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Kapoor Publisher:Cengage Learning When asked about their values, the vast majority of companies can provide a document they would describe as a code of ethics or conduct. However, research suggests a possible disconnect between companies’ stated intentions and the degree to which they truly value ethical behaviour. Here are five steps that companies can take to ensure that their corporate ethics policy is effective and becomes embedded in the company culture. Also included are practical examples of the various ways organisations have accomplished this task. 1. Code of ethicsThe essential elements of a code include assurances of support for the policies from organizational leadership, practical guidance on what is expected regarding ethical issues, commitments concerning stakeholder relationships, example Q&As, scenarios or decision trees, details of how the code will be implemented and monitored, and the consequences of misconduct. Signposts to further support, advice and other relevant policies should also be included. 2. Communication and awareness campaignsThis is a continuous process. Communication of a company’s ethics policy never ends. To engage employees and raise awareness of ethical decision-making, Cisco Systems created “Ethics Idol”, a cartoon parody of the reality television singing contest American Idol. In each episode, animated contestants sang about a particular ethical dilemma or situation, which was then commented on by a panel of Idol-esque judges. After watching the show on the company’s intranet, viewers were asked to vote on which of the judges had given the appropriate response to the situation. At the end of each section, the organisation’s ethics officer revealed the correct answer based on official compliance standards. Research shows that most companies’ efforts tend to fail after step two. 3. Training and reinforcementMost organisations now offer online anti-bribery training. On its own, this is not enough; companies shouldn’t be comforted by a tick-the-box mentality. There is no substitute for face-to-face, qualitative training with wider discussion and debate of understanding and practical application. Discussion of scenarios can help employees explore ethical issues in training sessions. For example, Stryker, a medical device producer, reviewed events that had taken place within its industry and built a set of fictionalised scenarios based on them. To provide context, Stryker created a hypothetical organisation with a back story, mission and an organisation chart. Employees were presented with a scenario based on this background and were asked to go through the company’s code of ethics to identify which of the standards were being broken in that case. After the discussion, it was revealed to participants that all of the scenarios had actually taken place in the sector in the past, helping to bring the training home. 4. Supporting context and cultureThis involves having the “ethical architecture” in place to support a living, breathing code. That architecture includes outlining policies and regulations in employee contracts and supplier agreements, identifying individuals and boards who are accountable for outcomes, creating ongoing awareness-raising programmes, opening discussions with feedback and having oversight and monitoring procedures in place. Taking action against wrongdoing and communicating the action taken to staff is an important element of this. More companies are including ethics-related criteria in performance reviews. For example, management accountants might be asked whether they challenged or raised and resolved an issue or an area of concern that could lead to fraud. For managers, does your team escalate issues and ask for clarification? Siemens’s strategy is to focus on bridging the communication gap between senior management and employees at the lower levels of the company. In the 2013 financial year, the company introduced “integrity dialogues” in which compliance refresher training is cascaded down through the company. Compliance officers provide training to the senior management of each business unit, who then train their own direct reports and so on. Individual operating units within the company enhance their training activities with additional topics that address challenges specific to them. In this ongoing part of the practice, leaders talk about integrity and explain how they themselves “walk the talk” in terms of how they do business. The dialogue is carried through to every sales meeting to bring about an open discussion on ethical issues and how they should be handled. 5. Monitoring and accountabilityEffective speak-up arrangements, such as anonymous helplines, through which employees, contractors and other third parties can raise concerns in confidence about unsafe, unethical or unlawful practices are an important element of good corporate governance. A key component of these arrangements is that staff feel comfortable that they can raise issues without fear of retribution. Some companies report the number and nature of queries raised internally to the board and executive committee and include the information in company newsletters. Some provide a breakdown of the reports by country and as a percentage of the workforce. Enlightened companies now communicate internally about disciplinary actions taken when wrongdoing occurs. Some companies make this information public. Beverage company Diageo’s annual sustainability report details the number of suspected breaches of the company’s code of ethics (743 in 2013), how many of these were later substantiated (376) and whether they were reported through the speak-up hotline (242) or raised directly with a line manager or the compliance department, for example. The report also states that 116 people exited the business in 2013 as a result of breaches of the company’s code or policies. Reporting in this way provides evidence that the company has procedures in place that are actually used and are effective in managing ethical misconduct. According to the report, Diageo routinely shares examples of breaches that have recently occurred or testimonials from colleagues who were tempted to do the wrong thing yet made the right decision. The company also keeps track of employees’ perceptions of integrity within the company through asking questions in a values survey. The litmus testThe real litmus test of whether your ethics policy is working and embedded is if an employee feels comfortable enough to speak up if he or she has a concern and whether he or she believes the company will respond and, if need be, take appropriate action. Once an ethics policy is securely embedded in your company, you also have to take into account the wider value chain. Today’s complex and extended supply chain has significant implications for organisations’ ethical, governance and risk-management policies and practices. Therefore, it is advisable to conduct due diligence on new and existing suppliers alike, engaging them in ongoing discussions regarding your standards and contractual expectations. For example, to engage a supplier base spanning 70 countries, UK-based retailer Marks & Spencer holds regular face-to-face meetings with partners as well as an annual conference. The company has a website where suppliers can access tools, guidance and incentives. Helping to raise standards and awareness through the chain is beneficial for all. After all, good companies keep good company. Ethical management checklistHere’s a checklist of reflective questions for finance professionals relating to the management of ethics. It can be found in the Essential Tools for Management Accountants. The questions serve as a foundation for reflection. CGMA designation holders must consider and comply with their employer’s policies as well as ensure they uphold the code of conduct of the membership organisation to which they belong. A CGMA designation holder who is a member of the American Institute of CPAs (AICPA) must comply with requirements set out in the AICPA Code of Professional Conduct as well as any rules his or her state board of accountancy may have on the matter, and Chartered Institute of Management Accountants (CIMA) members are required to uphold the CIMA Code of Ethics.
Best practices for making an ethics code effective
—from Developing a Code of Business Ethics, Institute of Business Ethics What are the steps to follow in establishing an effective ethics program in a business?Six Steps to an Ethical Business Culture. Establish an enforceable code of conduct.. Initial and ongoing training.. Regular communications.. Anonymous reporting hotline.. Enforcement/Action.. Rewarding employees that live the culture.. What are the steps in ethics management?The Ethical Decision-Making Process. Take Time to Define the Problem. ... . Consult Resources and Seek Assistance. ... . Think About the Lasting Effects. ... . Consider Regulations in Other Industries. ... . Decide on a Decision. ... . Implement and Evaluate.. What are the 7 principles of ethics in business discuss each?The seven business ethics principles are accountability, care and respect, honesty, healthy competition, loyalty and respect for commitment, information, respect for rule of law.
What is a business ethics program?A business ethics program helps owners and managers improve their business performance, make profits, and contribute to the economic progress of their communities by meeting the reason- able expectations of their stakeholders.
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