Developing

an Effective
Ethics Program
Objectives
• Understand the responsibility of the corporation to be a moral agent.
• Understand why businesses need to develop ethics program.
• List the minimum requirements for an ethics program.
• Describe the role of codes of ethics in identifying key risk areas for an
organization.
• Identify the keys to successful ethics training, including program types
and goals.
• Examine the ways that ethical standards are monitored, audited, and
enforced, and to understand the need for continuous improvement.
Corporations as Moral
Agents
Corporations as Moral Agents
• Corporations are increasingly viewed as moral
agents that are accountable for their conduct to
stakeholders
• Laws and regulations are necessary to provide
formal structural restraints and guidance on ethical
issues
Need for Ethics Program
in the Business
 Increase
employees’
ethical
awareness

Why do
Increase
employees’
organizations
Scandals
Participation
in ethical
need reduce trust
decision Organizational
Ethics Program?

Increase
employees’
Ethical
behavior
To promote legal and ethical conduct, an
organization should develop a program by
Establishing Communicating
Monitoring The legal requirements that characterize
it’s Industry
History Culture
and Operating environment
Policies of conduct
Programs
Uniform standards
Strong Ethics Program:

• Written code of conduct

• Ethics officer
• Careful delegation of
authority
• Formal Ethics Training
• Rigorous editing, monitoring
and revision of program
standards
 Ethics
Program
Plans and structure
for Ethical
considerations
Minimum Requirements for an Ethics
Program
An Ethics Program Can Help Avoid Legal
Problems
• The FSGO encourages companies to access their key risk areas and
customizes a compliance program to address them.
• A program developed in the absence of misconduct will be more effective
than one imposed as a reaction to scandal
• It is important to weigh the risks of third-party suppliers since a company
can be damaged by misconduct that occurs in the supply chain.
• The heart of the FSGO is a “carrot-and-stick“ philosophy
• It is important for organizations to consider incentives for employees
who act accordingly to ethical standards.
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. Systems to monitor, audit, and report misconduct
6. Consistent enforcement of standards, codes, and punishment
7. Continuous improvement of the ethics and compliance
program.
• The effectiveness of a program is determined by its
design and implementation.
• An ethics program can help a firm avoid civil liability,
but the company still bears the burden of proving it has
an effective program.
Code of Ethics
Most companies begin the process of establishing
organizational ethics programs by developing codes
of conduct, or formal statements that describe what
an organization expects of its employees.
Three(3) types of ethical
statement:
oA code of ethics
oA code of conduct
oA statement of values
Code of ethics – is the most comprehensive and consists general
statements, sometimes altruistic or inspirational, that serve as principles
and as the basis for rules of conduct.
Some of the key reasons that codes of ethics fail :
(1) not promoted and employees do not read it
(2) not easily accessible
(3) written too legalistically and not understandable by average employees
(4) written too vaguely
(5) top management never refers to the code in body or spirit
Code of conduct – is a written document that may contain
some inspirational statements but mainly specifies acceptable
and unacceptable types of behavior.

Statement of values – serves the general public and also

addresses distinct groups such as stakeholders.
Six values that have been suggested as being desirable
for codes of ethics :

1. trustworthiness
2. respect
3. responsibility
4. fairness
5. caring
6. citizenship
Benefits of Having an Ethics
Code
• Guide employees in situations where the ethical course of action is not immediately
obvious.
• Help the company reinforce and acquaint new employees.
• Help the company communicate its expectations for its staff
• Minimize subjective and inconsistent management standards.
• Help a company remain in compliance with complex government regulations.
• Build public trust and enhance business reputations.
• Offer protection in preempting or defending against lawsuits.
• Enhance morale, employee pride, loyalty, and the recruitment of outstanding
employees.
• Promote constructive social change by raising awareness.
• Promote market efficiency, especially in areas where laws are weak or inefficient
Developing and Implementing a Code
of Ethics
1. Consider areas of risk and state the values as well as conduct
necessary to comply with laws and regulations.
2. Identify values that specifically address current ethical issues.
3. Consider values that link the organization to a stakeholder
orientation.
4. Make the code understandable by providing examples that reflect
values
5. Communicate the code frequently and in language that employees
can understand.
6. Revise the code every year with input from organizational
members and stakeholders.
Keys to Successful Ethics
Training
Ethics Officers
• Responsible for managing their organization’s ethics and legal
compliance programs

• Asses the needs and risks and organization-wide ethics program must address
• Developing and distributing code of ethics
• Conducting training programs
• Establishing and maintaining a confidential service to answer employees’
questions
• Compliance with government regulation
• Monitoring and auditing ethical conduct
• Taking action on possible violations
• Reviewing and updating the code
Negative impact on
public trust

 Chief Compliance Officers

 Ethics and Business conduct
professionals

• Law
• Finance
• HRM
Ethics Training and Communication
Training Programs &
Communication System
Educate employees about the
firm’s standards
 Training Programs Awareness of ethical issues
Increase importance of ethics training
• Educate employees about firm’s Increase employees’ confidence (to make correct
policies and expectations, relevant decision)
laws and regulations, and general
social standards
• Aware employees of available Strengthen corporate culture and ethical stance
resources, support systems and of peers and supervisors
designated personnel (ethical and
Arms employees against opportunities for
legal advice assistance)
• Empower employees to ask tough unethical behavior and lessens the likelihood of
questions and make ethical decisions misconduct
These foundations must be communicated to
employees

Clear
values Code of Procedures Line & Staff Executive
Involvements Priorities on
ethics Ethics

Foundation of
Ethics Training
A key component of managing an
effective and efficient ethics and
compliance program is a firm grasp of
techniques that clearly communicate
the company’s values, culture, and
policies dealing with ethical issues to
employees.  Resolving in teams
 Behavioral Simulation
 Key Goals of Successful Ethics
Training Program
 Identify key risk areas employees will face.
 Provide experience in dealing with hypothetical or disguised ethical issues within the industry through
mini-causes, online challenges, DVDs, or other experiential learning opportunities.
 Let employees know wrongdoing will never be supported in the organization and employee evaluations
will take their conduct in this area into consideration.
 Let employees know they are individually accountable for their behavior.
 Align employee conduct with organizational reputation and branding.
 Provide ongoing feedback to employees about how they are handling ethical issues.
 Allow a mechanism for employees to voice their concerns that is anonymous, but provides answers to
key questions (24-hour hotlines).
 Provide a hierarchy of leadership of employees to contract when they are faced with an ethical dilemma
they do not know ow to resolve.
Systems to Monitor and
Enforce Ethical
Standards
- An effective ethics program employs variety of resources to
monitor ethical conduct and measure the program's
effectiveness.
Ways of a company to assess compliance of the
employees with its ethical code and standards:

Observing employees
-to determine if a person is performing his/her job adequately and
ethically.
Conducting internal audits and investigation
-
Circulating survey/ questionnaires
-It serves as benchmarks in an ongoing assessment of ethical
performances.
Instituting reporting systems
-Allows employees to report misconduct is especially useful for
monitoring and evaluating ethical performance.

External audit and review of company activities

-It helps in developing benchmark of compliance.
Companies are increasingly used consultants that provides
professional case-management software

▪Software becomes popular:

-It provides reports of employee's concerns, compliants or observation
of misconduct that can be tracked and managed.
-It helps prevent lawsuits and analyze ethical lapses.
*Companies that are not making progress towards creating
and maintaining ethical culture.

-It needs to determine why and take corrective action, either

enforcing current standards more strictly or setting high
standards.

-Corrective actions involves rewarding employees who

comply with the company policies and standards.
•When an employee abide by organizational standards:
-His/her effort will be acknowledged through public
recognition, bonuses, raises and some other means.
•When an employees violates organizational standards:
-He/she will be reprimanded, transferred, docked,
suspended, or even fired.
• Consistent enforcement and necessary disciplinary actions are
essential to a functional ethics or compliance.
• The ethics officer is usually responsible for implementing all
disciplinary actions for violations of ethical standards.
• Many companies included ethical compliance in employee
performance evaluation.
• Efforts is to deter unethical behavior are companies' long-term
relationships with their employees, customers and community.

-If the code of ethics is aggressively enforce and become part of the
corporate culture, it improves ethical behavior within an organization
effectively.

-If code is not properly enforced, it becomes mere window dressing and
will accomplished little.
Continuous Improvement of an
Ethics Program

• Improving a system that encourages employees differs little

from implementing and other type of business strategy.
-Implementation requires:
•designing activities
•translates a plan for action
• A firm's ability to plan and implement ethical standards depends:
• -how it structures resources and activities to achieve its ethical
objectives.
• People's attitude and behavior must be guided.
• Encouraging diversity of perspectives, disagreement and empowerment of
people.
• If a company determines its ethical performance is less satisfactory,
executives may want to change how certain kinds of decisions are made.
Common Mistakes in Designing and
Implementing an Ethics Program

1. Failure to understand and appreciate the goals of having

ethical programs.
2. Not setting realistic and measurable program objectives.
3. The senior management's failure to take ownership of the
ethics program.
4. The developing program materials do not address to the
needs of the average employee.
Thank you for Listening

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