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Chapter 9 - Managing and Controlling Ethics Programs

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on 15 October 2013

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Transcript of Chapter 9 - Managing and Controlling Ethics Programs

Chapter 9 - Managing and Controlling Ethics Programs
Implementing Ethics Programs
Types of Controls
The Ethics Audit
• a systematic evaluation of an organization’s ethics program and performance to determine whether it is effective.
Benefits of Ethics Auditing
Can enhance the firm's reputation - Social Responsibility
Enables identifying potential risks and liabilities to improve compliance with the law to avoid legal ramifications
Helps companies assess the effectiveness of their programs and policies
Allows a company to ensure that they are achieving the greatest possible impact with available resources
Reduces the likelihood of a recurrence of misconduct.
Greater transparency for stakeholders

The Auditing Process
1- Secure commitment of the firms top management and/or board of directors.

2- Establish a committee or team to oversee the audit process and reports results. In most firms managers and ethics officers conduct auditing

3- Establish scope of the audit - define key subject matter, Identify risks, and available opportunities to manage ethics.
The Strategic Importance of Ethics Auditing
Any attempt to verify outcome and compare them with standards can be considered an auditing activity.
Like a financial audit, should be conducted regularly rather than in response to problem or crisis situations.
Can be comprehensive or can focus on one or two areas.
Can help fulfill mission statements to boost profits and reduce risk.
Will help improve employment practices and operating practices.
Most importantly can demonstrate the positive impact of ethical conduct and social responsibility.
BBB provide awards and assessment tools to help any organization evaluate its ethical performance (see pg. 264).
Formal Controls
Process Controls
Output Controls
- Proper selection of employees
- Effective ethics training
- Strong structural systems
(communication systems)

-Management's commitment
-Ethical audit
• Ethical audits are important to a business because:
- can improve performance and effectiveness
- increase attractiveness to investors
- improve its relationship with stakeholders
- identify potential risks
- decrease the risk of misconduct
• Similar to a financial audit
The Auditing Process
4- Review of the firms mission, values, goals and policies.

5-Identifying the tools or methods that can be used to measure the firms progress, then analyzing the information.

6- Having an independent party, then verify and analyze the results.

Final Step- Report audit findings to board of directors.
Measurement Tools
Balanced Scorecard - to provide a more balanced view of organizational performance
Six Sigma - focuses on improving existing processes that need to be improved
Triple Bottom Line - measuring social, financial, and environmental factors
Risks of Ethics Auditing
A firm may uncover a serious ethical problem that is would prefer not to disclose until it has remedied the situation
One or more stakeholder's criticisms may not be easily addressed - imposes burdens that can be costly
An ethics audit could foster stakeholder dissatisfaction rather than stifle it
Provides no assurance that ethical risks and challenges can be avoided
Processes can be tricky because of a lack of standardization and widely accepted measures - benchmarking is difficult


"The greatest fear of most corporate leaders is discovering misconduct or illegal activity that could be reported by the mass media, used by competitors, or prosecuted by the government." (Pg. 247)
Full transcript