BA 310 Mod 13 Ch 12 Establishing a Code of Ethics and Ethical Guidelines Objectives List the four types of statements that corporation may use to communicate its ethics viewpoint Explain the benefits of having a living code of ethics 1 Describe the role of a code of ethics in organizations 2 3 4 Describe the three major stages of TRM systems used when setting up a code of ethics 5 6 7 List the recommended items for a code of ethics Explain the necessary ingredients for ethics programs to add value to organizations Identify the major global codes of ethics Tyco Scandal Different from WorldCom Enron and HealthSouth in that there was no fraudulent accounting present CEO Dennis Kozlowski was charged with stealing 150 million from the company 81 million in unauthorized bonuses 15 million in art 20 million to a friend for investment banking fees Extravagant lifestyle charged to the company First trial 2004 was declared a mistrial Second trial 2005 resulted in criminal convictions for CEO and CFO Each received up to 25 years in prison Hird a Senior Vice President for Corporate Governance All board members were dismissed and new ones hired VP position reports directly to the Board not the CEO Carefully reviewed all activities of former executives whether convicted or not Reviewed all financial statements of each business unit Fixing up Tyco Developed a comprehensive new code of ethics to include the following Conflicts of interest Compliance rules Sexual harassment Fraudulent behavior 1 Role of A Code of Ethics 2 Four Types of Statements code of ethics a written document that explicitly states what acceptable and unacceptable behaviors are for all of the employees in the organization Components that impact the development of the ethical standards of the firm Social Values Is it valuable to society at large Institutional Factors Voluntary industry guidelines and government regulations Personal Factors Values of the individuals developing the code of ethics Organizational Factors Is there the internal will of the company to develop a code of ethics stakeholders A corporation may adopt four types of statements to communicate the corporation s view of the subject of ethics Values Statements A succinct document that is intended to set out the guiding principles of a company Corporate Credo A statement that sets forth the company s beliefs and responsibilities to Code of Ethics A detailed statement of a firm s ethical policies Internet Privacy Policy A statement discussing the company s privacy policy for transactions usually written in legal terms relating to the firm s ethical values Internet Code of Ethics and Stakeholders Code of ethics gives a firm an opportunity to declare its ethical vision to all its stakeholders Four ethical values to consider when developing a code of ethics integrity presenting ideals in the code of ethics that highlight the attributes of honesty sincerity and transparency justice presenting the firm s commitment to unbiased and good faith interactions with its stakeholders competence the duties and capabilities of the firm to execute its ethical vision utility incorporating within the code of ethics values and actions that will do the greatest good for the greatest number of people Early Code of Ethics and Stakeholders JCPenney Developed one of the first corporate codes of ethics Stores were originally called the Golden Rule Stores In 1913 when the JCPenney stores were formed the Penney Idea was adopted It is important to put a code of ethics into writing regardless of the size of the business because it helps stakeholders know which behaviors are acceptable and which are not Include a code of sanctions Have employees sign 1 BA 310 Mod 13 Ch 12 Establishing a Code of Ethics and Ethical Guidelines 3 Benefits of A Code of Ethics When companies have a code of ethic in place and enforce that code the following happens Employee loyalty increases Questionable behavior decreases Competitive positions improve Managers become more confident Employee relations improve Customer relationships become more solid Content of A Code of Ethics Beginning with a statement that says that profit is the company s goal and integrity is the means by which it will achieve that goal the company achieves these benefits Meeting customer expectations Honesty Nondelegable quality Traceability which reduces occasions for waste and fraud Respect for privacy and avoidance of conflicts of interest Antidiscrimination which is required by law but inserted to complete the code Empowerment through organizational freedom responsibility and authority True reports Integrity encouragement of whistle blowing reduces animosity and punitive action Code of ethics content areas could include the following Fiduciary responsibilities Compliance Accounting Governance Member communications and confidentiality Commitment to learning and skill enhancement Absence of prejudice and harassment Conflict of interest Human resources Cooperation with other credit unions Social responsibility 4 The Role of Total Responsibility Management and a Code of Ethics Total Responsibility Management TRM Starts with the premise that the vision of the firm drives the development of the code of ethics The firms vision establishes the benchmark goals in which the firm is now accountable to its stakeholders Inspiration Process Vision setting and leadership commitment Identifying the unique relationship each firm has with its competitive advantage its stakeholders and its historical development Responsibility vision and leadership commitments The formalization of the responsibilities and commitments to the ethical vision take place Stakeholder Engagement Processes The firm interacts with the stakeholders to ensure that the ethical vision the firm is developing coincides with the needs and expectations of all the stakeholders Integration Changes in Strategies and Management Practices The firm identifies its foundation values along with the international standards that apply to its operations Foundation values Strategy Integration of the ethical vision in the strategic formulation stage of the decision making process can eliminate the potential conditions for a crisis before it can occur Building human resource capacity Integrations into management systems Decisions are made and implemented pertaining to allocating resources to execute the ethical vision Establish the link between the responsibilities of executing the ethical vision and the