6 WAYS TO IMPROVE A WEAK ETHICAL CULTURE
WHAT IS ETHICS?
Ethics can be defined as a principle that manifests itself in decisions, choices, and behaviours that bring values to life. According to Stephen D. Potts, author of ‘The Ethics of Nonprofit Management’, ethics can be explained as ‘a set of standards of behaviour that guide decisions and actions based on duties derived from core values’. Accordingly, ethical behaviour can be considered an internal guide that enables individuals to distinguish between right and wrong and act accordingly.
WHAT IS PROFESSIONAL SENSE AND HOW DID IT GAIN MEANING?
It is possible to start the history of ethics and compliance management by looking at when ethics and compliance programs were first established and for what purposes. Ethics and Compliance have always existed since the beginning of corporate trade and companies
However, its foundations as we know them today were first laid in the early 1960s. Following the involvement of major electrical equipment manufacturers in corrupt practices such as bid rigging and price fixing, modern compliance programs began to emerge, particularly in the US. The first prison sentences in the 70-year history of the Sherman Antitrust Act prompted company executives to develop compliance programs. These and similar scandals led to the spread of compliance programs in more heavily regulated sectors. The Watergate investigation, which shook the US and led to the resignation of President Nixon, revealed that companies were bribing foreign officials with unregistered funds. In response, Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977. This law criminalised the bribery of foreign public officials by American companies.
WHO IS AN ETHICS DIRECTOR?
An ethics and compliance manager can be defined as a professional who manages the ethics and compliance risks of companies in local and global markets, ensures compliance with anti-corruption laws, is an ethical leader and role model for employees, raises awareness by training his/her team and other employees, creates internal regulations that will reflect the company's ethical values on the way of doing business, and manages compliance with these rules.
In order to ensure the effective implementation of the program, it carries out information, training, and awareness-raising activities and monitors notifications regarding ethical violations. It also manages the processes of regular monitoring, reporting, and updating of the program. The Ethics and Compliance Manager, who carries out his/her duties in accordance with occupational health and safety and environmental protection measures, also carries out various activities to maintain his/her professional development.
Recent Ethical Scandals at Global Companies
Recent corporate scandals, such as Wells Fargo's cross-selling scandal and Volkswagen's emissions scandal, have highlighted the negative effects of a weak ethical culture in similar companies.
6 WAYS TO IMPOVE A WEAK ETHICAL CULTURE
Code of Conduct Supports Ethical Behaviour
The first step in planning an ethical audit is to check whether there are codes of conduct or practices that promote ethical behaviour of the organisation and stakeholders. In fact, many publicly listed companies around the world are legally required to have such codes. However, the main risk is not only the existence of such codes but also how they are implemented within the organisation. Whether codes of ethical behaviour actually enhance the ethical environment is a complex issue.
According to a 2011 study published in the Decision Sciences Journal, the implementation of ethical codes can reduce the likelihood of ethical behaviour. Another study by Harvard Business School in 2005 shows that the main purpose of such codes is not to improve an organisation's ethical environment but to reduce potential legal fines in the event of litigation. Furthermore, a 2018 study by Hui Chen and Eugene Soltes in the Harvard Business Review found that codes of ethics have no direct impact on ethical decision-making.
organisations need to examine in depth how their ethical codes of conduct operate in day-to-day practice. It is not enough to have employees sign the code annually, to check compliance policies to provide additional guidance on key components, or to conduct focus groups and surveys to evaluate the code of conduct. In The Honest Truth About Dishonesty, Dan Ariely argues, based on a variety of behavioural experiments, that the best practice is to require decision makers to read and sign a statement of compliance with the code before every major decision.
领英推荐
Compliance Programme Helps Organisation Become More Ethical
According to a 2018 Harvard Business Review article by Chen and Soltes, the average multinational company may need to spend several million dollars on compliance, and these costs are much higher in more heavily regulated industries such as finance and defence. Despite such expenditures, executives complain that compliance does not provide tangible ethical value. In trying to understand how compliance can contribute to improving the ethical culture in the organisation, managers realise that compliance programmes face a similar dilemma as codes of ethics: The primary goal is to comply with legal requirements or minimise potential penalties rather than to make the organisation more ethical. Internal auditors must also remember that compliance issues are not the same as ethical issues; what is legal may not always be ethical, and what is ethical may not always be legal.
For compliance programs to be effective, internal auditors should continually test and innovate programs to determine which methods work and which do not. In this process, assumptions should be tested to uncover the difference between people's stated and actual behaviour. Compliance programs should evaluate the impact of programs or internal controls using hypothesis testing or control and test groups to understand why people do not follow rules and how these rules should be presented most effectively. For example, some individuals are more responsive to visual information, while others are more sensitive to auditory information; in this case, rules should be tailored to each individual's way of receiving information.
Whistleblowing Tools Reduce the Risk of Unethical Behaviour
The fact that Nike faced gender discrimination lawsuits despite taking culture change steps shows that unethical behaviour can continue even if ethical development tools are implemented and communicated in an organisation. EY's 14th Global Fraud Survey also reveals that people are reluctant to report wrongdoing and that this carries great risks. Challenging the status quo in the organisation can jeopardise individuals' status and relationships with managers or colleagues. Furthermore, whistleblowing behaviour can become a self-serving tool when combined with bystander influence. Witnesses to someone facing a problem often do not get involved because they believe that someone else will take action or because they do not believe it is their responsibility to intervene.
The main objective of whistleblowing is to ensure that errors are detected in a timely manner. More than one method can be applied to achieve this goal:
Such strategies can contribute to whistleblowing functioning as an effective and safe tool.
More Ethics Education is Better
One consequence of the 2008 financial crisis is that it provided evidence that the character of managers was a contributing factor to the global crisis. It should be clear to supervisors that personality and character are not the same thing. The main difference is that personality can change over time, while character remains the same. Moreover, while personality is a set of personal qualities and characteristics that are unique to an individual, character is a set of moral and belief values that define how an individual behaves towards others, or how he or she treats others and himself or herself. Although character cannot be changed, organisations spend millions of dollars on such programs.
It is often not effective to change an employee's character during his or her time with the organisation in order to make it more ethical. The root causes of character become apparent during the recruitment process. Human resource practices are often effective in assessing both the technical competences and personal characteristics of candidates. However, many organisations face difficulties in testing the ethical character of candidates.
The Appropriate Internal Controls Can Limit Unethical Individual Character
One consequence of the 2008 financial crisis is that it provided evidence that the character of managers was a contributing factor to the global crisis. It should be clear to supervisors that personality and character are not the same thing. The main difference is that personality can change over time, while character remains the same. Moreover, while personality is a set of personal qualities and characteristics that are unique to an individual, character is a set of moral and belief values that define how an individual behaves towards others, or how he or she treats others and himself or herself. Although character cannot be changed, organisations spend millions of dollars on such programs.
It is often not effective to change an employee's character during his or her time with the organisation in order to make it more ethical. The root causes of character become apparent during the recruitment process. Human resource practices are often effective in assessing both the technical competences and personal characteristics of candidates. However, many organisations face difficulties in testing the ethical character of candidates.
Internal auditors ought to keep an eye on whether the company's hiring procedures consider applicants' moral growth. In this context, well-known tests such as the Heinz dilemma, developed by psychologist Lawrence Kohlberg, which ranks participants in six stages from obedience to universal ethical principles, can be used to assess ethical character. These tests offer valuable resources that organizations can use to develop a more moral workforce.
Ethics or Compliance-Related Objectives Help Organisations and Individuals Behave More Ethically
Enron's bankruptcy revealed, both by independent investigators and by company officials, that the company's performance goal-setting practices were at the centre of the misconduct. Many of the company's targets were based on compliance criteria that directly impacted employees' ethical behaviour, such as ethics training completion rates and legal fines paid.
At the same time, a growing body of academic research suggests that specific and challenging performance targets can lead employees to engage in unethical behaviour. Pressure to meet companies' quarterly earnings targets or personal targets set in annual appraisal interviews can be a trigger for ethical violations. This case highlights the negative effects of performance pressure on ethical behaviour in organisations and provides an important lesson for companies to re-evaluate their goal-setting practices.
.