Issue 5 content and analysis

Corporate Ethics

Business - or corporate -- ethics is a form of applied ethics or professional ethics that examines applied and theoretical ethical principles that occur in the context / format of a business intrusion. It applies to the organization / company as a whole as well as to individuals who work in that company.

Corporate ethics has both normative and descriptive categories:

Normative -- Practical 'ought to' prescriptions, conventions and laws that hedge in practices, such as the Sarbanes-Oxley (mentioned later) that is used to regulate ethical requirements of audits.

Descriptive - more theoretical such as describing (and arguing) whether or not a practice is ethical and should be employed.

Corporate ethics mainly concerns itself with the normative aspect where a cadre of rules and laws exist to ensure that the organization, as a larger whole, practices ethical conduct in each and every one of its practices. At the same time, rules exist to ensure that employee's behavior is ethical too.

Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors. They also include economical duties between the company and its shareholders -- or more correctly, issues of integrity so that shareholders are correctly informed about the circumstances of the company.

Other ethical issues exist too between company and competitors such as hostile take-overs and industrial espionage. And then we have legal ethical issues such as corporate manslaughter; and the marketing of corporations' ethics policies. Other ethical issues include governance; corporate; and political contributions .

Both government and company have formulated policies to implement and maintain ethical behavior. The questions is whether these policies work and are kept. Many observers see a disassociation between the company requirements and actual company behavior. Others however perceive the intransigence and strictness of laws such as the SOX to be sufficient to keep the company in control. No company wants to be bankrupt or run into trouble with the government. Debate therefore varies between whether or not ethical codes can build a true corporate ethics.

Yes:

Ethics codes can build a true 'corporate ethics"

Krell (2010) believes that corporations can build a true ethics environment and he provides an example of how an organization can do so in his essay on How to Conduct an Ethics Audit.

Krell points out that the legal environment during the last few years has compelled organizations to tighten their corporate ethics. Instruments such as the Sarbanes-Oxley and policies such as the Federal Acquisition Regulation and the Federal Sentencing Guidelines have compelled companies to adopt codes of conduct, train their employees on these codes, and create effective audit and reporting mechanisms. HR professionals too play a major part in not only employing ethical staff but in also monitoring and mentoring the practices of the company to ensure the morality of their standards.

The company's ethics is largely seen in its auditing and an ethical audit follows six rules:

1. Start with a detailed foundation - ethics related policies and procedures should be thorough so as to guide the company and leave no gaps

2. Develop metrics. -- put tangible ethics measures in place and consider connecting compensation to ethical principles.

3. Create a cross-functional team. - include an HR professional in auditing team as well as an ethics and compliance manager and internal auditor and legal managers.

4. Audit efficiently. -- Audits frequently disrupt regular business schedule. Krell recommends conducting audit in such a way that it will limit disruption as much as possible.

5. Look for other issues. -- conducting the audit may reveal needs for improvement in other ethical-related matters. Share these with relevant sources.

6. Respond consistently and communicate. -- adhere consistently to ethical requirements and penalize ethical violations when they occur.

In short, Krelll believes that an ethics code can build a true corporate ethics and that HR professional have a core role to play in building this ethics.

(Krell, E. (2010) How to Conduct an Ethics Audit SHRM, Vol. 55 No. 4 )

No:

Ethics codes cannot build a true corporate ethics

A corporate ethical environment cannot be created via the Sarbanes-Oxley and like policies and regulations. The best way that one can be created is via ERM (Enterprise Resource Management). In fact, The Enterprise Risk Management -- Integrated Framework and guidelines from the Committee of Sponsoring Organizations of the Treadway Commission (COSO) is fast becoming the standards for best practices in organizations.

Young and Hasleer drive their essay through three stages in order to argue their point:

1. They show how the IMA Statement of Ethical Professional Practice best suggests a process and scope of ethical conduct and principles

2. They account for reasons that enterprises negotiate on ethics

3. They describe a method that integrates ethics with the COSO ERM components. This framework they suggest would best drive companies to practice ethical principles and thereby build their reputation in this regard.