Ethical Benchmarks
As you can see, ethical business behavior is critical to the success of an enterprise. An ethics checklist can be created to enable management to make the correct business decisions. Management should first gather all pertinent facts and decide on critical issues. It is derived from these facts and issues that a set of alternatives can be determined that would satisfy the stakeholders. Within the alternatives, questions about legality, consequences, and public relations should be determined. The alternatives should not violate company values of self respect and responsibility. If the alternative violates values, determine which values are most important and choose the alternative that is most consistent with your values.
In creating an ethical workplace, management must set the tone for its employees and stakeholders. As such, management must not tolerate unethical behavior and should set the example for others within the firm. One method management may choose to set the correct and ethical way of doing business is to set policies and procedures that guide correct and fundamentally sound behavior. Companies may decide on a code of conduct that benefits the welfare of the employees, customers and suppliers. By acknowledging the interests of these types of groups, the goal of profit maximization could be achieved. In addition, firms should provide training to employees concerning ethical decision-making processes. The training will help to openly discuss ethical problems and to provide a benchmark for employee behavior. Corporate compliance programs should be set up to monitor compliance with recently enacted law.
In 2002, amid the scandals at WorldCom and Enron, the Sarbanes-Oxley Act was enacted. The act is a United States federal law passed in response to a number of major corporate and accounting scandals involving prominent companies in the United States. These scandals resulted in a decline of public trust in accounting and reporting practices. The legislation is wide ranging and establishes new or enhanced standards for all public U.S. company boards, management, and public accounting firms. The first and most important part of the act establishes a new quasi-public agency, the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, and enhanced financial disclosure. See: http://www.sarbanes-oxley.com/
Due to the act, many corporate entities developed corporate governance rules which established the rights and responsibilities of a corporation's management. To be effective, compliance should be integrated within the firm and monitored by a separate committee.
Ethical problems do arise when decisions are made with underlying trade-offs or conflict. Management may decide on a course of action that satisfies owners and shareholders but the decision may adversely affect other stakeholders.
Example:
GGH must reduce costs to stay competitive in the market. Management has found two alternatives to the solution. One would be to reduce the upper management through attrition and restructuring, the other would be company-wide lay-offs. Would it be better to trim the executive force or to lay off employees?
Neither decision would necessarily be unethical, but it's a question of which interest group—those employees who have been faithful for years, or upper management—should take priority in the decision. One of the best ways to learn about ethical behavior might be to learn from the behavior of other firms.