Core Assessment: Ethics Policy

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Table of Contents

Introduction
Ethics and Policies evaluation
Critique of the Policy Standards
Conclusion
References

Introduction

Ethics entails learning to recognize and differentiate what is right or wrong, and then choosing to do what is right. Organizations commend the subscription of all its employees to uphold the highest ethical standards alongside ardent professional conducts.

The codes of ethics provide basic guidelines meant to oversee business practice performance, personal conducts and professional standards anticipated of every organization’s associates. The various organization’s extrinsic observers and critics attribute the general organizations perception to the conducts of its associates.

Consequently, to instill substantial public confidence and general public interest to the organization to support its business is crucial for positive ethical codes of conduct to begin right from the subordinate organization’s employee in the hierarchical order up to the most senior staff member.

The different distinguished policies that help put into place desirable organizations codes of conduct stand engineered in such a way that they give a hand in prevention and reduction of conflicts arising between individualistic interests and the overall interests of the organization.

They also intend to help promote security and confidentiality of the organization’s internal operational information, guarding the employees and associates of the organization against violation of law through making decisions that are contrary to the established statutes, or in accordance with the internal regulations and policies within an organization’s horizons among others.

Even though the policies on ethics are crucial and advocated for at different magnitudes at varying levels of organizations level of administrations, critics and proposals for alternative redesigns of the policies to expand or replace policies are hardly absent.

Ethics and Policies evaluation

Because of mega scandals such as Enron among other corporate scandals, the congress brought Sarbanes-Oxley Act (SOX) into law to help combat fraudulent activities within the public traded institutions. In section 406 of the act, the U.S Securities and Exchange Commission (SEC) is required to call upon all ‘issuers’ to disclose constituents of their ethics policies during yearly and other reports filed to SEC.

In the act, codes of ethics are defined as “standards reasonably necessary to promote honest and ethical conduct, accurate and timely disclosure in periodic reports and compliance with applicable governmental rules and regulations” (Kirrane, 1990, p.53). To evaluate the level of compliance of an organization to the requirements of the act entangles an audit action.

The organization performance in response to its own internally established codes of ethics seems, therefore subjected to variance of the established standards. Performance in accordance with SEC requirements: which seeks to ensure compliance to the government rules and regulations, which are prone spontaneous state of influx, becomes a challenge to commitment of the organization to its own internal ethics policies.

Nevertheless, an organization can provide incredible defense to its ethics policy and provide adequate mechanisms to ensure the effectiveness of the policies and make pragmatic strides to ensure that the policies are followed. This way, an organization can be sure that the ethics policies take the proactive role of internal control of its operations.

Committee of sponsoring organizations of the Tread way commission (COSO), established in 1985, sought to enhance the control function of the organization’s internal ethics policy.

The committee strategizes frameworks for guiding issues dealing with internally instigated fraudulent activities within an organization, fraud deterrence and internal controls. Kirrane (1990) notes that, “COSO recognized the importance of internal controls in creating an environment of fraud deterrence and that “unmonitored” controls tend to deteriorate” (p.55).

It is in accordance to priory discussed government interference with the organizations ethic policy that organizations such as the bank of America has formulated their codes of ethics under that tag “the bank of America core values” (2011, p.1). The bank spells out five core values: teamwork and trust, doing right things, winning, inclusive meritocracy and leadership.

The bank’s head, Brian Moynihan, believes that these codes of ethics have the capacity to propel the bank to success. According to the bank of America, he laments that the values present “what we believe in as individuals and a team, and how we aspire to interact with our customers, our shareholders, our communities and one another” (p.2).

The compliance to the established ethics policies is a shared commitment in which to facilitate compliance to the governmental requirements enforceable through its established legal arms demands the bank to make appropriate adjustments to their ethics policy frameworks.

Brian notes, “…the code of ethics that we review each year contains new information this year about making good decisions, interactions with government employees, identifying conflicts and anti-corruption”.

Brian’s concern sound consistent with the fruits anticipated from inculcation of proper ethics policy in an organization to mitigate penalties and criminal fines as consequence of shoddy organizational employee’s, agents and officers acts. In an ideal world, commitments by organizations to adhere ethical conducts remain directly reflected by an organizations urge to do just the right things.

Mitigation is of great paramount since mitigation attempts help to eliminate an organization’s catastrophic collapse and prosecution. Kirrane (1990) notes that “Existence of a good and demonstrable effective compliance program is critical to an establishment, the government, and the organizations “good corporate citizen” (p.59). Evidently, a satisfying ethic policy should have this essential element.

Critique of the Policy Standards

Conflict of interest policy

The concept of conflict of interest is viewed from different dimensions, especially while considered in the formulation, evaluation and implementation of ethical policies. Sims (1991) argues that conflict of interest “involves the abuse — actual, apparent, or potential — of the trust that people have in professionals” (p.494). Conflict of interest results to organizational officers compromising their reasonable judgment credibility.

A more simplistic definition of conflict of interest states that “A conflict of interest is a situation in which financial or other personal considerations have the potential to compromise or bias professional judgment and objectivity” (Sims, 1991, p.496). Many varieties of conflicts of interest exist.

However, all of them entangle the application of one’s power legally conferred to him/her by an organization for egocentric financial or personal gains. The various established ethic policies have a responsibility to ensure that conflict of interests does not occur at both individual and organizational level.

The bank of America codes of conduct, for instance, provides that all the bank’s associates must recognize the various ways in which the conflict of interest occurs and that on recognition they should take some certain steps.

The bank claims that conflict of interest occurs when the corporation illegitimately places some specific interests over its customers, when conflict arises between two or more customers of the corporation with repercussions of likelihood of risks of material damage and or when the interests of an employee’s compete with the obligations of the corporation.

The bank believes that such situations have the capacity to interfere with the corporation’s employees or associates to make judgments and hence posing a danger to fulfillment of the banks’ duties. To mitigate the repercussions of conflict of interest violations, the bank refers the culprits to various professional help for educational purposes.

According to the bank of America (2011), for instance, one may seek “counsel through your manager, your primary compliance or risk officer or your designated conflicts officer” (p.4). This policy stands the critics since apart from giving circumstances under which unethical conducts may emanate, provides a positive remedy for the good of the employees.

A corrective strategy and reinstating the guilty individuals have the capacity to instill the desire to fulfill and meet organizational obligation requirements to the culprits as opposed discharging the ethical codes of conducts defaulters. The policy is training orientated. Any ethical program is “essentially useless unless all staff is trained about what it is, how it works and their roles in it” (Sims, 1991, p.499).

Furthermore, a policy designed while considering a room for training as opposed to policies that may be perceived as just ‘open’ allows the staff to be fully aware of polices procedures. It is impossible to avoid a possible mistake if at all the existence and the manner in which a problem results stands known. Through training, financial conflicts of interests remain dealt with ease.

Even though a policy to counter conflict of interest through training, ardently addresses the problem, intangible conflicts of interest remain problematic since they are not only widely recognized but also widely shared.

Privacy, confidentiality and information security policy

Amongst the spectra of ethic policies, organizations establish policies to guard against insecurity, foster confidentiality, and privacy of organization’s information. The various existing policies remain so designed, for example, in the banking industry to ensure, that the employees or associates of an organization, hold customers, bank, associates and supplier information secure and confidential.

The bank of America, in line with policies conducts privacy and protection of information policy. This policy requires an individual to discuss only close information about the bank with people who only need to know it.

According to the bank of America, “the associate privacy policy outlines responsibilities for associates, managers and services providers when requesting, using, transmitting and disposing of associates information” (p.5). The policy places strict requirement for the employees to ensure that the bank’s assets are secure and that they should only use it for purposes, which are in line with the core business of the bank.

To foster compliance with the policy, the bank conduct review, recording and monitoring use of the company’s assets without priory noticing the user of the assets. The system also establishes various disciplinary actions against those who misappropriate, steal or embezzle the institution’s funds, use the bank’s assets for individual gains or even remove the assets of the bank without rightful authority from the respective concerned manager.

In any organization, confidentiality, privacy and information security are treated with utmost strict concern. Critics however, emphasize that enforcement of organizational policies deserve to be viewed from different perspectives rather than as a single whole.

Kirrane (1990, p.56) claims that operational challenges can be categorized into attitudinal or systematic despite the fact that overlaps occur between the two categories.

Combined with training on the relevance of upholding this policy, attitudinal approach, which refers to “the attitudes of individuals and systems about the value of organizational ethics review and a lack of knowledge and/or awareness of the contribution that this type of review may make to the functions and functioning of an organization” (Kirrane, 1990, p.56).

This may greatly facilitate adherence to the policy requirements without infliction of fear in case of bleach of the policy. Furthermore, to enhance compliance to the policy an organization can improve adherence to the policy by looking at the mechanisms of fostering it from systematic perspective point of view.

Redesigning such policies this way, workers and all concerned personnel charged with the responsibility of ensuring confidentiality of organizations information, will amicably relate the consequences of failure on their part to comply with the laid policy to the devastating effects to the organization, which would translate into negative impacts on their part rather than to policy-oriented anticipated victimizations.

According to Kirrane (1990), “…systematic approach refers to putting systems in place within the organization/institution that impact upon the ability of the ethics committee to contribute to policy development and review” (p.58). The idea here is to provide avenues to be followed rather than direct dictation of the ethics codes.

Such an approach not only make the worker adherence to the institution’s policies realizable but also enhance the relationship between the organization’s policy enforcers and the employees which are for the general good of the company since it fosters the operational effectiveness and personal willingness to take responsibilities in case things go haywire.

Policy on compliance with the law

Every organization’s operation must be in accordance with the established legal laws as determined by statutes or constitution. Therefore, ethics policies within an organization must be consistent with the laws since the law, is the principal determinant of acceptable codes of conduct. Quite often than not, ethics policies encompasses laws dictated by the force of morality but also resting on statutes and constitutional foundation.

The existing policies provide that individuals working in an organization should not take action on behave of an organization or personally that undermines or serves to violate regulations, any law or internal policies that affect the organization in question. According to the policy, every employee in an organization has legal responsibility to in all possible ways to unveil disguised criminal activities as legitimate activities.

This is particularly crucial as part of ethics in banking industry where cases of money laundering are rampant. Bank of America, for instance, requires employees to make reasonable attempts to unveil true customer’s identities. The policy also seeks to make sure that the associates do not compete with the corporation’s position for self-egocentric gains.

In compliance with the anti-bribery and anti-corruption laws governing fair practices, associates need not make promises or make valuable offers to influence the manner in which decisions are arrived at. Involvement in such acts exposes organizations into legal actions, especially on considering cases of strict liability in which an organization is held responsible for all acts of misconduct executed by its employees.

According to Sims (1991), ethical requirements for an institution cannot be pegged substantially on the legal capacity of an institution to take strict liability in the occurrence of fraudulent criminal acts by organizations employees (p.500). He noted that “crime and fraud will continued to flourish, unless those who perpetuate it are decisively dealt with” (p.501).

Important to note is the fact that incorporation of religiously instigated moral persuasions in the ethics policies formulations are not adequate to curb criminal acts. Rather as part of mitigation strategies, ethics policies need to be redesigned to create viable room for “adequate legal sanctions to be imposed against the policy violators and the beneficiaries” (Sims, 1991, p.501).

The modified ethics policies should amicably make provisions for professional and legal limitations on the external auditors in as much as fraud detection is concerned in an attempt to provide an extension of the ability of the external auditors to not only detect but also compile reports on fraud.

This new approach to curb fraudulent acts has anticipations to succeed since the latter are the aggrieved parties in case of collapse of organizations. However, the success of various ethical policies designed to ensure compliance with the law is dependent for the better part on the political goodwill. This is particularly true since “unrealistic government detectives encourage corrupt practices in the market place” (Sims, 1991, p. 503).

Furthermore, during legal proceeding involving fraud in accordance to the existing ethics policies, there is possibility of burden of proof to be shifted to the accused. This mainly happens when “malpractice involving unjustifiable secretion of wealth” (Sims, 1991, p.503).

In countries like Nigeria, this is contrary to the existing ethics codes stipulations. According to Sims (1991) laments, “the relevant section of the criminal code act must thus be amended” (p.505). Lastly, ardent training should be incorporated in the ethics policies aimed at reducing fraud since innovative methodologies to cover fraudulent acts emerge at all times.

Varying circumstances brought about by technological sophistications advances render otiose the existing legal stipulations on acts of fraud. Sims is to the opinion that “in addition to the forfeiture requirement in the event of successful prosecution must be concluded, restitution and tracing” (1991, p.506).

Unfortunately, some courts are lenient to impose sanctions. Consequently, minimal stipulations detailing penalties should be incorporated in the organizational ethics codes of conduct. “Consideration should also be given to the imposition of times which is multiplier of the amount involved as is the case with the violation of some tax laws to serve as a further deterrence” (Sims, 1991, p.506).

Governance and administration Policy

In virtually all organizations, an ethical policy must be established to ensure cute administration and governance of all other ethics policies. According to bank of America, this is achieved through establishment of an oversight ethics committee, which “resolves issues regarding the code of ethics, including potential violations and certain exceptions, and review information from the ethics and compliance hotlines” (p.5).

The existing governance and administration policies require that means be provided to ensure proper reporting of misconducts, accounting, codes waiving, observance of codes of ethics and conduction of annual training, frameworks for making right decisions and interventions while relating to various governments employees. As the existing ethics codes of governance are, they are good policies.

As the bank of America reports, strict observation of business ethics within an organization is necessary since “the decisions made by an institution and associates impacts not only a corporation and the corporations fellow associates, but also the shareholders and communities as well” (p.5). The policies also provide guidelines that can facilitate making of good decisions.

For instance the bank of America administration and governance ethics code of conduct demand it associates and its employees to take into consideration both positive and negative facts, consider potential options and the possible repercussions, take into consideration all relevant laws, values and policies and also competing interests before making any decision that may be perceived as informed decision.

The existing policies also make associates and be bound by the organizations codes of ethical conducts by requesting them to make personal agreement that he/she shall be bound by the same. This in an important aspect since an individual cannot accept to be bound by a rule that he/she is not well acquitted.

The policies, therefore, foster information availability to the associates through education: something vital for success of any organization. The policies also establish various accounting disclosures, procedures and operating controls committees. All responsible organizations information suppliers must comply and adhere strictly to the controls not only with an organization but also with its third parties.

In addition, with reference to the bank of America, all associates are required by the policies to take responsibility in promotion of full, accurate and timely disclosure of reports to the SEC or “other global regulators, as well as in other public communications made by corporations” (p.7).

This way the existing policies encourage transparency and hence presentation of the corporation’s good name to its esteemed customers necessary for thrive of the organization in the competitive global business arena.

Conclusion

An effective internal organizational ethic policy to promote ethical and fair actions is paramount as a basis of good practices of an organization’s business. The codes of conduct present a checklist from which comparisons of the performance of organizations associates in terms of upholding the ethical standards can be checked.

Where derailment occurs, viable corrective actions can be taken to ensure integrity, and acceptable values, which have the capacity to foster good business practices such as good governance and administration and prohibit other conducts such as law violations and conflicts of interest. In as much some existing ethics policies are commended, in some policies redesigns are crucial.

References

Bank of America. (2011). Bank of America Codes of Ethics. Web.

Kirrane, D. (1990). Managing Values: A Systematic Approach to Business Ethics. Training and Development Journal, pp. 53-60.

Sims, R. R. (1991). Institutionalization of Organizational Ethics. Journal of Business Ethics, 10, pp. 493-506.

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