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What Does My Company Get Out of Having an Ethical Environment?
Recent reports about accounting practices, conflicts of interest, document shredding and retaliation against employees at Enron heighten interest in business ethics. Many of us are asking, "What about the ethics in my company?" The reaction from many executives might be "Nothing wrong with my company. I hired good people and can trust their judgment." Others might think, "OK, we've had a few minor problems but nothing to get excited about, only ordinary problems and we terminated people when we needed to." Typically, they are correct in their opinion of their employees. However, today's complex workplace issues call for digging a little deeper.
As Carter McNamara states in his Complete Guide to Ethics Management: An Ethics Toolkit for Managers, "ethics is always 'managed' -- but, too often, indirectly." How does a company think and operate as an organization? What is the underlying culture of a company compared to the visible one? What surprises has the company had and how many more lay in waiting? What would it mean to a company, if its image were one associated with values; values such as honesty, respect, hard work and especially meeting the customer's needs?
Company officials want to ensure they meet the requirements demanded by regulators and the public. Many companies have established formal business ethics programs to address these issues but why should other companies do so? Businesses devote resources to elements that create some sort of return on investment. They build production facilities; obtain human resources; market their products or services; and educate and train the workforce. Why not invest in the environment where people work, the culture that allows these diverse areas to function together?
Business ethics are about the morally functional nature of our business relationships. Because these relationships are such an important part of daily life, as many current and former Enron employees can now attest, giving them the attention and care they deserve is crucial to an organization's success. Business Ethics concerns itself with how well we perform our responsibilities to others both inside and outside the company.
There are six major benefits to establishing a Business Ethics program:
1. Public Image.
2. Prevention and Reduction of Criminal Penalties.
3. Preventing civil lawsuits.
4. Employee Retention.
5. Market Leadership.
6. Setting the Example.
Comments from presenters at the Managing Ethics in Organizations course provided by the Ethics Officer Association and the Center for Business Ethics, June 2001 suggest that the most successful programs are those based on values rather than on compliance with a set of rules. In order to be effective, these values must be an integral part of how the company operates. Enron reportedly had good statements of values but it is questionable whether they really lived the values they expressed. One example is the well-known case of Sherron Watkins, the executive at Enron who internally brought attention to questionable accounting practices. The senior executive allegedly responsible for those practices reportedly wanted to have her terminated and almost succeeded.
Adhering to an organization's values sets the tone for daily operations and establishes the company's culture. By acting consistently within its values, a business demonstrates its concern with all the relationships it develops and maintains. A successful business conveys these values in its activities and reaps the reward for doing the right thing.
How Does My Company Create an Ethical Environment?
The following information will offer general guidance on how a company actually goes about developing an effective business ethics initiative. This information is general because each company requires a unique set of practices to ensure its own success. To create the kind of culture company officials desire, first determine the appropriate values. Then, communicate those values to everyone concerned. Other aspects of a successful program are training people in the selected values; documenting program development, implementation and execution; resolving any reported incidents; and verifying the results. Properly executed, these elements ensure that authorities will recognize the program as an effective one.
There are five phases to developing an ethical corporate culture and specifically a business ethics program:
2. Program Development.
3. Program Implementation.
4. Re-assessment and Modification.
Remember that ethics are about people and how they interact. This program is not just for line employees. It is for all staff from entry level to senior executives. Another element of the US Sentencing Guidelines is that the company disciplines everyone in a like manner. The program is about building a culture that supports sound decision-making based on respect for all stakeholders. With the right people involved and keeping the focus on the positive, you can develop a corporate culture that will provide a continuing asset to the company. That asset is a way to draw concerned parties into the company culture and create an environment where they all can be productive.
How Does My Company Maintain the Ethical Edge?
How do executives keep up the ethical edge at their company? First, determine the amount of resources the company needs to expend on the ethics initiative. Is the company investing the right amount of resources for a sound ethical environment? Is it training the staff enough and on the right subjects? Is it over training, making the information tedious? Does the staff have accessible methods of contacting the ethics department? Providing employees with anonymity makes it much more likely, that people will use this new resource and is a condition of acceptance from the US Sentencing Commission.
How well do the components of the ethics department work with the rest of the company? Does the company have an ethics committee responsible for determining company values and program success? Having a team work together to monitor the ethics initiative assures that the program will continue to receive the attention it needs to succeed. Who is on the ethics or values committee? Are there appropriate levels of senior management represented? Consider having the senior ethics officer, the senior human resources manager and the chief legal council on the committee. (One area where some companies are increasing exposure is by having the Board of Directors create and maintain an ethics committee responsible for program review and effectiveness.) Does the company allow lower level staff representation? Do they have an equal voice in the decisions of the committee? Are they encouraged to voice their opinion? Lower level staff representation provides all personnel with the knowledge that the program is not simply a mandate from senior management. It is a company wide initiative.
How often does the company perform training and who is conducting that training? Training on ethical issues at the right interval allows the staff to keep the concepts of the program fresh in their minds. Staff typically will accept as important only those items of the work environment that their immediate supervisor makes important. Thus, having the supervisors and managers conduct frequent informal ethics training keeps the program on everyone's mind. After providing them with appropriate training, send the supervisors and managers a case study suitable for their level. Make the studies brief to allow for a 15 to 20 minute review during a regular staff meeting. Conducting the sessions once a month allows the program to stay fresh in the employees' minds. Using case studies makes the subject matter interesting. Discussions can become vigorous and will make an impression.
Another area of concern is investigating reports of ethical misconduct. These investigations can be serious affairs requiring thoroughness and tact. Investigate all reports. Even if initial incidents appear to be frivolous, investigations can uncover serious ethical lapses. As much as possible, maintain the confidentiality of involved parties. It is important, however, that no one offers an absolute guarantee of confidentiality. In many cases, this is not possible. It is important to protect the initial caller and witnesses from retaliation. This enhances program credibility. The nature of business ethics warrants a strong statement of protection against retaliation. Example: "Retaliation against persons using the reporting system will not be tolerated. Any incident of retaliation will result in discipline up to and including termination of employment." In some cases, it might even be appropriate to turn the matter over to law enforcement or prosecutors when retaliation includes such things as physical threats.
Any substantiated example of retaliation against someone using the reporting mechanism must result in appropriate discipline to maintain program credibility. However, there are two cautions. First, in no circumstance, deride any person publicly for their ethical lapses. This can reduce program credibility and possibly subject the company to legal liability. Second, do not allow anyone to use the ethics program as a tool for revenge. Protect parties that initiate reports in good faith, prohibit falsely reporting items only to cause others harm.
Once an investigation substantiates an incident, what does the company do? First, appropriately discipline the responsible parties. Behavior change is the goal. Additional training requirements, more supervision, placing a letter of reprimand in personnel files, moving the person or persons to other departments or functions, suspending their employment, demoting them to a lower position or termination in the most severe cases can be appropriate, depending on the circumstances. ( In some cases, it might be appropriate to turn the matter over to law enforcement or prosecutors when the incident includes such things as sexual abuse or drug sales.) Disciplining all persons in a like manner is one of the conditions of the US Sentencing Guidelines for an effective program. (For example, a senior vice president cannot receive a token punishment for a serious infraction while an entry-level employee receives termination for something trivial.)
Should the company report the results of incidents back to the initial caller or make the investigation public? That depends on the circumstances of the incident. Giving some message to the initial caller tells them that the company took their report seriously and investigated it thoroughly. Something like the following is usually sufficient, "Our ethics code requires that we maintain the privacy of all persons concerned with any report. While we cannot provide you with details, we investigated your report and have taken any appropriate actions warranted by its results." This statement will satisfy most people but even if they are not satisfied, it will lend the program further credibility.
The next task upon substantiating an incident is to plug the holes that allowed the incident to occur. Modify policies, procedures, access to information or facilities, physical features or whatever is necessary to prevent similar lapses in the future. Find ways to fill the cracks and then communicate those corrective measures.
Another recommendation is to associate with local and national organizations that share best practices in ethics management. Two examples are the Ethics Officer Association and the Greater Houston Business Ethics Roundtable. These organizations offer a way to bring ethics practitioners together to learn how to improve the ethical climate at their organizations. They frequently review current industry standards. Keeping current in ethics management is another element of meeting the requirements of the US Sentencing Commission.
If the program is successful, the reporting system will transform over time. It will develop into a resource about decision-making. The ethics department will also develop into a guide on which people can rely. It will become a valuable resource to encourage the proper decision is made during all work efforts. There are many benefits to creating and maintaining an ethical environment in any company or group. The most important reason to establish ethics and maintain an ethical environment is that it is the right thing to do. Everyone benefits from working in that kind of healthy environment.
Many more articles in Ethics in The CEO Refresher Archives