Chapter 6 Strategic Planning, Corporate Culture, and Corporate Compliance

Transcription

1 Chapter 6 Strategic Planning, Corporate Culture, and Corporate Compliance Understanding Business Ethics Stanwick and Stanwick 2 nd Edition

2 1 When Ethics Drive a Change in Strategy In 2003, Charles Prince took over as CEO at Citigroup He stated that one of his primary goals was to improve the firm s corporate reputation and to focus on implementing stronger internal controls and a more comprehensive ethics program at the company Prince described Citigroup from a broader stakeholder perspective by styling the company as a quasipublic institution

3 2 Ethics and Strategic Planning Strategic Planning is the process in which future courses of action are developed to achieve the firm s short and long-term goals Five questions to ask before making a final decision 1. Why is this bothering me? 2. Is it my responsibility? 3. What is the ethical concern? 4. What do others think? 5. Am I being true to myself?

4 3 Ethics and Strategic Planning Mirror Test involves the decision maker s ability to look in the mirror after decisions have been made and state that he/she made the right choice The mirror test applies to the question Am I being true to myself?

5 4 The Ethical Cycle Stages of the Ethical Cycle Moral problem statement Problem analysis Options for actions Ethical judgment Reflection

6 5 The Ethical Cycle

7 Using Strategic Ethical Decisions to Build Character 6 The Ethical Cycle helps employees understand who they are from an ethical perspective. A defining moment is when a decision maker has a choice between two plausible and acceptable strategic options. Who am I? Who are we? Who is the company?

8 7 Wakenhut s Core Values 1. Customer focus 2. Partnership 3. Employees 4. Professionalism 5. Benchmarking 6. Innovation and versatility

9 How to Address Ethical Crisis and Disaster Recovery 8 An ethical crisis occurs when an event that was not part of the normal course of action takes place and has an impact on the firm. Crisis Typology Dimensions 1. Whether issues are internal or external called Center of Gravity 2. Frequency of the issues classified as normal or abnormal

10 9 Corporate Culture Defined as the shared values and beliefs of employees within any given organization Must have strong ethical focus to ensure that unethical activities do not take place in the workplace

11 Three Levels of Corporate Culture 10 Artifacts Factors such as what is seen and heard within a firm Shared Values Based on what groups within the firm learn about what is acceptable or not acceptable Basic Assumptions The agreed starting point for decision making within the firm

12 How Managers Can Change a Corporate Culture 11 Two types of mechanisms in which managers can change cultures 1. Primary Embedding Mechanisms 2. Secondary Articulation and Reinforcement Mechanisms

13 12 How to Change Ethical Values Three stage model of change Stage 1 (unfreezing) unfreezing of the individual s existing beliefs Stage 2 (moving) - top management needs to ensure that what is considered acceptable and unacceptable is clear Stage 3 (refreezing) top managers must reinforce their commitment to support strong ethical behavior

14 13 Formalizing a Culture of Ethics Culture should include three basic components 1. Define your philosophy and corporate values in a mission statement 2. Develop guidelines for employees 3. Establish a formal channel for employees to report violations

15 Evaluation of Corporate Culture Deloitte & Touche Cultural Assessment of a Firm 14 Do rank and file employees understand the tone set by senior management? Do you know that your organization s culture encourages ethical behavior at all levels? Can employees throughout your organization describe the company s code of ethics? Do employees in all areas of your organization ask questions and express concerns? Do your employees believe that the mechanisms are in place to allow them to voice opinions without fear of retribution?

16 15 Creating a Climate of Integrity Suggestions: 1. Set an example through strong leadership 2. Set realistic goals 3. Provide training 4. Distinguish between compliance and ethics

17 16 Ethics and Corporate Compliance Deloitte & Touche Five Step Process to embed positive ethics and values Step 1 Conduct risk/cultural assessment Step 2 Review current compliance program Step 3 Review ethical policies and procedures Step 4 - Review and revise the communication, training, and implementation phases of program Step 5 Develop an ongoing assessment of the program

18 The U.S. Federal Sentencing Guidelines for Organizations 17 Guidelines were passed in 1991 and revised in 2004 Guidelines stage that organizations can be charged with and convicted of federal crimes Organizations can be fined, sentenced to probation for up to five years, and ordered to pay restitution to their victims

19 Common Criminal Charges from Federal Sentencing Guidelines 18 Ranked in order of frequency 1. Fraud 2. Environmental waste discharge 3. Violations of taxation 4. Antitrust violations 5. Food and drug criminal violations

20 Corporate Compliance Systems and Global Corruption 19 Corruption Defined as the conscious abuse of public roles and resources for the private benefit of a firm and/or the individuals of the firm Bribery Extortion Embezzlement

21 Corruption Classifications 20 Petty Corruption Grand Corruption Influence Peddling Transparency International A global civil society organization whose mission is to try to reduce corruption around the world

22 21 The U.S. Foreign Corrupt Practices Act Passed into law in 1977 and amended in 1988 Prohibits any U.S. firm and its foreign subsidiaries from giving foreign government officials any financial incentives in exchange for either obtaining or retaining any government business in that country

23 22 The U.S. Foreign Corrupt Practices Act Includes both United States based firms and domestic concerns and individuals Criminal penalties for violation can be up to $2 million for a firm and $100,000 and five years in prison for an individual

24 Questions for Thought In the opening vignette, why do you think it was important for Sanford Weill to stay on as Chairman of the Board after Charles Prince was picked as the new CEO? Why did three top level employees at Citigroup want to leave after two years with Prince as CEO? Why do you think there were multiple ethical problems at Citigroup when Prince took over as CEO? 2. Explain why ethical decision making is so important.

25 24 Questions for Thought 3. Explain corporate culture in light of ethical conduct. 4. Examine the compliance program of a publicly held company. Do they have a mission statement related to ethics? Comment on the program.