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What is the Ethical Code of Conduct and Responsibility at the Corporate Level?
 
 

Code of Conduct and Responsibility at the Corporate Level



Whether the owner of a business or corporation, or a shift or department manager, managing legal compliance and ethics is an important aspect in the maintenance, growth, and productivity of any business. Again, whether your business employs 120,000 people or five, a public company that hires employees has certain obligations and responsibilities. This article will focus on corporate responsibility.
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Because of the growing concerns over employee rights, fairness, and perhaps, most of all, because of the scandals following Enron, many companies are adding ethics management to their business structures and development protocols.

Corporate Responsibility Defined

The history of corporate ethics can be traced back to the mid-1980s, when General Dynamics, a major United States defense contractor, established a code of ethics for its employees, with penalties for noncompliance and violations.

In 1991, United States Federal Sentencing Guidelines offered a formal ethics outline for a multitude of firms that focused on seven basic requirements that would constitute effective compliance. These seven requirements include:

  • Establishing compliance standards reasonably capable of preventing criminal conduct
  • Assigning specific high-level individuals with responsibility to oversee those compliance standards
  • Exercising due care to ensure that discretionary authority is not delegated to the individuals with a propensity to engage in illegality
  • Taking necessary steps to communicate compliance standards and procedures to all employees, with a special emphasis on training and the dissemination of manuals
  • Taking reasonable steps to achieve compliance in written standards through monitoring, auditing, and other systems designed to detect criminal conduct, including a reporting system free of retribution to employees who report criminal conduct
  • Consistently enforcing the organization's written standards through an appropriate disciplinary mechanism, including, as appropriate, discipline of individuals responsible for failure to detect an offense
  • After an offense is detected, taking all responsible steps to respond and to prevent future similar conduct

As a result of the growing concern of business ethics and responsibility, many businesses established a corporate ethics office or created positions for ethics officers, whose job description was to encourage ethical business practices. As a result of this growing need, workshops, seminars, and trading venues were created for ethics officers, staff members, and management personnel.

Senior level management personnel with a variety of functions and goals generally staff a corporate ethics committee. In general, such a committee is designed to provide policy and ethical guidance for management decisions as well as those made by CEOs. Such committees meet weekly, monthly, quarterly, or even less frequently, depending on need and demand.

Communication Is Key

Communicating between upper- and lower-level management and staff members is essential not only for the smooth running of any business adventure, but also for a strong and positive ethics infrastructure. However, communication does not just work from the top to the bottom, or from management downward to employee levels, but also from employees upward to management levels. Open communication is essential for the success of any ethics standard program and its desired expectations and results.

One of the most important and valuable communication tools in any place of business, be it an educational or medical environment or United States defense contractor, is the "grapevine". This unofficial, yet extremely effective, mode of communication is perhaps the most reliable tool to gauge satisfaction or displeasure within a work environment. The grapevine is the primary source of rumors, gossip, perceptions, and news in every workplace. Surprisingly, research has determined that more than 70 percent of information gathered from a grapevine is accurate.

However, employees and managers also are aware of the conflicting signals that are often sent by a corporation. For example, let's say that ZZ Company employs a policy that prohibits their employees from receiving entertainment accounts. The policy says so, and so does the president of the corporation. Unfortunately, the head of marketing is constantly entertaining clients, treating them to meals and other perks. These costs are detailed in monthly expense reports and financial management has approved these costs, which are being reimbursed to the marketing head.

Such an example will serve to focus on what's really going on in any environment where the policy says one thing, yet actions speak louder than words. This scenario is a prime example of how various employees literally thumb their nose at the policy, and get away with it! Such incidents are bound to cause problems, not only within the management structure, but may lead to grumblings and dissatisfaction among those who toe the line.

Truth, honesty, and loyalty - as well as concern for all employees and staff - are the foundation upon which ethics codes and responsibilities are developed. If a company does one thing, yet says another, employees may struggle to maintain their level of credibility of management and overall operations. Creating and enforcing consistent policies are the most important way a corporation can maintain its credibility. Policies must be enforced across the board, with no exceptions.

Orientation materials provide communication channels, as well as suggested solutions or courses of action for potential ethical dilemmas. Most manuals and materials will show employees the proper chain of command to initiate discussions or resolutions to ethical issues. Mission statements specify explicit definitions of how a business or corporation does business, as well as how business is expected to be conducted.

Policy manuals include company rules and regulations that explain laws and human resources policies. Let's face it, most people don't read policy manuals cover to cover. As a matter of fact, most new employees in any corporation who are given such a manual place it in a drawer, never to be looked at unless a problem arises. However, when in doubt, a person should always refer to the policy manual, and not another person, in order to receive the correct answer to any questions regarding ethics or policy.

Codes of Conduct and Ethics

A code of conduct is a document that is designed and written, at its most basic level, to encourage moral behavior; as such, a code of ethics or conduct should be designed to reflect an individual corporation or company. For example, a code of conduct or ethics for a medical corporation is by necessity different than one designed for a defense contractor.

Most codes of conduct and ethics are extremely difficult to read and are not considered user-friendly. Not only should such codes define the basic rules and regulations of the corporation, but a corporation's values as well. They should include procedures for raising ethical issues, such as following a proper chain of command, and define the responsibilities of everyone who works for the corporation.

At their core, codes of conduct and ethics should include, but are not limited to the following practices:

  • Accountability - For example, and of course, depending on the corporation's function, accountability will help to define rules and regulations that ensure that business is conducted in a legal manner.
  • Integrity - Integrity issues may include those that include travel expenses or the giving of gifts to fellow employees, potential customers, and clients. Employees who are required to travel, have a right to be reimbursed for their expenses, although those expenses must be lawful and limited to the authorized business purposes of the traveler.
  • Respect - Issues concerning respect should take into consideration the rules, regulations, and expectations of employees regarding non-harassment, safety of the workplace, equal opportunities, including equal pay for equal work within any corporate environment. This issue ensures that all management and employees are treated with courtesy and respect within the business environment.
  • Codes of conduct should be updated on a fairly regular basis, and training should be utilized in order to ensure greater understanding and support for such codes. Many employees are required to sign corporate codes of conduct.

Corporate Responsibility - Case Study


What would you do?
 
Everyone is familiar with Wal-Mart. It's one of the most successful companies in the world and operates thousands of stores across the U.S., with many international branches. The Wal-Mart Corporation employs more than a million people and is considered to be the largest private employer in the United States. There is no doubt that Wal-Mart is a financial success. Their stocks have climbed steadily since 1970, when shares were offered at less than $20 each. Founded in the 1960s, Wal-Mart is one of the world's largest retailer stores today.

So, it can be said that on one level, stockholders have benefited the most by Wal-Mart's success. On the other end of the spectrum, the consumer is rewarded due to Wal-Mart's low pricing structures. Wal-Mart offers employment opportunities to young and old alike. Suppliers are provided with an ample source for their goods and the community itself benefits through a higher employment rate. On the surface, Wal-Mart seems to be a very positive influence on society in general, and since its inception, has defined its values as those that were "built upon a foundation of honesty, respect, fairness, and integrity."

Unfortunately, Wal-Mart also has experienced several blemishes throughout its history and is often cited for not living up to very high ethical standards. As a matter of fact, among employees, Wal-Mart is listed as one of the least-admired corporations to work for, and many have charged that Wal-Mart is deceptive and manipulative.

One of the most common criticisms of Wal-Mart is the way it treats its employees. While everyone can understand that the bottom line for any corporation is to control labor costs and to increase profit, Wal-Mart has been charged with paying its employees consistently poor wages. Wal-Mart claims that it offers health care benefits to its full-time workers, but the fact remains that Wal-Mart employees must pay quite a bit more of their health care costs than employees who work for other corporations.

Another charge that is consistently leveled against Wal-Mart is that it pressures employees to work overtime without overtime pay. In some instances, former employees claim they were asked to work "off the clock." Such claims can be heard in just about every town where a Wal-Mart is located.

Wal-Mart has been fined for violating child labor laws and the Americans with Disabilities Act. Management in a multitude of Wal-Mart stores scattered throughout the United States have been accused of sex discrimination against women employees, who claim they have been denied equal opportunities within Wal-Mart's management infrastructure. Instead, they have been stuck in low-paying jobs. This claim may be buttressed by the fact that more than 70 percent of Wal-Mart employees are women, while men, hold nearly 90 percent of store management positions.

This single claim brought about one of the largest civil rights class action lawsuits in the state of California. In 2004, a California federal judge ruled that a lawsuit on behalf of female employees of Wal-Mart could proceed.

Wal-Mart also has been accused of hiring illegal aliens in a number of states, and has actually paid them less than minimum wage, no medical benefits and denial of overtime pay.

It is easily understood that, while Wal-Mart, as a whole, promotes employment and benefits for many communities, it also has a downside. This dilemma causes one to wonder, what is the proper role of business management within the community? Even further, what is the proper role of business within society?

Business managers do have a responsibility to earn a profit for stockholders, but at the same time, also have the ethical responsibility to customers, employees, and suppliers. Which is more important?

Conclusion

So what do you think? Does Wal-Mart have responsibility to everyone? From customers, to suppliers, to employees, to stockholders: Think about how Wal-Mart personifies the importance of business and ethics practiced by a single corporation. Who ultimately pays for Wal-Mart's low prices?

Corporate responsibility is not black and white; It's filled with fields of gray. Whether the defense, medical, financial, or retail industry, corporate responsibility involves a multitude of issues that include, but are not limited to, decency, integrity, fairness, and accountability.

 
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