Basically, a code of ethics is a written set of guidelines that are issued by many organizations for its workforce and management to help them perform their roles and responsibilities with its values and ethical standards. In today’s context, well prepared code of ethics plays a crucial role since organizations these days are found encountering many ethical dilemmas in the globalized scenario. This not only helps in creating ethical culture but also serves as a tool used by employees for guiding their decision when they face the workplace challenges while encouraging ethical behavior. From entry level to senior executives are found facing situations in which they must make decisions on behalf of the organization. The typical code of ethics is expected to address the issue of conflict of interest among the members within the organization. These conflicts of interest might represent the conflicting values in terms of accepting or rejecting the gifts from suppliers, nepotism and favoritism used for hiring purpose, maintaining confidentiality of the information and so on. The giant organization like Coca Cola have these terms well addressed in its annual report.
The code of ethics ensures that the resources of organization are utilized in rational and proper manner for the benefit of customers and overall stakeholders in the organization. It presents uniform policies, standards as well as punishment for violations. The expectations from the workers and management are well specified in the code of ethics. In this globalized era, employees and business person frequently faces the situation where they become unable to decide on what’s moral and ethical. Sometimes, it might not be possible for organizations to clarify each and every code of conduct for employees since they are guided by their own values and perceptions. Here, organization must opt for creating an ethical environment in which employees recognize the benefits of complying with the written code of organization. Today, many organizations are found having lengthy sets of code of conducts with no practical applications at all. Those codes are confined to the theoretical statements with very less chance of being equally followed by its workers. Fostered communications, ethical role model, rewarding mechanism for ethical decision maker, and ethics related training might help to some extent for encouraging the ethical decision making at work place.
Among all Fortune 500 companies, about 90% of companies have well set of code of conducts with 70% having statement of vision and values. It is so disappointing thing that most of them uses those code of conducts for impressing the shareholders. The purpose of the code of ethics should not be confined to impressing the shareholders but to apply them in real sense for the benefit of overall stakeholders. The practical application of the ethics will not only enhance the satisfaction level of employees but also improves their performance and overall productivity of the organization. There is the need of proper reinforcement mechanism in an organization for ensuring the ethical practice by all associated members. The code of ethics addresses the issue regarding respect for law, conflicts of interest, insider trading, and preservation of confidential information, bribery, competition and fair dealing which helps in providing clarification on expectation from key worker in an organization. The giant companies have already started presenting their respective code of conducts and ethics in their annual report with the proper supervision and monitoring mechanism through corporate governance. This presents the growing importance of the ethics at work place.
The corporate history of Enron, WorldCom, Adelphia, and Andersen has created circumstances where values and good conducts is a challenging task. The instances like employees violating company rules, workers sabotaging their peers, employees stealing from their own employers and executives overstating performance to shareholders are excessively found in most of the organizations calling for the most effective code of ethics. Policies in U.S. and Latin America provided rules and procedures for employees to stick on to company policies and societal laws while in Japan, most policies were the blend of legal compliance and statements of the company’s vision and mission.
In the past, Ford rushed into the production of Pinto under the intense competition from Volkswagen and other small car manufacturers. Though the engineers had discovered the probable danger of ruptured fuel tanks in pre production crash test, the Ford leaders made decision unethically to continue the production because the assembly line was ready to go. The executive did cost benefit analysis putting dollar amounts on a redesign, potential lawsuits and even lives and analyzed that it would be cheaper to pay off lawsuits than to make the repair. There was no consideration of ethics or empathetic feelings. Had there been well established code of ethics, this would not have prevailed. The situation could have been completely different while valuing the ethical culture in organization. In any organization, the low level staffs tend to follow the path and direction provided by the senior executive so, they must have the outstanding exemplary behavior at workplace. With the increasing role of ethical practice, the Best Buy have the Chief Ethics Officer, Kathleen Edmond, who have created a blog for his company employees so that they can refer to the website and read about the company policy regarding ethically questionable behaviors and learn to defend themselves from crossing ethical boundaries.
The article “Values in tension: ethics away from home”, Donaldson analyzes the ethical dilemmas faced in the global context. The dissimilarities in laws, values and culture among different countries create a great challenge when dealing with many business related issues. The challenge for international business is the adoption of the types of principles that can help them work through the situation of cultural differences while establishing code of conducts for globally ethical business practice. Donaldson in his article emphasizes that realization of ethical business conduct on organization level make sense only when managers are guided by the precise statements spelling out the operating practices and behaviors demanded by the organization. The statement of values and code of conduct make sense only when its practical application is valued in equal manner. This requires the code of conduct while leaving the room for managers to use his/her judgment which requires cultural sensitivity when conducting business in host countries.
For any organization, there are several reasons for which code of ethics are to be formulated and implemented as well. The well established code of ethics contributes in communicating the employees that the organization is committed in doing business in responsible manner. The company standards and expectations are well known from the code of ethics. Company with well established code of ethics creates a culture thereby resulting towards maintaining a high level of work consistent with the values. Consumers also tend to feel reassured due to presence due to the existence of code of ethics in a company. This represents the culture of responsibility and honesty. Another reason for company to consider keeping code of ethics is that it will serve as a reference for corrective action or even termination of the employees failing to meet certain standards in work performance. Any business can always benefit from a well set of code of ethics for avoiding the potential problems as well as to address problems when they happen to arise. If the behaviors of employees and managers are in line with codes, their behaviors are found positively influencing other in organization shoeing that the consistency is important. The code of ethics is crucial from the legality point of view as well. This will help to keep the company away from the legal trouble. A comprehensive code of ethics ensure extra protection if any employee commits a criminal act in the name of company. For instance, if the purchasing manager is engaged in doing the fraudulent act with any suppliers of company, the code of ethics can help convince the court that those sorts of behaviors are not endorsed by that company.
Of course, generating revenue and enhancing profitability position has always been the priority for any business but it is equally important to ensure the ethical conduct among employees for the long term benefit. This ensures that the business have good reputation for following sound professional principles and values that are in line with company’s mission and vision statements. In the context of diversified and globalized economy, it becomes necessary to promote the ethical practice in the workplace. The company can engage the staffs by providing them training with great emphasis on ethical acts. The rewards can be used to promote the ethical behavior. Holding the managers as a role model so that they are credible when they communicate expectations to their employees can also be applied. Frequent interaction with their staffs with the discussion on ethical issues can be done by the management to make them aware about how important the ethics is for the company.
Therefore, the overall long term success of business lies in the fact that there are clear code of conducts defining certain standards and expectations from the all level of employees at work place. Rather than the lengthy sets of principles of conduct, the code of ethics must be precise and reliable with the full clarity in its statement. Also there must be the proper monitoring and supervision mechanism followed by separate unit as ethical section in any organization to ensure fair employment practice. These clear sets of principle will not only serve the purpose of maintaining the reputation for the organization but also helps to tackle with the ethical dilemmas that are most likely to occur at any work place. Each and every member must be engaged in these ethical practice be it managers, clerical staffs or assembly line workers. The ethical dilemmas need to be handled consciously, ethically, empathetically and with intelligence at both individual and social level for the betterment of large group of people. Also, each and every members need to critically process situations, things and environment in which they work and make decisions considering ethics, values and social welfare. However, the code of ethics is often been criticized in terms of providing more protection for the company rather than the protection of overall stakeholders and employees. This should completely be taken into consideration while formulating the code of ethics thereby resulting towards the greater benefit of all the members associated or not.
- The Best Ways to Discuss Ethics, Francesca Gino, Harvard Business Review – https://hbr.org/2011/03/talking-about-ethics-how-we
- The Advantages of a Code of Ethics in Organizations, David Ingram, Chron – http://smallbusiness.chron.com/advantages-code-ethics-organizations-10802.html
- Values in Tension: Ethics Away from Home, Thomas Donaldson, Harvard Business Review – https://hbr.org/1996/09/values-in-tension-ethics-away-from-home
- Ways to Promote Ethical Conduct, Lynda Moultry Belcher, Chron – http://smallbusiness.chron.com/ways-promote-ethical-conduct-24132.html