Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
By James “Rick” Youngblood CFE
Corporations throughout the world are faced with the problem of dealing with ethical violations by those in their employ. Compliance with the company’s standards of ethical behavior is one area in which management must have 100 percent participation and agreement from its employees. Non-compliance or unethical behavior could prove detrimental to the company’s organizational stability as well as to its economic future. But in order to ensure compliance by employees and to provide a proper understanding of what constitutes ethical behavior, the company must make sure employees have a solid definition of ethics.
When dealing with the various aspects of ethics in the business environment, there are several important factors to keep in mind. There are three concepts, acting together, that produce a solid outline for acceptable ethical behavior: behavior, values and ethics. These three create the foundation on which professional ethical behavior is established. Each of the three factors is contingent upon the other two, and the three work together to provide a thorough understanding of business ethics.
Webster’s Dictionary (1992) defines behavior, values and ethics as follows:
Behavior is the manner of one’s conduct, demeanor and deportment.
Values is an abstract concept describing what is desirable, worthy or right, such as a belief, standard, or precept.
Ethics is the study and philosophy of human conduct, with emphasis on the determination of right or wrong.
Business scholars are in general agreement that values influence behavior. An individual with strong beliefs will express those beliefs in his behavior. These values underlie the development of individual attitudes that lead to specific decision-making behavior. Individuals are more inclined to behave in accordance with their strong beliefs when arriving at a decision. Individual decisions are based more on the core competencies of the person and less on other outside driving factors.
Managerial scholars tend to agree that personal values play a significant role in the overall dimensions of ethical decision making. People are more inclined to act in a manner consistent with their inner core of beliefs and desires than with other influential factors. Even though this philosophy adds credence to the value of strong core ethical beliefs and standards, it must also be understood that the behaviors and values of societal members will not provide a panacea.
The underpinnings of ethical standards reside within each individual person. Henry Mintzberg has stated, “It is unrealistic to suppose that individuals can somehow divorce from their thinking their ideas on what is morally acceptable or unacceptable.”
Ethics has also been defined as the study of the morality of human actions; hence, the standard for these actions. The subject of morality can be applied to the overall ethical equation. Morality can be defined as the property of an action by means of which it conforms to a norm of human conduct.
These characteristics of ethics, values, behavior and morality provide a solid foundation for the development of ethical standards. These standards hinge upon the concepts of human conduct and the various norms that guide human behavior. By placing societal norms within the overall ethical formula, additional outside factors can influence individual actions.
When a survey was taken of one hundred business managers, fifty percent defined ethical as “What my feelings tell me is right.” This further substantiates the fact that ethics are primarily personal but may have outside influences.
Most individuals will use their own personal internal guidance systems to determine a course of action. This guidance system is established over time and is accumulated through contact with outside forces. Opinions and beliefs are not formed in a vacuum; they are developed through interaction with other members of society. Certain beliefs and traits will be retained; others will be rejected because they do not conform to an individual’s personal desires or attitudes.
Relativism can also have a significant role in the development of ethics and ethical behavior. The proponents of relativism believe in the shades-of-gray theory and place less faith in black and white issues. Ethics are driven by personal, social and cultural issues and are relevant to individual daily situations. A person’s ethical standards can vary, based upon situations presented more than on role sequences. -Relativism has four individual factors: Naive, Role, Social Group and Cultural. Naive relativism hinges on individual standards of decision making and limits outsiders to knowing all of the factors that pertain to individual personal behavior. A naive person does not possess all of the pertinent information to make a moral analysis of an individual decision-making process. Role relativism separates the individual from decisions that are made in the public sector. Although a person may not agree with the activity, he goes along for the good of the organization.
Social relativism takes into account industry practices while relying on various social norms to render ethical judgments. Cultural relativism accepts the overall cultural norms of a society and the practices of an established institution. There is no outside judgment of established norms and cultures in cultural relativism.
Ethics or ethical behavior has wide and varying interpretations and takes into account many external and internal societal forces. These outside forces provide the groundwork and lay a foundation for the establishment of individual ethical beliefs. The individual beliefs established are then followed, both personally and professionally. Because of the uncertainty of individual ethical standards, employers may be presented with potential ethical dilemmas.
The ethical dilemma facing corporate America today is one of complexity and unforeseen circumstances. Trust must be placed in each and every business associate, with the hope that the employee will act accordingly and comply with the set policy standards or code of ethics. However, when individual and corporate ethical standards mix, there can be severe conflict.
Morality within a corporation has been defined as doing what is right in the corporation, which is not necessarily what is right in a man’s house or church. What is right in the corporation is determined by what the guy above you wants from you. These dual standards, which exist within much of our working society, can wreak havoc on both organizational and individual ethical standards. What is right or wrong, based on individual or organizational standards, could be as different as the attitudes of residents of separate continents. The corporation sets the desired ethical requirements, while the individual mind operates on ingrained values and behaviors.
This ongoing duality sets the stage for a potential business/personal conflict. This value conflict exists within the corporate boundaries. At times individuals must compromise their own individual values to retain membership within a specific group. These groups, at times, defer their values to that of the organization.
The businessman is, first of all, a man. As a man, he shares the universal trait of wanting to be certain that his life has meaning and purpose. But the nature of his role as a businessman places him in an ongoing position of conflict. This conflict brings to a head the process of reconciling individual values and potential corporate conflicting values. One way to circumvent this conflict is to develop a company code of ethics.
Today, nearly every organization in corporate America has established an individual policy pertaining to a Code of Ethics. Such policies have gained acceptance throughout the business world over the past thirty years. In 1964, only 40 percent of the largest American companies had a specific ethics policy. By 1987, the number of organizations with ethics polices had increased to 85 percent. The number of organizations developing such policies continues to grow.
When establishing an overall ethics policy, companies should pay particular attention to some specific areas. Almost all corporate ethics policies should contain a section pertaining to conflicts of interest to help prevent actual or apparent improprieties related to all business transactions. Employees working for the organization should have established policies related to business operations.
In one survey, companies were asked to rank the top 26 issues relating to business ethics. Conflict of interest, misuse of proprietary information, misuse of other businesses’ information and methods of gathering competitors’ information were listed among the top 12 responses. Organizations are concerned about the compromise of operational and proprietary information by personnel within the organization.
The problem facing many organizations is how to ensure individual morality and to police the nonconformists. A majority of organizations have written in their ethics polices, detailed guidelines pertaining to violations of the code. Termination is always the most severe level of retribution for violations of the code. Other punishment levels also exist, each carrying a separate but well-defined punishment assessment.
Management is ultimately responsible for establishing and monitoring enforcement measures for an organizational ethics policy. The enforcement and investigative aspects of corporate ethics policies normally rest with the corporate security department, legal department or internal audit department. Questions of malfeasance and other levels of deviance from stated policies should be referred to a specific department for investigation and reporting purposes. Follow-up personnel actions pertaining to code violations should come under the venue of Human Resources or Corporate Ethics Boards. Punishing authorities should be separated from the initial investigative authority.
A majority of policy violations can be quickly and easily identified, with punishment being swift and decisive. However, other variations from the stated polices can be concealed with little effort and little evidence of a defined paper trail. Questions of intent, malice and deception have to be answered. If suspicions of policy violations are raised, the allegations have to be proven.
The question of suspected ethical violations and other general violations of ethics policies should be addressed in accordance with a corporation’s ethical outline. These businesses should develop their individual ethics policies with regard to the organization in question. The information must be clear and concise and must be disseminated to each and every affected associate. Ethics policies must be referenced continually, enforced and followed, from top level executives, all the way down to each and every associate.
Organizations must understand that their well-investigated, well-written and well-disseminated ethics policies will not be followed to the letter and violations will occur. Every day employees will be exposed to moral temptations with potential conflicts of interest. Depending on the employee’s pre-existing behavioral, value and ethical standards, he will follow either his personal or his professional interests.
An understanding of what is right and what is wrong resides within each individual, based on the individual’s belief system. Although it is always one’s moral responsibility not to give in to immoral temptations, each individual must face the temptation himself, armed only with his own individual behavior and values. In order to ensure conformance to a corporate ethics policy, sufficient effort must be taken on the front end of the employment process. Screening processes should focus on individual behavioral, ethical and value-driven beliefs.
Corporate ethics policies, once established, must be continually reinforced and championed as proper business behavior. The more managerial commitment that is placed within the corporate ethics policy, the greater the probability for compliance. Proper ethical behavior is owned by the individual, influenced by society and eventually governed by the individual.
James “Rick” Youngblood, CFE, is President of JRY & Associates, an organizational security consulting firm.
© Copyright 1997 Alikim Media
Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a …
Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a …
Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a …