Code of Ethics

Need for Corporate Ethics

Programs
Almost companies in Sri Lanka have reduced

trust in businesses
Beverage, Milk powder, Meat products, services...

Employees are not legal experts and need

guidance as their orientation is deferent

Compliance orientation
Values orientation

Therefore an ethical program is required.

Values Vs. Compliance

Orientation

Compliance orientation
Requires that employees identify with and commit to
specified conduct
Uses legal terms, statutes and contracts that teach
employees the rules and penalties for
noncompliance
Values orientation
Focuses more on an abstract core of ideals such as

respect and responsibility

Research shows is most effective at creating ethical
reasoning

Ethical Programs
It is a programe that create firm's ethical

climate and helps ensure that all employees

understand the organization's values and
comply with the policies and codes of conduct.
Organizations should develop an organizational

ethics program by establishing, communicating,

and monitoring uniform ethical values and legal
requirements.

A strong ethics program

includes

Written code of conduct

Ethics officer to oversee the program
Care in the delegation of authority
Formal ethics training
Auditing, monitoring, enforcement, and

revision of program standards

Concepts of Code of Ethics

Codes of conduct - represents employee

ethics
Formal statements that describe what an

organization expects of its employees

Codes of ethics - corporate or business ethics

Most comprehensive document and it consists of
general statements that serve as principles and the
basis for the rules of conduct
Statement of values
Serves the general public and addresses stakeholder

interests

Code of Ethics
Code of ethics are formal statements of what

an organization expects in the way of ethical

behavior
It will not solve every dilemma
Provide rules & guidelines
It reflects senior management's desire for

compliance with values, rule & policies in support of

an ethical climate
And it should be specific enough to be reasonably
capable of preventing misconduct

Corporate Code of Ethics

Often contain six core values
Trustworthiness
Respect
Responsibility
Fairness
Caring
Citizenship

E.g. Uniliever
General Code of Ethics focuses on:
Standard of Conduct : Honesty, Integrity &
Openness
Obeying the Law : Laws of host country
Employees : No forced or child labor
Consumers : Consistent value offering
Public Activities : No political affiliation
Competition : strong & Fair
Compliance & Monitoring : Board, Senior Mgt

E.g. Wal-Mart
Wal-Mart's Ethics Beliefs
"respect for the individual,"
"service to the customer" and
"Striving for excellence.

Responsibilities and Obligations to Customers Fair

Transaction with stakeholders Fair Competition

E.g. LG
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Implementing Code of Ethics

Distribute the code comprehensively:

employees, subsidiaries, & associated

companies
Assist in interpretation & understanding
Specify management's role in
implementation
Make employees responsible for
understanding
Establish grievance procedures
Provide a conclusion or closing statement

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Consideration of Code of
Ethics

Ethics officers or committees are responsible

for oversight of the ethics/compliance

program
Coordinates program with top management
Develops, revises & disseminates the code
Develops effective communication
Establish audits & control systems
Provides consistent enforcement of standards
Reviews & modifies the program to improve
effectiveness.

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Communication of Ethical
Standards
Must start with a foundation, a code of

ethics, a procedure for airing ethical

concerns, and executive priorities on ethics
Can educate employees about firm's policies
and expectations, laws and regulations, and
general social standards
Can make employees aware of resources,
support systems, and personnel who can
assist them with ethical advice
Can empower employees.

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Communication of Ethical
Standards
Provides guidance for ethical standards &

activities that integrate the functional areas

of business
helps employees identify ethical issues &
provides a mean to address & resolve
Can help reduce criminal, civil &
administrative consequences including:
Fines, penalties, judgments, etc.

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Oversight of Ethical
standards

Reflect organizational size, culture, values,

management style & employee base

Improve employee understanding of ethical
issues
Influence the organizational culture,
significant others, & opportunity in the
ethical decision making process
Overall, provide for recognition of ethical
issues, understanding of culture & values,
and influence ethical decision making

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Enforcing Ethical Standards

Consistent enforcement is critical
But an internal system for employees to

report misconduct is an opportunity to

register ethical concerns
Ethics hot lines
Questionnaires may be used to serve as
benchmarks
Corrective actions provide standards &
punishment

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Enforcing Ethical Standards

If a company has determined that its ethical

performance has not been satisfactory,

management may want to recognize the way
ethical decisions are made:
A decentralized organization may be
centralized (perhaps temporarily) so that top
level managers can ensure that ethical
decisions are made.
A centralized organization may be
decentralized (perhaps temporarily) so that
lower level managers can make more
decisions.
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Enforcing Ethical Standards

An effective ethics program employs many

resources to monitor ethical conduct and

measure the programs effectiveness
Observing employees
Internal audits
Surveys
Reporting systems
Investigations
Independent audits

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Ethical Compliance Audit

A systematic evaluation of an organization's

ethics program and/or performance to

determine its effectiveness
Can help in establishing codes & program
Should provide a systematic & objective
approach to surveying the ethical condition of
the organization
May be more effective if performed by an
external entity (organizations should
participate in ethics audit instrument
development)
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Mistakes in Ethical Program

Not having a clear understanding of the goals

of the program from the beginning.

Not setting realistic and measurable program
objectives.
Senior management's failure to take
ownership of the ethics program.
Developing program materials that do not
address the needs of the average employee.
Transferring a domestic program
internationally.
Designing a program as a series of lectures.
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Thank You

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