Lecturer : DR AZLAN ALI 0193610027

THE ETHICAL ORGANIZATION

CHARACTERISTICS OF AN ETHICAL ORGANIZATION

CHARACTERISTICS OF AN ETHICAL

ORGANIZATION

TRUST

EFFECTIVE COMMUNICATION

UPWARD & DOWNWARDS

OPENNESS

OBJECTIVITY & FAIRNESS

INTEGRITY

TRANSPARENCY

VALUES

SHARING COMPANY’S

WEALTH

• Trust

- trusting and believing in the employees or subordinates, making them feel worth it and adding to the project and the company, showing of appreciation, i.e. praises and acknowledgement. E.g. Airasia

• Effective communication upwards & downwards

- able to communicate the company objectives, mission and vision with all customers, clients and the stakeholders.

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• Openness

- be open with your employees, no hidden agendas. E.g. Arthur Andersen shredded documents

• Objectivity and fairness

- be object in your praises and critics with the employees. Do not judge, but communicate. E.g. Lehman Brothers director salaries

• Integrity

- live up to the company’s values, beliefs in whatever they do.

- treats its employees fairly, communicating with them honestly and openly. E.g. I-Mac Apple

• Transparency

- Be fair, justify, consistent and objective in anything the company do. E.g. Enron scandal

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• Values

- live up to the company’s values. E.g. Nestle

• Sharing company’s wealth

- i.e. knowledge and or money (Corporate Social Responsibility). Empowering others who helped the company become successful or whom the company is benefiting from in the business society, community, etc.

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• Corporate Social Responsibility = is the continuous commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.

• CSR is about how companies manage the business processes to produce an overall positive impact on society.

• E.g. case study “Johnson & Johnson and Tylenol” (refer article).

CORPORATE SOCIAL RESPONSIBILITY (CSR)

• In general, organizations may exercise social responsibility towards the following 3 areas:-

AREAS OF SOCIAL RESPONSIBILITY

Organization’s Social Responsibility

Constituents

Natural Environment

General Social Welfare

Organizational Constituents

- People and organizations directly affected by the practices of a specific organizations and have a stake in its performance. Eg:

• state & federal government, creditors, customers, suppliers, employees, interest groups, courts and investors.

• If the manager is caught doing criminal acts, it will result to hurt the organization’s profit, stock prices, etc.

• Organizations that are socially responsible with employees, they treat workers fairly, respect their dignity and basic human needs.

• To maintain a socially responsible stance towards investors, manager should maintain proper accounting procedures, give appropriate information to shareholders, and manage the company in a way to protect shareholders’ rights and investment.

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Organizational Natural Environment.

- Companies have to be more social responsible in their release of pollutants. Eg.:

• Companies need to develop economically feasible ways to avoid contributing to acid rain, depletion of ozone layer and global warming.

• Find alternative methods of handling sewage, hazardous wastes and garbage. (need to develop safety policies to reduce accidents that will potentially disastrous environmental results)

• Contributions to charities, philanthropic organizations, not-for-profit foundations/association, support for museums, radio/television, involve in improving public health & education, etc.

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Organizational General Social Welfare.

- Business organizations should also promote the general welfare of society. Some people believe that organizations should act to correct, or at least not to contribute to political inequalities.

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Although there are arguments for and against the social responsibility in organizations behavior, organizations that make clear and visible contributions to society can achieve enhance reputation and gain a greater market share for their products, and increase profit itself.

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Corporate Moral Excellence = is the outstanding practices in managing the organization and achieving results. It is mainly centers on the corporate culture.

- It is the systematic use of quality management principles and tools in business management, with the goal of improving performance based on the principles of customer focus, stakeholder value, and process management.

- Eg.: It can be found in company’s mission statement, and code of ethics, etc.

CORPORATE MORAL EXCELLENCE

They are many ways organizations can achieve corporate moral excellence:-

CORPORATE MORAL EXCELLENCE

Corporate Mission Statement

Code of Ethics Organizational Culture

Total Quality Mgmt. (TQM)

1) Corporate Mission Statement• An organization’s mission consists of its long term vision

of what it seeks to achieve and reasons for its existence. • Usually this mission of the organization is denoted through

its mission statement & it contains of how it wishes to serve the society & contribute to social welfare.

• The mission statement has to be guided by a set of core values that the organization strives to use in order to achieve corporate moral in order excellence.

• It becomes the criterion by which the company measures its activities & achievements.

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2) Code of Ethics

A statement of the norms and beliefs of an organization. Norms are the standards of behavior, expected from everyone in the organization when confronted with a particular situation consisting of ethical dilemmas.

3) Organizational Culture

In the organizational context, culture refers to the set of values, dominant beliefs and guiding norms of behavior for its employees. It denotes the climate, atmosphere, mental attitude shared by the members of the organization.

4) Total Quality Mgmt (TQM)

A systematic approach to guide an organization towards excellence through superior quality products, services & processes.

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• Corporate Governance (CG) = is the system by which the companies hold the balance between economic and social goals, and between individual and communal goals.

• CG is a set of policies & procedures that the company’s directors employ in their conduct of company’s affairs and their relationship with shareholders to whom they are responsible as managers.

• The aim is to align as nearly as possible the interests of

individuals, corporations and society.

 

CORPORATE GOVERNANCE

DEFINITION OF CORPORATE CODE

• “Corporate code of conduct" refers to companies' policy statements that define ethical standards for their conduct. There is a great variance in the ways these statements are drafted.

Intended to serve the following purposes:

To give every employee an insight into the Mission, Values and Principles underlying the Company’s activities;

To establish standards of ethical behavior which shall govern relations within the Company and with customers, business associates, suppliers, state authorities, the community and competitors;

To serve as a tool for preventing possible offences and conflict situations, as well as developing a corporate culture based on high ethical standards.

By adopting the Code, the Company confirms its intention to follow the highest ethical standards of business practice.

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DEVELOPMENT OF CORPORATE CODE

Use the Code to Create an Organizational

Compliance Roadmap

Keep Your Audience in Mind

Use Questions to Highlight Important

Concepts

Make the Obligations Personal

Obtain Board of Directors and Senior Management Buy-In

Keep Your Audience in Mind

- Codes of conduct make the most impact if they are effectively communicated to all members of the organization. - For this reason, a code should be written clearly. Use simple and concise language, and avoid excessive “legalese” so that every employee at every level understands it. - It should also be tailored to an organization’s industry, culture and corporate values.

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Make the Obligations Personal

- Ideally, a code should be developed specifically for your organization so that every employee at every level feels a personal obligation to comply with it.

- Consider what elements would make it specific to your organization, as well as what would differentiate it from those developed by other organizations in your industry.

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Use Questions to Highlight Important Concepts

- Consider using a question/answer format to explore certain concepts and address specific situations that employees are likely to encounter in their daily professional pursuits.

- Questions can be incorporated throughout the code, followed by corresponding answers that explore and develop the relevant concepts.

- Providing information in this format not only will make it more concrete, but also will make its guiding principles easier to understand and remember.

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Obtain Board of Directors and Senior Management Buy-In

- It is important to establish a commitment to ethical conduct at all levels of an organization.

- When the code is developed, announce its existence to the entire organization and make it publicly available on the organization’s website.

- It should be clear that all levels of the organization, including senior management and the organization’s board of directors, will be governed by it, held to all of its standards and that appropriate discipline will result at all levels for failure to comply.

Use the Code to Create an Organizational Compliance Roadmap

- Beyond its direct application to your organization, a code of conduct also can be used to lay the foundation for the organization’s larger compliance efforts.

- Many organizations have implemented corporate compliance programs using the elements outlined in the U.S. Sentencing Commission Guidelines for Organizations.

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The guidelines highlight seven elements used to prove that an organization has adopted a program to promote compliance.

(1) Written policies, procedures and standards of conduct; (2) Designation of a compliance officer and a compliance

committee; (3) Effective training and education; (4) Effective lines of communication; (5) Well-publicized disciplinary guidelines for enforcing standards; (6) Internal auditing and monitoring processes; and (7) Prompt responses to detected offenses and corrective action.

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THANK YOU