UnitVIII Study Guide

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PHI 6301, Business Ethics 1 Course Learning Outcomes for Unit VIII Upon completion of this unit, students should be able to: 5. Analyze ethical obligations related to consumer protection. 5.1 Explain some main points of a company’s code of ethics. 5.2 Explore how a company’s code of ethics may protect the consumer. Required Unit Resources Chapter 4: Corporate Culture, Governance, and Ethical Leadership In order to access the following resources, click the links below. Chun, R. (2019, March). How virtuous global firms say they are: A content analysis of ethical values . Journal of Business Ethics, 155 (1), 57–73. https://libraryresources.columbiasouthern.edu/login?url=https://search.ebscohost.com/login.aspx?dire ct=true&db=bsu&AN=134918486&site=ehost-live&scope=site Kaptein, M. (2011, March). Toward effective codes: Testing the relationship with unethical behavior . Journal of Business Ethics, 99 (2), 233–251. https://libraryresources.columbiasouthern.edu/login?url=https://search.ebscohost.com/login.aspx?dire ct=true&db=bsu&AN=59292118&site=ehost-live&scope=site Unit Lesson Perhaps one of the most significant aspects of a company, organization, or business is the code of ethics it adheres to for its day-to-day operations. In recent years, more companies have developed a code of ethics that reflects their ethical principles. Companies believe that an effective code of ethics will provide a more principled approach for their workforce, leadership, and business practices. We will discuss how a code of ethics became an important part of business, why it is so important, and whether it benefits the company in some way. Contemporary business ethics and practices did not emerge until the mid-1970s (De George, 2012). Business ethics was fostered and developed by the U.S. government. After the U.S. Foreign Corrupt Practices Act was passed in 1977, corporations began to implement some type of code of ethics. It was not until several years later the Organisation for Economic Co-operation and Development (OECD) began adopting similar legislation. Additional corporations adopted codes of conduct into their organizations about this time as well (De George, 2012). During the 1980s, a second initiative was led by the U.S. government that led to the Defense Industry Initiative (DII) that was designed by contractors as a result of irregularities in several U.S. government contracts. During this time, the implementation of codes of conduct and the establishment of ethics training programs generally began to emerge. The code of conduct and ethics training programs were implemented to monitor improper conduct among employees and to detect whether codes of conduct were being followed or violated (De George, 2012). During the early 1990s, a document emerged called the Federal Sentencing Guidelines, which firmed up the financial initiatives for corporations to appoint ethics officers and to promote ethics training programs. The programs implemented a code of ethics as part of the training and began enforcing a code of conduct. Organizational leaders also became aware that such codes of conduct were ultimately cost-effective. As a UNIT VIII STUDY GUIDE Corporate Culture, Consumer Protection, and Codes of Ethics
PHI 6301, Business Ethics 2 UNIT x STUDY GUIDE Title result, codes of conduct were no longer considered a doubtful value as they had been in the past. One additional initiative to implement a code of ethics was the result of the Sarbanes-Oxley Act in 2002. The initiative was enacted as the result of the Enron accounting crime and similar scandals (De George, 2012). As a consequence of some initiatives and related legislative actions put forth by the U.S. government as described above, corporations needed to confront their newfound tasks and to create new roles in their organizations. This included ethics and compliance officers and related personnel, as well as new initiatives to create codes of ethics in their respective organizations (De George, 2012). A question that should be asked is what roles and responsibilities a code of ethics might play in organizations. One key role is to guide individual behaviors and actions. This could prevent some unethical behavior, not only by managers and workers, but also by the entire organization. Additionally, when a code of ethics has been adopted and implemented by an organization, everyone in the organization can be clear about what ethical conduct standards are expected; in short, everyone can avoid the wrong things and focus on the right things. What positive and negative outcomes can result from an organization’s code of ethics? Before we answer that question, we should define what codes of ethics are. According to Stevens and Buechler (2013), codes of ethics are a documental instrument designed to articulate and promote the values and principles of an organization. Most effective codes will also do the following: • Delineate what is acceptable conduct of employees. • Outline what is appropriate while engaging in organizational activities. • Define the responsibilities of the organization to all stakeholders. Unfortunately, some companies have a code of ethics merely for the sake of outward appearance and reputation but do not adhere to them. Other companies may take their code of ethics quite seriously trying to integrate them into all aspects of organizational activities (Stevens & Buechler, 2013). Some companies attempt to align the code of ethics with their corporate social responsibility (CSR) documents that they may promote to their respective customers and stockholders as well. To be effective, codes of ethics must be culturally embedded into the organization. If they are not, codes of ethics may be perceived as separate documents and may not be enacted upon, therefore not relating the purpose, values, objectives, or mission of the organizational stakeholders. Of course, weaknesses in any organizations’ code of ethics can surface or become apparent. Lehman Brothers is just one example whereby a code of ethics did not prevent the organization from failing during the 2008 economic crisis that led to its bankruptcy. One study done by Stevens and Buechler (2013) revealed several interesting facts regarding the culture of Lehman Brothers, including some of the following: • The code was nondescript and not unique to the organization. • There were also little, if any, comments given in the code about how the organization could be helped in times of crises and therefore how it might evolve in case of a serious emergency situation. • Few details were given regarding the specific ethical culture or any unique ethical values that could be upheld and implemented by the company and in which all stakeholders could participate. • The code did not provide any strategic documentation regarding how the company might remain viable in times of stress (Stevens & Buechler, 2013). As a result of the points mentioned above, it is clear that Lehman Brothers’ ethical code fell far short in being an effective and instructive instrument to help the company during a time of serious economic crisis. The above is merely one study of the weaknesses that could exist in a code of ethics. An important takeaway is that a strong code of ethics needs to be unique, and all features of the code should be expected to be applied to the company culture. This is in contrast to merely possessing a code of ethics that is disconnected from the company culture and does not adhere to the mission, objectives, and policies of the organization. Another important question that should be raised is whether a corporate code of ethics could actually influence the behavior of upper management, employees, and additional stakeholders. Although a study in the Journal of Business Ethics had been completed in the late 1990s that attempted to determine if a code of ethics could influence corporate behavior, little research has been published on the topic. According to Cleek
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