how can business leaders encourage their employees to act ethically

The potential risks and benefits from taking an ethical stand can be high for companies. Hire the right people. Lead by Example. The employees may obligate themselvesto do the work of the particular company for financial gains. Under the new rules, a whistleblower is eligible for a bounty equal to 10 percent to 30 percent of monetary sanctions resulting from an enforcement action. Ethical leadership is very important, most companies set a code of ethics or a mission statement to help guide that needed leadership. Neil Weinberg, “JPMorgan Whistle-Blowers Set to Reap Record $61 Million Bounty,” July 20, 2017. The purpose of a code of ethics is to guide employees in handling ethical dilemmas. Under the act, employers are prohibited from retaliating against whistleblowing employees. Don't separate ethics from day-to-day business: Leaders must make it clear to their employees that ethics is "the way we operate" and not a training program or reference manual. The more you train employees and place an emphasis on the importance of ethical behavior the more your staff will understand what is expected in the workplace. 2. Companies Can Encourage Ethics in the Workplace Companies can encourage workplace ethics by preparing and supporting staff to act right. Interviewers already doing the job a candidate is applying for can ask relevant questions that can lead to answers that reveal a lot about the candidate, such as a propensity to make unethical decisions. Another agency, the Securities and Exchange Commission, also strengthened whistleblower protections and rewards. A whistleblower is an individual such as an employee who reports the misconduct of someone in a position of authority in his or her own organization. Explain the purpose of a code of ethics (why US laws require one for companies listed on the largest stock exchanges). Ethics questions regarding leadership and ethics: 1 How can business leaders encourage their companies to act ethically? OSHA also said the bank must rehire him. 2. While your values don't need to be identical to those of your workers, … Although it is important, or even required in some cases, to have an established and effective code of ethics, it is crucial to the stability of a company to first hire ethical employees. In LaToya J. Murray’s “Sarbanes-Oxley Code of Conduct Requirements,” Chron.com, accessed July 29, 2017. But if we take care of the others, then stockholders will do well. The events can get the word out about their business to many leaders in the community. Two whistleblowers are set to share a record $61 million award from the SEC for helping make the case that JPMorgan Chase & Co. failed to disclose to wealthy clients that it was steering them into investments that would be most profitable for the bank.[5]. Last Name* Encourage open communication. They need to enforce these standards as well. What values are important to our company and its employees? A code of ethics, also known as a code of conduct or statement of values,is a policy statement of a company’s values, responsibilities, and conduct expectations. Stacy Cowley, “Wells Fargo Whistle-Blower Wins $5.4 Million and His Job Back,” April 3, 2017. In order to create a relevant and meaningful plan, you have to know the lay of the land. Most companies recognize the need for organizational leaders to get feedback from their employees. It’s important to know: 1. Ethical conduct can be furthered by not tolerating unethical behavior, setting realistic employee goals, and periodic employee review. Business leaders can encourage their companies to act ethically via various ways. Enron and WorldCom executives used deceptive accounting and sold inflated stock while r… Stockholders come last. Employees generally follow the examples set forth for them by management. They should also have a clear understanding of the ramifications if they fail to behave ethically. It is also important for senior management to model ethical behavior. They also need to make sure that what they are asking of their employees is reasonable. Where are our greatest areas of risk? If managers really want to promote ethical behavior they need to reward it when they see it. Oftentimes companies expect ethical behavior but they fail to acknowledge it. Hold Collective 'Sense-Making' Discussions. Arthur Andersen’s accountants, who audited Enron and WorldCom, turned a blind eye to the fraud. The $5.4 million, intended to cover back pay, compensatory damages, and legal fees, was the largest individual award ever ordered through OSHA’s whistleblower protection program at the time.[4]. Training seminars and workshops are the some ways a business can teach and train it's employees on how to behave ethically in the business environment. If management is emphasizing the importance of ethics at work but doesn’t treat its own employees fairly, it becomes hypocritical. You don’t want to encourage your employees to talk with their children while at work. You can’t expect your employees to follow your code of ethics if they don’t know what it is. If managers want their staff to behave ethically then they must understand that it starts with them. The responsibilities of senior management in modeling ethical behavior include the following: Ethics programs are like an insurance policy. Ethical behavior isn’t something you can teach and hope it will stick. Be active in the ethics program. When managers show that they are invested in the success and well-being of their employees, it creates a company culture that is built on ethical principles. The purpose of a code of ethics is to guide employees in handling ethical dilemmas. Under the whistleblower protection offered by the Sarbanes-Oxley Act, anyone who reports a corporate wrongdoing and believes he or she could be penalized for it can request that the Occupational Safety and Health Administration (OSHA) investigate the matter. Ethics programs disclose important corporate values, often through the use of policies and employee/manager training. Email* Colleagues often see suspicious behavior and are well-positioned to report it or fix it. Most companies recognize the need for organizational leaders to provide feedback to employees. Act ethically and be seen to act ethically. In her book, Seven Lenses: Learning the Principles and Practices of Ethical Leadership (2013), author Linda Thornton says that getting employees to act ethically in … In 2011, the SEC issued new whistleblower rules, required by the Dodd-Frank Act. One of the best enforcement tools is a whistleblower hotline, which is a phone number or other method for employees or other stakeholders to report suspected acts of impropriety, such as fraud, waste, abuse, misconduct, or violations of policy, laws, or regulations. The ethical lapses of global companies, such as Enron, Arthur Andersen, and WorldCom, over the span of a few years caused much devastation. Johnson & Johnson has a relatively simple code of conduct, with just four paragraphs that can be summarized as: Our customers are our first priority, then our employees, then our communities. Situation-specific questionnaires can be customized by a company and used to uncover how a candidate would react when faced with an ethical dilemma. Attracting top talent is significantly easier for ethical businesses. As a company grows, its corporate identity matures and … However, some employees are reluctant to speak up for fear of retaliation.[3]. Discussing the responses gives managers the opportunity to explain why some policies are in place and demonstrate how employees should respond in ethical situations they will likely face on the job. According to a Bayt.com poll on diversity of thought in the Middle … But you need to recognize that for many, especially professional employees, the line between work time and lifetime is no longer distinct. What ethics challenges are common in the work we do? Company*, Check out our new book Managing from the Inside Out written by Jim Hornickel, PMI Project Management Professional (PMP)®, How to Manage Millennials and Intergenerational Teams, Teaching Employees Better Time Management, Five Benefits of Being Flexible During a Crisis, How to Encourage Teamwork While Also Recognizing Individual Strengths, How to Give Credit Publicly Without Embarrassing or Humiliating Anyone, How to Practice Consistency During Difficult Times, Why You Need to Foster Clear and Concise Communication in the Workplace. Whistleblowing pays, and so does an ethics program that prevents the need for whistleblowers. This includes involving the employees in decision making. Avoid setting performance goals that encourage employees to put profit over clients, coworkers, and safety standards. Unethical behavior in the workplace has been around since the beginning of time but that doesn’t mean it has to be acceptable in your company. Catch employees “doing something right” and reward ethical behavior. After a program has been implemented, senior management should monitor and evaluate it and then modify the program as needed or desired to ensure its effectiveness. Here are a few ways managers can promote ethical conduct among their staff. Effective leaders maintain integrity and trust by communicating clearly, leading by example and fostering positive relationships with sponsors, stakeholders, suppliers and employees. If leaders will demonstrate ethical behavior, followers will automatically be motivated to act ethically and adhere to ethical principles and code of conduct. Good intentions and proclamations aren’t enough, so leaders must both model and reward ethical behavior in employees. Although this method is used often, it is important to be aware that references often withhold negative information about a candidate. a. If the whistleblower is an employee who was fired and the termination of employment was found to be improper, the company can be ordered to rehire the individual and give him or her back pay as well as a penalty award. Having codes and policies in place that address ethics is not enough. Employees generally follow the examples set forth for them by management. c. Feedback can occur through informal methods like a simple conversation or through more formal systems such as employee performance evaluations. Ethical behavior should be included in performance reviews and managers can encourage it by showing gratitude when they see it. [2] Without being too detailed or lengthy, this credo expresses the company’s values and gives employees the guidance they need to make ethical decisions. Good … A code of ethics, also known as a code of conduct or statement of values, is a policy statement of a company’s values, responsibilities, and conduct expectations. Ethics Research Center, “National Business Ethics Survey (NBES) 2013,” accessed August 3, 2017. Managers could also implement a system where employees can anonymously submit examples of their colleagues behaving ethically. How Managers Can Encourage Ethical Behavior. For example, introduce the ethics training or be the person to speak. Leaders and managerial staff most importantly can also lead by example. Following business ethics can also be beneficial for the business' employees and operations. However, companies like Costco, Chipotle, and CVS demonstrate that ethics can pay off in business. Did you have an idea for improving this content? It is essentially a moral compass. Ethical conduct will ensure that your business maintains a reputation of professional principles and values. They help mitigate the worst consequences when employees do stray, and they help prevent “accidents” by raising employee “safety” awareness. Research has shown that unethical leaders can increase the likelihood that their employees will also be unethical, and this can break trust and motivation for staff to act ethically. Ethical behavior should be included in performance reviews and managers can encourage it by showing gratitude when they see it. Johnson & Johnson, “Our Credo,” accessed August 03, 2017. In the past, whistleblowers had no protection from retaliation by those they reported—reporting a superior’s wrongdoings often required risking one’s livelihood. Employees need to be taught how to respond in situations involving ethics. This discouraged employees from reporting offenses. Compliance Programs A. Managers should supplement references with another method of weeding out dishonest candidates. The US Securities and Exchange Commission has strengthened whistleblowing protections and rewards. Employees are hired for the company’s tasks. Companies Can Encourage Ethics in the Workplace Companies can encourage workplace ethics by preparing and supporting staff to act right. One ethics activity involves having employees match various scenarios on one set of cards with the possible responses on another set of cards. Every activity , whether it is a training program, a client meeting or an important top management strategy session, should include conversations about ethics. Leaders who talk about ethical issues, support staff and behave in an open and transparent way, send the message to all employees, and the wider world, that ethics is taken seriously. are potential “hot spots”? Hire people with similar values. In a continuing series,MBA's were asked for their opinions on topics related to "Ethics". Ideally, managerial leaders and their people will act ethically as a result of their internalized virtuous core values. As part of the onboarding process employees should be educated on your code of ethics and why it’s important. This is because how ethical you are will determine how you run your business as well as how people perceive you. It should act as a moral compass that guides employees in handling ethical dilemmas. Managers really need to reflect on their current operating methods. Explain senior management’s role in fostering ethical decisions and behavior. Every scenario will have appropriate and inappropriate answers. After the participants match scenarios with responses, the group discusses the decision. It also requires that any changes to an established code of ethics be disclosed to the public. Rewards and Punishments People wants to feel appreciated, and they do have fear of warnings or punishments. Managers should also hold regular workshops on ethics and demonstrate how employees can solve problems ethically. 2 What role, if any, should the existence and availability of an ethics code or policy play in helping executives and management to support and strengthen ethical behavior and resolve ethical issues? It is essentially a moral compass. These reports are usually confidential and may be anonymous. If managers want their staff to behave ethically then they must understand that it starts with them. Therefore, managers need to consider the company’s decisions to hire, train, promote, and pay employees. 11. b. First Name* Ethics programs often involve activities that encourage ethical behavior and reinforce a company’s ethics code/policies. Enron and WorldCom executives used deceptive accounting and sold inflated stock while recommending it to employees and external investors. One method of selecting and hiring ethical employees is the use of personality tests or situation-specific questionnaires. For example, you might implement a system in which people can submit anonymous tips telling about employees behaving in a particularly honest way. It is better to hire someone who is naturally inclined to behave in an ethical manner than to rely on a company code of ethics to encourage an unethical employee to make ethical choices. Many businesses in today's world hold business events for a large variety of reasons. That impact can be positive or negative. Personality tests can be used to determine temperament, outlook (i.e., whether positive or negative), and mood. In 2017, OSHA ordered Wells Fargo to pay $5.4 million to a former manager who said he was fired in 2010 after reporting to his supervisors and to a bank ethics hotline what he suspected was fraudulent behavior. These may include dress codes and respectful behavior. As a result, in 2002, Congress passed the Sarbanes-Oxley Act, which requires that companies listed or applying to be listed on a public stock exchange establish and enforce a code of ethics. THE IMPORTANCE OF ETHICAL LEADERSHIP Management must set and apply ethical standards to which they are committed. Use examples and role play to give employees opportunities to work through various dilemmas. Employees internalize a company’s ethics through actions of leaders, their own experiences, stories from other coworkers and personal observations. Ethics, beyond a set of values, is a culture that every well-balanced company should endeavor to adapt to ensure they give as well as take from their surrounding environment. Calling personal references may also help hiring managers filter out less ethical candidates. This includes ensuring rules are enforced and finding opportunities to discuss ethical dilemmas in daily business. Ethical stands with political and philosophical implications can have a high cost, as the Musk and Kaepernick examples show. How can business leaders encourage companies to act ethically?Managers need to set standards for their company, themselves and employees. Being ethical is a significant part of running a business. The ethical lapses of global companies, such as Enron, Arthur Andersen, and WorldCom, over the span of a few years caused much devastation. Which groups of employees, locations, business units, etc. managers should share information with the employees and should delegate some duties to them. 4. How can business leaders encourage their employees to act ethically? When managers are respectful to their staff they are able to develop a trusting relationship that encourages ethical behavior. Best practices in the selection and hiring of ethical employees involve including the company’s most ethical employees in the interview process. During the … d. Nor do you want to encourage employees to use online time during the workday for personal reasons. First of all, leaders should themselves set up an example in front of their employees. If a manager catches an employee doing something right, they should stop and thank them. http://smallbusiness.chron.com/sarbanes-oxley-code-conduct-requirements-4060.html, https://www.ethics.org/ecihome/research/nbes/nbes-reports/nbes-2013, https://www.nytimes.com/2017/04/03/business/04-wells-fargo-whistleblower-fired-osha.html?_r=0, https://www.bloomberg.com/news/articles/2017-07-20/jpmorgan-whistle-blowers-seen-reaping-record-61-million-bounty, https://commons.wikimedia.org/wiki/File:The_Office_of_the_Whistleblower(SEC)_Symbol.jpg. So do successful ethics and compliance programs. Therefore, many managers enroll their employees in an ethics training program. The employers often have numerous conditions to employment which the employee has to follow. We’d love your input. Step-by-step solution: Chapter: CH1 CH2 CH3 CH4 CH5 CH6 CH7 CH8 CH9 CH10 CH11 CH12 CH13 CH14 CH15 CH16 CH17 CH18 CH19 CH20 Problem: 1BSCP 1C1 1C3 1FR 1OD 1RBE 2BSCP 2FR 2RBE 3BSCP 3FR 3RBE 4BSCP 4FR 4RBE 5BSCP 5FR 6BSCP 7BSCP 8BSCP 9BSCP Ethical leaders are role models who communicate the importance of ethical standards, hold their employees accountable to those standards, and— crucially— design environments in which others work and live that are conducive to ethical behavior. Regardless, I often stress to leaders in positions of power that their actions, ethics, values, and behaviors have a direct impact on the attitudes and behaviors of those they lead, and thus, on the organizational culture. It is important for managers to focus on accomplishing company goals while developing good relationships in the workplace but it is equally important to focus on ethical conduct among employees. Every company should have a code of ethics in place that represents the company’s values, responsibilities, and conduct expectations. Describe the methods of selecting and hiring ethical employees. Image: The Office of the Whistleblower (SEC) Symbol. In addition to establishing a code of ethics, hiring ethical employees, and protecting whistleblowers, key aspects of senior management’s role in fostering ethical decisions and behavior in any organization include planning, implementing, and communicating the specifics of an ethics program. If everyone is on the same page it becomes easier for the team as a whole to adopt the same types of ethical behaviors. Business leaders can encourage their employees to act ethically by implementing proper procedures and rules that mandate employees to hold them selves to a higher standard and take accountability for their actions. Prioritize ethical decisions over sales or profits. In our workplace? Enforce the ethics program, such as by punishing violators. A code of ethics that meets the requirements of the act comprises the standards necessary to promote “honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports” and “compliance with applicable governmental rules and regulations.”[1]. 3. Accordingly, companies will be faced with the prospect that their employees, suppliers, customers, consultants, advisors, and others may report possible violations directly to the SEC without providing the companies with an opportunity to first investigate the allegations and remediate any violations. I like to think of this as ethics from the “inside out.” Relying solely on this “inside out” approach, however, is simply naïve in many circumstances. "Is this question part of your […] If managers hold themselves to a high standard of ethical behavior then they have credibility when they expect the same thing from their employees. Employees will likely follow their example. Show gratitude when someone "blows the whistle" on a practice that could potentially hurt customers or stakeholders. Most leaders in the study reflected on how rapidly their businesses had globalized over the last 10 years and how ethical issues can be profoundly difficult when … Codes of ethics vary in content, length, and complexity. It is useful to point out several reasons why developing a culture where all employees embrace ethical standards can … Managers can also practice ethical leadership through sharing and delegation. Ways Managers Can Encourage Ethical Behavior. Successful businesses start with a good plan. The SEC announced the largest award ever in July 2017. We should set practices which are not permissible, and to address possible ethical dilemmas. Sales quotas and other profit-centered benchmarks can incentivize unethical behavior. 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