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D4 THE OAKVILLE BEAVER Business Wednesdsay July 28, 1999 E th ics shou ld be valued part of corporate cu ltu re B y Diane McDougall SPECIAL TO THE BEAVER Are you worried about employees pocketing products? Are sales results not matching rev­ enues? Is your intellectual capital being sold to competitors? Clyde Yorke, a certified manage­ ment accountant, executive vice-president of Paddon & Yorke in Barrie, Ontario, and a former RCMP officer, has been in the fraud business for more than 25 years. He says the biggest and most difficult fraud problems exist at the senior man­ agement level, not on the shop floor. "It's more difficult to prove fraud by a senior official, because their actions are seldom questioned. And a fraud case is more difficult to solve than a mur­ der because it takes a lot of time and resources to reconstruct," says Yorke. The extravagant expenditures of some corpo­ rate leaders, such as those within the Olympics' organization or the Livent case, are rarely ques­ tioned until they hit the news. Only afterwards do people wonder how a global institution that's founded on such lofty ideals could have fallen so far. We look to leaders to provide and serve as a model for, ethical vision, and behaviour. But ethics is a broad and often murky area, and the workplace is full of ethical confusion, dilemmas, and issues. Employees at every level of manage­ ment feel the pressure to perform. A 1997 study by the Ethics Officers Association in the U.S. found that 56% of workers felt some pressure to act unethically. About 46% of them admitted to doing so over the past year -- such as cutting comers on quality, deceiving cus­ tomers, and covering up incidents. "Fortunately, things are beginning to change in the business world. Business people are connect­ ing e'thics and business integrity to profitability and success," says Robert Dye, CMA, president and CEO of Certified Management Accountants of Canada in Hamilton. "Employees, consumers, investors, suppliers, and business partners are vot­ ing with their feet," says Dye. 'They choose not to do business with companies that are insensitive to ethical standards and don't do their best to control the unethical impulses of their employees." Why ethics programs are needed Ethics training, compliance programs, and con­ sulting is now a $1-billion industry in North America. By the mid-1990s, more than 80% of large companies had codes of corporate conduct, and more than a third of companies had a corpo­ rate ethics officer. Ethical issues are involved in all aspects of decision-making. They involve hiring practices, pricing, advertising, pollution control, social assis­ tance, and financial management. Employees often feel pressured by management to compro­ mise their standards of ethical conduct to meet business objectives. What emphasis are organizations giving to eth­ ical challenges? As demonstrated by their codes of ethics, most organizations focus on the prevention of unethical acts against the organization's assets and conflicts of interest. They show less focus on preventing unethical acts committed by managers and employees for the benefit of the firm's future, as well as the public interest. Guidelines for ethics programs A mini self-audit will help tailor an ethics code to your company's needs. How well are you mod­ eling positive ethical behaviour for your employ­ ees, your business partners, or your clients? Has your organization implemented an effective ethics program? How many codes of conduct or ethics are you committed to, through your organization and professional bodies? When did you last read any of them? According to recent ethics research, few orga­ nizations have developed an integrated approach to assuring organizational integrity. However, about 95% of the Fortune 500 companies now teach ethics to their employees. "A well constructed ethics program can clearly reduce the likelihood of an organization being involved in a major scandal," says Dye. "It also minimizes it being singled out as a target, when an entire industry is criticized for widespread unethi­ cal practices." Companies are using innovative approaches to promoting ethical understanding and practice. For example, 200,000 employees at Lockheed Martin get one hour of ethics training from their supervi­ sor or manager every year. They have also distrib­ uted an ethics board game to help workers deal with work-related issues. However, the best ethical guides do not tell people what they should do. They show people how to discover the best course of action by them­ selves. "Establishing channels of communication for employees is also important. You need some­ one to answer employees' questions about stan­ dards. There should also be a method that allows an employee to report a suspected violation -- such as a hotline or counselling," says Dye. Professional associations play an important role in the ethics area. Ethics is being given a high­ er profile through association-driven codes of ethics, training, and on-going support and guid­ ance. CMA Canada provides ethics training for CMA candidates, as well as designated members. There is a Code of Ethics and private counselling. CMA Canada guidelines such as Implementing Ethics Strategies Within Organizations and Code of Ethics, Practice and Conduct are publications for reference use. A management ideology is emerging and needs encouragement. It includes ethics as fundamental an attribute as effectiveness, efficiency, and econ­ omy. An integrated ethics program provides the basis for re-integrating ethical values into daily business decision-making. In both the private and public sectors, less experienced employees have more responsibilities and discretion for decision-making. Combine this with high-pressure work environments, new atti­ tudes about trust and loyalty, and there's a recipe for ethical stress and transgressions unless these issues are addressed. Ethics programs must be an integral part o f creating trust among business rela­ tionships. W hy design a code o f ethics? There is a strong case for leaders to build pre­ ventive ethical measures into their management framework. The benefits being reported for an ethics program are persuasive. They include: • Increased confidence by different stakehold­ ers, such as clients, partners, and employees; • Decreased vulnerability to crim es com mitted against the public; • Increased em ployee productivity and reduced absenteeism; • Reduced losses due to internal theft, as well as increased profitability. W hat your code should include: • Visible and energetic corporate leadership; • Clear and relevent objectives; • W orkable expression o f values and standards; • Assignment o f responsibility and delegations o f authority; • Com munications and training programs; • M eans for discussing ethical issues; • System s for m onitoring, auditing, and enforcement; • Continuous improvement processes, includ­ ing periodic evaluation o f the program. Diane M cDougall is editor o f C M A M anagem ent, a m onth ly m agazine p ub lish ed by th e C ertified M anagem ent A ccountants o f Canada. 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'Trademark of A* MIES Inlemcfconai HoWngs N.V. ♦♦Du* to local bylaws >tor. hour, may vary om m m F E R R O N E F I T N E S S C E N T R E Voted #1 Gym in O akville 1994, '95, 9 6 & 97! • W E I G H T L O S S C L IN IC • D A IL Y A E R O B IC S • T R E A D M IL L S • S T A IR M A S T E R S • L IF E C Y C L E S • S T E P M IL L • F R E E W E IG H T S • N A U T I L U S * H A IR S A L O N - u n i u n n L More than just a Gym! * ■"""W ■ aM # & f ■ PERSONAL TRAINING SESSION by appointment 8 4 9 -1 0 2 1 4 6 7 S P E E R S R O A D O A K V IL L E(West o f Dorsal) 7 - -- -------------------------------------- --- . -- ' mailto:ns@nc.tds.net Business Ethics should be valued part of corporate culture By Diane McDougall LIFE ENRICHMENT EXPO JULY 28 THE MONTE CARLO HOTEL 7-10 PM Full Colour Flyer _ in Today's Paper!. ONE FULL YEAR! ON EVERYTHING IN Tiff STORE!* o FERRONE •WEIGHT LOSS CLINIC • DAILY AEROBICS • TREADMILLS • STAIRMASTERS • LIFE CYCLES • STEP MILL • FREE WEIGHTS •NAUTILUS* HAIR SALON