Business ethics

FEDERAL SENTENCING
GUIDELINES FOR THE
ORGANIZATIONS
NAZISH SOHAIL
AMBER JOEL GILL
SHELLVY CHIRAGH
 AGENDA
 Why one should be Ethical?
 Ethical Issues in Business
 Why do companies develop ethics
programs?
 Federal Sentencing Guidelines
 Seven Elements of the Program
 Role of an Ethics Officer...
 Sustaining an Effective Program
 training
 Modifications To the Guidelines
 Impact of Guidelines
 Conclusion
 Questions and Answers
Why one should be Ethical?

Corporate Ethics = Profits...

 Improved financial performance
 Reduced operating costs
 Enhanced corporate reputation
 Increased ability to attract and retain
employees
Ethical Issues in Business
 Key Causes of Unethical
Behavior...
 meeting overly aggressive
financial or business objectives
 meeting schedule pressures
 helping the organization survive
 rationalizing that others do it
 resisting competitive threats
 saving jobs
 Key Influences on Ethical
Behavior...
 personal values
 supervisor influence
 senior management influence
 internal drive to succeed
 performance pressures
 lack of punishment
 friends/coworker influence
 Why Misconduct Is Not
Reported...
 fear of not being considered a
team player
 did not think corrective action
would be taken
 fear of retribution (from
management)
 “no one else cares, why
should I”
 did not trust the organization
to keep report confidential
 Causes of Ethical
Disasters…
 failure to understand the role of
business ethics in an
organizational culture
 lack of effective leadership
 focus on the bottom above all else
 short term focus
 belief that it could happen to us
 downloading of responsibility to
lawyers & accountants
 ineffective corporate governance
 Classification of Ethical
Issues...
 conflict of interest
 honesty and fairness
 communications
 organizational relationships
Why do companies develop ethics
programs?
 to allow employees and
stakeholders to understand the
values of the business
 to comply with policies and
codes of conduct
 TO CREATE THE ETHICAL
CLIMATE OF THE BUSINESS
Federal Sentencing Guidelines for
Organizations...
Why Compliance Programs?
 Why Ethical Programs Are
Essential
 Raise Awareness
 Mitigating Factor
 Communicate Organization’s
Commitment
 Avoid Investigation
 Reduce Threat of Qui-Tams
 Purpose
 to exercise due diligence to
prevent and detect criminal
conduct
 otherwise promote an
organizational culture that
encourages ethical conduct
and a commitment to
compliance with the law
Organizations under FSGO 
 Corporations
 Partnerships
 Associations
 Joint stock companies
 Unions
 Trusts
 Pension funds
 & others
Original 7 Hallmarks of FSGO
 Prevention and Detection Procedures
 High Level Oversight
 Due Care in Delegation of Authority
 Communication, Training and
Education
 Monitoring, Auditing and Reporting
Systems
 Enforcement and Discipline
 Appropriate, Consistent Response
FSGO Considerations if Misconduct
Is Determined...
 organizations must remedy any
harm caused by the offense
 if criminal purpose, fines are
designed to put the firm out of
business
 fines are based on the
seriousness of the offense as
well as culpability
 probation may be assigned
Top Ten Unethical Behaviors Reported
by Employees...
 sexual  discrimination
harassment  drug or alcohol
 lying on reports abuse
or falsifying  improper
records accounting
 conflicts of procedures
interest  violation of
 theft environmental laws
 lying to  gift/entertainment
supervisors violations
 Code of Ethics...
 formal statement of what an
organization expects in the way
of ethical behavior (what
behaviors are acceptable or
unacceptable)
 reflects senior management’s
organizational values, rules, and
policies
Six Steps in Implementing a Code of
Ethics...
 distribute internally & externally
 assist employees in
understanding
 specify management’s role
 make employee’s responsible
for understanding the code
 establish grievance procedures
 provide a concluding statement
 How CEOs Support Ethics
Initiatives...
 communicate directly with
employees
 use their own “phraseology”
 tout successes and condemn failures
 use one standard for all employees
(regardless of level)
 acknowledge & promote ‘ethically
aware’ managers
 survey employees about the program
Role of an Ethics Officer...
 Step 1: Conduct a rigorous self-
assessment
 Step 2: Ensure commitment from
the top of the organization
 Step 3: Publish and distribute
Code(s) of Ethics and related
guidance materials
 Step 4: Communicate,
communicate, and communicate
once again
 Step 5: Training
 Step 6: Provide confidential
resources
 Step 7: Ensure consistent
implementation
 Step 8: Respond and enforce
consistently, promptly, and
fairly
 Step 9: Monitor and assess
 Step 10: Revise and reform
 Sustaining an Effective
Program
 Employees are encouraged to
ask questions and get advice
before taking action.
 Employees receive prompt,
useful, and accurate advice
about ethical workplace
behavior.
 Employees receive, read, and use
ethics program materials.
 Employees, managers, and board
members participate in regular
training about ethics and
compliance.
 Sustaining an Effective
Program
 Information about ethics and
compliance is communicated to
all internal and external
stakeholders.
 The rules (both written and
unwritten) stay the same in
good times as well as in bad
times.
 Training
 Is Training Required?
 How Does Ethics Training
Occur
Development of a code of ethics
(79%)
Lectures (63%)
Workshops and seminars
(53%)
Case studies (46%)
Videos with discussion (41%)
Examples of Reductions
 An organization may obtain up to a
five-point reduction in its culpability
score
 A two-point reduction is available for
cooperation in the investigation and
acceptance of responsibility
 A one-point reduction will apply for
acceptance of responsibility alone.
 Culpability reductions of up to five-
points are available based on effective
compliance programs and are subject
to negotiation
How to Avoid a Qui Tam or
Whistleblower Action
 Create an atmosphere that
encourages compliance
 Carrying the TORCH Awareness
Champaign
 Non-Retaliation Policy for Reporting
 Provide training on why compliance and
each workforce member’s role
 Set up a hotline
 Allows for anonymous reporting with
follow-up
 Demonstrate action and/or
acknowledgement of a concern
 Listen to employees
What Are The 10 Modifications To
the Guidelines?
 Tone At The Top
 Conduct And Internal Control
 Leadership Accountability
 Resources and Authority
 History of Violations
 Conduct Training
 Evaluate Programs
 Risk Assessment
 Encourage Employees
 Whistleblower System
Impact of Guidelines
 "...a clear picture of what a
compliance program should look like
and a set of instructions on how to
construct a program."

 "…certainly, the guidelines are having

a significant impact on what
organizations are doing to prevent and
detect violations of law"
Conclusion
 Questions & Answers

Slides Prepared by Nazish Sohail