2. and crises influence the relationship more than ethical concerns. However. The ´barterµ aspects of negotiation to achieve the desired outcomes result in a dynamic relationship between leaders and employees where reactions. As long as employees and leaders find the exchange mutually rewarding. Transactional Leadership Transactional leadership focuses on making certain that the required conduct and procedures are implemented.
LEADERS INFLUENCE CORPORATE CULTURE Organizational leaders use their power and influence to shape corporate culture. even when their personal ethical values conflict with the superior·s wishes. Exerting power is one way to influence the ethical decision-making. The status and power of leaders are directly related to the amount of pressure they can exert on employees to conform to their expectations. . A superior in an authority position can put strong pressure on employees to comply. An individual has power over others when his or her presence causes them to behave differently. Power refers to the influence that leaders and managers have over the behavior and decisions of subordinates.
Coercive power relies on fear to change behavior. Coercion is often employed in situations where there is an extreme imbalance in power. it has been found to be more effective in changing behavior in the short run than in the long run. COERCIVE POWER Coercive power is essentially the opposite of reward power. or promotion. status. However. coercive power penalizes actions or behavior.5 Power bases from which one person may influence another: REWARD POWER Reward power refers to a person·s ability to influence the behavior of others by offering them something desirable. people who are continually subjected to coercion may seek a counterbalance by aligning themselves with other more . Typical rewards might be money. Instead of rewarding a person for doing something. For this reason.
REWARD POWER Reward power refers to a person·s ability to influence the behavior of others by offering them something desirable. Power is an ethical issue not only for individuals but also for work groups that establish policy for large corporations.powerful persons or simply by leaving the organization. For this reason. In firms that use coercive power. coercive power penalizes actions or behavior. COERCIVE POWER Coercive power is essentially the opposite of reward power. Typical rewards might be money. Coercive power relies on fear to change behavior. or promotion. Instead of rewarding a person for doing something. 2. it has been found to be more . 5 Power bases from which one person may influence another: 1. status. relationships usually break down in the long run.
In firms that use coercive power. people who are continually subjected to coercion may seek a counterbalance by aligning themselves with other more powerful persons or simply by leaving the organization. the employee may try anything to fulfil that order. In business.effective in changing behavior in the short run than in the long run. LEGITIMATE POWER Legitimate power stems from the belief that a certain person has the right to exert influence and that certain others have an obligation to accept it. . 3. Power is an ethical issue not only for individuals but also for work groups that establish policy for large corporations. However. relationships usually break down in the long run. if a superior tells an employee to increase sales ´no matter what it takesµ and that employee has a strong affiliation to legitimate power. Coercion is often employed in situations where there is an extreme imbalance in power.
EXPERT POWER Expert power is derived from a person·s knowledge (or the perception that the person possesses knowledge. or the honors he or she has received for performance. Because they share the same objectives. REFERENT POWER Referent power may exist when one person perceives that his or her goals or objectives are similar to another·s. For this power relationship to be effective. The second person may attempt to influence the first to take actions that will lead both to achieve their objectives. Credibility. the person influenced by the other will perceive the other·s use of referent power as beneficial. and thus expert power.4.) Expert power usually stems from a superior·s credibility with subordinates. . is positively related to the number of years a person has worked in a firm or industry. however. Expert power may cause ethical problems when it is used to manipulate others to gain an unfair advantage. the person·s education. some sort of empathy must exist between the individuals. 5.
thus increasing his or her referent power. THE ROLE OF AN ETHICAL CORPORATE CULTURE To be most successful.Identification with others helps to boost the decision maker·s confidence when making a decision. . has identified seven steps to changing the ethical culture of an organization. a consultant to the Ethics Resource Center. or they believe their organization is not concerned about the activity. they are afraid they will not remain anonymous. ethical standards and expected behaviours should be integrated throughout every organizational process from hiring. Frank Navran. Many employees who view unethical conduct do not report it because they fear inaction. training. and rewarding to firing. compensating.
Steps for Changing the Ethical Culture of an Organization 1. Reinforce the policy through measurements and rewards. Create formal organizational systems. 3. 5. 6. 4. philosophy. Avoid the perception of hidden agendas. including perspectives on ethical issues. 7. or belief. Implement communications and education strategies. 2. State your position. Communicate expectations through informal (leadership) systems. Employees who work in an open environment may be more likely to communicate freely and share information. Use responses to critical events to underscore commitment. .
VARIATION IN EMPLOYEE CONDUCT Although the corporations is required to take responsibility for conducting its business ethically. they interpret situations differently and will vary in the ethical decisions they make on the same ethical issue. . because people are culturally diverse and have different values. a substantial amount of research indicates that there are significant differences in the values and philosophies that influence how the individuals that comprise corporations make ethical decisions. In other words.
If the code of ethics is aggressively enforced and becomes part of the corporate culture. If progress is not being made toward creating and maintaining an ethical culture.Reducing unethical behavior is a business goal no different from increasing profits. . the company needs to determine why and take corrective action. it will accomplish very little. either by enforcing current standards more strictly or by setting higher standards. it can merely window-dressing and not genuinely part of the corporate culture.
END THANK YOU FOR LISTENING ! .
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.