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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)