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  1. 1. Chapter 8 Development of an Effective Ethics Program
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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)