Professional Ethics & Code of Ethics

Professional Ethics & Code of EthicsLesson 061Lesson's ObjectivesDefine Professional EthicsOrganizational standards and codes of ethics,Evaluation of code of ethics,Implementing business ethics,The ethics audit.2Professional EthicsA profession is a job that requires specific training and is regulated by certain standardsProfessional ethics the ethical norms, values, and principles that guide a profession and the ethics of decisions made within the profession.LecturerDoctorAccountant3Professional EthicsProfessional ethics are often established by professional organizations to help guide members in performing their job functions according to sound and consistent ethical principles.4Characteristics of a ProfessionCommon body of knowledgeFormal educational processStandards of entryRecognition of public responsibilityThe Public InterestIntegrityObjectivity and independenceDue CareScope and Nature of Services5Teens View of Business Leaders6To Be Ethical LeaderTo be perceived as an ethical leader, must be a visibly ethical person and an ethical manager with a consistent message

Therefore to be a ethical leader;Being a moral person alone is insufficientExecutives are distant from most employees and, without "moral management," bottom line messages can overwhelm all others.7To Be Ethical LeaderBeing a moral manager is insufficientMoral management gain legitimacy only if employees believe the given principled, caring person who means what s/he saysThen ethical leadership isMuch more than traits (e.g. integrity)Requires great care to create and sustain an ethical culture that sends a consistent message that is at least as powerful as the "bottom line" drumbeat (via real attention to ethics in multiple cultural systems).89Ethical Leadership ExampleKnown to be a person of the highest integrity. Strength and revised corporate credo/philosophy, launched annual credo survey after Tylenol crisis, required action plans to address problems, handled ethical violations swiftlyJames Burke,Johnson & Johnson.10James Burke.11

Unethical Leadership ExampleLied to employee & financial analysts, was condescending / not respecting, belligerent/ aggressive and disrespectful of employees, made decisions and rewarded employees based upon bottom line only, left company crippled, accused of filing false financial reports - settled with SEC for half million dollars.Al Dunlap, Sunbeam12Al Dunlap, Sunbeam.13

Hypocritical Leadership ExampleTalked about ethics, religion (doing "God's work"). Yet, employees became aware of misleading financial practices, conflicts of interest, lying to donors, theft of donor contributions, sexual liaisons, etc!

Jim Bakker of PTL Ministries(PTL stands for "Praise the Lord" or "People That Love"), later called The Jim and Tammy Show)14Jim Bakker of PTL Ministries.15

Ethical Neutral Leadership ExampleIntense/strongly focus on bottom line. Decentralized management style means that ethics management is left to business unit managers. Describe by Fortune magazine as tone deaf" on ethics issues. Citigroup has dealt with a variety of conflicts of interest scandals.

Sandy Weill, Citigroup16Need for Corporate Ethics ProgramsAlmost companies in Sri Lanka have reduced trust in businessesBeverage, Milk powder, Meat products, services...Employees are not legal experts and need guidance as their orientation is deferentCompliance orientationValues orientationTherefore an ethical program is required.17Values Vs. Compliance OrientationCompliance orientationRequires that employees identify with and commit to specified conductUses legal terms, statutes and contracts that teach employees the rules and penalties for noncomplianceValues orientationFocuses more on an abstract core of ideals such as respect and responsibilityResearch shows is most effective at creating ethical reasoning18Ethical ProgramsIt is a programe that create firm's ethical climate and helps ensure that all employees understand the organization's values and comply with the policies and codes of conduct.

Organizations should develop an organizational ethics program by establishing, communicating, and monitoring uniform ethical values and legal requirements.19A strong ethics program includesWritten code of conductEthics officer to oversee the programCare in the delegation of authorityFormal ethics trainingAuditing, monitoring, enforcement, and revision of program standards20Concepts of Code of EthicsCodes of conduct - represents employee ethicsFormal statements that describe what an organization expects of its employeesCodes of ethics - corporate or business ethicsMost comprehensive document and it consists of general statements that serve as principles and the basis for the rules of conductStatement of valuesServes the general public and addresses stakeholder interests21Code of EthicsCode of ethics are formal statements of what an organization expects in the way of ethical behaviorIt will not solve every dilemmaProvide rules & guidelinesIt reflects senior management's desire for compliance with values, rule & policies in support of an ethical climateAnd it should be specific enough to be reasonably capable of preventing misconduct22Corporate Code of EthicsOften contain six core valuesTrustworthinessRespectResponsibilityFairnessCaringCitizenship23E.g. UnilieverGeneral Code of Ethics focuses on:Standard of Conduct : Honesty, Integrity & OpennessObeying the Law : Laws of host countryEmployees : No forced or child laborConsumers : Consistent value offeringPublic Activities : No political affiliationCompetition : strong & FairCompliance & Monitoring : Board, Senior Mgt24E.g. Wal-MartWal-Mart's Ethics Beliefs"respect for the individual,""service to the customer" and"Striving for excellence.

Responsibilities and Obligations to Customers Fair Transaction with stakeholders Fair Competition25E.g. LGImplementing Code of EthicsDistribute the code comprehensively: employees, subsidiaries, & associated companiesAssist in interpretation & understandingSpecify management's role in implementationMake employees responsible for understandingEstablish grievance proceduresProvide a conclusion or closing statement26Consideration of Code of EthicsEthics officers or committees are responsible for oversight of the ethics/compliance programCoordinates program with top managementDevelops, revises & disseminates the codeDevelops effective communicationEstablish audits & control systemsProvides consistent enforcement of standardsReviews & modifies the program to improve effectiveness.27Communication of Ethical StandardsMust start with a foundation, a code of ethics, a procedure for airing ethical concerns, and executive priorities on ethicsCan educate employees about firm's policies and expectations, laws and regulations, and general social standardsCan make employees aware of resources, support systems, and personnel who can assist them with ethical adviceCan empower employees.28Communication of Ethical StandardsProvides guidance for ethical standards & activities that integrate the functional areas of businesshelps employees identify ethical issues & provides a mean to address & resolveCan help reduce criminal, civil & administrative consequences including:Fines, penalties, judgments, etc.29Oversight of Ethical standardsReflect organizational size, culture, values, management style & employee baseImprove employee understanding of ethical issuesInfluence the organizational culture, significant others, & opportunity in the ethical decision making processOverall, provide for recognition of ethical issues, understanding of culture & values, and influence ethical decision making30Enforcing Ethical StandardsConsistent enforcement is criticalBut an internal system for employees to report misconduct is an opportunity to register ethical concernsEthics hot linesQuestionnaires may be used to serve as benchmarksCorrective actions provide standards & punishment31Enforcing Ethical StandardsIf 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.32Enforcing Ethical StandardsAn effective ethics program employs many resources to monitor ethical conduct and measure the programs effectivenessObserving employeesInternal auditsSurveysReporting systemsInvestigationsIndependent audits33Ethical Compliance AuditA systematic evaluation of an organization's ethics program and/or performance to determine its effectivenessCan help in establishing codes & programShould provide a systematic & objective approach to surveying the ethical condition of the organizationMay be more effective if performed by an external entity (organizations should participate in ethics audit instrument development)34Mistakes in Ethical ProgramNot having a clear understanding of the goals of the program from the beginning.Not setting realistic and measurable program objectives.Senior management's failure to take ownership of the ethics program.Developing program materials that do not address the needs of the average employee.Transferring a domestic program internationally.Designing a program as a series of lectures.3536Thank You