2 What role, if any, should the existence and availability of an ethics code or policy play in helping executives and management to support and strengthen ethical behavior and resolve ethical issues? Effective leaders maintain integrity and trust by communicating clearly, leading by example and fostering positive relationships with sponsors, stakeholders, suppliers and employees. They should also have a clear understanding of the ramifications if they fail to behave ethically. First of all, leaders should themselves set up an example in front of their employees. Email* Following business ethics can also be beneficial for the business' employees and operations. Describe the methods of selecting and hiring ethical employees. What values are important to our company and its employees? Here are a few ways managers can promote ethical conduct among their staff. Managers should also hold regular workshops on ethics and demonstrate how employees can solve problems ethically. First Name* The potential risks and benefits from taking an ethical stand can be high for companies. If managers really want to promote ethical behavior they need to reward it when they see it. It is essentially a moral compass. The ethical lapses of global companies, such as Enron, Arthur Andersen, and WorldCom, over the span of a few years caused much devastation. Calling personal references may also help hiring managers filter out less ethical candidates. If leaders will demonstrate ethical behavior, followers will automatically be motivated to act ethically and adhere to ethical principles and code of conduct. "Is this question part of your […] Best practices in the selection and hiring of ethical employees involve including the company’s most ethical employees in the interview process. Under the whistleblower protection offered by the Sarbanes-Oxley Act, anyone who reports a corporate wrongdoing and believes he or she could be penalized for it can request that the Occupational Safety and Health Administration (OSHA) investigate the matter. Where are our greatest areas of risk? Arthur Andersen’s accountants, who audited Enron and WorldCom, turned a blind eye to the fraud. A code of ethics, also known as a code of conduct or statement of values,is a policy statement of a company’s values, responsibilities, and conduct expectations. Employees will likely follow their example. Companies Can Encourage Ethics in the Workplace Companies can encourage workplace ethics by preparing and supporting staff to act right. It should act as a moral compass that guides employees in handling ethical dilemmas. The purpose of a code of ethics is to guide employees in handling ethical dilemmas. It’s important to know: 1. 3. Successful businesses start with a good plan. During the … Therefore, managers need to consider the company’s decisions to hire, train, promote, and pay employees. For example, introduce the ethics training or be the person to speak. However, some employees are reluctant to speak up for fear of retaliation.[3]. In her book, Seven Lenses: Learning the Principles and Practices of Ethical Leadership (2013), author Linda Thornton says that getting employees to act ethically in … If managers want their staff to behave ethically then they must understand that it starts with them. However, companies like Costco, Chipotle, and CVS demonstrate that ethics can pay off in business. Don't separate ethics from day-to-day business: Leaders must make it clear to their employees that ethics is "the way we operate" and not a training program or reference manual. If managers want their staff to behave ethically then they must understand that it starts with them. How can business leaders encourage their employees to act ethically? a. These reports are usually confidential and may be anonymous. Prioritize ethical decisions over sales or profits. Nor do you want to encourage employees to use online time during the workday for personal reasons. You can’t expect your employees to follow your code of ethics if they don’t know what it is. are potential “hot spots”? As a company grows, its corporate identity matures and … You don’t want to encourage your employees to talk with their children while at work. Leaders and managerial staff most importantly can also lead by example. Two whistleblowers are set to share a record $61 million award from the SEC for helping make the case that JPMorgan Chase & Co. failed to disclose to wealthy clients that it was steering them into investments that would be most profitable for the bank.[5]. That impact can be positive or negative. After a program has been implemented, senior management should monitor and evaluate it and then modify the program as needed or desired to ensure its effectiveness. As part of the onboarding process employees should be educated on your code of ethics and why it’s important. The ethical lapses of global companies, such as Enron, Arthur Andersen, and WorldCom, over the span of a few years caused much devastation. Oftentimes companies expect ethical behavior but they fail to acknowledge it. Stacy Cowley, “Wells Fargo Whistle-Blower Wins $5.4 Million and His Job Back,” April 3, 2017. Neil Weinberg, “JPMorgan Whistle-Blowers Set to Reap Record $61 Million Bounty,” July 20, 2017. Employees internalize a company’s ethics through actions of leaders, their own experiences, stories from other coworkers and personal observations. Enron and WorldCom executives used deceptive accounting and sold inflated stock while recommending it to employees and external investors. Ethical conduct will ensure that your business maintains a reputation of professional principles and values. THE IMPORTANCE OF ETHICAL LEADERSHIP Management must set and apply ethical standards to which they are committed. Research has shown that unethical leaders can increase the likelihood that their employees will also be unethical, and this can break trust and motivation for staff to act ethically. Last Name* Therefore, many managers enroll their employees in an ethics training program. Hire the right people. c. Feedback can occur through informal methods like a simple conversation or through more formal systems such as employee performance evaluations. Hold Collective 'Sense-Making' Discussions. Colleagues often see suspicious behavior and are well-positioned to report it or fix it. The SEC announced the largest award ever in July 2017. http://smallbusiness.chron.com/sarbanes-oxley-code-conduct-requirements-4060.html, https://www.ethics.org/ecihome/research/nbes/nbes-reports/nbes-2013, https://www.nytimes.com/2017/04/03/business/04-wells-fargo-whistleblower-fired-osha.html?_r=0, https://www.bloomberg.com/news/articles/2017-07-20/jpmorgan-whistle-blowers-seen-reaping-record-61-million-bounty, https://commons.wikimedia.org/wiki/File:The_Office_of_the_Whistleblower(SEC)_Symbol.jpg. We’d love your input. The employees may obligate themselvesto do the work of the particular company for financial gains. Enforce the ethics program, such as by punishing violators. Employees are hired for the company’s tasks. Whistleblowing pays, and so does an ethics program that prevents the need for whistleblowers. Every scenario will have appropriate and inappropriate answers. How can business leaders encourage companies to act ethically?Managers need to set standards for their company, themselves and employees. Managers should supplement references with another method of weeding out dishonest candidates. In our workplace? The purpose of a code of ethics is to guide employees in handling ethical dilemmas. Johnson & Johnson has a relatively simple code of conduct, with just four paragraphs that can be summarized as: Our customers are our first priority, then our employees, then our communities. A code of ethics that meets the requirements of the act comprises the standards necessary to promote “honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports” and “compliance with applicable governmental rules and regulations.”[1]. In 2011, the SEC issued new whistleblower rules, required by the Dodd-Frank Act. Managers could also implement a system where employees can anonymously submit examples of their colleagues behaving ethically. It is useful to point out several reasons why developing a culture where all employees embrace ethical standards can … Ethics, beyond a set of values, is a culture that every well-balanced company should endeavor to adapt to ensure they give as well as take from their surrounding environment. Ethical conduct can be furthered by not tolerating unethical behavior, setting realistic employee goals, and periodic employee review. Personality tests can be used to determine temperament, outlook (i.e., whether positive or negative), and mood. If management is emphasizing the importance of ethics at work but doesn’t treat its own employees fairly, it becomes hypocritical. I like to think of this as ethics from the “inside out.” Relying solely on this “inside out” approach, however, is simply naïve in many circumstances. Employees generally follow the examples set forth for them by management. Under the act, employers are prohibited from retaliating against whistleblowing employees. Avoid setting performance goals that encourage employees to put profit over clients, coworkers, and safety standards. Situation-specific questionnaires can be customized by a company and used to uncover how a candidate would react when faced with an ethical dilemma. Ethics programs disclose important corporate values, often through the use of policies and employee/manager training. Hire people with similar values. Ethical behavior should be included in performance reviews and managers can encourage it by showing gratitude when they see it. We should set practices which are not permissible, and to address possible ethical dilemmas. Most companies recognize the need for organizational leaders to provide feedback to employees. 2. Ways Managers Can Encourage Ethical Behavior. In a continuing series,MBA's were asked for their opinions on topics related to "Ethics". Enron and WorldCom executives used deceptive accounting and sold inflated stock while r… The events can get the word out about their business to many leaders in the community. If managers hold themselves to a high standard of ethical behavior then they have credibility when they expect the same thing from their employees. Interviewers already doing the job a candidate is applying for can ask relevant questions that can lead to answers that reveal a lot about the candidate, such as a propensity to make unethical decisions. Accordingly, companies will be faced with the prospect that their employees, suppliers, customers, consultants, advisors, and others may report possible violations directly to the SEC without providing the companies with an opportunity to first investigate the allegations and remediate any violations. How Managers Can Encourage Ethical Behavior. It is essentially a moral compass. One ethics activity involves having employees match various scenarios on one set of cards with the possible responses on another set of cards. Companies Can Encourage Ethics in the Workplace Companies can encourage workplace ethics by preparing and supporting staff to act right. Ethical stands with political and philosophical implications can have a high cost, as the Musk and Kaepernick examples show. According to a Bayt.com poll on diversity of thought in the Middle … One of the best enforcement tools is a whistleblower hotline, which is a phone number or other method for employees or other stakeholders to report suspected acts of impropriety, such as fraud, waste, abuse, misconduct, or violations of policy, laws, or regulations. Under the new rules, a whistleblower is eligible for a bounty equal to 10 percent to 30 percent of monetary sanctions resulting from an enforcement action. Explain the purpose of a code of ethics (why US laws require one for companies listed on the largest stock exchanges). Step-by-step solution: Chapter: CH1 CH2 CH3 CH4 CH5 CH6 CH7 CH8 CH9 CH10 CH11 CH12 CH13 CH14 CH15 CH16 CH17 CH18 CH19 CH20 Problem: 1BSCP 1C1 1C3 1FR 1OD 1RBE 2BSCP 2FR 2RBE 3BSCP 3FR 3RBE 4BSCP 4FR 4RBE 5BSCP 5FR 6BSCP 7BSCP 8BSCP 9BSCP managers should share information with the employees and should delegate some duties to them. Ethics Research Center, “National Business Ethics Survey (NBES) 2013,” accessed August 3, 2017. Good intentions and proclamations aren’t enough, so leaders must both model and reward ethical behavior in employees. Although this method is used often, it is important to be aware that references often withhold negative information about a candidate. Unethical behavior in the workplace has been around since the beginning of time but that doesn’t mean it has to be acceptable in your company. Image: The Office of the Whistleblower (SEC) Symbol. Discussing the responses gives managers the opportunity to explain why some policies are in place and demonstrate how employees should respond in ethical situations they will likely face on the job. It is also important for senior management to model ethical behavior. Business leaders can encourage their employees to act ethically by implementing proper procedures and rules that mandate employees to hold them selves to a higher standard and take accountability for their actions. The responsibilities of senior management in modeling ethical behavior include the following: Ethics programs are like an insurance policy. The $5.4 million, intended to cover back pay, compensatory damages, and legal fees, was the largest individual award ever ordered through OSHA’s whistleblower protection program at the time.[4]. Which groups of employees, locations, business units, etc. Act ethically and be seen to act ethically. Show gratitude when someone "blows the whistle" on a practice that could potentially hurt customers or stakeholders. This is because how ethical you are will determine how you run your business as well as how people perceive you. Ethics programs often involve activities that encourage ethical behavior and reinforce a company’s ethics code/policies. As a result, in 2002, Congress passed the Sarbanes-Oxley Act, which requires that companies listed or applying to be listed on a public stock exchange establish and enforce a code of ethics. In LaToya J. Murray’s “Sarbanes-Oxley Code of Conduct Requirements,” Chron.com, accessed July 29, 2017. Rewards and Punishments People wants to feel appreciated, and they do have fear of warnings or punishments. Business leaders can encourage their companies to act ethically via various ways. This includes ensuring rules are enforced and finding opportunities to discuss ethical dilemmas in daily business. Did you have an idea for improving this content? Use examples and role play to give employees opportunities to work through various dilemmas. Be active in the ethics program. Employees need to be taught how to respond in situations involving ethics. Many businesses in today's world hold business events for a large variety of reasons. After the participants match scenarios with responses, the group discusses the decision. Being ethical is a significant part of running a business. Lead by Example. Ideally, managerial leaders and their people will act ethically as a result of their internalized virtuous core values. 2. But if we take care of the others, then stockholders will do well. Ethical leadership is very important, most companies set a code of ethics or a mission statement to help guide that needed leadership. Ethical behavior should be included in performance reviews and managers can encourage it by showing gratitude when they see it. One method of selecting and hiring ethical employees is the use of personality tests or situation-specific questionnaires. But you need to recognize that for many, especially professional employees, the line between work time and lifetime is no longer distinct. If everyone is on the same page it becomes easier for the team as a whole to adopt the same types of ethical behaviors. Although it is important, or even required in some cases, to have an established and effective code of ethics, it is crucial to the stability of a company to first hire ethical employees. The more you train employees and place an emphasis on the importance of ethical behavior the more your staff will understand what is expected in the workplace. Codes of ethics vary in content, length, and complexity. Sales quotas and other profit-centered benchmarks can incentivize unethical behavior. This includes involving the employees in decision making. 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