Business_Ethics

B Resource Guide: Creating a Code of Ethics B Resource Guide: Creating a Code of Ethics What’s in this Guide: I. Definition II. Why Have a Code of Ethics' III. Generic Template/Outline IV. How to Implement a Code of Ethics V. Some Advice on Developing a Code of Ethics VI. Links to Code of Ethics Examples, by Industry VII. More Resources I. Definition A Code of Ethics (also known as a Code of Conduct) is a formal document that establishes behavioral expectations for the company and the people who work there. II. Why Have a Code of Ethics' • to define accepted/acceptable behaviors; • to promote high standards of practice; • to provide a benchmark for members to use for self evaluation; • to establish a framework for professional behavior and responsibilities; • as a vehicle for occupational identity; • as a mark of occupational maturity; III. Generic Template/Outline: Codes can take various forms. We’ve included here a generic outline that can be customized. A more detailed template is available at about.com. 1. Preface or Introduction (signed by the Chairman or Chief Executive Officer or both) Start with a sentence on the purpose of the Statement - mention the values that are important to the top management in the conduct of the business such as integrity, responsibility and reputation. Describe the leadership commitment in maintaining high standards both within the organization and in its dealings with others. Set out the role of the company in the community and end with a personal endorsement of the code and the expectation that the standard set out in it will be maintained by all involved in the organization. Last updated: 11/3/2007 page 2 of 7 2 1 B Resource Guide: Creating a Code of Ethics Last updated: 11/3/2007 page 3 of 7 2. Key areas to include A. The Purpose and Values of the Business The service, which is being provided - a group of products, or set or services - financial objectives and the business’ role in society as the company sees it. B. Employees How the business values employees. the company’s policies on: working conditions, recruitment, development and training, rewards, health, safety & security, equal opportunities, diversity, retirement, redundancy, discrimination and harassment. Use of company assets by employees. C. Customer Relations The importance of customer satisfaction and good faith in all agreements, quality, fair pricing and after-sales service. D. Shareholders or other providers of money The protection of investment made in the company and proper ‘return’ on money lent. A commitment to accurate and timely communication on achievements and prospects. E. Suppliers Prompt settling of bills. Co-operation to achieve quality and efficiency. No bribery or excess hospitality accepted or given. F. Society or the wider community Compliance with the spirit of laws as well as the letter. The company’s obligations to protect and preserve the environment. The involvement of the company and its staff in local affairs. The corporate policy on sponsorship as well as giving to education and charitable appeals. G. Implementation The process by which the code is issued and used. Means to obtain advice on potential breaches. Awareness raising examples (Q & As) Training programs for all staff. H Assurance, reporting and reviews Suggest ways of knowing if the code is effective. Report to the board or board committee at least annually. Review procedures for updating the code. IV. How to Implement a Code of Ethics How you engage your employees in the writing and implementation of your Code is as important as what you put B Resource Guide: Creating a Code of Ethics Last updated: 11/3/2007 page 4 of 7 in it. Below are 12 Steps for Implementing a Code, taken from The Institute for Business Ethics’ publication: “Developing a Code of Business Ethics.” Twe lve Steps for Implementi ng a Code 1. Endorsement Make sure that the code is endorsed by the Chairman and CEO 2. Integration Produce a strategy for integrating the code into the running of the business at the time that it is issued. 3. Circulation Send the code to all employees in a readable and portable form and give it to all employees joining the company. 4. Personal Response Give all staff the personal opportunity to respond to the content of the code. An employee should know how to react if he or she is faced with a potential breach of the code or is in doubt about a course of action involving an ethical choice. 5. Affirmation Have a procedure for managers and supervisors regularly to state that they and their staff understand and apply the provisions of the code and raise matters not covered by it. 6. Contracts Consider making adherence to the code obligatory by including reference to it in all contracts of employment and linking it with disciplinary procedures. 7. Regular Review Have a procedure for regular review and updating the code 8. Enforcement Employees and others should be aware of the consequences of breaching the code 9. Training Ask those responsible for company training programs at all levels to include issues raised by the code in their programs. 10. Translation See that the code is translated for use in overseas subsidiaries or other places where English is not the principal language B Resource Guide: Creating a Code of Ethics Last updated: 11/3/2007 page 5 of 7 11. Distribution Make copies of the code available to business partners (suppliers, customers etc.), and expect their compliance 12. Annual Report Reproduce or insert a copy of the code in the Annual Report so that shareholders and a wider public know about the company’s position on ethical matters V. Some Advice on Developing a Code of Ethics 1. Focus on business practices and specific issues. What actually ends up in a company’s code of ethics will differ from one firm to the next. However, these are things to consider including: conflicts of interest to avoid, accuracy of financial statements, sexual harassment, workplace safety, environmental standards, and rules and regulations specific to your industry and company. “A good rule of thumb is that ethics codes should call attention to key domestic and international regulations that apply to the organization,” says Diane Swanson, professor o management at Kansas State University. 2. Tailor it to fit your business. Codes of ethics are not cookie cutters — one size definitely does not fit all. While you can gain a sense of what your company’s code might include by looking at other companies’, keep your thinking as singular as possible. “It’s really critical that the code of ethics fits the values and mission of the specific company,” says Alice Peterson, president of Listen Up Group, a Chicago provider of services for confidential employee reporting of wrongdoing. “That also means you should never go to somebody else’s Web site and copy theirs.” 3. Include employees in developing a code of ethics. Nothing may be more ineffective than a code of ethics that comes down as an executive mandate. When considering those issues that should be part of your code of ethics, ask others throughout your company what they think is important. Not only will that strengthen the overall scope of the code of ethics, but employees will also be more accepting of ethical guidelines into which they had input. 4. Train your people to be ethical. Even the most thoughtful code of ethics is of little use if a company doesn’t know what it really means. That makes employee training particularly important. Arrange for classes, seminars or meetings to lay out the specifics of your code of ethics and what it means to everyone’s daily activities. “Ethics training should include vignettes and stories that come from the company, so that the subject is real for everybody — everyone from the mailroom to the corner office,” Peterson says. 5. Post your code of ethics internally, and set up a reporting system. While you don’t want to encourage a 3 B Resource Guide: Creating a Code of Ethics Last updated: 11/3/2007 page 6 of 7 network of snitches and informants, employees will need a way to let someone know about any ethics breaches they may see. Peterson recommends a two-tier system. First, she suggests a complete open-door policy so that employees know that information is always welcome. Moreover, consider accepting anonymous reports. That, too, may help overcome some employees’ reticence to report ethics code violations. 6. Consider appointing a compliance person. Obviously, a company’s ethics should be of concern to everyone within the organization. But, if it’s feasible, it can be advantageous to appoint a compliance officer whose responsibilities include investigating ethics problems. If nothing else, that can make it much simpler to know to whom employees should pass along suspected ethics missteps. 7. Follow up on any ethics violations you uncover. Just like failing to publicize and promote your code of ethics to your employees and others renders it virtually meaningless, failing to act on ethics violations will disable even the best intentioned of company efforts. When drawing up your code, specify what range of penalties go with certain missteps and violations. Lay out an appeals process. Make sure everyone in your company knows the ramifications of violating the code. “Holding people to ethical conduct is something many people are very poor at,” says Sun. “It requires some confrontation and a lot of leadership skills.” 8. Live it from the top down. It’s critical that no one person in a company ever appears to be above a code of ethics. That means it’s particularly important that executives and top managers also adhere to the guidelines of an ethics code. If managers say one thing but do something else, that’s nothing more than a license for the rest of the company to follow suit. “Good role modeling by top managers is a must,” Swanson says. “Without it, ethics codes can be seen as mere window dressing.” VI. Links to Code of Ethics Examples, by Industry • Finance • General • Administrative Staffing • Auditing • Grocery • Manufacturing • Finance • Investment • Banking • Franchising • Online / E Business VII. More Resources B Resource Guide: Creating a Code of Ethics Last updated: 11/3/2007 page 7 of 7 • Business ethics links • Codes of ethics • Case studies • Ethisphere Magazine 1 http://www.ethicsweb.ca/codes/coe2.htm 2 http://www.ibe.org.uk/contentcode.html 3http://www.microsoft.com/smallbusiness/resources/management/leadership_training/put_it_in_writing_your_ business_has_ethics.mspx The Importance of Ethics in Business The importance of a good business ethic can't be understated. Without daily practising ethical behaviour in business people simply will learn that you can't be trusted. To survive in business long-term you will need a strong work ethic and integrity. So what is the difference between ethics and integrity' Many people today confuse the two. Integrity simply means honesty and if you are an ethical person, integrity will also be part and parcel of your character and work ethics. People can pick up very quickly if you aren't dealing honestly with them. People who tell 'porkies' or lies, give themselves away through their body language. Human communication is so much more than the words we speak and if what we speak doesn't match the body language at the time the words are spoken, people read the difference very quickly and become very wary. After all, if you suspect someone is lying to you, do you trust them' With the popularity of social media today and less one-on-one interaction between people, there exists a lot of unethical behaviour in business. This is flourishing because people don't get the real message when someone is telling them 'whoppers' in order to make a sale. This unethical behaviour is growing as online business expands. Sooner or later, those who participate in business using such deceptive behaviour will no longer have a business. Many internet marketers complain all the time about products and sales letters being hyped. Hype is very prevalent on the internet and a 'good' copy writer who writes this stuff to get readers emotions 'revved up' is a very good example of unethical behaviour. The copy writer who is paid many thousands of dollars to write a sales letter extolling the virtues of what something could do for the buyer is a borderline liar yet we accept this behaviour. Why' Worse still, is someone, somewhere is paying them to lie to us! Eventually though these characters do get found out, labelled and avoided. Then their businesses disappear only to have their places taken by up and coming new entrepreneurs who have often been mentored by these original unethical people. And the spiral continues because we accept the behaviour. Business ethics are something that can be explained in a business degree but getting someone to use them all the time is another matter. Knowing what they are and how important they are to every businesses survival will not guarantee that they will be used. The business schools around the world can teach business ethics as part of the curriculum in every business degree, but it is up to each individual business to implement them as a way of life. To be an ethical affiliate marketer involves being a person with integrity | | | | | Code of Ethics: a sample case for implementation, purpose and benefits, and steps in strategic formulation and implementation   Ethics in business is primarily an applied ethics. Ethics influences the value system of every organisation and employee by serving as a moral guide or “base” (Sweet 2001). Furthermore, business ethics is a potential vehicle for employee pride and motivation as well as a focus for customer satisfaction (Hall 1991). Ethics is a part of the manager’s responsibility as the ethical environment reflects managerial value system including personal and organisational perceptions and preferences of morality and known to be fundamental on a person’s attitude towards ends and means (McCarty and Bagby 1990, p. 21 cited in Fox 2000, p. 70). Fox (2000) believes that ethics are values that traditionally sprouted from religious or organisational influences and may evolve from personal experiences. There is importance in combination of value systems that leads to generalised principles, which are used as guidelines in making and evaluating decisions and specific cases that require acceptable conduct among people. General theories of business ethics are considered generic and are not directed to specific applications (Walle 1995). In almost all organisational setting, Frederick and colleagues (1994) state that ethical guidelines are expressed in the forms of code of conduct, outlining the organisation’s foremost expectations to every contributing factors such as the employees and other stakeholders. Business ethics further support management strategies, accountability structures, organisational policies, incentive systems, training programs, and decision-making processes. It ensures their unity of work as the common denominator of strengthening the organisation’s essential ethical code of conduct. This paper narrates the case of an up-market eatery. It specifically deals with the stakeholders’ interest in accordance to effective management.   A detailed code of ethics for circulation to all employees Whereas, this organization recognizes and addresses stakeholders’ interests and needs are considered better than others. It is considered that the stakeholders are any group that is affected by, or can influence, conducts of this organisation. In order to serve the needs and interests of stakeholders or other groups, managers are expected to employ their managerial expertise toward highest standards of effective management and customer satisfaction. Organisational relationships are associated by stakeholders’ interests and managers’ ability to be guided in terms of strategies employed in maximising organisational performance. The influencing ability of stakeholders is high that most managers are required to give in to it. This influential power guides managers to decision making in relation to strategic issues affecting the whole business operations. Managers are often dependent on stakeholders’ interests and act on the applicability of generic strategies. Such interests reflect desires that are subjected to moral evaluation by the manager by looking on ethics on business management. To serve stakeholders’ interests, the following ethical behaviours should be observed: Þ    Stakeholders’ desires are crucial consideration in decision making of managers. Þ    While the organisation requires maximum satisfaction on the employees as well as the customers, the managers in response to the desires of the stakeholders must encourage responsible planning, management, and development. Þ    Strict compliance to individual policies on bribery, extortion, facilitation payments, environmental problems, and human rights are addressed in details. Þ    Sexual and racial discrimination, price discrimination, and destructive products are also firmly avoided. Þ    Integrity and competence are significant managerial factors particularly in performance of their identified duties. Þ    Participation is an important aspect of determining the acceptability of stakeholders’ desires and interests. Þ    Responding to ethical dilemmas is a manager’s or leader’s concern. Þ    Stakeholders’ interests are mainly covered by managerial responsibilities.   A circular to all employees explaining the purpose and benefits of good ethics in managing an enterprise   Re: Stakeholders’ Interest For: Senior Managers and Employees Date of Implementation: Immediately Business ethical practices and principles are important elements in building an ethical working environment with strong corporate guidelines. These guidelines govern the overall condition of the organisation in terms of allowing members of the workforce be familiar with the upper management authorities’ deliberation of ethical behaviours as significant ingredients of business operations. Generally, ethical codes are used as functional agents that govern the conduct of the members of a particular profession. It guides individuals in making decisions based on sound moral judgment. Codes further enhance working relationships and adjudicate disputes among members of the organisation. General principles of business ethics should guide behaviours in any field and type of business and its operations. Also, these codes are clearly articulated, wide-ranging, phrased in order to accentuate and provide commendation on doing the right thing other than listing a series of prohibitions. Perhaps, established code of conducts help in ensuring managers’ ability to respond on times when they are struggling on moral crises and confusion. They keep hold of a strong moral compass. In hospitality and tourism industries, holding on to the moral compass of managers is a challenge when they try to serve the desires of stakeholders. Ethics and quality is equivalent because the production of quality goods and services is a clear manifestation of ethical treatment of the consumer. In this case, serving the desires of the stakeholders is difficult. It exposes the manager to ethical concern on how to come up with balance on customer satisfaction and profitability. The duty of the managers must stick on the basic and personal beliefs of what are right and never entertaining unethical options. It is acknowledge that most employees prefer to work in a working environment governed and guided by high ethical standards. In addressing ethical dilemmas, managers should stick on managerial foundations and practices and full adherence to morality. Articulating stakeholders’ desires is a challenge yet can be fulfilled successfully through holding and believing into management principles and practices including organisational and individual commitment to morality. Ethical decision making poses danger on unethical or selfish motives of stakeholders as seen on their unjustifiable desires. Thus, managers should know how to classify ethical dilemmas and react to such in the best and most acceptable ways possible. According to Hudson and Miller (2005), ethical decision making is also expected to be affected by the type of ethical dilemma being faced by, and level of ethical education of the managers. Managers are to be educated and trained to compare outcomes to the various stakeholders for each promising decision and decide on the choice that has the best outcomes for greater number. More often than not, the moral ordeals that are faced by managers are difficult to describe as they are complex and complicated (Marnburg 2005). These ordeals might occur instantaneously and involve several factors of people, things, or circumstances. Interpreting and understanding managerial pursuits including complying or defying the desires of stakeholders is based on the manager’s own set of expectations toward behaviour that is or is not match with their individual standards and values. While managers are often subjected to ethical dilemmas where they need to lie, break certain law, cheat subordinates, and the likes, they feel that they need to occasionally participate in such behaviour as it is an implicit part of the working setting (Marnburg 2005). However, it is argued that such practices are simple yet open violations of moral standards. Reacting on stakeholders’ desires as example of workplace ethical case needs a concrete instrumentation based on virtues of justice, integrity, competence and utility. These virtues are expected in a manager’s complete personal disposition. For Fleckenstein and Huebsch (1999), the idea of impartiality, sound judgment, and correctness is exemplified in justifiable decisions that are made in response to some desires of stakeholders. Utility is a virtue that projects the principle of efficiency by providing the greatest amount of good to the greatest number. If managers are able to consider these virtues, identifying the merits of stakeholders’ desires is easier, thus, facilitating accountable and ethical decision making. Choosing what is good to the majority of stakeholders is prioritised if and only if the means used justify the end. Through participation, there are more opportunities of accumulating choices and solutions that a manager can choose in response to a moral dilemma. The consensus of other members of the management is needed in organisational ethical cases. It is expected that managers are able to communicate to other managers on issues affecting the workplace especially on cases where a certain department is governed by two or more managerial figures. The concept of who is to be blame or is anyone to be blamed is also considered. Relationships on individual’s performance and certain ethical dilemma are apparent, where “moral voice” is quite strong.  The behaviour being shown by the superiors in every moral situation in the organisation is often associated to outcomes. For example, a neglect of duty or lack of knowledge of operational and managerial matters is referent to coming up with poor judgments and decisions. No one is claiming or forcing managers to pursue in rationality, efficiency, and profit given the unconditional circumstance. However, it is the ethical codes that manipulate managers on how to act, what to do, or when to do things according to what is perceived to be standard and acceptable. Sometimes, managers become schizophrenic on their personal value systems (Pruzan 2004). But then again, it is always the ethical codes and the belief of what should be the most appreciate action based on morals are to be considered. This is also applicable on the instances of integrating managerial duties to stakeholders’ desires. Managers need to identify specific situations where temptations and potential dilemmas exist and the common reaction is for them to act according to clear corporate code of conduct for all the employees to understand, abide, and emulate. Wong (1998) affirms that an individual’s line of thinking about work ethics serves as his/her basic compass that will navigate him/her to act in accordance to what is right. The ethical beliefs of an employee affect their ways on coming up with rational judgment on any work-related concerns.    A brief report on the steps involved in strategic formulation and implementation Before the application of the detailed code of conduct, drafting copies of codes of ethical conduct and are to be distributed as guidelines to employees in overcoming ethical dilemmas; involving employees to scheduled seminar-workshop and training programs concentrated on enhancing ethical behaviours; or providing in-house advisors who can be directly consulted during urgent ethical cases; and so on (De Mesa Graziano 2002). There is always consultation among parties involved. Communication is very relevant. The duties of managers are always bounded on standard management principles and practices. Research and development efforts are encouraged so as to determine weak areas and loopholes of the said code of conduct. Responding to the its weaknesses will lead to more effective organisational governance provided that the desires of stakeholders are classified based on merits of desires on whether or not valid or invalid, etc. Feedback systems are also available. All parties concerned and affected are always open to communicate and air their issues pro or against the circulated code of conduct. Memorandums and formal letters are to be addressed to HR department with quick actions and resolutions. All in all, the code of conduct application will take effect after its official publication among all employees and other parties affected within the bounds of the organisation. It is then expected that such code of conduct are strictly implemented and reap positive results.   References De Mesa Graziano, C (2002) ‘Promoting Ethical Conduct: A Review of Corporate Practices’, Strategic Investor Relations, Fall, 29-35   Fleckenstein, MP and Huebsch, P (1999 March) ‘Ethics in tourism-reality or hallucination’, Journal of Business Ethics, 19: 1, 137-142   Fox, J (2000) ‘Approaching managerial ethical standards in Croatia's hotel industry’, International Journal of Contemporary Hospitality Management, 12: 1, 70-74   Frederick, RE, Hoffman, WM, Kamm, JB, and Petry Jr., ES (eds) (1994) Emerging Global Business Ethics, Quorum Books, Westport, CT   Hall, SSJ (1992) Ethics in Hospitality Management: A Book of Readings, Educational Institute of the American Hotel and Motel Association, East Lansing, MI   Hudson, S and Miller, G (2005) ‘Ethical Orientation and Awareness of Tourism Students’, Journal of Business Ethics, 62: 4, 383–396   Marnburg, E (2006) ‘”I hope it won’t happen to me!” Hospitality and tourism students’ fear of difficult moral situations as managers’, Tourism Management, 27: 4, 561–575   Pruzan, P (2004) ‘The question of organisational consciousness: Can organisations have values, virtues and visions'’ Here and Now Online Magazine 4U [online] (cited 18 November 2008) Available from   Sweet, W (ed.) (2001) The Bases of Ethics, Marquette University Press, Milwaukee   Walle, AH (1995) 'Business ethics and tourism: from micro to macro perspectives', Tourism Management, 16: 4, 263-268 Read more: http://ivythesis.typepad.com/term_paper_topics/2010/10/code-of-ethics-strategic-management.html#ixzz1BG5oXPHs