Professional Documents
Culture Documents
Ethics
Chapter III
Chapter Objectives:
Recognize the need for a code of ethics that is upheld especially by setting
the right tone at the top.
Become familiar with the SEC rules and regulations relating to ethics.
Provide an overview of listing standards and suggestions relating to ethics.
Understand the boards role in setting the companys ethical codes.
Recognize the benefits of and need for an ethical workplace.
Identify incentive programs and their roles in promoting an ethical workplace.
Illustrate that actions speak louder than words in promoting an ethical
workplace.
Discuss the integration of business ethics into the business curriculum.
Provide an example of proficient implementation of an ethical code by
examining the Defense Industry Initiatives on Business Ethics and Conduct.
Key Terms
Business ethics
Code of Ethics
Committee of Sponsoring Organizations
Of the Treadway Committee (COSO)
Conference board
Defense Industry Initiatives
on Business Ethics and Conduct
Ethical Behavior
Ethical Incentives
Ethical Sensitivity
Ethical Theories
There are several broadly accepted ethical theories.
Consequentialist Theory
Nonconsequentialist Theory
Collectivist Theory
Metaethics
Normative Ethics
Business Ethics
Ethics In Workplace
Findings of Deloitte&Touche
2007 Survey on Ethics and
Workplace
Key factors in promoting ethical workplace
management
behavior
direct supervisors
behaviour
positive
reinforcement
compensation (bonus
+salary)
behaviour of peers
Findings of Deloitte&Touche
2007 Survey on Ethics and
Workplace
Reasons why people make unethical decisions
lack of personal
integrity
job dissatisfaction
financial rewards
pressure to meet
goals
ignorance of code of
conduct
Findings of Deloitte&Touche
2007 Survey on Ethics and
Workplace
Aspects that cause incentives conflicts
Findings of Deloitte&Touche
2007 Survey on Ethics and
Workplace
results pertaining to questionable
behavior in the workplace environment
cheating on expense
reports
lying on time sheets
about hours worked
Findings of Deloitte&Touche
2007 Survey on Ethics and
Workplace
Majority believes that following actions are acceptable
use company
technology for
personal use
take a sick day when
not actually ill
date a subordinate
ask a collegue for
personal favour
THUS:
All organizations, regardless of their mission (e.g., profit
oriented, nonprofit) and size (large vs. small), should
establish an organizational ethical culture. The phrase
organizational ethical culture consists of three words:
(1) organization, which is defined as a group of individuals
or entities bound to achieve a shared goal;
(2) ethics, which is honorable behavior conforming to the
norm of the group;
(3) culture, which is a pattern of shared beliefs adopted by
the group in dealing with its internal and external affairs.
Business Ethics
Four different levels of business ethics have been identified based
on what type of business and how their actions are evaluated.
1. The society level, which defines ethical behavior and
assesses the effect of business on society.
2. The industry level, which suggests that different industries have
their own set of ethical standards (e.g., chemical industry vs.
pharmaceutical industry)
3. The company level, under which different companies have
their own set of ethical standards
4. The individual manager level, at which each manager and
other corporate participants are responsible for their own
ethical behavior
of
Incentives
Opportunities
Choices
Listing Standards
The listing standards of the NYSE further expanded on the SEC
rules by requiring listed companies to
(1) adopt and disclose a code of business conduct and ethics for
directors, officers, and employees;
(2)
promptly disclose any waivers of the adopted code for
directors and executive officers.
Ethics in Institutions of
Higher Education
Academic integrity and ethical conduct by students and
faculty are important to the sustainable well-being and
reputation of institutions of higher education. This academic
integrity can be achieved when:
(1) there is an effective and fairly enforceable academic honor
code,
(2) faculty are willing to take proper action against suspected
cheaters,
(3) adequate research is conducted to identify factors that
affect academic integrity, including fundamental ethical
values,
(4) ethics are integrated into the business curriculum, and
pedagogies are developed to teach and encourage adherence
to ethical values and conducts.
Personal Ethics
In June 2005, the International Ethics Standards Board for
Accountants (IESBA), part of the International Federation of
Accountants (IFAC), issued its revised Code of Ethics for use
by professional accountants worldwide.
The key principles of the IESBAs code of ethics are:
(1) integrity,
(2) objectivity,
(3) professional competence and due care,
(4) confidentiality,
(5) professional behavior.
Conclusion
Ethics are broadly described in the literature as moral
principles about right and wrong, honorable behavior
reflecting values, or standards of conduct. Honesty, openness,
responsiveness, accountability, due diligence, and fairness
are the core ethical principles.
Business ethics are a specialized study of moral right and
wrong.
An appropriate code of ethics that sets the right tone at the
top of promoting ethical and professional conduct and
establishing the moral structure for the entire organization is
the backbone of effective corporate governance.
SEC rules require public companies to report significant
amendments or any waiver affecting specified officers
pursuant to the filing of their first annual report on their code
of ethics.
Conclusion
Corporate culture and compliance rules should provide
incentives and opportunities for the majority of ethical
individuals to maintain their honesty and integrity, and provide
measures for the minority of unethical individuals to be
monitored, punished, and corrected for their unethical
conduct.
Attributes of an ethical corporate culture or an integritybased culture are sense of employee responsibility, freedom
to raise concerns, managers modeling ethical behavior and
expressing the importance of integrity.
The companys directors and executives should demonstrate,
through their actions as well as their policies, a firm
commitment to ethical behavior throughout the company and
a culture of trust within the company. Although a right tone
at the top is very important in promoting an ethical culture,
actions often speak louder than words.