Managing Company Ethics

Many managers are concerned with improving the ethical climate and social responsiveness of their companies. As one expert on the topic of ethics said, Management is responsible for creating and sustaining conditions in which people are likely to behave themselves. Managers must take active steps to ensure that the company stays on an ethical footing. Ethical business practices depend on individual managers and the organization’s values, policies and practices. Exhibit illustrates the three pillars that support an ethical organization.

Ethical Individuals:

Managers who are essentially ethical individuals make up the first pillar. These individuals possess honesty and integrity which is reflected in their behavior and decisions. People inside and outside the organization trust them because they can be relied upon to follow the standards of fairness, treat people right and be ethical in their dealings with others. Ethical individuals strive for a high level of moral development.

However, being a moral person and making ethical decisions is not enough. Ethical managers also encourage the moral development of others. They find ways to focus the entire organization’s attention on ethical values and create an organizational environment that encourages, guides and supports the ethical behavior of all employees. Two additional pillars are needed to provide a strong foundation for an ethical organization: ethical leadership and organizational structures and systems.

Ethical Leadership:

In a study of ethics, policy and practice in successful, ethical companies no point emerged more clearly than the crucial role of leadership. Employees are acutely aware of their bosses’ ethical lapses and the company grapevine quickly communicates situations in which top managers choose an expedient action over an ethical one. The primary way in which leaders set the tone for an organization’s ethics is through their own behavior. In addition, leaders make a commitment to ethical values and help others throughout the organization to embody and reflect those values.

If people don’t hear about values from top leadership, they get the idea that ethical values are not important in the organization. Peter Holt, CEO of the Holt Companies, sees himself as the company’s chief ethics officer. Ethical values are woven into the organizational culture, and Holt continually works to renew the values and signal its total commitment to them. Most importantly he visits each of the firm’s location twice a year to meet with employees, answer questions, and talk about the importance of each employee upholding Holt’s core values every day in every action. Holt’s evaluation and reward systems are also tied to how well managers and employees live the values in their everyday actions. Using performance reviews and rewards effectively is a powerful way for managers to signal that ethics counts. Consistently rewarding ethical behavior and disciplining unethical conduct at all levels of the company is a critical component of providing ethical leadership.

Organizational Structures and systems:

The third pillar of ethical organizations is the set of tools that managers use to shape values and promote ethical behavior throughout the organization. Three of these tools are codes of ethics ethical structures, and mechanisms or supporting whistle blowers.

Code of ethics:

A code of ethics is a formal statement of the company’s values concerning ethics and social issues; it communicates to employees what the company stands for. Codes of ethics tend to exist in two types: principle based statements and policy based statements. Principle based statements are designed to affect corporate culture they define fundamental values and contain general language about company responsibilities, quality of products, and treatment of employees. General statements of principle are often called corporate credos. One good example is Johnson & Johnson’s The Credo.

Policy based statements generally outline the procedures to be used in specific ethical situations. These situations include marketing practices conflicts of interest, observance of laws, proprietary information, political gifts, and equal opportunities. Examples of policy based statements are Boeing’s Business Conduct Guidelines, Chemical Bank’s Code of Ethics, GTE, Code of Business Ethics and Anti-Trust and Conflict of the Interest Guidelines and Norton’s Norton policy on Business Ethics.

Source: New Era Management