10 Benefits of Managing Ethics in the Workplace

Many people are used to reading or hearing of the moral benefits of attention to business ethics. However, there are other types of benefits, as well. The following list describes various types of benefits from managing ethics in the workplace.

1. Attention to business ethics has substantially improved society.

A matter of decades ago, children in our country worked 16-hour days. Workers limbs were torn off and disabled workers were condemned to poverty and often to starvation. Trusts controlled some markets to the extent that prices were fixed and small businesses choked out. Price fixing crippled normal market forces. Employees were terminated based on personalities. Influence was applied through intimidation and harassment. Then society reacted and demanded that businesses place high value on fairness and equal rights. Antitrust laws were instituted. Government agencies were established. Unions were organized. Laws and regulations were established.

2. Ethics programs help maintain a moral course in turbulent times.

Attention to business ethics is critical during times of fundamental change times much like those faced now by businesses, both nonprofit or for-profit. During times of change, there is often no clear moral compass to guide leaders through complex conflicts about what is right or wrong. Continuing attention to ethics in the workplace sensitizes leaders and staff to how they want to act consistently.

3. Ethics programs cultivate strong teamwork and productivity.

Ethics programs align employee behaviors with those top priority ethical values preferred by leaders of the organization. Usually, an organization finds surprising disparity between its preferred values and the values actually reflected by behaviors in the workplace. Ongoing attention and dialogue regarding values in the workplace builds openness, integrity and community critical ingredients of strong teams in the workplace. Employees feel strong alignment between their values and those of the organization. They react with strong motivation and performance.

4. Ethics programs support employee growth and meaning.

Attention to ethics in the workplace helps employees face reality, both good and bad in the organization and themselves. Employees feel full confidence they can admit and deal with whatever comes their way. Bennett, in his article Unethical Behavior, Stress Appear Linked (Wall Street Journal, April 11, 1991, p. B1), explained that a consulting company tested a range of executives and managers. Their most striking finding: the more emotionally healthy executives, as measured on a battery of tests, the more likely they were to score high on ethics tests.

5. Ethics programs are an insurance policy they help ensure that policies are
legal. There is an increasing number of lawsuits in regard to personnel matters and to effects of an organizations services or products on stakeholders. As mentioned earlier in this document, ethical principles are often state-of-the-art legal matters. These principles are often applied to current, major ethical issues to become legislation. Attention to ethics ensures highly ethical policies and procedures in the workplace. Its far better to incur the

cost of mechanisms to ensure ethical practices now than to incur costs of litigation later. A major intent of well-designed personnel policies is to ensure ethical treatment of employees, e.g., in matters of hiring, evaluating, disciplining, firing, etc. Drake and Drake (California Management Review, V16, pp. 107-123) note that an employer can be subject to suit for breach of contract for failure to comply with any promise it made, so the gap between stated corporate culture and actual practice has significant legal, as well as ethical implications.

6. Ethics programs help avoid criminal acts of omission and can lower fines.
Ethics programs tend to detect ethical issues and violations early on so they can be reported or addressed. In some cases, when an organization is aware of an actual or potential violation and does not report it to the appropriate authorities, this can be considered a criminal act, e.g., in business dealings with certain government agencies, such as the Defense Department. The recent Federal Sentencing Guidelines specify major penalties for various types of major ethics violations. However, the guidelines potentially lowers fines if an organization has clearly made an effort to operate ethically.

7. Ethics programs help manage values associated with quality management,

strategic planning and diversity management this benefit needs far more attention. Ethics programs identify preferred values and ensuring organizational behaviors are aligned with those values. This effort includes recording the values, developing policies and procedures to align behaviors with preferred values, and then training all personnel about the policies and procedures. This overall effort is very useful for several other programs in the workplace that require behaviors to be aligned with values, including quality management, strategic planning and diversity management. Total Quality Management includes high priority on certain operating values, e.g., trust among stakeholders, performance, reliability, measurement, and feedback. Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their relationships with stakeholders. Ethics management techniques are highly useful for managing strategic values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their ethics programs into their strategic planning process. Ethics management programs are also useful in managing diversity. Diversity is much more than the color of peoples skin its acknowledging different values and perspectives. Diversity programs require recognizing and applying diverse values and perspectives these activities are the basis of a sound ethics management program.

8. Ethics programs promote a strong public image.

Attention to ethics is also strong public relations admittedly, managing ethics should not be done primarily for reasons of public relations. But, frankly, the fact that an organization regularly gives attention to its ethics can portray a strong positive to the public. People see those organizations as valuing people more than profit, as striving to operate with the utmost of integrity and honor. Aligning behavior with values is critical to effective marketing and public relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, puts it best: Ethical values, consistently

applied, are the cornerstones in building a commercially successful and socially responsible business.

9. Overall benefits of ethics programs:

Donaldson and Davis, in Business Ethics? Yes, But What Can it Do for the Bottom Line? (Management Decision, V28, N6, 1990) explain that managing ethical values in the workplace legitimizes managerial actions, strengthens the coherence and balance of the organizations culture, improves trust in relationships between individuals and groups, supports greater consistency in standards and qualities of products, and cultivates greater sensitivity to the impact of the enterprises values and messages.

6 Key Roles and Responsibilities in Ethics Management

Depending on the size of the organization, certain roles may prove useful in managing ethics in the workplace. These can be full-time roles or part-time functions assumed by someone already in the organization. Small organizations certainly will not have the resources to implement each the following roles using different people in the organization. However, the following functions points out responsibilities that should be included somewhere in the organization. 1. The organization's chief executive must fully support the program. If the chief executive isn't fully behind the program, employees will certainly notice -- and this apparent hypocrisy may cause such cynicism that the organization may be worse off than having no formal ethics program at all. Therefore, the chief executive should announce the program, and champion its development and implementation. Most important, the chief executive should consistently aspire to lead in an ethical manner. If a mistake is made, admit it. 2. Consider establishing an ethics committee at the board level. The committee would be charged to oversee development and operation of the ethics management program. 3. Consider establishing an ethics management committee. It would be charged with implementing and administrating an ethics management program, including administrating and training about policies and procedures, and resolving ethical dilemmas. The committee should be comprised of senior officers. 4. Consider assigning/developing an ethics officer. This role is becoming more common, particularly in larger and more progressive organizations. The ethics officer is usually trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas. 5. Consider establishing an ombudsperson. The ombudsperson is responsible to help coordinate development of the policies and procedures to institutionalize moral values in the workplace. This position usually is directly responsible for resolving ethical dilemmas by interpreting policies and procedures. 6. Note that one person must ultimately be responsible for managing the ethics management program.

7 Principles of Admirable Business Ethics

1. Be Trustful: Recognize customers want to do business with a company they can trust; when trust is at the core of a company, it's easy to recognize. Trust defined, is assured reliance on the character, ability, strength, and truth of a business. 2. Keep An Open Mind: For continuous improvement of a company, the leader of an organization must be open to new ideas. Ask for opinions and feedback from both customers and team members and your company will continue to grow. 3. Meet Obligations: Regardless of the circumstances, do everything in your power to gain the trust of past customer's and clients, particularly if something has gone awry. Reclaim any lost business by honoring all commitments and obligations. 4. Have Clear Documents: Re-evaluate all print materials including small business advertising, brochures, and other business documents making sure they are clear, precise and professional. Most important, make sure they do not misrepresent or misinterpret. 5. Become Community Involved: Remain involved in community-related issues and activities, thereby demonstrating that your business is a responsible community contributor. In other words, stay involved. 6. Maintain Accounting Control: Take a hands-on approach to accounting and record keeping, not only as a means of gaining a better feel for the progress of your company, but as a resource for any "questionable " activities. Gaining control of accounting and record keeping allows you to end any dubious activities promptly. 7. Be Respectful: Treat others with the utmost of respect. Regardless of differences, positions, titles, ages, or other types of distinctions, always treat others with professional respect and courtesy. Recognizing the significance of business ethics as a tool for achieving your desired outcome is only the beginning. A small business that instills a deep-seated theme of business ethics within its strategies and policies will be evident among customers. It's overall influence will lead to a profitable, successful company. By recognizing the value of practicing admirable business ethics, and following each of the 7 principles, your success will not be far off.

Ethics in Business
For those of us in the accounting profession, however, ethics is at the cornerstone of what we do. Clients look to us to provide impartial information about their company and industry. The business community depends on accountants to perform their jobs with the highest degree of accuracy and ethical standards. The stability of a free-market system depends, in large part, on unimpeachably exact audits and statements. As more traditional accounting firms become involved in consulting, which to some slightly grays the line of impartiality, it is more important than ever that the accounting profession operate according to the highest ethical standards.

Most ethical lapses are so small as to seem insignificant. However, they add up over time, and can snowball into a serious situation. Poor ethical standards are most damaging in the long-term. The biggest victim of ethical lapse is trust. A small breach of ethics is often known only between a few people. But this knowledge can destroy trust between fellow employees, and from there make its way up the ladder, destroying trust between employee and supervisor, and between divisions of companies. When ethical lapses become rampant, employee productivity declines, loyalty follows, soon major breaches such as employee theft begin to appear. Eventually, and worst of all, the most important advantage a firm has, the trust between a firm and its clients, erodes. Why has such an important topic as business ethics gone unnoticed, even actively ignored? The biggest reason is that ethics is largely misunderstood. Ethical behavior-behavior conducted with honesty and integrity, has recently become muddled up with moral or political questions. In the past generation, the business community for the first time was asked to consider political and moral consequences when making business decisions-whether to do business with South Africa during apartheid, for instance. The public's new interest has changed the way many companies do business. However, as political and moral concerns have taken center stage, ethical concerns have been forgotten. Ethics has very little to do with political beliefs, or public opinion. Ethical behavior is a very personal matter, which requires that a person be honest and truthful in all business dealings. Because ethical behavior is so personal, it is unlikely to be given any recognition. While there are many awards for corporate social responsibility, awards that recognize ethical behavior are rare. Ethics is viewed as something that is expected from employees-only when ethics codes are breached is the topic even discussed. However, this Monday Morning Quarterbacking approach to ethics gives employees who are being ethical day in and day out, without encouragement from above, the impression that ethics are not important. A movement has begun to combat this impression. Business leaders know the importance of ethics--an international survey found that 78% of boards of directors are setting ethical codes of conduct, up from only 41% in 1991. Ethical behavior starts at the top. Before a company can expect to be viewed as ethical in the business community, ethical behavior within its own walls-to and by employees-is a must, and top management dictates the mood. Ethical behavior by the leaders of an organization will inevitably set the tone for the rest of the company-values will remain consistent. Further, a well-communicated commitment to ethics sends a powerful message that ethical behavior is considered to be a business imperative. Companies, led by top management, are increasingly adopting ethical codes of conduct. Modern ethics codes aren't just some simple platitudes set in a break-room plaque. Companies now commit considerable time and money to illustrate their reliance on ethical behavior. Companies now bring in consulting firms (including KPMG's own Business Ethics Services Practice), to craft a document with concrete rules and real meaning.

A modern ethics code will consider the main ethical dilemmas of a company's employees, and determine the most vulnerable ethical areas for the company. The execution of a company's ethics program depends on identifying these vulnerabilities. All future messages, from the code, to materials, to training, will focus on these major ethical dilemmas. Companies are also interested in determining whether ethical behavior can be measured, just as efficiency and productivity are. KPMG's Business Ethics Institute is taking the lead on research in this area. Often companies must innovate ways to measure ethical behavior, which in turn motivates ethical behavior. Once training, measurement and a new ethical code have been developed, companies are also hiring full-time ethical compliance officers, and starting ethics hotlines to report possible policy violations. Hiring a full-time ethics officer is another signal to employees that ethical violations will be taken very seriously. However, this person isn't just a watchdogthey will take a proactive approach to identifying possible violations before they develop. An ethics violation hotline is another essential step to ensure ethical compliance. Employees can call the hotline 24 hours per day, 7 days per week, to report violations or even to discuss potentially dangerous ethical situations. As ethical behavior comes to the forefront, more and more companies will be taking these steps to ensure that the ethics of their company and its employees are unassailable. For those of you about to enter the workforce, ethical questions are fairly faint on your radar screen. However, because companies, and especially accounting firms, are so concerned with maintaining proper ethical standards, it is important to reiterate the major principles of professional ethics: Avoiding even the appearance of conflict of interest-This is most important in the accounting field. Especially when confidential financial material is involved, as in an audit, there can be no interest conflict. For instance, it is improper to hold stock in a company that you are auditing. Keeping sensitive information confidential-Most, if not all, information you get from a client is confidential. As an accountant or consultant, you are usually dealing with some of the most sensitive material a client has. Therefore, that material, even its existence, should not be discussed with anyone outside the firm. Full disclosure-Any information with any impact whatsoever on your duties or professional life should be shared openly and honestly with supervisors. At KPMG we encourage such honesty with a "time-bank" leave policy. There is no such thing as sick leave or personal days, it is all lumped together-employees can use the time for whatever they choose, making for a much more open workplace. Devotion to responsibility-As a paid employee, you are expected to perform your duties to the best of your possible abilities, and to retain loyalty and respect to your firm.

You may have taken a business ethics class, where you learned theories of ethics and analyzed case studies of famous ethical dilemmas. This is important preparation-but in the business world, there won't be time to fulminate and analyze. Split-second ethical decisions are made every day-and if you follow the main professional ethics principles, making the correct decision shouldn't be difficult.

business ethics - do businesses behave ethically?

Introduction The word ethics means standards of right and wrong behaviour. Another word often used is morality. This revision note is about whether or not businesses behave in an ethical way. There is a popular image of the cruel and wicked Victorian mill owner. But in the 19th Century everybody in the UK more or less accepted the Christian code of ethical behaviour, and businesses were expected to follow. Some businesses, especially those owned by Quakers such as the Fry and Rowntree families, set very high standards indeed. The Modern Business Environment Today, things have got more complicated:1. There is no longer one agreed moral code. Most people have a weak sense of religion or none at all. So their morals must come from somewhere else. 2. There are competing religious and social moral codes, especially for multinational companies ("MNCs") operating in different parts of the world and employing people from different cultures. 3. The pursuit of profit has become a goal in its own right, and this puts pressures on people to compromise their standards, not just ethically, but in less important areas also. For example, a very rude manager might be tolerated because he (it usually is a he) makes large profits. So when good behaviour and good profits come into conflict, businesses find it difficult to resist the profits. 4. Businesses are only the people who work there; businesses dont decide anything its the people who make decisions. But businesses have group cultures with their own norms and standards. Individuals have a strong need to fit in and be accepted, so it is very difficult for any individual to stand up against attitudes and decisions they disagree with. 5. Greater wealth in the western economies means people have less tolerance for ethically dubious behaviour. We are no longer so desperate for growth and employment at any cost. People are also better educated and better informed. People are less deferential ie they are less accepting of what people in authority say. So there are higher expectations of how businesses should behave. 6. Businesses have to sell to consumers and employ workers who have their own standards and opinions. They are not going to buy from or work for a business they disapprove of. So there is a competitive pressure for better behaviour from businesses. 7. Many managers and owners have ambitions of social acceptance and recognition eg knighthoods, and so are not going to get caught behaving unethically. 8. Modern technology creates ethical dilemmas which never existed until quite recently. Medical products, and gene technologies, are a good example of this. Should parents be allowed to alter the genes of their unborn children, and should businesses sell the products to do this? You can see that these factors all pull in different directions. It has all got a lot more difficult and a lot more complicated. Some businesses set up special committees to discuss and decide ethical problems, and they may even employ a professional philosopher to help them. The Growth of Corporate Responsibility

Corporate responsibility is the phrase used to describe businesses which have decide to behave in a deliberately socially responsible manner. Obeying the strict letter of the law doesnt always solve these problems, although it does keep the business out of trouble with the authorities. Laws are general, and dont always act as a good guide to decisions in any one individual case. Laws have to interpreted by courts, and it is not always obvious what is illegal until the case goes to court. Laws dont cover all the areas that people consider important in ethical behaviour. For example, it may be perfectly legal to dump waste at sea, but many people would consider this to be unacceptable behaviour. In many cases different ethical principles pull in opposite directions. For example, closing a polluting factory may be good for the environment, but it is not going to help the local community who need the jobs and the incomes. What should the business do? Whatever it does, it is going to upset one group of people or another, because society at large cannot clearly answer these questions, and there is no clear guide to the business how to behave. Businesses which get caught acting unethically suffer much more damage than used to be the case. The press is much more active in investigating and publicising such cases. The population at large takes more interest, has their own views, and is more willing to let their displeasure be known. Pressure groups opposed to some activities of business are much better organised, better financed and better able to attack such businesses. Huntingdon Life Sciences has been an extreme example, because the Animal Liberation Movement is prepared to use extreme (and ethically dubious) methods. Not only have employees been threatened, but the employees of shareholders and banks, so the business nearly went bust through lack of finance. This shows that the opponents of business understand business and its weak points very well. The internet now allows very rapid sharing of information across the world (and MNCs operate across the world). There are many web sites devoted to publicising and discussing the behaviour of businesses. Whistle-blowing is more acceptable, and even protected by law in some countries, so access to secret information is now better. Increasing Consumer Activism Consumer campaigns can be very effective. If enough consumers stop buying from a business revenues will fall until the business is forced to change or go bust. Managers dont like the negative publicity, and are sometimes embarrassed by their own decisions anyway; they know they are dubious decisions. Suppliers may want to switch away from such a business because there is guilt by association. In extremes there may be an investors strike where large numbers of people refuse to buy the shares of such a business and the business cannot raise finance. A large number of US pension funds (especially in the public sector) used to refuse to invest in US businesses involved in apartheid S Africa. Businesses may also have trouble recruiting enough good employees. Benefits of Ethical Behaviour The main benefits for a business of behaving ethically are: 1. Avoidance of expensive and embarrassing PR disasters. 2. Better image with consumers and better sales. 3. Better recruitment. 4. Better employee motivation because employees are proud of their jobs. Effects of Ethical Behaviour

1. Increased costs as businesses try to do what is expected eg not pay bottom wages, or dump pollution cheaply at sea. 2. Conflict between profit and ethical standards. 3. Business practice and organisational culture will have to be changed. 4. Changes in relations with suppliers. This may mean passing the same standards down the supply chain, and severing relations with suppliers not prepared to meet the same standards. Alternative suppliers may be more expensive. For example, the export of Brazilian mahogany is illegal for reasons of conservation, but it is very difficult (and expensive) to buy mahogany that is absolutely guaranteed to come from an officially recognised sustainable source. Should Businesses Be Expected to Behave Ethically? One argument is that businesses are products of the society in which they operate, in which they sell their products, and in which they hire their employees. So businesses should be expected to reflect the ethical standards of the surrounding society. One problem with this view is that society doesnt always have clear ethical standards to which businesses can stick. For example, some people care passionately about animal experiments, and argue it is deeply unethical, whereas many other people say such experiments are justified if real people benefit medically from the research. What is a business supposed to do? The opposite argument is that business are supposed to make a profit for their owners, to create jobs for employees, and to create wealth for society as a whole. Anything else is at best an irrelevance and at worst simply gets in the way of profitable business. See What's Wrong with Ethical Corporate Behaviour for a counter-argument. The middle argument is that businesses in the real world (or most of them, at least) would like to do both, if possible. But there will always be conflicts. What then happens? Does the business stick with the ethical behaviour? Usually the business will go for the profits and it is this which upsets many people, although perhaps people sometimes expect too much and havent really thought through the consequences of their own opinions. Are Businesses Behaving More Ethically? Research suggests middle and junior managers care quite a lot about ethical behaviour, but that senior managers still care mainly about profit. To the extent that it is senior managers that make the decisions, then little has changed, but middle managers can gradually shift the climate of opinion in a business. Well-publicised cases such as Shell and the Brent Spar suggest businesses have become more sensitive to public opinion about ethical behaviour and have begun to behave more ethically (as opposed to just saying that they do). Cynics argue this is not because of a change of heart, but merely yet another changed response to changed market conditions in the eternal pursuit of profit