Creating an Ethical Organization Ankit kumar verma IITTM,Gwalior

Creating an ethical organization

Is it possible to create an ethical organization? Can we make a corporation realize its objective of catering to the interests of all its stakeholders and yet keep its activities unblemished? In the present context, it appears that it is a task laced with various problems.

Problems in creating an ethical organization

1. The problem lies in the mindset of people who man the corporations
2. High salary does not ensure Better Governance

3. Fraudulent Accounting
4. Independent Directors and Malpractices

Suggestions to Improve Corporate Virtue

Three alternatives that can improve corporate virtue are:

1.

Selection of managers based on pro-social intrinsic preferences to ensure the conditional co-operation of other employees;
Stronger emphasis on fixed salaries to reduce the temptation to cheat. Managers must be paid a fair market wage for their overall performance, and Employees willingness to contribute to corporate virtue by identifying and admonishing anyone resorting to fraudulent accounting must be encouraged. This promotes self-monitoring and sanctioning in an informal way and reduces the tendency to break rules.

2.

3.

Role of Corporate Governance

Corporate governance can be viewed as a set of arrangements internal to the corporation that define the relationship between the owners and managers of the corporation. Corporate governance relates to the working arrangement among various participants in determining the direction and performance of corporations. These participants are 1)the shareholders, 2)the management and 3)the board of directors.

What is corporate governance?

The World Bank defines corporate governance as the relations among the owners, the management board and other stakeholders. According to the OECD, corporate governance specifies the distribution of rights and responsibilities among different participants in the company and spells out the rules and procedures for making and monitoring decisions on corporate affairs.

Role of corporate culture

Corporate culture is a set of values, beliefs, goals, norms and ways of solving problems by the members of an organization.

Each firm tries to develop its own corporate culture based on the values its founder wants to transmit in the work place.

Role of corporate social responsibility

Corporate Social Responsibility refers to an organisations obligation to maximise its positive impact and minimize its negative impact on society.
When an organization goes beyond its economic goal of making profit to benefit its shareholders, reaches out to enrich social life through its philanthropic, environmentfriendly, pro-poor and welfare activities, we say that it is socially responsible.

Such philanthropic or social welfare activities are not required or normally expected of business, but these promote both goodwill and human welfare.

Other influences in creating an ethical organization

Ethical or unethical behaviour of individual employees are influenced at the workplace both by their own moral development and the influences that the organizational culture exerts on them. The HRM department of a company plays a pivotal role in ensuring ethical behaviour through its role in training, communication with workers and its manner of enforcing discipline in the organization.

Developing and Executing a Comprehensive Ethics Programme

A sound ethics programme should include the following six components: 1. Formal codes of conduct: Codes of conduct are statements of organizational values that comprise three components, namely, a code of ethics, a code of conduct and a statement of values. It is a written document, inspirational in content and specifies clearly what is acceptable or unacceptable behaviour in the workplace and beyond, when employees represent their organizations outside.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

2. Ethics Committees: develop an ethical policy for the organization and also investigate ethical infractions by employees. They raise concerns of ethical nature, prepare or update codes of conduct, resolve ethical dilemmas in companies, formulate ethics policy, develop ethical standards, and in the context of these norms, evaluate the companys compliance with them.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

3. Ethics Communication System: includes the facility for employees to post queries, get advice, or report any wrongdoing.

The objective of the ethics communication system is to:

a) Communicate the companys values and standards of ethical business conduct to employees; b) Provide information to employees on the companys policies and procedures regarding ethical business conduct;

Developing and Executing a Comprehensive Ethics Programme (Contd.)

c) Put in place processes to help employees obtain guidance and to resolve questions regarding compliance with the firms standards of conduct and values; and d) Establish means of enquiry for employees to get in touch with and get advice from competent authorities.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

4. An Ethics Office with officer(s) to oversee the process and facilitate the communication of the policy to employees. Ethics officers are responsible for:
assessing the needs and risks that an organizationwide ethics programme must address, developing and distributing a code of conduct for ethics, conducting training programme for employees,

Developing and Executing a Comprehensive Ethics Programme (Contd.)

Responsibilities of an ethics officer

Establishing and maintaining a confidential service to answer employees questions about ethical issues,
Making sure that the company is in compliance with government regulation, Monitoring and auditing ethical conduct, taking action on possible violations of the companys code, and Reviewing and updating the code.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

5. Ethics training programmes: These programmes are aimed at ensuring ethical behaviour in an organization. The basic objective of such a training programme is to help employees understand the ethical issues that are likely to arise at their workplace and to offer assistance in dealing with such issues.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

6. A corporation committed to ethics has to establish a disciplinary system that would ensure prompt, decisive and impartial dealings with violations. To have and maintain an effective ethics programme calls for a continuous monitoring of the tools used and results obtained. Consistent enforcement and pursuit of disciplinary system are necessary for achieving a sound and fruitful ethics programme.