ETHICS HOW DO YOU AND YOUR ORGANIZATION MEASURE UP? Larry Finney, CPA

ETHICS HOW DO YOU AND YOUR ORGANIZATION MEASURE UP? Larry Finney, CPA

ETHICS Case studies Survey

ETHICS What is ethics? What is basis? How determined? Why important? Why is ethics an issue? What happens when ethical standards are not practiced? What are the good things that come from good ethical practices? Where/how do we apply/practice ethics? What does a trustworthy organization look like?

ETHICS What is your ethics style?

Ethics History and Timeline 1960s Ethical Climate Social unrest. Anti-war sentiment. Employees have an adversarial relationship with management. Values shift away from loyalty to an employer to loyalty to ideals. Old values are cast aside. Civil rights. Federal gov t boom-many new departments created. Major Ethical Dilemmas Environmental issues Increased employee -employer tension Civil rights issues dominate Honesty The work ethic changes Drug use escalates

Ethics History and Timeline 1960s Business Ethics Developments Companies begin establishing codes of conduct and values statements Birth of social responsibility movement Corporations address ethics issues through legal or personnel departments

Ethics History and Timeline 1970s Ethical Culture Defense contractors and other major industries riddled by scandal. The economy suffers through recession. Unemployment escalates. There are heightened environmental concerns. The public pushes to make businesses accountable for ethical shortcomings. Gov t saves Chrysler with loans. Microsoft started. Major Ethical Dilemmas Employee militancy (employee versus management mentality) Human rights issues surface (forced labor, sub-standard wages, unsafe practices) Some firms choose to cover rather than correct dilemmas Watergate

Ethics History and Timeline 1970s Business Ethics Developments ERC founded (1977) Compliance with laws high-lighted Federal Corrupt Practices Act passed in 1977 Values movement begins to move ethics from compliance orientation to being "values centered"

Ethics History and Timeline 1980s Ethical Culture The social contract between employers and employees is redefined. Defense contractors are required to conform to stringent rules. Corporations downsize and employees' attitudes about loyalty to the employer are eroded. Health care ethics emphasized. Major Ethical Dilemmas Bribes and illegal contracting practices Influence peddling Deceptive advertising Financial fraud (savings and loan scandal) Transparency issues arise

Ethics History and Timeline 1980s Business Ethics Developments ERC develops the U.S. Code of Ethics for Government Service (1980) First business ethics office at General Dynamics (1985) False Claims Act (government contracting)

Ethics History and Timeline 1990s Ethical Climate Global expansion brings new ethical challenges. There are major concerns about child labor, facilitation payments (bribes), and environmental issues. The emergence of the Internet challenges cultural borders. What was forbidden becomes common. Major Ethical Dilemmas Unsafe work practices in third world countries Increased corporate liability for personal damage (cigarette companies, Dow Chemical, etc.) Financial mismanagement and fraud galore.

Ethics History and Timeline 1990s Business Ethics Developments Federal Sentencing Guidelines for Organizations (1991) Class action lawsuits Global Sullivan Principles (1999) (corporate social responsibility) In re Caremark (Delaware Chancery Court ruling re Board responsibility for ethics) IGs requiring voluntary disclosure Royal Dutch Shell International begins issuing annual reports on their ethical performance Federal government shutdown

Ethics History and Timeline 2000s Ethical Culture Unprecedented economic growth is followed by financial failures and major recession. Ethics issues destroy some high profile firms. Personal data is collected and sold openly. Hackers and data thieves plague businesses and government agencies. Acts of terror and aggression occur internationally. Major Ethical Dilemmas Cyber crime Privacy issues (data mining) Financial mismanagement. International corruption. Loss of privacy - employees versus employers Intellectual property theft The role of business in promoting sustainable development

Ethics History and Timeline 2000s Business Ethics Developments Business regulations mandate stronger ethical safeguards (Federal Sentencing Guidelines for Organizations; Sarbanes-Oxley Act of 2002) Anticorruption efforts grow. Stronger emphasis on Corporate Social Responsibility and Integrity Management Revised Federal Sentencing Guidelines for Organizations (2004) Increased emphasis on evaluating ethics program effectiveness Whistleblower protection and Dodd-Frank ARRA

ETHICS Ethics Report Thoughts from a social networker

Ethics-What is Out There Today? Good general guidance Many businesses have codes, training, etc. Governments are behind in organization-specific codes What does your organization have and do? How do these measure up? See various examples

Ethics-Whistle blowing Vaguely going on for a long time, but started becoming a major issue in late 1990s and early 2000s. Protection laws and regulations continue to be passed, but are they effective? Whistle blower report Inside the mind of a whistle blower

Ethics So what do you think of what we have looked at so far?

Ethics-So Why Have a Code of Conduct?

Ethics-So Why Have a Code of Conduct? Central guide and reference for users in support of day-today decision making. It should clarify an organization's mission, values and principles, linking them with standards of professional conduct. As a reference, it can be used to locate relevant documents, services and other resources related to ethics within the organization.

Ethics-So Why Have a Code of Conduct? A code is an open disclosure of the way an organization operates. It provides visible guidelines for behavior. A well-written and thoughtful code also serves as an important communication vehicle that "reflects the covenant that an organization has made to uphold its most important values, dealing with such matters as its commitment to employees, its standards for operating and its relationship with the community."

Ethics-So Why Have a Code of Conduct? A code is also a tool to encourage discussions of ethics and to improve how employees/members deal with the ethical dilemmas, prejudices and gray areas that are encountered in everyday work. A code is meant to complement relevant standards, policies and rules, not to substitute for them. Codes of conduct offer an invaluable opportunity for responsible organizations to create a positive public identity for themselves which can lead to a more supportive political environment and an increased level of public confidence and trust among important elected officials and the public.

How Would You Build an Ethical Organization?

How Would You Build an Ethical Organization? Do we know what our mission and vision is and is it what it should be? Buy-in Communication Get complete buy-in from top management on plan and project (don t start if not 100% committed to it) Code of conduct Get samples from others Research-find help and recommendations wherever you can see writing tips for codes See code construction ideas Many people need to be involved and you know who they are

How Would You Build an Ethical Organization? Exercise Create an outline for a code of conduct/ethics code

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? Values Organization values typically are expressed in terms of how the organization performs its day-to-day interactions with suppliers, employees and customers. A primary objective of the code of ethics is to define what the organization is about and make it clear that the organization is based on honesty and fairness.

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? Principles Principles are used to further support the business values by including operational credos employees should follow. Customer satisfaction, financial stewardship and continuous improvement are key factors in documenting principles. Community responsibility to the environmentally friendly use of natural resources is another business principle that often is found in code of ethics.

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? Management Support Manager support of the values and principles may be documented in the code of ethics. Open door policies for reporting ethics violations can be included in the code, along with a process to anonymously report any code of ethics issues. To reflect how seriously management considers the code, some businesses display the code of ethics with management signatures in prominent areas, such as the break room, where employees will see it on a daily basis.

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? Personal Responsibility Another component is a statement regarding each employee's personal responsibility to uphold the code of ethics. This may contain information regarding both the legal and moral consequences if an employee violates the code. The requirement to report any violators is normally a component of the ethics code's personal responsibility. This is meant to show that it is not sufficient to merely adhere to the values and principles but to help ensure every employee supports the code of ethics by reporting violators.

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? Compliance Any laws or regulations may be referenced as rules to adhere to as part of daily organization interactions. The SC Ethics Act, etc. can be referenced here.

How Would You Build an Ethical Organization? Code of conduct Create outline-what should it include? See ERC outline for more detail Still don t see much out there, but there should be some information somewhere about commitment to whistle blowers Then it is time to write! See BP Code of Conduct

How Would You Build an Ethical Organization? Once the Code has been written, reviewed and approved then what?

How Would You Build an Ethical Organization? Once the Code has been written, reviewed and approved then what? THAT IS THE EASY PART, NOW THE HARD PART BEGINS There needs to be an ethics committee within the organization It needs to be a living breathing document Train, train, train at all levels of the organization It says a lot when the head of the organization is there Live it out-be careful what is in the code and what you say during training, because then EVERYONE must live it out day-to-day. And when someone is unethical the rubber meets the road-what are you going to do, no matter who it is? Is the code just a bunch of words on piece of paper or are the our beliefs and values?

Ethical Dilemmas So now what? I have read the code, I have been trained, I understand what I am supposed to do, and now my boss wants me to do something I am not sure is right or ethical for our company and for me personally. What do I do? This is where the code falls short, but training and having an open door policy can close the gaps. You can t write a code to deal with every ethical dilemma but you can train people on practices that have proven over time to be effective But remember, every ethical dilemma is unique!

Ethical Dilemmas Do you believe there is a difference between what is legal and what is ethical? Yes No

Ethical Dilemmas What we are really talking about hear is applying the typical decision making process to a difficult situation.

Ethical Dilemmas Step 1: Define the problem

Ethical Dilemmas Step 2: Identify available alternative solutions to the problem

Ethical Dilemmas Step 3: Evaluate the identified alternatives

Ethical Dilemmas Step 4: Make the decision

Ethical Dilemmas Step 5: Implement the decision

Ethical Dilemmas Step 6: Evaluate the decision.

Ethical Dilemmas Case Study on elevators: Your organization owns an old, downtown office building. Tenants are complaining that their employees are getting angry and frustrated because there is always a long delay getting an elevator to the lobby at rush hour. How would you solve this problem?

Ethical Dilemmas Several different methods out there when it comes to how to solve an ethical dilemma They all take that general decision making process and apply it to an ethical dilemma you find yourself in

Ethical Dilemmas Basic issues to address: Is it consistent with my organization s values, principles, policies and guidelines? Is it legal according to laws and regulations? Is it ethical for me personally? Will it appear to be the right decision to others? In the end, I like to ask am I going to be able to sleep well at night? Video-five ways to think ethically

Ethical Dilemmas If the answer to any of those is no, then what? Evaluate what you should do next-most likely it will be to talk to someone Before you do anything, you need to think through what you will do for each step for each different possible response Who do you talk to? Spouse Outside friend Internal peer Supervisor Internal HR or legal departments Top management Hot line anonymously An outside organization

Ethical Dilemmas If the answer to any those is no, then what? Do you put anything in writing? How far are you willing to go? You find out what kind of organization you work for and what you are made of when adversity comes My stories and your stories Back to first case studies

Ethics So What?

Ethics-It is about trust Video-earning trust