Organizational can contribute to diminished employee trust and increased employee turnover

If your organization encourages moral behavior and emphasizes its code of conduct and internal controls, then the organization is likely promoting ethics in the business environment effectively.

Corporations should establish a culture of business ethics to promote integrity among their employees and gain trust from key stakeholders, such as investors and consumers.

An unethical, high- pressure, win-at-all-costs culture can lead to increased turnover rates, lower productivity, deficiencies in compliance and controls, fines, and a diminished reputation. According to the Ethics & Compliance Initiative’s (ECI) 2020 Global Business Ethics Survey, one in five respondents felt pressure to compromise their ethical standards in the workplace. Given their roles in an organization, management accountants are positioned to help their organizations create an ethical envi­ronment.

Finance professionals are expected to embody ethical leadership and demonstrate appropriate conduct through personal actions and interpersonal relations. An important trait of ethical leadership is giving respect to everyone regardless of rank by listening attentively, valuing their contributions, and being compassionate while considering opposing viewpoints.

CAUTIONARY TALES

It’s important to look at ethical violations and penalties as reminders to remain vigilant. Even seemingly reputable companies can fall victim to ethical violations that make them liable for huge penalties.

In January 2021, Toyota settled a lawsuit with the U.S. Department of Justice (DOJ) and Environmental Protection Agency (EPA) for $180 million—the largest civil penalty ever for violations of the EPA’s emission-reporting requirements under the Clean Air Act. That same month, Boeing agreed to pay more than $2.5 billion as part of a three-year deferred prosecution agreement entered into with the DOJ to resolve a criminal charge related to the company’s 737 MAX scandal.

In December 2020, Ticketmaster agreed to a $10 million criminal fine as part of a deferred prosecution agreement to resolve charges that it repeatedly accessed the computer systems of a competitor to illegally gather business intelligence. That same month, the U.K. Financial Conduct Authority fined Barclays Bank £26 million ($36.1 million) for poor treatment of consumer credit customers experiencing financial hardship.

It’s instructive to analyze these violations and try to glean takeaways for what could’ve been done to prevent such misconduct stemming from ethical failures.

MEASURES TO BOOST ETHICS

The following measures are likely to create and bolster an ethical environment in business.

• Recruit the right people: Human resources is a great place to start for creating an ethical environment. They’re the influencers and gatekeepers. They can champion ethics codes and programs and act as guardians against unethical behavior and conduct.

• Offer ethics training for employees: Provide motivational ethics training for employees to cultivate ethical awareness and support honesty, integrity, and competence in the workplace. All employees should be familiar with ethical principles and practices of the company so that their actions contribute to creating an ethical culture.

• Reward or penalize employees based on their ethical decision making: Make ethics part of your employees’ performance evaluations. Reward staff who act ethically or report misconduct and penalize those who commit unethical acts or retaliate against whistleblowers.

• Communicate your organization’s ethics policies:Articulate a code of conduct and offer a program to instill ethical principles outlined in the IMA Statement of Ethical Professional Practice: honesty, fairness, objectivity, and responsibility. In addition, IMA® members have a responsibility to uphold the ethical standards of competence, confidentiality, integrity, and credibility.

• Set an ethical tone at the top: Ethical culture typically stems from top management. Staff members look to the behavior of their supervisors and other leaders as the gauge of what’s acceptable behavior in the workplace. When management acts ethically, it delivers a positive message to all employees.

• Establish a framework for resolving ethical dilemmas: Companies’ leaders should encourage their employees to discuss ethical dilemmas and report unethical behavior in the workplace without fear of retaliation.

• Host all-hands meetings: Management should meet with its employees at periodic intervals and exchange their views on a range of topics, including ethics.

• Make ethical investments: Companies should ensure that their investments, financial transactions, and operations are ethical and deliver a positive social impact.

Companies can also conduct sessions in conjunction with Global Ethics Day. Distribute leaflets or pamphlets describing ethics policies and organize teams to act out case studies or hypothetical scenarios that require ethical decision making. Reward the top performers in an ethics competition, which would encourage participants to follow the organization’s code of ethics and the IMA Statement.

Establishing and reinforcing an ethical culture reaps benefits, as it provides guidance helping professionals to remain on the straight and narrow, reduces reputational risk, and inspires other organizations to follow that example. Ethical organizations attract and retain top talent and, above all, provide value for their stakeholders.

IMA ETHICS HELPLINE

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.business.att.com/collateral/access.html, then the above number.

The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

Babu I. Razack, D.Litt., CMA, ACMA, is general manager of finance at Ali Alghanim & Sons Group Gen. Trad. & Cont. Co. and a member of IMA’s Kuwait Chapter and Committee on Ethics. He can be reached at .

You may also like

Which of the following is a major problem organizations tend to have when implementing an organizational ethics program?

Which of the following is one of the main reasons employees do not report observed misconduct?

Which of the following is a possible unintended consequence of an organization focusing more on ethics planning than on implementation quizlet?

When an employee fails to act with integrity does it impact quizlet?