Managing Business ethics, class 5.ppt

7/27/2019 Managing Business ethics, class 5.ppt

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What is Business Ethics Management? Business ethics is too important to be left to chance or

ignored

It requires a professional approach BEM: is an attempt to formally or informally manage

ethical issues or problems through specific policies,procedures and programs

A new major industry has developed: EthicsConsulting


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Components of BEM Mission or Values Statement

Code of Ethics

Reporting/Advice Channels Risk analysis and management

Ethics managers, officers and committees

Ethics consultants

Ethics training

Social auditing, accounting and reporting

Managing stakeholder relations


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How to institutionalize ethics? Requires building ethical safeguards and practices into

everyday operations

Managers need guidance on ethical questions manygrey areas

Ie. Accepting gifts. What is acceptable?

Leadership: This is most important leaders set the

moral tone of a firm It emphasizes the priority that ethical concerns have in

the firm


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Mission or Values Statements General statements of corporate values or beliefs

IKEA: To create a better everyday life for everyone

Marks and Spencer: to be the most trusted retailerwherever we trade by demonstrating a clear sense ofsocial responsibility and consistency in our decisionmaking and behavior

Butlittle evidence that these have much of an impacton employee behavior


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Codes of Conduct Explicit outline of what kind of ethical behavior is

expected

4 main types: Organizational or corporate seek to identify and

encourage ethical behavior within the organization

Professional Codes of Ethics Professional groups

often have their own codes for members medicine, law,accounting, but also marketing, purchasing, etc. Thesedeal with ethical issues often run into by members

Industryie. Financial Services, Electronics


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Codes of Conduct Program or Group Codes ie. International

Fairtrade Standards International body can certifythat a firm meets its standards. If consumers respectthe certification then firms will try to earn it

Codes are now very widespread: Nearly all large USfirms and over 2/3 of European firms have codes

Content: Labor standards; environmentalstewardship; consumer protection; bribery and oftentopics unique to the industry


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Codes: Content The more specific the codes the greater the guidance;

but also means less flexible this may be a problem ifa firm takes a detailed code from one country and tries

to apply it in quite a different culture Critics argue that simply having a code is not on its

own going to do anything: mostly Public Relations

Indeed the evidence does suggest that a code without

additional components of Ethics Management will dolittle

It can be a helpful guide for employees if the firmfollows up on the other items as well


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Effectiveness of Codes?A code can be thought of as a supportive element of

the larger package

Newton(1992) concluded that if staff are involved in

the drafting of the code, or at least discussion aroundits drafting there will be much more buy-in and itwill be taken more seriously

It must have teeth: It will only be effective if

individuals found violating it are punished otherwiseit will be ignored

There must be follow through: Behavior must bemonitored and infractions punished


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Issues in Global Codes If codes are to reflect ethical standards that may vary,

at least regarding smaller matters, from one culture toanother, then allowing for local variation may beneeded

Consider gift giving: In China it is expected, but it isagainst many US firms Codes. In China to refuse a giftwould likely mean the end of a relationship it is veryinsulting

The key question: To distinguish between what issimply differentand what is wrong


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Global Codes This suggests that a global code should do the following:

Respect core human values based on moral threshold

Respect local traditions

Recognition that context matters when deciding what is rightand what is wrong

For example..In 1994 business and government and religiousleaders (Islamic, Christian, Jewish) produced: Interfaith

Declaration: A Code of Ethics on InternationalBusiness for Christians, Muslims and Jews

Principles: Justice, Mutual Respect, Stewardship ofResources, and Honesty


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Codes United Nations Global Compact established in 1999.

Over 2000 MNEs have signed on to this initiative

Global codes tend to be more general, less specific Firms are paying a lot of attention to the preparation of

such codes and training staff about them

Code really can only set out minimal guidelines it is

only a first step firm must ensure that all operationsreceive training in ethical behavior and are monitoredand rewarded for ethical behavior


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Reporting/Advice Channels Ethics Hotline is a method for reporting conduct that may be unethical, illegal,

in violation of professional standards.

Ethics hotlines can be very effective

They remind all that senior management expects ethical behavior andunethical behavior or cutting corners to meet other targets or goals may bereported

Ethics hotlines can only work if there is appropriate follow up.

If ethical issues are ignored or swept under the carpet they will be ignored

May also be used to ask for ethical advice

Over half of all large firms (and the Emirate of Dubai) have ethical hotlines


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Risk Analysis and Management From the perspective of the Board ethics is often

approached as a matter of risk management

Firms may face legal liability product safety,environmental issues, etc.

Firms may face major Brand damage if charged withunethical if legal behavior

After Sarbanes-Oxley in US reporting on bribery andaccounting practices have moved into the forum oflegal liability


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Ethics Training Ethics training has been on the rise, reflecting growing

importance to senior management

Initially, it focused on labor force issues, but now thereis renewed emphasis on stakeholder engagement

Auditing and CSR Reporting

This too has been on the rise with Europe leading Over 50% of leading MNEs now report on CSR


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Assessing Ethical Performance Effective management of business ethics requires an

ability to measure and to evaluate performance

But how can it be measured? Shell issues a Sustainability Report, the BBC issues a

CSR Report , Microsoft issues a Citizenship Report but they all serve the same purpose reporting on

environmental, economic and social impacts Frequently firms that have the word ethical in the

Report title are reporting on internal management andcontrol systems HR and labor issues


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Social Accounting The voluntary process concerned with assessing and

communicating organizational activities and impacts onsocial, ethical and environmental issues relevant tostakeholders

No uniform standard: unlike financial accounting Much of the reporting is qualitative in nature Need to consult with stakeholders to determine what to

report on and specific objectives

Stakeholder satisfaction surveys often used Question: Is such a voluntary report with no set standards

reliable? It varies a lot from firm to firm A report will be more credible if it has external validation


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What makes for good Social Accounting Inclusivity reflects the views of major stakeholders

Comparability allows for over time views and providesbenchmarks with other firms

Management Policies and Systems must beinstitutionalized within firm part of ongoing procedures

Disclosure revealed to all stakeholders

External verification Has it been verified as true by areputable third party

Focus on continuous improvement report should identifyactions required in specific areas


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How to organize for Business Ethics

Management 1) HR and Boundary Spanning Departments play key

roles Manage codes and training and monitoring

2) Business Ethics and Leadership Whatever the

specific policies, leadership is critical Employees taketheir cues from the top if leaders behave in an ethicalfashion and expect the same from others others willfollow

3) Ethical Culture and Climate: This depends onleadership. Most important factor if unethicalbehavior is the norm, a firm will have to determinehow to change its culture and climate huge problem


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Managing Stakeholder Relations Organizing to deliver business ethics also involves

effective stakeholder engagement

Reminder: Firm needs to determine who keystakeholders are and:

Engage stakeholders initiate lines of communicationto determine key issues, strengths of issues, stakeholderalliances,

Intelligence gathering

Leads to Stakeholder Impact Assessment


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Stakeholder Impact Assessment Need to determine the ability of the SH to impact the

corporation

Three key attributes:

Power: The ability of the SH to influence the Firm orGovernment

Legitimacy:Whether the organization sees the SHissue as desirable, sustainable or not does the org. wishto cooperate?

Urgency: The degree to which SH issue demandsimmediate attention


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Types of Stakeholder Relationships Traditionally, it has been assumed that relationship is

fundamentally antagonistic; even if a compromise is laterreached on an issue

More recently recognition that relationship is oftencollaborative and cooperative

Many collaborations within supply chain firms comingtogether to agree on standards inc. ethical standards

Environmental Management Issues - collaborationswith NGOs began here

Fields such as packaging, deforestation, mining, fishing,


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Environmental Management Issues Many MNEs and global NGOs have agreed to follow

and accept certain Voluntary Codes of Conduct

Incl. Greenpeace, Friends of the Earth, and WorldWildlife Federation

Also joint fund raising tackling social issues

For example: Fair Trade Certification

Covers many fruits, vegetables, coffee, tea Farmers receive higher prices but;

Must agree to certain environmental standards, safetystandards, no child labor etc


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Environmental Management Issues MNE, like Starbucks, pay more but are able to put

FairTrade Certification on products

$20 billion and growing at 15% year

Over 700 small farmer producer organizations


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Problems with Stakeholder Collaborations Resource Intensity can consume time, energy and $

Culture Clash Initial optimism is sometimesdashed; if goals are too far apart

Cooperate and Conflict at the same time? It isquite likely that SHs may agree with MNE on one issuebut not on all (MCD and PETA)

Capture: Some critics argue that NGOs too oftenaccept too little captured by the agenda of MNE

Greenwash firm may be certified as acceptable whilenot making significant changes depends on values!


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QuestionsWhat are the major elements that may be included in

a strategy to implement Business Ethics Management?

What are 3 different types of Codes of Conduct?

What key elements should be included in a Code ofConduct?

What are ethics hotlines/reporting lines. Why can

these be very important?What is the role of leadership in establishing an

ethical operation?

What is the role of ethical culture in establishing an

ethical operation?


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QuestionsAre relations with all stakeholders likely to be smooth

and cooperative initially?

What is the main limitation of global codes ofconduct?

Why is enforcement a critical issue with regards to theeffectiveness of codes of conduct

Why has the use of ethics hotlines increased sorapidly in recent years?

How can a firm assess the effectiveness of its ethicspolicies and procedures?

Managing Business ethics, class 5.ppt

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