TONE at the
Issue 55 / April 2012
Exclusively for Senior Management, Boards of Directors, and Audit Committees
What rationalization does a company make to justify a corporate culture where ethics are ignored? In recent years, greed, fraud, and a lack of ethical conduct have led to the collapse of many organizations. A variety of internal and external pressures can lead companies down the wrong path. And once the first misstep is taken, it’s a slippery slope to hurting stakeholders, the community, and your reputation. This turmoil and damage could have been avoided if organizations had chosen to maintain an ethical corporate environment, exercising ...view middle of the document...
n Fair and equitable. n Respectful and mindful. n Compassionate and caring.
Case Study: A Lack of Outrage
Larry is a young port engineer who works energetically for his shipping company, overseeing repairs and related projects. He is proud when put in charge of a multimillion-dollar repair order for one of his company’s ships. The repairs are contracted out to a major shipyard, and everything goes smoothly until the end of the project. When Larry is handed the bill, he realizes it has been inflated by about one-third of total project costs. Larry is shocked. He has never been confronted by such an apparently corrupt practice before. After delaying the “sign off” for a couple of days, he approaches his boss, points out what is going on, and explains why he cannot sign off. His boss asks for specifics, which Larry readily supplies. A meeting is arranged between shipyard and shipping company officials, who go over the disputed items. They agree the shipping company is being overbilled by millions of dollars. To Larry’s surprise, however, there is little reaction from either side of the table. Nor is there any definitive, ethical stance from his company. The meeting adjourns until the next day, when shipyard officials meet again and this time offer to split the difference. For approval, both parties turn to Larry who explains
Just imagine how choices might be altered if every organization made a conscious decision to embrace and foster these five values, and if everyone, individually and collectively, made a concerted effort to incorporate them in all of their encounters and actions. The IGE works to “explore the global common ground of values, elevate awareness of ethics, provide practical tools for making ethical decisions, and encourage moral actions based on those decisions.” The institute provides case studies — such as the one included here — of a broad range of dilemmas that can be used to explore how individuals and groups might react when faced with making a decision that challenges their ethical code.
An Ethical Culture
According to the U.S. Federal Sentencing Guidelines, a company with an “effective” compliance and ethics program exercises due diligence to prevent and detect criminal conduct and promotes a culture that encourages ethical conduct and commitment to compliance with the law. SOURCE: Audit Committee Effectiveness: What Works Best — 4th Edition Several practices management can use to monitor the ethical tone of the organization include conducting employee surveys, holding discussions with Human Resources to review upward feedback from staff, and implementing a way to review employee complaints,
such as a confidential whistleblower hotline. According to the U.S. Sarbanes-Oxley Act of 2002, Section 301, each audit committee shall “establish procedures for the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls or auditing matters; and the...