Developing an Effective Ethics Program (Chapter 8) - LWC1 - Business Ethics

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compliance orientation

creates order by requiring that employees identify with and commit to specific required conduct. It uses legal terms, statutes, and contracts that teach employees the rules and penalties for noncompliance.

values orientation

strives to develop shared values. Although penalties are attached, the focus is more on an abstract core of ideals such as respect and responsibility. Instead of relying on coercion, the company's values are seen as something to which people willingly aspire.

code of conduct

which are formal statements that describe what an organization expects of its employees. A code of conduct is a written document that may contain some inspirational statements but usually specifies acceptable or unacceptable types of behavior. A code of conduct is more akin to a regulatory set of rules and, as such, tends to elicit less debate about specific actions.

code of ethics

the most comprehensive and consists of general statements,
sometimes altruistic or inspirational, that serve as principles and the basis for rules of conduct. A code of ethics generally specifies methods for reporting violations, disciplinary action for violations, and a structure of due process.

statement of values

which serves the general public and also addresses distinct groups such as stake-holders. Values statements are conceived by management and are fully developed with input from all stakeholders.

ethics officers

are responsible for managing their organizations' ethics and legal compliance programs. They are usually responsible for (1) assessing the needs and risks that an organization-wide ethics program must address, (2) developing and distributing a code of conduct or ethics, (3) conducting training programs for employees, (4) establishing and maintaining a confidential service to answer employees' questions about ethical issues, (5) making sure that the company is in compliance with government regulation, (6) monitoring and auditing ethical conduct, (7) taking action on possible violations of the company's code, and (8) reviewing and updating the code. Ethics officers are also responsible for knowing thousands of pages of relevant regulations as well as communicating and reinforcing values that build an ethical corporate culture.

What is the company's responsibility as a moral agent?

Viewed as moral agents, companies are required to obey the laws and regulations that define acceptable business conduct. However, it is important to acknowledge that they are not human beings who can think through moral issues. Because companies are not human, laws and regulations are necessary to provide formal structural restraints and guidance on ethical issues.

Why do businesses need to develop ethics programs?

One reason why ethics programs are required in one form or another is to help sensitize employees to the potential legal and ethical issues within their work environments.

What are the minimum requirements for an ethics program?

Minimum Requirements for Ethics and Compliance Programs

1 . Standards and procedures, such as codes of ethics, that are reasonably capable of detecting and preventing misconduct
2. High-level personnel who are responsible for an ethics and compliance program
3. No substantial discretionary authority given to individuals with a propensity for misconduct
4. Standards and procedures communicated effectively via ethics training programs
5. Establishment of systems to monitor, audit, and report misconduct
6. Consistent enforcement of standards, codes, and punishment
7. Continuous improvement of the ethics and compliance program

How are ethical standards monitored, audited and enforced? Why is continuous improvement necessary?

Organizational ethics programs also must have oversight by high-ranking persons known to respect legal and ethical standards. These individuals—often referred to as ethics officers—are responsible for managing their organizations' ethics and legal compliance programs.

Corporate wrongdoings and scandal-grabbing headlines have a profound negative impact on public trust. To ensure compliance with state and federal regulations, many corporations are now appointing chief compliance officers and ethics and business conduct professionals to develop and oversee corporate compliance programs.

The Ethics and Compliance Officer Association (ECOA) has over twelve hundred members, who are at the front lines of managing ethics programs.

The financial reporting requirements of the Sarbanes-Oxley Act put more pressure on ethics officers to monitor financial reporting and the reporting of sales and inventory movements to prevent fraud in booking revenue and profits.

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