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Q: Essential elements of a corporate ethics program and why they are important. ( Answered 5 out of 5 stars,   0 Comments )
Subject: Essential elements of a corporate ethics program and why they are important.
Category: Relationships and Society > Politics
Asked by: bren-ga
List Price: $10.00
Posted: 18 Aug 2002 12:14 PDT
Expires: 17 Sep 2002 12:14 PDT
Question ID: 55931
Need a list of essential elements that make up a corporate ethcs
program, Need to describle what the elements are and why they are
important.  If possible give examples
Subject: Re: Essential elements of a corporate ethics program and why they are important.
Answered By: lot-ga on 18 Aug 2002 17:10 PDT
Rated:5 out of 5 stars
Hello bren-ga

-The essentials of a corporate ethics program are:

A well-drafted and enforceable Code of Ethics and Business Conduct; 
- A "protected" mechanism for bringing complaints, concerns and Code
interpretation questions forward (i.e. complainants should be assured
about lack of retaliation, confidentiality to the extent possible, and
procedural fairness);
- An effective training and reinforcement program which seeks to
communicate standards of proper business conduct;
- Agreement to comply with the Code as a condition of initial and
continued employment, with compliance incorporated into business
objectives as well as individual performance appraisals;
- Accountability and reporting mechanisms, including proper
measurement, auditing and feedback;
- Regular reporting to the board or a special committee on matters
including compliance reviews, program effectiveness and risk
assessment, as well as the establishment of regular opportunities for
board input;
- Most importantly, a tangible commitment by senior management and
leadership by the board in overseeing the corporate compliance
“Integrating these elements into a coherent and effective values-based
ethics program can accomplish a number of objectives. First, it
creates and sustains an ethical corporate culture that guides
decision-making throughout the company. Second, it demonstrates to the
public, government, regulators, employees, customers, suppliers,
investors and competitors that the company’s ethics program is soundly
managed and that the company is trustworthy. Third, it promotes high
levels of individual and corporate performance and compliance. Fourth,
an effective ethics program educates employees and management about
the company’s principles and values and helps them determine
appropriate business practices and behaviour.

Lastly – and very significantly – an effective, comprehensive program
helps to demonstrate that the directors are diligent in exercising
their duty of care.”
The above points are important for implementing an effective corporate
ethics program, otherwise -
1. Corporate ethical failure can be very costly. 
2. Negative publicity and lasting harm to the organization’s
3. Consumer boycotts, 
4. Corporate liability or 
5. Personal liability of directors and officers 
are only some of the possible consequences of unethical conduct on the
part of employees or management.

excerpts from “Corporate Ethics Programs By: Laurence Hebb 
31 Dec 1997

The program once in place needs to be regularly assessed and below are
some audit points: (excerpt from “Ethics and Attestation” )
- Your corporate Mission/Vision Statement and its relationship to the
detailed day-to-day Code of Conduct.
- Thoroughness of your Code of Conduct both as it relates to the
particular industry and the ever-changing federal and state laws.
- Consistency with the core business process and financial and
accounting internal control structure of the enterprise.
- Ethics Officer position and structure of the Ethics Office.
- Top Management's involvement in the ethics program.
- Employment hiring and termination procedures.
- Employees - new and existing - professional training in ethics.
- Surveying employee behaviour perceptions of the organization's
ethics environment.
- Reporting system of both complaints and grievances.
- Investigation procedures for both complaints and grievances.
- Due process and appearance of fairness considerations.
- International concerns, if applicable.
- Employment Practices Liability insurance coverage.
- Regular ethics committee meetings and agendas.
- Annual report to and review by the Board of Directors.
- Such other areas particular to your enterprise and/or industry.
- Such other related concerns as your management may have.

However some ethics programs are viewed sceptically by the public, and
such programs need to be embedded within a company and not just
implemented as a fashion accessory.
Excerpts below from “Ethics and Corporate
Reputation Building” by Michael Coates
Hill and
“Perhaps the first key issue that our industry faces is convincing
people that we take the issue of corporate ethics seriously.
And the second key issue is that our industry has the courage to talk
about ethical issues.
There is obviously a lot of scepticism about the role that PR plays in
corporate ethics. Most people think it comes down to spinning a good
“When a company wants to reinforce consistent, ethical patterns of
behaviour, effective communications among members of that organization
can make the difference between success and failure. For a company to
behave ethically it must live and breathe its code of conduct, train
its personnel and communicate its code through its visioning
statements. It cannot be a manual that sits on a corporate shelf.”

“The third major issue we face relates to the type of advice we give
our clients.Among the many ethical issues we grapple with, the most
fundamental is when to disclose when a client has a problem.
Disclosure and transparency are the bedrock of ethical conduct. The
public can generally accept that governments and corporations make
mistakes. What they can’t accept is stonewalling or cover-up. The
public feels it has a right to know and the media is determined to
feed that quest for knowledge.
Now, advocating early disclosure of ethical issues and problems is
easier said than done. When ethical issues occur, most individuals are
caught off guard. They are understandably fearful of saying the wrong
“The CEO must carry the can and needs to focus on what is in the
long-term interest of the reputation of the company.”

“Which leads me to the fourth most frequent issue and that is what to
disclose. We recommend identifying and acknowledging and rectifying
the problem immediately and … in deference to our legal colleagues, we
don’t necessarily demand accepting responsibility for the issue.
Instead too often concerns about responsibility delay companies’
reactions. On this issue, CEOs, Deputy Ministers, Ministers need
clarity of thought.”
“If business spent more time planning for crisis, the reputational
damage when ethical issues occur – and they will always occur – would
be better managed.”

“The fifth and final issue that I raise today among the many we could
talk about is distinguishing for our stakeholders and our employees
the difference between moral and ethical issues. And there is a
difference. Morality is a deeply ingrained set of values that differ
between countries, races, and religions. Ethics are business codes of
conduct that a company or an industry or government signs on to, that
outlines a acceptable business practices. Separating the two is key to
the consulting industry.”

- Examples
Perhaps one striking example of a ethical act putting social
responsibility before company profits was the Johnson and Johnson’s
case detailed at the site by Tamara Kaplan, The Pennsylvania State University.
“In the fall of 1982, McNeil Consumer Products, a subsidiary of
Johnson & Johnson, was confronted with a crisis when seven people on
Chicago's West Side died mysteriously. Authorities determined that
each of the people that died, had ingested an Extra-Strength Tylenol
capsule laced with cyanide. The news of this incident travelled
quickly and was the cause of a massive, nationwide panic. These
poisonings made it necessary for Johnson & Johnson to launch a public
relations program immediately, in order to save the integrity of both
their product and their corporation as a whole.”
“The Extra-Strength Tylenol capsules in question were each found to
contain 65 milligrams of cyanide. The amount of cyanide necessary to
kill a human is five to seven micrograms, which means that the person
who tampered with the pills, used 10,000 times more poison than was
“Along with a nationwide scare, the poisoned capsules brought with
them copycats, who attempted to simulate the tamperings in Chicago. In
the first month after the Tylenol related deaths, the Food and Drug
Administration counted 270 incidents of suspected product tampering.”
“After this crisis, Johnson & Johnson was faced with quite a dilemma.
They needed to find the best way to deal with the tamperings, without
destroying the reputation of their company and their most profitable
product, Tylenol. Many marketing experts thought that Tylenol was
doomed by doubts that the public may have had to whether or not the
product was safe. "I don't think they can ever sell another product
under that name," advertising genius Jerry Della Femina told the New
York Times in the first days following the crisis.”
“Phase one of Johnson & Johnson's public relations campaign was
executed immediately following the discovery that the deaths in
Chicago were caused by Extra- Strength Tylenol capsules. As the plan
was constructed, Johnson & Johnson's top management put customer
safety first, before they worried about their companies profit and
other financial concerns.

The company immediately alerted consumers across the nation, via the
media, not to consume any type of Tylenol product. They told consumers
not to resume using the product until the extent of the tampering
could be determined. Johnson & Johnson, along with stopping the
production and advertising of Tylenol, recalled all Tylenol capsules
from the market. The recall included approximately 31 million bottles
of Tylenol, with a retail value of more than 100 million dollars.
(Broom, Center, Cutlip, 381)
This was unusual for a large corporation facing a crisis. In many
other similar cases, companies had put themselves first, and ended up
doing more damage to their reputations than if they had immediately
taken responsibility for the crisis. An example of this was the crisis
that hit Source Perrier when traces of benzene were found in their
bottled water. Instead of holding themselves accountable for the
incident, Source Perrier claimed that the contamination resulted from
an isolated incident. They then recalled only a limited number of
Perrier bottles in North America. (Broom, Center, Cutlip, 59, 381)

When benzene was found in Perrier bottled water in Europe, an
embarrassed Source Perrier had to announce a world wide recall on the
bottled water. Apparently, consumers around the world had been
drinking contaminated water for months. Source Perrier was harshly
attacked by the media. They were criticized for having little
integrity and for disregarding public safety. (Broom, Center Cutlip,

Johnson & Johnson, on the other hand, was praised for their actions by
the media for their socially responsible actions. Along with the
nationwide alert and the Tylenol recall, Johnson & Johnson established
relations with the Chicago Police, the FBI, and the Food and Drug
Administration. This way the company could have a part in searching
for the person who laced the Tylenol capsules and they could help
prevent further tamperings. Johnson & Johnson was given much positive
coverage for their handling of this crisis. (Atkinson, 2) (Broom,
Center, Cutlip, 381)

“The Washington Post article stressed that it must have been difficult
for the company to withstand the temptation to disclaim any possible
link between Tylenol and the seven sudden deaths in the Chicago area.
They added that the company never attempted to do anything, other than
try to get to the bottom of the deaths.

According to the article, "what Johnson & Johnson executives have done
is communicate the message that the company is candid, contrite, and
compassionate, committed to solving the murders and protecting the
public." The Washington Post also mentioned that Johnson & Johnson
almost immediately put up a reward of $100,000 for the killer.”

Some excerpt examples on a company level:
Center for Ethics and Business “HOW AMERICA'S CORPORATIONS ARE
“The heads of corporations are also quick to point out the long term
financial costs of doing business unethically. "If I do something
unethical for some short term gain," explains Jerry R. Junkins,
President and CEO of Texas Instruments, "somebody else is going to get
hurt, and they're not going to forget it.”

“Yet another issue cited is the effect of unethical conduct by the
corporation on its employees. Bunge's Walter Klein claims, "If the
company is unethical, that company is going to be cheated by its own
employees."” “Corporate America Takes a Closer Look at Ethics” by Rachel
Davis Oct 2001
October 2001
"Companies have begun to realize that ethical decision making can
provide a competitive advantage," says Jacquelyn Gates, vice
president, diversity, ethics, and compliance for Duke Energy
Corporation. "You'll see a number of industries, like our industry,
that have been highly regulated and monopolies, and as we evolve into
a competitive arena, we recognize the advantage." Ethics programs
serve not only as recruiting and retention tools for new employees,
but also as a retention tool for customers and investors, Gates and
others say.”

:According to Tracy Carter, Lockheed Martin's director of ethics
communication and training, the company is also looking to use the
latest technology to streamline training delivery. She says Lockheed
Martin will be starting a pilot program that will test the potential
for compliance training via Palm Pilot or other handheld devices.”

“Weyerhaeuser's Business Conduct Committee and corporate code of
conduct have been in place since 1976; however, the Business Conduct
Office is a newer addition. Intranet information, a 24-hour ethics
hotline, wallet cards, and brochures emphasize the company's ethics
message. Although the employees are permitted to make anonymous calls
to the hotline, Thomas says that few of the 1% to 2% of the employee
base that call each year elect to remain anonymous.”

“Experiences of Multinationals and International Business
Associations” by the International Chamber of Commerce
excerpt: “MERCK & CO.: One Company's Approach To Promoting Good Ethics
Merck & Co. has been leading efforts to promote high standards of
ethical business conduct that involve discussion and cooperation with
other actors. The company not only does its part on the demand side of
the equation by adopting internal ethics programs, but it also
supports programs to change the environment within which it operates.
J. Anthony Imler explained Merck & Co.'s decision to focus on
promoting ethics for both enlightened and self-interested reasons:
while fostering economic and political development in host countries,
he suggested, Merck & Co.'s ethics programs also work to improve the
business climate and promote trust in their pharmaceutical products.”

Corporate ethics programs are relatively new, not every understands
them, but corporates feel they need them and programs are filtering
into the company structure. However with the recent Worldcom, Enron
and other recent accounting scandals there is obviously some way to

Search strategy:
"corporate ethics program"

I hope that helps,
and I hope I have provided an ethical answer :-)
kind regards lot-ga

Clarification of Answer by lot-ga on 18 Aug 2002 17:41 PDT
I forgot to include this very useful reference:
"Complete Guide to Ethics Management: An Ethics Toolkit for Managers"
Written by Carter McNamara, MBA, PhD
Gives practical advice on deploying a solution and also deconstructs
some myths behind ethics programs
"10 Myths About Business Ethics"
Great stuff!

Request for Answer Clarification by bren-ga on 23 Aug 2002 05:51 PDT
When decisioning ethics programs and someone ask is it Ethically
Defensible what does this mean. I have read the information on you
sites and can not put the term in a proper contend.

Clarification of Answer by lot-ga on 23 Aug 2002 07:53 PDT
Hello Bren-ga,

‘Ethically Defensible’ as I understand it, is the ‘justification’ of
that ethical decision in a compromise situation. If a decision
satisfies certain ethical factors but is at the expense or sacrifice
of another resource - then that is ethically defensible. Also if the
underlying reason for making that decision is ethical only from
certain perspectives, then that decision is not ethically defensible,
i.e. the decision maker cannot maintain and defend that position from
all angles.
“Transgenic Animals Conference and the Danish Board of Technology”
modified: December 10, 1998
“It is ethically defensible to manufacture technological animals if
the purpose is to combat severe human diseases. Conversely, it is not
ethically defensible if the purpose is to have the animals yield more
or to endure more efficient production conditions.”
The resource in the above example that was sacrificed was the
technological animals, the gain in combating severe human diseases was
seen to be ethically defensible.

“Ethically Defensible Decision in the Workplace: Righting a Monetary
Mistake” by Jennifer Wardwell and Professor Carol Parker 30 January
Extrapolating from the article:
“An example of an ethical dilemma in the workplace that might be
encountered is one in which money is mistakenly not paid to a group of
“If the company had chosen to pursue different ideals in designing its
ground rules, some examples of such ground rules could have been the
- A company only has a legal obligation if it gets caught doing a
wrong or making a mistake.
- What the customer doesn’t know won’t hurt them. 
- If you can get away with taking something to better the finances of
the company, go ahead.” 
Clearly decisions based on these ideals are not ethically defensible.
Arranging payment of the money at the expense of company time and
administration costs to protect the company image is an ethically
defensible decision.

Search Strategy:
decision "Ethically defensible" -genetic -religion -surgical
-medical -doctors -hospital
"Ethically defensible"

I hope that helps,
kind regards lot-ga

Clarification of Answer by lot-ga on 24 Aug 2002 04:53 PDT
Hello bren-ga
Additionally I managed to source this paragraph from
"Invitation to a public debate on ethical computer use "
"To obtain ethically defensible behavior in a particular situation, or
context, one must first define what is considered ethically defensible
in that context. Without contextual norms, people assume no norms and
are then (mis)guided solely by their own experience. According to
Integrated Social Contracts Theory, typical contexts include
individual-only situations and situations in which the individual is a
member of professional, business and social organizations. Norm
development is a complex process. It requires discussion between many
individuals to identify the ethical issues relevant to each context,
to define ethically defensible behaviors for each, and then to decide
which norms take priority in the event of a conflict. This paper
argues that the importance of context identifies fundamental flaws in
the notion that professional associations can address all ethical
behaviors through generic codes of ethics. The arguement goes further
to assert that Integrated Social Contracts Theory, if applied to
universal codes of ethics, can facilitate their redefinition into a
useful set of guidelines for ethical professional behavior. "
The following guide "Making Ethical Decisions" by the Josephson
Institute of Ethics
may be useful in defining the contextual norms.

Search Strategy:
ethically defensible setting
ethically defensible rules

kind regards

Clarification of Answer by lot-ga on 24 Aug 2002 14:30 PDT
Hello bren-ga,
and one more thing I managed to find,
- key points on ethics questions highlighted in this presentation
"EC32810 Business Ethics, Lecture 3: What is Ethically Defensible in Business?
Search Strategy:
ethically defensible
regards lot-ga
bren-ga rated this answer:5 out of 5 stars
It was great used all of it

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