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Code of Ethics

Need for Corporate Ethics Programs

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Almost companies in Sri Lanka have reduced trust in businessesBeverage, Milk powder, Meat products, services...

Employees are not legal experts and need guidance as their orientation is deferentCompliance orientationValues orientation

Therefore an ethical program is required.

Values Vs. Compliance Orientation

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Compliance orientationRequires that employees identify with and commit

to specified conductUses legal terms, statutes and contracts that teach

employees the rules and penalties for noncompliance

Values orientationFocuses more on an abstract core of ideals such as

respect and responsibilityResearch shows is most effective at creating ethical

reasoning

Ethical Programs

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It is a programe that create firm's ethical climate and helps ensure that all employees understand the organization's values and comply with the policies and codes of conduct.

Organizations should develop an organizational ethics program by establishing, communicating, and monitoring uniform ethical values and legal requirements.

A strong ethics program includes

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Written code of conductEthics officer to oversee the programCare in the delegation of authorityFormal ethics trainingAuditing, monitoring, enforcement, and

revision of program standards

Concepts of Code of Ethics

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Codes of conduct - represents employee ethicsFormal statements that describe what an

organization expects of its employeesCodes of ethics - corporate or business ethics

Most comprehensive document and it consists of general statements that serve as principles and the basis for the rules of conduct

Statement of valuesServes the general public and addresses

stakeholder interests

Code of Ethics

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Code of ethics are formal statements of what an organization expects in the way of ethical behaviorIt will not solve every dilemmaProvide rules & guidelinesIt reflects senior management's desire for

compliance with values, rule & policies in support of an ethical climate

And it should be specific enough to be reasonably capable of preventing misconduct

Corporate Code of Ethics

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Often contain six core valuesTrustworthinessRespectResponsibilityFairnessCaringCitizenship

E.g. Uniliever

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General Code of Ethics focuses on:Standard of Conduct : Honesty, Integrity &

OpennessObeying the Law : Laws of host countryEmployees : No forced or child laborConsumers : Consistent value offeringPublic Activities : No political affiliationCompetition : strong & FairCompliance & Monitoring : Board, Senior Mgt

E.g. Wal-Mart

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Wal-Mart's Ethics Beliefs"respect for the individual,""service to the customer" and"Striving for excellence.“

Responsibilities and Obligations to Customers Fair Transaction with stakeholders Fair Competition

E.g. LGE.g. LG

Implementing Code of Ethics

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Distribute the code comprehensively: employees, subsidiaries, & associated companies

Assist in interpretation & understandingSpecify management's role in

implementationMake employees responsible for

understandingEstablish grievance proceduresProvide a conclusion or closing statement

Consideration of Code of Ethics

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Ethics officers or committees are responsible for oversight of the ethics/compliance program

Coordinates program with top managementDevelops, revises & disseminates the codeDevelops effective communicationEstablish audits & control systemsProvides consistent enforcement of

standardsReviews & modifies the program to improve

effectiveness.

Communication of Ethical Standards

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Must start with a foundation, a code of ethics, a procedure for airing ethical concerns, and executive priorities on ethics

Can educate employees about firm's policies and expectations, laws and regulations, and general social standards

Can make employees aware of resources, support systems, and personnel who can assist them with ethical advice

Can empower employees.

Communication of Ethical Standards

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Provides guidance for ethical standards & activities that integrate the functional areas of business

helps employees identify ethical issues & provides a mean to address & resolve

Can help reduce criminal, civil & administrative consequences including:Fines, penalties, judgments, etc.

Oversight of Ethical standards

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Reflect organizational size, culture, values, management style & employee base

Improve employee understanding of ethical issues

Influence the organizational culture, significant others, & opportunity in the ethical decision making process

Overall, provide for recognition of ethical issues, understanding of culture & values, and influence ethical decision making

Enforcing Ethical Standards

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Consistent enforcement is criticalBut an internal system for employees to

report misconduct is an opportunity to register ethical concerns

Ethics hot linesQuestionnaires may be used to serve as

benchmarksCorrective actions provide standards &

punishment

Enforcing Ethical Standards

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If a company has determined that its ethical performance has not been satisfactory, management may want to recognize the way ethical decisions are made:

A decentralized organization may be centralized (perhaps temporarily) so that top level managers can ensure that ethical decisions are made.

A centralized organization may be decentralized (perhaps temporarily) so that lower level managers can make more decisions.

Enforcing Ethical Standards

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An effective ethics program employs many resources to monitor ethical conduct and measure the program’s effectivenessObserving employeesInternal auditsSurveysReporting systemsInvestigationsIndependent audits

Ethical Compliance Audit

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A systematic evaluation of an organization's ethics program and/or performance to determine its effectiveness

Can help in establishing codes & programShould provide a systematic & objective

approach to surveying the ethical condition of the organization

May be more effective if performed by an external entity (organizations should participate in ethics audit instrument development)

Mistakes in Ethical Program

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Not having a clear understanding of the goals of the program from the beginning.

Not setting realistic and measurable program objectives.

Senior management's failure to take ownership of the ethics program.

Developing program materials that do not address the needs of the average employee.

Transferring a domestic program internationally.

Designing a program as a series of lectures.

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Thank You