Week 2 Assignment

Opening Decision Point - pg 108

Creating an Ethics Program

Imagine that you work in the Human Resources department of your company. Your CEO has asked the HR department to develop an ethics program for the firm, and you have been assigned responsibility for creating it. You have been asked to report back to your CEO in two weeks with a draft version of a code of ethics for the company, a summary of other elements that the ethics program will include, and a proposal for how you will be able to assess whether the program is working. Your CEO also asks that you come prepared to explain what role she can play in promoting ethics and to ensure the success of the ethics program.

You begin your research and quickly find that there are a number of potentially desirable and somewhat overlapping outcomes of effective ethics programs:

1. Discovery of unethical/illegal behavior and reduction of meltdowns, resulting in avoidance or reduction of fines/criminal charges (also applies to several of the items included below):

2. Awareness of ethical and legal issues.

3. A resource for guidance and advice.

4. Accurate reports of wrongdoing.

5. Greater customer loyalty, resulting in increased sales and better reputation.

6. Incorporation of values in decision processes.

7. Greater employee commitment and loyalty to the organization, resulting in higher productivity.

8. Satisfaction of external and internal stakeholder needs (all resulting in more effective financial performance). Play the role of this HR person in several different types of businesses: a fast-food restaurant, an automobile dealership, a retail store selling consumer electronics, a government agency, and a large international corporation.1

• List the issues you think should be addressed in a code of ethics.

• Other than a code of ethics, what other elements would you include in an ethics program?

• How will you define “success”? Are there any facts that you will need to gather to make this judgment?

• How would you measure success along the way? How will you measure whether your ethics program is “working” before you reach any end objective?

• Whom will you define as your primary stakeholders?

• What are the interests of your stakeholders in your program and what are the impacts of your program on each stakeholder? How might the measurement of the program’s success influence the type of people attracted to the firm or people who are most motivated within your organization?

• How will you answer the CEO’s questions about her own role in promoting ethics?

Opening Decision Point Revisited – pg 144

Creating an Ethics Program

You have developed and implemented an ethics program. But how do you know whether the ethics program is “working”? How will you define “success”? Whom do you define as your primary stakeholders? What are their interests in your program and what are the impacts of your program on each stakeholder? How could you modify your program to ensure even greater success? This Decision Point asks you to define the “success” of an ethics program, an extraordinary challenge even for those in this business for many years. One way to look at the inquiry would be to consider the measures by which you might be willing to be evaluated, since this is your project. Overall, you will need to explore whether there are pressures in your environment that encourage worker misconduct. You will need to consider whether there are systematic problems that encourage bad decisions. Have you identified all the major legal, ethical, and reputational risks that your organization faces, and have you determined the means by which to remediate those risks? Because you will encourage the performance that you plan to measure, it is important to determine whether you will be most concerned with the end results or consequences or with the protection of particular values articulated by your program or codes. If you measure outcomes alone, you will have a singular focus on the achievement of those outcomes by decision makers. If you measure the protection of rights alone, you may be failing to consider the long-range implications of decisions in terms of their costs and benefits to the firm. According to the Ethics Resource Center, the Federal Sentencing Guidelines are rarely applied to large corporations today. Those guidelines apply only to decisions by courts, and it is more common for cases against large corporations to be settled by means of Deferred Prosecution Agreements or Non-Prosecution Agreements.57 On the other hand, ethics programs seem to be having an effect internally. A 2013 study found that corporate employees in the United States are witnessing record-low levels of wrongdoing; and these levels have continued to drop since 2007. However, while employees’ willingness to report wrongdoing has declined, some of that decline is due, in part, to high retaliation rates that discourage reporting.58 To provide some context to this exploration, consider which offenses are most likely to lead to a fine for an organization. In 2014, the USSC received information on 162 organizations sentenced. Of those, 25.9 percent had been charged with fraud; 13 percent were charged with environmental offenses related specifically to water; 13 percent were charged with import/export offenses. Approximately 71 percent were required to pay a fine (or a fine plus restitution), and another 17.9 percent were required to pay restitution only. The average restitution payment imposed was almost $1.2 million, and the average fine imposed was more than $27.5 million. The average fine for cases involving fraud was more than $46.5 million, while the average fine in public corruption cases was $41.7 million, and in antitrust cases, the average was $65.6 million. 59