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THE ORGANIZATION OF ETHICS AND THEETHICS OF ORGANIZATIONS T.docx
1. THE ORGANIZATION OF ETHICS AND THE
ETHICS OF ORGANIZATIONS: THE CASE FOR
EXPANDED ORGANIZATIONAL ETHICS AUDITS
Michael Metzger, Dan R. Dalton, John W. Hill
Abstract: The United States Sentencing Commission's
guidelines for the
sentencing of organizations found guilty of violating federal
laws re*
cently became effective. Dramatically increased penalties are
possi-
ble under these gudelines, but so too is a substantial reduction
in the
penalties imposed on organizations that have an effective
program in
place to prevent and detect violations. This provides
corporations
with a tremendous new incentive in inaugurate organizational
ethics
audits both to avoid violations in the first instance and to
reduce the
penalty imposed in the event that a violation occurs. We argue,
how-
ever, that there have always been very good reasons for
organizations
to conduct such audits, which emphasize the identification of
the or-
ganizational factors that create incentives for unethical
behavior. Cor-
porate ethics programs initiated without reference to such
2. factors
cannot reasonably be expected to be effective in improving a
company's internal ethical environment.
Introduction
ACCORDING to recent surveys, 90% of Fortune 500 firms and
abouthalf of all companies have some form of corporate ethics
code.^ An-
other recent survey indicates that managers see corporate codes
as the most
effective way to encourage ethical corporate behavior.^ But the
accuracy of
such managerial perceptions is called into question by the
findings of other
researchers.
Corporate controllers and managerial accountants surveyed in a
recent
study, for example, indicated that they perceived no positive
behavioral
changes attributable to the adoption of a corporate code.^
Perhaps even more
disturbing, these same respondents indicated that the pressure to
achieve
specific income and ROI targets was actually greater in
companies that had
adopted codes than in those with no code.* Additional
confirmation of the
limited impact of corporate codes can be found in a recent
empirical study
which found no statistically significant correlation between
corporate codes
and corporate regulatory violations.^
Dispiriting as these findings may be, however, they do not
4. continues to
discourage it."'°
Thus, as we will discuss in some detail later in this article, there
have
always been excellent reasons why corporations seeking to
promote ethical
employee behavior should perform organizational ethics audits
designed to
identify intraorganizational practices, procedures, and pressures
that en-
courage unethical behavior." Corporations that were unaware of
those rea-
sons or that found them unconvincing now have a powerful new
incentive
to inaugurate an organizational ethics audit program. The
United States
Sentencing Commission's guidelines for the sentencing of
organizations
found guilty of violating federal laws became effective on
November 1,
1991.'^ Under the new guidelines, dramatically increased
penalties (as high
as $290 million) are possible for some types of violations. The
defendant
organization's "culpability score" now plays a major role in the
penalty
determination process. So, for example, an organizational
history of similar
offenses or the active involvement of high-level corporate
personnel in the
instant offense will increase the ultimate penalty imposed. As a
result, U.S.
companies have never before had greater incentives to do
everything they
can to avoid illegal behavior. An organizational ethics audit
5. emphasizing the
"organizational" could play an effective, if not an essential, part
in minimiz-
ing a company's liability exposure.
Of course, even the most effective organizational ethics audit
will not
totally eliminate the risk of illegal behavior. However, the very
fact that a
company has such an audit program can reduce it's liability
exposure under
the new guidelines, which provide that "an effective program to
prevent and
detect violations of the law" can serve to reduce a company's
culpability
score and fine.'^ In a similar vein, recently announced Justice
Department
guidelines state that companies regularly conducting
environmental compli-
ance audits and reporting discovered violations promptly
qualify for "pros-
ecution leniency."'^
Faced with such powerful incentives, corporate America should
now be
more receptive to the idea of a thorough organizational ethics
audit program.
In the following sections we delineate the components of such a
program,
commencing with a discussion of corporate ethics codes.
EXPANDED ORGANIZATIONAL ETHICS AUDITS 29
Corporate Codes
6. Proponents of corporate ethics codes assert that such codes can
serve
many useful purposes. The fact that a company has a code may
enhance its
public image and, in the event of organizational wrongdoing,
add to the
credibility of a corporate assertion that the wrong at issue was
the product
of the malfeasance of an individual employee or small group of
employees,
rather than a reflection of company policy.^^ Codes can provide
guidance to
employees who do want to do the "right thing,"'^ bolstering
individuals'
ability to resist superiors' unethical requests,'^ and legitmating
the discus-
sion of overtly moral issues within the organization.'^
Many corporate codes, however, may do little more that serve as
a pretext
for public posturing, as they provide little meaningful guidance
for manag-
ers. Such codes have been described by critics as "bland lists of
platitudes"'^
made up of "public relations boilerplate"20 and "motherhood
and apple pie"
pronouncements.^' Lack of substance, however, is only one
problem with
extant corporate ethics codes.
The substance of many corporate codes has been criticized as
"legalis-
t i c , " " and one study found that 91% of the codes examined
grounded the
code on the company's legal responsibilities.^^ There are
7. several reasons
why it is unwise to suggest that a company's ethical obligations
emanate
from and are coextensive with its legal obligations.
Employees admonished to behave ethically because their failure
to do so
may visit negative legal consequences on their employer are
unlikely to see
such an admonition as very compelling in situations where the
perceived
odds that their wrongdoing will be detected are slim. Codes that
primarily
emphasize preservation of the employer's reputation are
vulnerable to a
similar criticism: employees engaging in questionable practices
that can
harm a company's reputation rarely do so if they believe that
they are likely
to be caught.^* One need not deny the essential truth behind
such a con-
sequentialist view of corporate ethics (unethical behavior can
indeed lead to
undesirable legal penalties and/or damage to corporate image)
to see the
danger in the hidden message such codes unwittingly contain: if
the sole
purpose of the code is to avoid unpleasant consequences it need
not be
followed when the risk of such consequences is slight or
nonexistent.
In addition, whatever the theoretical merits may be of the
arguments in the
perennial debate over the extent of business's moral duties
beyond compli-
8. ance with existing legal rules,^^ as a practical matter companies
that treat
existing legal rules as the only constraint on their behavior risk
disaster. The
law is dynamic rather than static, and the Johns-Manville case
amply illus-
trates the punishing liability that may flow from actions that
were legal
when taken.2**
Admonishing employees to "do the right thing" for it's own sake
can-
not, however, redeem an ethics code if it fails to address
fundamental
issues or if its focus is too narrow. Extant studies of the content
of
corporate codes indicate that items focused on employees'
ethical obliga-
30 BUSINESS ETHICS QUARTERLY
tions to the firm tend to predominate, to the exclusion of items
addressing
the firm's moral duties to its external constituencies.^^ One can
comfort-
ably acknowledge employers' legitimate and compelling interest
in ques-
tions such as employee theft and employee conflict of interest^^
while
still maintaining that companies adopting ethics codes for no
purpose
other than the reduction of their legal liability exposure would
be well
advised to broaden their codes' focus to embrace their duties to
9. their broader
constituencies.
But codes that do no more than contain a laundry list of ethical
norms,
none of which is assigned any relative priority, are also unlikely
to be very
effective.^' "[P]riorities are the true values of a firm,"^'' and in
the absence
of a definitive statement of the firm's priorities in its code,
middle and
operating level managers can be expected favor economic goals
in any
conflict between such goals and announced ethical norms.^'
"Ambiguity
about priorities" has been identified as a major source of
corporate devi-
ance,^^ a finding supporting the assertion that '*[i]f legal and
moral con-
straints are to be obeyed, they must be accorded higher priority
than
conventional economic goals, and this must be stated repeatedly
and
Even a code that avoids all of the pitfalls mentioned above
cannot reason-
ably be expected to be self-executing, though many companies
that have
adopted ethics codes have apparently harbored such
expectations given their
failure to take any serious steps to implement their codes.̂ "^
All too often,
new employees are merely asked to read and sign off on the
corporate code
upon accepting employment'^ and existing employees are
required to sign
10. annual compliance letters certifying that they understand, and
have com-
plied with, the
Implementation
Draining
Education is a "key method for institutionalizing ethics
awareness."^^
Communication of the company's rules to affected employees is
obviously
an essential component of an effective compliance program,^*
but an effec-
tive training program should go beyond such communication to
include
sessions designed to sensitize employees to the ethical
dimensions of busi-
ness behavior and to give them practice applying the code to
realistic prob-
lems that they are likely to confront. Corporate ethics training
should also
emphasize the proper way for supervisors to respond to
subordinates' ethi-
cal concerns. Properly conducted ethics training programs can
go a long
way toward bringing morality "out of the corporate closet"" and
making the
discussion of moral issues "a familiar, comfortable part of the
manager's
job."^° Sadly, many corporate ethics training programs are
unlikely to
achieve these goals. One recent survey of Fortune 500
companies, for exam-
ple, disclosed the fact that over 50% of those companies with
training pro-
11. grams devoted less than five hours to ethics.^'
EXPANDED ORGANIZATIONAL ETHICS AUDITS 31
Channels of Communication
A candid and ethical organizational culture is one where
information
flows freely,^^ and effective internal monitoring is impossible
without open
channels of communication.^^ Reducing the intraorganizational
barriers to
the open discussion of moral issues is a first step toward the
creation of of
a candid culture, but there are other important steps companies
must take if
they are to have the best chance of minimizing both the
instances and effects
of unethical behavior by their employees. Although one recent
survey indi-
cated that only 17% of the companies surveyed had an internal
hotline or
other provision for anonymous employee reporting of ethical
concerns,'^*
there is widespread agreement that such a device is essential to
an effective
corporate ethics program.^' Whistleblowers are "one of the least
expensive
and most efficient sources of feedback about mistakes the firm
may be
making," so they should be listened to even if they are
wrong.*® Further-
more, the costs of public whistleblowing are so dramatic that
any device
12. which allows top management to learn of a problem and respond
to it before
a dissident employee goes public with it can be invaluable.*^
But structural changes such as hotlines and/or corporate
ombudsmen will
not assure honesty in intracorporate communication*^ unless
managerial
practice is conducive to frankness. Are the bearers of bad news
killed?*' Do
upper level managers commonly adopt an "I don't want to
know" attitude,
sending subordinates the message that they don't really care
how results are
obtained so long as they are obtained?^" If so, there is no
mystery behind the
observed tendency for bad news not to reach the top of the
organization.^^
The Pinto^^ and the Corvair^^ cases furnish sad, but by no
means isolated,
examples of situations where managerial practice stifled
internal dissent to
the ultimate detriment of the organization.
Inspection
Another device which can both prevent the occurrence of
undesirable
behavior and enhance the chances of its discovery is an
effective program
of employee monitoring. One study of middle managers cited
employee
monitoring as a key element in the cultivation of ethical
corporate behav-
ior.̂ * Saul Gellerman has suggested increasing the frequency of
audits and
13. spot checks, scheduling audits irregularly, conducting some
surprise audits,
and following quickly on the heels of some audits with
others.^^
Punishment of Offenders
However evidence of a code violation is uncovered, the way in
which
those who violate the code are treated is of essential importance
to the
success of the code. Put simply, punishment of transgressions
should be
prompt, public,^^ serious,^^ and certain.^* If those who violate
ethical norms
are not punished severely, "the word spreads that the boss is not
really
interested in ethics."^' Top management plays the
fundamental*" role in
establishing the ethical "tone" of a company,**' and that what
top manage-
32 BUSINESS ETHICS QUARTERLY
ment does,^^ rather than what it says,^^ is the ultimate
determinant of the
message sent to subordinates. One commentator correctly
observes that:
Values are what you say you believe. Ethics are how you
actually behave.^
Thus, for example, when Continental Illinois merely
reprimanded a success-
ful loan officer who had borrowed money from a client from
14. whom he had
also purchased loans, it "sent a clear message to other managers
about what
top management really thought was important."^^
Ethics Audits
Although a properly drafted code, adequate training, open
charmels of
communication, frequent inspections, and firm treatment of
transgressors
are all essential elements of a corporate ethics implementation
strategy,
more is needed if a company is serious about doing everything
possible to
ensure ethical employee behavior.^^ A number of organizations
apparently
understand this, and recently it has become increasingly
fashionable for
organizations to conduct ethics audits.^'' These audits may
involve written
instruments designed to find out how employees perceive their
ethical envi-
ronment,^* audit committee interviews with company auditors
to gain their
insights concerning the company's ethical environment,^' or
employee in-
terviews designed to ferret out ethics abuses^^ or test the
adequacy of exist-
ing policies or procedures."
Such audits, while laudable, are nonetheless inadequate because
they fail
to identify the organizational causes of unethical behavior. To
do that, audits
are needed that more explicitly focus more on the organizational
15. dimension.
What is the "institutional logic" of the organization?'^
Organizational Ethics Audits
To discover their "institutional logic," companies must engage
in a prob-
ing, objective self-examination. For a corporate ethics policy to
succeed,
"individuals must be motivated to do the right thing."'' What
does the
existing incentive system motivate employees to do? As Steven
Kerr ob-
served in his classic article:
Most organisms seek information concerning what activities are
rewarded,
and then seek to do (or at least pretend to do) those things,
often to the
exclusion of activities not rewarded.'^
An organization's reward system is the key to understanding its
culture and
"an unequivocal statement ofthe corporation's values and
beliefs."'^ Which
plant manager is rewarded, the one with the highest accident
rate or the one
with the best environmental compliance record?'^
Two things are at issue here. Does the current incentive system
reward
ethical behavior? Worse yet, do existing systems positively
encourage un-
ethical behavior? A recent survey of large corporations found
that although
many of the respondents had adopted an ethics code of some
16. sort, "almost
no company had ... implemented a reward system for reinforcing
the
EXPANDED ORGANIZATIONAL ETHICS AUDITS 33
achievement of ethical goals."'' This despite another well
publicized survey
of managers which found that 62% of the respondents agreed
that "the
equalization of managerial rewards and punishments for social
performance
with those for financial performance" would have a positive
impact on
corporate behavior.'^ The experience at least one company that
has tried to
positively reward ethical behavior would appear to confirm such
managerial
perceptions. In response to its conviction in the Kepone case.
Allied Chem-
ical changed its compensation system so that one-third of
management bo-
nuses derived from "environmental compliance, safety,
antitrust, civil rights
and other non-fiscal goals," an action which produced 75%
reduction in
workplace injuries.''
More important than rewarding ethical behavior, however, is the
identifi-
cation of organizational incentives for unethical behavior.
Bizarre as it may
seem at first glance, "numerous examples exist of reward
systems that are
17. fouled up in that behaviors which are rewarded are those which
the rewarder
is trying to discourage, while the behavior that he desires is not
being
rewarded at all."*" Managerial control systems that emphasize
"the short-
term and the obvious"*' can create perverse incentives that
produce long-
range problems. As Steven Kerr observed:
[M]any organizational reward systems pay off for short-run
sales and earn-
ings only. Under such circumstances it is perfectly rational for
officials to
sacrifice long-term growth and profit (by selling off equipment
and prop-
erty, or by stifling research and development) for short-term
advantages.*^
Thus, the G.M. plant manager whose plant produced the worst
quality cars
is alleged to have received some of the highest bonuses because
company
policy empahsized cost-cutting and his plant had low costs."^
Likewise, plant managers whose compensation and promotion
prospects
depend in substantial part on short-term ROA measures are
virtually com-
pelled to produce "good" numbers by underinvesting in training,
mainte-
nance, and capital equipment, particularly when producing such
numbers
can produce a promotion that will allow them to escape the
plant before the
consequences of under-investment become obvious.*^
18. Similarly, division
managers evaluated on ROI can manipulate the ROI calculation
in a number
of ways that are inimical to the firm's interests. If, for example,
absorption
costing measures are used in the evaluation, such a manager
may be tempted
to produce excess inventory so that fixed overhead may be
spread over more
units of product, yielding a higher income figure.*^
All too often companies shoot themselves in the foot by
thoughtlessly
adopting practices that virtually demand that their employees
pursue
courses of conduct which are not in the company's ultimate
interests. Many
organizations become victims of deceptive reporting schemes by
their em-
ployees because they gave their employees "strong incentives"
to engage in
such schemes.** Mortgage bankers whose compensation plans
are based in
part on the amounts they lend can easily become "borrower-
advocates"
because they have "a strong financial incentive to approve,
rather than deny.
34 BUSINESS ETHICS QUARTERLY
many loan applications."^'' That such incentives create loan
portfolios of
poor quality should hardly come as much of a surprise. Even so,
the institutions
19. that adopted them probably were surprised by the results they
produced.
The effects of such perverse incentives are exacerbated in
companies that
lack any negative feedback mechanisms aimed at searching out
and punish-
ing those who engage in self-maximizing behavior at the
expense of the
organization.^^ As Saul Gellerman has observed: "[M]any
managers have
been promoted on the basis of 'great' results obtained in just
those ways,
leaving unfortunate successors to inherit the inevitable
whirlwind."®' This
is possible because "the problems that such people create are
not always
traced back to them."̂ ** Robert Jackall argues that the lack of
such tracking
systems implicitly encourages scapegoating because it allows
people to
outrun their mistakes,^' making such organizations "systems of
organized
irresponsibility."'2 It is of critical importance, therefore, that
companies not
just look at results, but that they insist on finding out how
"good" results
were obtained.^^ It is also imperative that companies examine
the structure
of their promotion systems to be certain that "[c]utting corners
catches up
with you," making short-term behavior counterproductive for
managers
who might otherwise be tempted to engage in it.̂ *
Without such incentive, feedback, and promotion systems, for
20. example,
the possibility that their corporate employer may have to pay
out warranty
claims or product liability judgments in the future may simply
not be an
important part of the reality of plant managers who must meet
monthly
production quotas.^^Likewise, unless mortgage banking
managers create
financial disincentives against questionable lending practices,
charging
back losses from fraud against commissions earned, branch
offices, and
profit centers, they can expect a substantial number of
questionable loans.^^
Nor can employees who respond to such perverse incentives be
seen as
particularly blameworthy, given the "double whammy" effect of
poorly de-
signed measures of performance and non-existent negative
feedback mech-
anisms: they not only encourage employees to further their own
interests at
the expense of their employer by rewarding those who do; they
also penalize
employees who do put the employer's interest first with lower
bonuses and
diminished chances of promotion. Even well intentioned
employees can be
forgiven for asking themselves how much they owe a company
that puts
them in such a position. Any company that expects a corporate
ethics code
to countervail the corrupting effects of such warped
institutional logic is
21. ignoring human nature '̂̂ and living in a dream from which a
rude awakening
can be expected.'*
Conclusion
Corporate ethics codes have been justly criticized for reflecting
"a naive
belief that existing and largely unstated oversight and
surveillance proce-
dures, coupled with stern statements about the importance of
ethical con-
duct, are sufficient to ensure that a firm's ethical standards will
be
EXPANDED ORGANIZATIONAL ETHICS AUDITS 35
followed."" To assure the creation of an ethical internal
environment, com-
panies must conduct a rigorous and thorough examination of
existing sys-
tems and incentives to determine what behaviors are currently
being
rewarded and to ascertain employee perceptions about the
current state of
the prevailing intemal ethical climate. Due to the sensitive
nature of the
inquiry and the expected difficulty with getting candid
employee responses,
such an organizational ethics audit is most likely to be effective
when con-
ducted by outsiders.""*
The process envisioned here plainly goes far beyond the
22. standard ethics
"audit," but we believe that the rewards of attempting it will be
proportion-
ate to the effort expended. Such an extensive audit could be
viewed as "a
corporate wellness tool;" a way for the corporation to
understand itself
better.'"' For a host of reasons too numerous to detail here (but,
we suspect,
ail too familiar to our readers) people at the top of an
organization may know
very little about the reality confronting their subordinates.'°^
From a purely profit-maximizing perspective, it should be
obvious that a
well-executed organizational audit of the type described here
could yield
significant returns in the form of greater organizational goal
alignment,'"^
improved employee morale,'°* greatly improved information
flows,'°^ and
reduced exposure to the kind of incidents that damage
companies' reputa-
tions and expose them to dramatic legal liability.'°^ In these
senses, at least,
it seems to us that good ethics is, indeed, good business. We are
familiar
with the numerous studies which have found no demonstrable
relationship
between corporate social responsibility and firm performance.'"'
We ques-
tion whether the measures of corporate social responsibility
used these stud-
ies truly capture much socially responsible behavior,'"* and we
note that
many in the private sector appear to disagree with researchers
23. on this
point.'"9
We think that an effective organizational ethics audit program
can go a
long way toward preventing the kind of "catastrophes" that can
undeniably
have a negative impact on the bottom line. We agree that it is at
best disin-
genuous to suggest that doing the ethical thing will always be
the profitable
thing.''° Nonetheless, because the focus of organizational ethics
audits as
we envision them is on the prevention of firm action unintended
by top
management rather than upon situations where firms
cotisciously choose to
maximize the bottom line at the expense of their ethical
obligations, we see
substantial harmony between organizational ethics audits and
business
organizations' legitimate efforts to maximize their profits.
Notes
'Murphy, P.: 1988, 'Implementing Business Ethics', Journal of
Business Ethics 7, pp.
907-15, p. 904. Another survey found that only 56% of the
companies sampled had codes,
with a positive correlation between company size and the
adoption of a code. See Sweeney,
36 BUSINESS ETHICS QUARTERLY
24. R.B., and H.L. Siers: 1990, 'Survey: Ethics in Corporate
America', Management Accounting
(June), pp. 34-40, p. 34.
^Toiiche Ross: 1988, Ethics in American Business (Touche
Ross & Co., New York). Other
commentators, however, have noted the existence of "a gap
between what mangers hope to
accomplish with corporate codes and what is actually
accomplished." Robin, D., M.
Galloutakis, F. David, and T. Moritz: 1989, 'A Different Look at
Codes of Ethics', Business
Horizons 32 (Jan.-Feb.), pp. 66-73, p. 71. This petception is
echoed in Lane, M.R.: 1991,
'Improving American Business Ethics in Three Steps', The CPA
Journal (Feb.), pp. 30-34, p. 30.
^Rich, A.J., C.S. Smith, and RH. Mihaiek: 1990, 'Are Corporate
Codes of Conduct
Effective?', Management Accounting (Sept.), pp. 34-35, p. 35.
^Ibid. the authors tentatively attribute this phenomenon to the
greater size of the companies
adopting codes. Other possible explanations also suggest
themselves. For example, compa-
nies with such heightened internal pressures may adopt codes in
an attempt to counteract the
tendency of such pressures to produce undesirable employee
behavior. For those unencum-
bered by an exposure to managerial accounting, ROI (retum of
investment) is a measure by
which top corporate management attempts to gauge which
intraotganizational investment
centets are most profitably using the funds which have been
entrusted to them. It is calculated
by multiplying a center's margin (its net operating income
25. divided by its sales) and its
turnover (its sales divided by its operating assets). See
Garrison, Ray H.: 1979, Managerial
Accounting (Business Publications, Inc., Dallas, Texas), pp.
389-90.
^Mathews, M.C.: 1987, 'Codes of Ethics: Oi;ganizational
Behavior and Misbehavior',
Research in Corporate Social Performance and Policy 9, pp.
107-30, p. 119. In this study,
firm size and industry were found to be far more significant
variables than the presence or
absence of a corporate code.
^We acknowledge the possibility that, in some cases, corporate
codes have had the desired
effect. In other words, some companies may have adopted ethics
codes purely for public
relations purposes. Few things are more unlikely than a code
adopted for such purposes
having a positive impact on corporate behavior. Our discussion,
however, presupposes the
existence of a bona fide desire for an effective ethics program.
''Kaplan, J.: 1991, 'Now is the time to review corporate
compliance programs', Ethikos
5(1), pp. 8-9, p. 11. Another study found that only 15% of firms
had ethics modules in their
training programs, while about 30% discussed ethical concerns
in management or policy
sessions. Murphy, op. cit., p. 909.
^Cressey, D.R., and C.A. Moore: 1983, 'Managerial Values and
Corporate Codes of
Ethics', California Management Review 25(4), pp. 53-77, p. 73.
26. id., p. 74.
audits are not to be confused with the various forms of "social"
audits designed
to measure an organization's social performance. For an
extensive discussion of the various
forms of such audits, see Belkaoui, A.: 1984, Socio-Economic
Accounting (Quorum Books,
Westport, Conn.), pp. 262-94. For a seminal work in the area,
see Bauer, R.A., & Fenn, D.H.:
1972, The Corporate Social Audit (Russell Sage Foundation,
New York).
'^U.S. Sentencing Commission: 1991, 'Sentencing Guidelines
for Organizational
Defendants', Federal Register 56(95), pp. 22786-22797. For
discussions ofthe new guide-
lines and their importance to business, see Kaplan, op. cit., p. 8;
Singer, A.W.: 1991, 'Ethics
programs could save companies millions under new sentencing
guidelines', Ethikos 4(4), pp.
1-4; Wallance, G.: 1991, 'Guidelines on Corporate Crime
Emphasize Prevention Programs',
National Law Journal (July 1) pp. 22-23.
EXPANDED ORGANIZATIONAL ETHICS AUDITS 37
There is some evidence, however, that many companies are
ignorant of the existence and
the import of the guidelines. See Hayes, A: 1991, 'Corporate
Sentencing Guidelines Thgger
Limited Initial Response', Wall Street Journal (Nov. 1), pp. B l ,
B7.
27. '^Even where federal offenses are not at issue and the guidelines
are not applicable, the
existence of such a program is likely to have a significant
impact on judges' and jurors'
attitudes toward a defendant corporation. At least one scholar
has suggested that the impo-
sition of corporate liability should be contingent upon the
existence or non-existence of a
"corporate ethos" which encouraged corporate misconduct. See
Bucy, P.H.: 1991, 'Corporate
Ethos: A Standard for Imposing Corporate Criminal Liability',
Minnesota Law Review, 75,
pp. 109S-1184. An effective organizational ethics audit program
presumably would go a iong
way toward disproving the existence of such an ethos.
^*Moses, J., and W. Lambert: 1991, 'Companies Given Spur to
Uncover Own Environ-
mental Wrongdoing", The Wall Street Journal, Sept. 25, p. B2.
^*Pitt, H.L., and K.A. Groskaufmanis: 1990, 'Why a Corporate
Code may not Protect
You', Across the Board (May), pp. 22-25, p. 24.
'^An employee troubled by an existing or contemplated
corporate practice can say: "Hey,
it's not just me saying this. Our own code prohibits this kind of
thing." For a survey in which
the majority of respondents thought that a code would help
subordinates refuse improper
requests from their superiors, see Brenner, S.N., and E.A.
Molander: 1977, 'Is the Ethics of
Business Changing?', Harvard Business Review 55 (Jan.-Feb.),
pp. 57-71.
^̂ On the general reluctance of managers to raise explicitly
28. moral concerns, see Bird, F.B.,
and J.A. Waters: 1989, 'The Moral Muteness of Managers',
Business Ethics 32, pp. 73-88;
Jackall, R.: 1988, Moral Mazes (Oxford Press, New York, NY)
pp. 104-05.
^^Bavaria, S.: 1991, 'Corporate Ethics Should Start in the
Boatdroom,' Business Horizons
34(Jan.-Feb.), pp. 9-13,p. 9.
'̂'Laczmiak, GR., and P. Murphy: 1991, 'Fostering Ethical
Marketing Decisions',
of Business Ethics 10(4), pp. 259-71, p. 268.
Gallourakis, David, and Moritz, op. cit., p. 66.
s, op. cit., p. 115. Neither of these outcomes is too surprising
when one considers
the fact that corporate counsel is the official most likely to be
involved in drafting the code.
•Chronikos': 1991, Ethikos 5(1), p. 10.
^^Interestingly enough, one study found a higher incidence of
legal violations in compa-
nies with codes emphasizing corporate reputation. See Mathews,
op. cit., pp. 123-24.
^̂ We do not intend to tread here on the well trampled ground of
this debate. The literature
on the issue is extensive and a meaningful discussion of it is
beyond the scope of this article.
While most readers are quite familiar with the debate, a nice
summary of the arguments can
be found in Goldman, A.: 1980, TTie Moral Foundations of
Professional Ethics (Rowman
and Littlefield, Totowa, NJ), pp. 230-64.
29. ^̂ In 1982, Johns-Manville filed for reorganization under
Chapter 11 of the Federal
Bankruptcy Act due to thousands of lawsuits Tiled by former
employees or their next-of-kin. The
suits sought to recova for death or injuries allegedly attributable
to exposure to asbestos while
working for the company. The exposures in question were not
prohibited by any existing fedetal
or state law. For a discussion of the Johns-Manville case in
particular and of the dynamic nature
of the law in general, see Silverstein, D.: 1987, 'Managing
Corporate Social Responsibility in
a Changing Legal Environment', American Business Law
Journal 25(3), pp. 524-66.
38 BUSINESS ETHICS QUARTERLY
^'Bavaria, op. cit., p. 9; Cressey and Moore, op. cit., p. 58;
Mathews, op. cit., p. 115;
Robin, Gallourakis, David, and Moritz, op. cit., p. 72.
^^For a source acknowledging the internal focus of most
corporate codes but arguing that
"the large number of possible conflicts against the corporation
seem to justify discussion of
them," see Benson, G.C.S.: 1989, 'Codes of Ethics', Journal of
Business Ethics 8(5), pp.
305-19, p. 312.
29see Weller, S.: 1988, "The Effectiveness of Corporate Codes
of Ethics', Journal of
Business Ethics 7(5), pp. 389-95; p. 393; 'Making Ethics a Part
of a Company's "Mythol-
30. ogy"': 1991, Ethikos 4(4), pp. 12-13, p. 13.
'•^osmer, L.T.: 1987, The Ethics of Management (Irwin,
Homewood, Illinois), p. 154.
Hosmer believes that codes are doomed to be ineffective
because "it is not possible to state
the norms and beliefs of an organization relative to the various
constituent groups... clearly
and explicitly, without offending at least one of those groups."
Ibid.
^^Ibid., p. 169.
^^See Szwajkowski, E.: 1983, 'Organizational Illegality:
Theoretical Integration and
Illustrative Application', Academy of Management Review
10(3), pp. 558-567, p. 563.
Szwajkowski observes that although ethics and profit are both
typically formalized as
corporate priorities, directives concerning profit are more
numerous and carry more implied
authority.
'^Waters, J.A., and F. Bird: 1987, 'The Moral Dimension of
Organizational Culture',
Journal of Business 7(1), pp. 15-22, p. 21.
^^Several commentators have noted a tendency for companies to
devote too little attention
to implementation issues. See, for example Murphy, op. cit, p.
907; Pascale, R.: 1985, 'The
Paradox of "Corporate Culture": Reconciling Ourselves to
Socialization' California Man-
agement Review 27(2), pp, 26-41, p. 28; Singer. A.W.: 1991,
'Ethics, "quality" and the
Persian Gulf War', Ethikos 4(6), pp. 1-3, 16, p. 3.
31. y, op. cit., p. 911.
sources commending compliance letters as a component of a
corporate ethics
program, see Bucy, op. cit., p. 24.
^'''Digital Rewards Ethical Employees who "Buck the System"':
1991, Ethikos 5(1), pp.
5-7, 16, p. 7.
and Groskaufmanis, op. cit., p. 24.
and Bird, op. cit., p. 18.
40/iiV/., p. 22.
^^Kohls, J., C. Chapman, and C. Mathieu: 1989, 'Ethics
Training Programs in the Fortune
500', Business and Professional Ethics Journal 8(2), pp. 55-72,
p. 69.
^^Murphy, op. cit., p. 910. When we speak of free information
flows we are speaking of
matters of degree, given the well known problems associated
with assuring accurate infor-
mation flows to top decisionmakers in any large organization.
Anthony Downs, for example,
has compellingly described the tendency of bureaucrats to
distort the information reaching
their superiors. See Downs, A.: 1967, Inside Bureaucracy
(Little, Brown & Co., Boston,
MA), p. 77. Kenneth Boulding similarly observed:
"[AJlmost all organizational structures tend to produce false
images in the decisionma-
ker, and . . . the larger and more authoritarian the organization,
32. the better the chance
that its top decisionmakers will be operating in purely
imaginary worlds."
Boulding, K.: 1966, 'The Economics of Knowledge and the
Knowledge of Economies',
American Economic Review 56(2), pp. 1-13, at 8.
EXPANDED ORGANIZATIONAL ETHICS AUDITS 39
y, op. c/r.,p. 1136.
''̂ Kaplan, op. cit., p. 11.
^^See, for example, Cooke, R.A.: 1991, 'Danger Signs of
Unethical Behavior: How to
Determine If Your Firm Is at Ethical Risk', Jour/to/ of Business
Ethics 10(4), pp. 249-53;
Pitt and Groskaufmanis, op. cit., p. 394; * A "Hotline" for
Management Accountants': 1991,
Ethikos 4(6), pp. 9, 12-13; 'Pitney Bowes' Ombudsman: Venting
Ethical Conflicts': 1991,
Ethikos 4(5), pp. 5-8.
'*^ear, J.P.: 1989, 'Whistle-Blowing: Encourage It!*, Business
Horizons 32 (Jan.-Feb.),
pp, 2-6, p. 5.
^^One 1976 study found that "honesty in communication" was
the biggest challenge faced
by managers. This included communication with clients,
government, and top management.
See Brenner and Molander, op. cit., p. 59. For the indicators of
lack of candor in an
33. organization, see Serpa, R.: 1985, 'Creating a Candid Corporate
Culture', Journal of Business
Ethics 4(5), pp. 425-30, p. 427.
^^Robert Jackal! has discussed top managers' "well-known
aversion to bad news and the
resulting tendency to kill the messenger who bears the news."
Jackall, R.: 1988, Moral Mazes
(Oxford Press, New York, NY) p. 21. This tendency, according
to Jackall, derives from the
fact that "[b]ad news either requires action, always open to
pejorative interpretations, or it
upsets pre-established plans of action, scattering ducks already
set in a row." Ibid., p. 118.
^ n one survey, 50% of the respondents felt that their superiors
did not want to know how
results are obtained as long as the desired outcome was
achieved. Brenner and Molander,
op. cit., p. 62. The "I don't want to be told" attitude has been
identified as a significant
contributor to corporate lawbreaking. See Clinard, M., and P.
Yeager: 1980, Corporate Crime
(Free Press, New York, NY), p. 45. Saul Gelletman has also
identified it as a major source
of unethical behavior. Gellerman, S.: 1986, "Why "Good"
Managers Make Bad Ethical
Choices', Harvard Business Review, (July/Aug.), pp. 85-90, p.
88.
e, C : 1975, Where the Law Ends (Harper & Row, New York,
NY), p. 45.
lacocca. Ford's president during the development of the Pinto
allegedly was fond
of saying: "Safety doesn't sell." Not surprisingly, no one told
34. him when it was discovered
that there were i^oblems with the car's gas tank. Pinto's
designers were operating under
lacocca-dictated "limits of 2,000"—the car couldn't weigh more
than 2,000 lbs or cost more
than $2,000—consequently, they rejected safety devices that
would have added either weight
or cost. See Dowie, M.: 1977, 'How Ford Put Two Million
Firetraps on Wheels', Business
& Society Review 23, pp. 46-55.
The engineers and managers who were concerned about the
Corvair's design allegedly
were in effect told to "stop these objections. Get on the team, or
you can find someplace else
Jo work." See Wright, J.P., 1980, On a Clear Day You Can See
General Motors (Avon Books,
New York, NY), at p. 66.
**Bucy, op. cit., p. 1136.
^^Gellerman, op. cit., p. 90.
^^Saul Gellerman asserts that:
A trespass detected should not be dealt with discreetly.
Managers should announce the
misconduct and how the individuals involved were punished.
Gellerman, op. cit., p. 90.
^Unethical actions must have "serious, perceived, and negative
consequences" if a
company's ethics program is to succeed. Singer, A.W,: 1991,
'The Dark Side of Leadership',
40 BUSINESS ETHICS QUARTERLY
35. Ethikos S(l), pp. 1-4,3 [quoting ethicist Michael Josephson].
Two other commentatots agree,
observing that:
the bottom line is that the company must send a simple
message: Violation of the code
leads to penalties, including dismissal.
Pitt and Groskauftnanis, op. cit., p. 25.
^^The mote serious the penalties for violation of the code and
the greater the threat that
those sanctions will be imposed, the more efiiective the code is
likely to be. Weller, op. cit.,
p. 393.
^ '̂The Dark Side of Leadership', op. cit., p. 2. [quoting Harvard
Professor John Kotter].
^^^eller argues that in decentralized organizations middle
managers are a more effective
source of authority for promoting the corporate code than upper
management. Weller, op.
cit., p. 391. This is unobjectionable, so far as it goes, but it
gives too little credit to the role
of top management in establishing the imperatives under which
such middle managers must
operate. For example, John Coffee has aigued that
organizationally undesirable behavior is
sometimes produced when central managers press divisional
managers for ''quick solutions
to intractable problems." Coffee, J.: 1981, 'No Soul to Damn:
No Body to Kick.: An
Unscandalized Inquiry into the Problem of Corporate
Punishment' Michigan Law Review
36. 79, pp. 386-459, p. 398. Ultimately, the zeal with which middle
managers will enforce the
corporate code depends in large part on the way in which their
performance is measured.
See, for example, DeMott, D.A.: 1977, 'Reweaving the
Corporate Veil: Management
Structure and the Control of Corporate Information', Law and
Contemporary Problems 41(3)
pp. 182-221, p. 217; Hambrick, D.C, and P.A. Mason: 1984,
'Upper Echelons: The Organi-
zation as a Reflection of Its Top Managers', Academy of
Management Review 9(2), pp.
193-206; Murphy, op. cit., p. 910.
*̂ Ŝee, for example, 'Chocolate Aside, Hershey Keeps a Close
Eye on Gifts': 1991, Ethikos
4(6), pp. 4-6, p. 6; 'Ethics, "Quality" and the Persian Gulf War',
op cit, p. 3; Singer, A.W.:
1990, 'Do Business Ethics Deteriorate in a Downturn?', Ethikos
4(3), pp. 1-3, 16, p. 3.
"̂ In one survey, executives ranked "formal organization policy"
as the least important
factor in influencing unethical behavior in organizations while
the actual conduct of superiors
and peers were seen as the most important factors. See Serpa,
op. cit., p. 427.
^Reynolds, L.: 1991, 'The Ethics Audit', Business Ethics 5(4),
pp. 20-2, p. 20.
^^Gellerman, op. cit., p. 88.
°°We are far from the first to recognize this fact. For example,
see the following observa-
tion from Mary Ellen Oliverio:
37. Writing a code of ethics, establishing procedures for
communicating the code to all
employees, and setting aside time in the schedule of internal
auditors to check com-
pliance may give the aura of introducing a high level of ethical
behavior. However,
even though such actions are necessary, they are not sufficient
to assure success. There
must be a constant, thorough, pervasive style of attention and
assessment to ethical
concerns if there is to be a difference in behavior throughout the
entity.
Oliverio, M.E.: 1989, 'The Implementation of a Code of Ethics:
The Early Efforts of One
Entrepreneur', Jour/ia/ of Business Ethics 8(5), pp. 367-74, p.
373.
'̂̂ Nixon, J., C. Wiley, and J. West: 1991, 'Beyond Survival:
Ethics for Industrial
Managers', Industrial Management (May-June), pp. 15-18, p. 15.
See generally Reynolds, op. cit.,; 'Making Ethics Part of a
Company's "Mythology"',
op. cit.
EXPANDED ORGANIZATIONAL ETHICS AUDITS 41
, S.F.: 1990, 'Auditors, Directors, and Management" Promoting
Accountability', Intemal Auditing (Winter), pp. 3-9, p. 7.
'°See Muiphy, op. ciL p. 909.
" S e e , Impert, J.E.: 1991, 'How Boeing Moved Beyond the
38. Prohibition List Toward
Inspiring "Right Behavior'", Ethikos 5(2), pp. 1-9, 11, p. 9.
'^The term is Robert Jackall's. He defines it as:
[T]he complicated, experientially constructed,. . . , set of rules,
premiums, and sanc-
tions that men and women in a particular context create and re-
create in such a way
that their behavior and accompanying perspectives are to some
extent regularized and
predictable.
In short, "the way a particular social world works." Jackall, op.
cit, p. 112. The institu-
tional logic of their corporation is of critical importance to
managers because their "fates
depend on how well they accomplish defined goals in
accordance with the institutional logic
of their situation." Ibid.
'^Murphy, op. cit, p. 911.
''̂ Kerr, S.: 1975, On the Folly of Rewarding A, While Hoping
for B', Academy of
Management Journal 18, pp. 769-83, p. 769.
'^Kerr, J., and J.W. Slocum, Jr.: 1987, 'Managing Corporate
Culture Through Reward
Systems', Academy of Management Executive l{2), pp. 99-108,
p. 99.
'^The example is drawn from Bucy, op. cit, p. 1139.
"Brooks, L.J.: 1989, 'Corporate Ethical Performance: Trends,
Forecaste and Outlooks',
39. Joumal of Business Ethics 8(1), pp. 31-38, p. 34.
'^Brenner and Molander, op. cit, p. 1149.
"Bucy, op. cit, p. 1149.
^^Kerr, op. cit., p. 769 (original emphasis). Kerr gives the
example of a manufacturing
company where a survey revealed that behaviors which
management labeled dysfunctional
were seen by lower level employees as behaviors which were
rewarded. Ibid., p. 778. See
also Reynolds, op. cit., p. 22, for the case of a company which
found that its aggressive
pursuit of sales and service quotas caused employee behavior
that undermined its customer
service objectives.
r, op. cit., p. 12.
r, op. cit., p. 775.
t, op. cit., pp. 251-52.
a full discussion of plant-milking, see Jackall, op. cit, pp. 91-
95. Saul Gellerman
has observed that:
[I]t is not difficult to look remarkably gook in the short run by
avoiding the things that
pay off only in the long run. For example, you can skimp on
maintenance or training
or customer service, and you can get away with it—for a while.
Gellerman, op. cit, p. 89. ROA (retum on assets) is a measure of
operating perfonnance which
seeks to determine how well assets have been employed. It is
40. calculated by dividing the sum of
a fum's net income and interest expense by its average total
assets. Ganison, op. cit, p. 652.
°^This tendency is aggravated in cases where the division has
excess capacity which the
manager cannot control in the short-run. Such excess capacity
has a negative impact on the
manager*s ability to reach target ROI because it increases the
amount of fixed overhead which
must be covered.
^^Merchanl, K.A.: 1987, Fraudulent and Questionable Financial
Reporting: A Corporate
42 BUSINESS ETHICS QUARTERLY
Perspective (Financial Executives Research Foundation,
Morristown, NJ 1987), p. 12. Mer-
chant identifies the organizational factors that contribute to
deceptive financial reporting as:
emphasis on results; pressure to meet unrealistic performance
targets; upper and lower cutoffs
on bonus plans; nonexistent intemal control systems;
environmental change which renders
existing controls ineffective; and high divisional autonomy.
Ibid. pp. 12-14.
8'Wolfe, C : 1991, 'An Inside Job', Mortgage Banking (May),
pp. 45-53, p. 47.
^^Robert Jackall makes the following observation:
Whenever structural inducements place premiums on immediate
personal gains, espe-
41. cially when mistakes are not penalized, there seems to be a
sharp decline in the
likelihood of men and women sacrificing their own interests for
others, for their
organizations, or least of all for the common weal.
Jackall, op. cit., p. 96 (emphasis added).
^'Gellerman, op. cit., p. 89.
^Ibid.
l, op. cit., pp. 87, 90.
id., p. 95 (the phrase belongs to C. Wright Mills).
Gellerman, op. cit., p. 89; Hosmer, op. cit., p. 169; 'How the
Numbers are Obtained is
as Important as Wwrthe Numbers Are': 1991, Ethikos 4(5), p.
16; Murphy, op. cit., p. 911.
^Pascale, op. cit., p. 31. Pascale argues that at highly socialized
companies, "in-the-
trenches" training and orchestrated promotion paths lead "all
trainees [to] understand there
is one step by step career path," which has the effect of
reducing politics and short-term
behavior because "[t]here is no quick way to jump ranks and
reach the top." Ibid., p. 30.
Firms that lack a strong culture, Pascale asserts, are forced to
rely on formal controls, leading
to an inordinate amount of energy being dissipated fighting the
system. Ibid., p. 34.
Stone, op. cit., p. 44.
e, op. cit., pp. 51-52.
^^Chester Bamard tellingly observed that "a person can and will
42. accept a communication
as authoritative only when . . . at the time of bis decision, he
believes it to be compatible
with his personal interests as a whole. Bamard, Chester I. 1964,
The Functions of the
Executive (Harvard University Press, Cambridge, MA), p. 165.
^̂ A recent article in the Wall Street Journal succinctly makes
the point where governmen-
tal regulation of business activity is concerned:
In a properly designed institutional and contractual setting,
ethical conduct is conso-
nant with, not contrary to, economic gain.
Furbush, Dean: 1991, 'Better Rules for More Ethical Finance',
Wall Street Journal, Nov.
8,p.A14.
^Cressey and Moore, op. cit., p. 73.
^'^ven if outsiders are used, significant employee suspicion will
probably need to be
overcome if candid responses are to be obtained. Techniques are
available, howevra-, to elicit such
responses without violating employee privacy or confidentiality.
See Dalton, D., and Metzger,
M.: 1992, 'Towards Candor, Cooperation, & Privacy in Applied
Business Ethics Research: TTie
Randomized Response Technique', Business Ethics Quarterly, 2
(2), pp. 207-221. Etespite what
we have said about the desirability of outsiders as ethics
auditors, some oi^nizations may prefer
to rely on intemal auditors. We have addressed this possibility
elsewhere. See Metzger, M., Hill,
J., & Dalton, D. (1992), 'How Ethical is Your Company',
43. Management Accounting (July),
pp. 59-61.
EXPANDED ORGANIZATIONAL ETHICS AUDITS 43
s, op. cit., p. 22.
id., p. 20.
^̂ ^On the relationship between organizational ethics and
quality, see 'Ethics, "quality"
and the Persian Gulf War', op. cit., pp. 2, 16.
'^For the assertion that improving a company's ethical climate
can yield dividends in the
form of improved employee satisfaction and morale, see Nixon,
Wiley, and West, op. cit., p.
18.
A major part of a manager's job is processing information.
When truthful information
is flowing freely throughout the organization decisionmakers
have the "greatest likelihood
of formulating realistic objectives and strategies." Serpa, op.
cit., p. 426.
"^It is surely not accidental that the defense industry, which has
suffered greatly from
ethics scandals, is a leader in corporate ethics programs. See
'Pitney Bowes' Ombudsman:
Venting Ethical Conflicts', op. cit., p. 9.
''̂ ^See Aupperle, K.E., A.B. Carroll, and J.D. Hatfield: 1985,
'An Empirical Examination
44. of the Relationship Between Corporate Social Responsibility
and Profitability', Academy of
Management Journal 28, pp. 446-63; Cochran, P.L., and R.A.
Wood: 1984, 'Corporate Social
Responsibility and Financial Performance', Academy of
Management Journal 27, pp. 42-56;
McGuire, J.B., A. Sundren, and T.Schneeweis: 1988, 'Corporate
Social Responsibility and
Firm Financial Performance', Academy of Management Journal
31, pp. 854-72. Also see
O'Toole, J.: 1991, 'Doing Good by Doing Well: The Business
Enterprise Trust Awards',
California Management Review 33(3), pp. 9-24, p. 21, for the
assertion that "[o]ne may either
succeed or fail taking the high road, as one may either succeed
or fail taking the low road."
^ °For an exhaustive overview of the state of research on
corporate social performance,
see Wood, D.J.: 1991, Academy of Management Review 16(4),
pp. 691-718.
'̂'̂ See Harrington, S.J.: 1991, 'What Corporate America is
Teaching About Ethics',
Academy of Management Executive 5(1), pp. 21-30, pp. 21-22.
'^^avid Vogel has observed that:
Et is irresponsible to imply that acting responsibly is always
costless, and it is unethical
to base a case for ethics on economic self interest. If we want
executives to act more
ethically, we need to be more honest with each other. The
market has many worthwhile
features, but setting an appropriate price on virtue is not among
them.
46. Preparing for Ethical Leadership in Organizations.
Authors:
Mendonca, Manuel
Source:
Canadian Journal of Administrative Sciences (Canadian Journal
of Administrative Sciences). Dec2001, Vol. 18 Issue 4, p266.
11p. 1 Diagram.
Document Type:
Article
Subject Terms:
*LEADERSHIP
*MANAGEMENTMORAL & ethical aspectsETHICS
Abstract:
Explores the need for ethical leadership and the ways in which
it is manifested in organizations. Dimensions
of ethical leadership in organizations; Basic competencies in
managerial resourcefulness; Principles of ethical power.
ISSN:
0825-0383
Accession Number:
6287498
Journal Article Analysis Each student will select one of the key
terms presented in the module and conduct a search of
Campbellsville University’s online Library resources to find 1
recent peer-reviewed academic journal article (within the past 3
years) that closely relate to the concept. Your submission must
include the following information in the following format:
DEFINITION: a brief definition of the key term followed by the
APA reference for the term; this does not count in the word
requirement. SUMMARY: Summarize the article in your own
words- this should be in the 150-200 word range. Be sure to
note the article's author, note their credentials and why we
should put any weight behind his/her opinions, research or
findings regarding the key term. DISCUSSION: Using 300-350
47. words, write a brief discussion, in your own words of how the
article relates to the selected chapter Key Term. A discussion is
not rehashing what was already stated in the article, but the
opportunity for you to add value by sharing your experiences,
thoughts and opinions. This is the most important part of the
assignment. REFERENCES: All references must be listed at the
bottom of the submission--in APA format. Be sure to use the
headers in your submission to ensure that all aspects of the
assignment are completed as required. Any form of plagiarism,
including cutting and pasting, will result in zero points for the
entire assignment.
THE ORGANIZATION OF ETHICS AND THE ETHICS OF
ORGANIZATIONS: THE CASE FOR EXPANDED
ORGANIZATIONAL ETHICS AUDITS.
Authors:
Metzger, Michael1
Dalton, Dan R.2
Hill, John W.3
Source:
Business Ethics Quarterly. Jan1993, Vol. 3 Issue 1, p27-43.
17p.
Document Type:
Article
Subject Terms:
*BUSINESS ethics
*AUDITING of corporations
*COMMERCIAL crimes
*FINES (Penalties)
*CORPORATE culture
*AUDITINGETHICSETHICAL problems
Geographic Terms:
UNITED States
Abstract:
The United States Sentencing Commission's guidelines for the
sentencing of organizations found guilty of violating federal
48. laws recently became effective. Dramatically increased
penalties are possible under these guidelines, but so too is a
substantial reduction in the penalties imposed on organizations
that have an effective program in place to prevent and detect
violations. This provides corporations with a tremendous new
incentive in inaugurate organizational ethicsaudits both to avoid
violations in the first instance and to reduce the penalty
imposed in the event that a violation occurs. We argue,
however, that there have always been very good reasons for
organizations to conduct such audits, which emphasize the
identification of the organizational factors that create incentives
for unethical behavior. Corporate ethics programs initiated
without reference to such factors cannot reasonably be expected
to be effective in improving a company's internal ethical
environment. [ABSTRACT FROM AUTHOR]
Copyright of Business Ethics Quarterly is the property of
Cambridge University Press and its content may not be copied
or emailed to multiple sites or posted to a listserv without the
copyright holder's express written permission. However, users
may print, download, or email articles for individual use. This
abstract may be abridged. No warranty is given about the
accuracy of the copy. Users should refer to the original
published version of the material for the full
abstract. (Copyright applies to all Abstracts.)
Author Affiliations:
1Professor of Business Law, Indiana University Graduate
School of Business
2Professor of Management and Director of Graduate Programs,
Graduate School of Business, Indiana University
3Assistant Professor of Accounting at the Indiana University
School of Business
ISSN:
1052-150X
DOI:
10.2307/3857380