Developing an Effective Ethics Program

Corporations as Moral Agents

• Corporations are increasingly viewed as moral agents
that are accountable for their conduct to stakeholders

 Society holds companies accountable for employee conduct,

their decisions and the consequences

• Laws and regulations are necessary to provide formal structural

restraints and guidance on ethical issues
Causes of Misconduct
 The Need for Corporate Ethics

• Scandals in corporate America have reduced trust in

businesses

• Unde r s ta nding th e fa c t or s t hat inf luence et hical

decision-making can help companies encourage ethical
behavior

• Employees are not legal experts and need guidance

Source: Stockbyte
The Need for Corporate Ethics Programs

• Organizations should develop an organizational ethics p r o

gram by establishing , communicating , and monitori
ng uniform ethical values and legal requirements
• A strong ethics program includes:
• Written code of conduct
• Ethics officer to oversee the program
• Care in the delegation of authority
• Formal ethics training
• Auditing, monitoring, enforcement, and revision of
program standards
 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

• Cannot assume that employees will know how to behave

when entering an organization
 An Ethics Program Can Help Avoid
Legal Problems
• The FSGO encourage companies to assess key risks and create a
program to address them
• An ethics program can help a firm avoid civil liability
• The company bears the burden of proving that it has an
effective program

• A program developed in the absence of misconduct will be more

effective than one imposed as a reaction to scandal
• The Sarbanes-Oxley Act of 2002 established new requirements
for corporate governance to prevent fraudulent behavior in
business
Implementing and Auditing Ethics
Programs

The Ethics Audit

• Ethics audit—systematic evaluation of
an organization’s ethics program and
performance to determine whether it is
effective
– Regular, complete, and documented
measurements of compliance with the
company’s published policies and
procedures
– Opportunity to measure conformity to
the firm’s ethical standards
– Similar to financial auditing

Continued..
Social Auditing
• Social auditing—process of accessing and
reporting a business’s performance in fulfilling
the economic, legal, ethical, and philanthropic
responsibilities expected by its stakeholders.
– Broader in scope than an ethics audit
–An ethics audit might be a component of a
social audit
The Auditing Process

• Secure top management and board

commitment.
• Establish an ethics audit committee.
• Define the scope of the audit.
• Review the organizational mission, goals,
and values.
• Collect and analyze relevant information.
• Verify the results through an outside
agent.
• Report the findings to:
– Audit committee, managers, and
stakeholders.
Business Ethics in a Global Economy

• Business Ethics is one of applied ethics and its

contemporary task is to morally regulate activities of
economic subjects in a new global economic and
social environments.

• Business activities within this environment are

connected with many immoral practices leading
towards global inequalities, global social thunders,
and conflicts or deepening some of the global
problems.
 The business ethics focuses on the fact that in attempt to succeed
in the market and global competition, economic subjects forget
about the principal role of economics which is to satisfy the needs
of citizens in the world and take part in development and
improvement the quality of their lives.
 It clarifies the need to examine business activities from the point of
view of ethics and take into consideration also the global ethos in a
new global economic environment.
 Furthermore, it proves the need to morally regulate business
activities so that business subjects realized their activities in a
global environment responsibly towards all members of business
as well as towards the nature.
 Last but not the least, the role of the business ethics is to warn
contemporary and future entrepreneurs so that moral behaviour of
entrepreneurial subjects represents one of instruments of
increasing competitiveness.
Difference Between Knowledge And Wisdom
 In brief, the difference between knowledge and
wisdom is that knowledge is fact-based, an accumulation of
ideas and data about how this or that works and why. We
gather information from experience, observation, and
research. Wisdom is about knowing which facts are relevant
to you or to someone else, and why.
 Values Vs Compliance Orientation

• Compliance orientation
 Requires 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
 Focuses more on an abstract core of ideals such as respect and
responsibility
 Research shows is most effective at creating ethical reasoning
 Corporate Codes of Ethics

Often contain six core values

1.Trustworthiness
2.Respect
3.Responsibility
4.Fairness
5.Caring
6.Citizenship
 Ethics Officers

• Ethics officers or committees are responsible

for oversight of the ethics/compliance program
 Assess the needs and risks that an ethics program must address
 Develop, revise, and disseminate the code
 Conduct training programs for employees
 Develop effective communication
 Establish audits and control systems
 Review and modify the program to improve effectiveness
 Systems to Monitor and Enforce
Ethical Standards
• An effective ethics program employs many resources to
monitor ethical conduct and measure the program’s
effectiveness

 Observing employees
 Internal audits
 Surveys
 Reporting systems
 Investigations
 Independent audits
 Forms of Reported Retaliation
Experienced as a Result of Reported
Misconduct
 Continuous Improvement

• Implementation requires designing activities

to achieve organizational objectives using
available resources and existing constraints

• Depends in part on how an organization

structures resources and activities to achieve
its ethical objectives
Wisdom Workers And Wisdom Based
Management
 A wisdom worker is a (mostly) creative minded
individual, who works primarily in emotional
creativeness. Their main skill is their ability to weave
engaging narrative into their work.
• The wisdom management is to manage
collective wisdom which gains more knowledge that
creates more wisdom: Understanding of wisdom in
the data, information, knowledge,
and wisdom spectrum is that wisdom is the
application of knowledge to solve practical problems in
daily life.
 Modern Business Ethics And Dilemmas
o Business ethics refers to contemporary organizational standards,
principles, sets of values and norms that govern the actions and behavior of
an individual in the business organization. Business ethics have two
dimensions, normative business ethics or descriptive business ethics.

o An ethical dilemma (ethical paradox or moral dilemma) is a problem in the

decision-making process Corporate Strategy Corporate Strategy focuses on
how to manage resources, risk and return across a firm, as opposed to
looking at competitive advantages in business strategy between two possible
options, neither of which is
Thank You…!!!
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