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Chapter 8

Chapter 8. Development of an Effective Ethics Program. Effective Ethical Compliance Programs. should reduce the possibilities of penalties & negative public reaction to misconduct must be communicated to all employees-common understanding of organizational values, policies & procedures

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Chapter 8

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  1. Chapter 8 Development of an Effective Ethics Program

  2. Effective Ethical Compliance Programs... • should reduce the possibilities of penalties & negative public reaction to misconduct • must be communicated to all employees-common understanding of organizational values, policies & procedures • companies that act to prevent organizational misconduct may receive a ‘carrot’ and avoid organizational penalties • those that do not may receive a ‘stick’-fines & penalties

  3. The Sentencing of Organizations Under the FSGO is Governed by 4 Considerations • the organization must remedy the harm • fines may be set sufficiently high to divest the organization of all assets if it is found to be criminal purpose • fines levied against the organization are based on the seriousness of the offense & the culpability of the organization • probation is deemed appropriate when the organization will work to prevent further misconduct

  4. Effective Ethical Compliance Programs... • must deal effectively with the risk associated with a particular business & has to become part of the corporate culture • can help avoid civil litigation • must exhibit due diligence to prevent misconduct

  5. Codes of Ethics... • are formal statements of what an organization expects in the way of ethical behavior • will not solve every dilemma • provide rules & guidelines • reflects senior management’s desire for compliance with values, rules & policies in support of an ethical climate • should be specific enough to be reasonably capable of preventing misconduct

  6. Manley’s Six Steps to Implement a Code of Ethics • distribute the code comprehensively: employees, subsidiaries, & associated companies • assist in interpretation & understanding • specify management’s role in implementation • make employees responsible for understanding • establish grievance procedures • provide a conclusion or closing statement

  7. High Level Oversight • ethics officers or committees are responsible for oversight of the ethics/compliance program • coordinates program with top management • develops, revises & disseminates the code • develops effective communication • establishes audits & control systems • provides consistent enforcement of standards • reviews & modifies the program to improve effectiveness

  8. Effective Communication of Ethical Standards... • provides guidance for ethical standards & activities that integrate the functional areas of business • helps employees identify ethical issues & provides a means to address & resolve • can help reduce criminal, civil & administrative consequences including: • fines, penalties, judgements, etc.

  9. Ethics Training Programs Should... • reflect organizational size, culture, values, management style & employee base • improve employee understanding of ethical issues • influence the organizational culture, significant others, & opportunity in the ethical decision making process • overall, provide for recognition of ethical issues, understanding of culture & values, and influence ethical decision making

  10. Monitoring, Auditing, & Enforcing Ethical Standards... • an internal system for employees to report misconduct is an opportunity to register ethical concerns • ethics hot lines • questionnaires may be used to serve as benchmarks • corrective actions provide standards & punishment • consistent enforcement is critical

  11. Continuous Improvement • if a company has determined that its ethical performance has not been satisfactory, management may want to recognize the way ethical decisions are made: • a decentralized organization may be centralized (perhaps temporarily) so that top level managers can ensure that ethical decisions are made • a centralized organization may be decentralized (perhaps temporarily) so that lower level managers can make more decisions

  12. “Bad Apple-Bad Barrel” Theory • “bad apple”-the notion that blame for unethical behavior rests with a few unsavory individuals (difficult for organizations to influence ethical decision making) • “bad barrel”-views that people are not inherently ethical or unethical, but are influenced by the corporate culture surrounding them (more organizational control)

  13. Ethical Compliance Audit • a systematic evaluation of an organization’s ethics program and/or performance to determine its effectiveness • can help in establishing codes & program • should provide a systematic & objective approach to surveying the ethical condition of the organization • may be more effective if performed by an external entity (organizations should participate in ethics audit instrument development)

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