ETHICS IN A WORKPLACE

The Importance of Ethics in Organizations

Importance of Creating a Code of Ethics for a Business
Why Do Professional Organizations Have a Code of Ethics?
What are the Sources of an Organization's Code of Ethics?
How to Analyze the Code of Ethics of an Organization
Marketing Code of Ethics
The Advantages of a Code of Ethics in Organizations
A Code of Ethics in the Work Place
Importance of Creating a Code of Ethics for a Business
How Would an Organizational Code of Ethics Help Ensure Ethical Business
Behavior?
What are the Sources of an Organization's Code of Ethics?
Why Do Professional Organizations Have a Code of Ethics?
Roles That Ethics & Laws Play in an Organization
What Are the Major Ethical Issues Business People Face?
How to Analyze the Code of Ethics of an Organization
How to Analyze the Code of Ethics of an Organization
Effects of a Lack of Ethics on a Business Environment
What are the Sources of an Organization's Code of Ethics?
Diversity & Ethics in the Workplace
Marketing Code of Ethics
What Are the Ethical Decisions That Impact Any Organization?
Why Are Accountability Ethics & Social Responsibility Important to
Organizations?

Organizational ethics
Organizational ethics is the ethics of an organization, and it is how an
organization ethically responds to an internal or external stimulus.
Organizational ethics is interdependent with the organizational culture.
Although, it is akin to both organizational behavior (OB) and business ethics
on the micro and macro levels, organizational ethics is neither OB, nor is it
solely business ethics (which includes corporate governance and corporate
ethics). Organizational ethics express the values of an organization to its
employees and/or other entities irrespective of governmental and/or
regulatory laws.

Overview
The Foreign Corrupt Practices Act (FCPA) restricts the United States
business firms from engaging in bribery and other illegal practices
internationally. There are laws that have the same type of prohibition for
European companies. These laws create a disadvantage competitively for both
European and U.S. firms.[1] Such laws are not a restricting element to
organizations that have highly elevated ethical behavior as part of their
values. Organizations that lack ethical practices as a mandatory basis of their
business structure and corporate culture, have commonly been found to fail
due to the absence of business ethics; Corporate downfalls including, but are
not limited to, the recent Enron and WorldCom scandals, are two primary
examples of unethical business practices concerning questionable accounting
transactions.
Organizations focusing on encouraging ethical practices are commonly viewed
with respect by employees, the community, and corresponding industries.[2]
Ethical business practices of organizations has resulted in a solid financial
bottom-line. This has been seen through greater sales and increased revenue
by companies retaining talented personnel and attracting newly skilled
employees. More importantly, an ethical organization will have the ability to
retain employees that are experienced and knowledgeable (generally referred
to as human capital). This human capital results in less employee turnover,
less training time for new employees, and greater output regarding services
(or production of goods).
Basic Ethical Elements
There are at least four elements that aim to create an ethical culture and
behavior of employees within an organization. These elements are:
1) a written code of ethics and standards (ethical code)
2) ethics training for executives, managers, and employees
3) the availability of ethical situational advice (i.e. advice lines or offices)
4) confidential reporting systems[3]
Organizations are constantly striving for a better ethical atmosphere within
the business climate and culture. Businesses must create an ethical business
climate in order to develop an ethical organization. Otherwise saying,
companies must focus on the ethics of employees in order to create an ethical
business. Employees must know the difference between what is acceptable and
unacceptable in the workplace. These standards are found within the written
code of ethics or may be referred to as the employee handbook. These
standards are a written form of employee conduct and performance
expectations.

Employee handbooks also commonly include rules concerning expectations

and consequences that follow misconduct. Handbooks normally will clearly
state the rules, guidelines, and standards of an organization as well as possible
rules, regulations, and laws that they are bound by. Many company
handbooks will include laws regarding sexual harassment, alcohol abuse, and
drug/substance abuse.
For more information regarding situational ethical principles, refer to
"Situational Ethics."
Intrinsic
Rewards and Extrinsic Organizational
The intrinsic and extrinsic rewards of an ethical organization are bound to an
organization's culture and ethics. Based upon the reliability and support
structure of each of the four areas needed for ethical behavior, the
organizational ethics will be evident throughout the organization. The
organization including the employees, managers, suppliers, customers, and
other entities, will receive intrinsic and extrinsic rewards. Actions of
employees can range from whistle blowing (intrinsic) to the extraordinary
actions of hourly employee purchasing all the recently produced peanut butter
(as produced by his employer), that has no resale value due to mislabeled jars.
This employee was aware that his employer (extrinsic) would reimburse him
in full for purchasing the mislabeled peanut butter.[4]
For more information regarding intrinsic and extrinsic motivation, see
"Intrinsic and Extrinsic Motivation."
Ethical Theory and Leadership
Empowerment
There are many theories and organizational studies that are related to
“organizational ethics,” but "organizations" and "ethics" are wide and varied
in application and scope. These theories and studies can range from
individual(s), team(s), stakeholder, management, leadership, human resources,
group(s) interaction(s), as well as the psychological framework behind each
area to include the distribution of job tasks within various types of
organizations. As among these areas, the influence of leadership in any
organization cannot go unexamined, because a clear understanding of the
organization’s vision, goals (to include immediate and long-term strategic
plans), and values. Leadership sets the tone for organizational management
(strategic actions taken by an organization to create a positive image to both
internal and external publics). In turn, leadership directly influences the
organizational symbolism (which reflects the culture, the language of the
members, any meaningful objects, representations, and/or how someone may
act or think within an organization). The values and ideals within an
organization generally center upon “values for business” as the theoretical
approach most leaders use to present to their "co-members" (which in truth
maybe subordinates).
In fact, an examination of business reveals that most leaders approach the
X(?) from the perspective of values for the business.[5][6] Alongside
presenting the vision, values, and goals of the organization, the leader should
infuse empowerment and motivation to its members. Leaders using
empowerment to motivate their subordinates, is based upon the view of:
“Achieving organizational ownership of company values is a continuous
process of communication, discussion, and debate throughout all areas of the
organization” [7] as.
For more information about organization theory, refer to "Organizational
Theory."
Stakeholder Theory
Whether it is a team, small group, or a large international entity, the ability
for any organization to reason, act rationally, and respond ethically is
paramount. Leaders must have the ability to recognize the needs and desires
of members (or called “stakeholders” in some theories or models), and how
they correspond to the organization. It is the stakeholder theory that implies
that all stakeholders (or individuals) must be treated equally, regardless of the
fact that some individuals will contribute more than others to the
organization.[8]
Leaders who motivate others must present the goals of an organization to the
stakeholders with respect to particular benefits of the stakeholders. Leaders
must set aside individual (or personal) ambitions (along with any prejudice) in
order to present these goals properly. Furthermore, it is leadership that
influences stakeholders towards ethical behavior for the organization. They
must step behind a veil of ignorance and treat every stakeholder as a means
with equal weight. Importantly, the leader (or stakeholder management) must
possess the necessary skills and rank to ensure that each stakeholders voice is
respected and heard within the organization to ensure that other voices are
not expressing views (or needs as in respects to Maslow's Hierarchy of Needs).
Therefore, stakeholder management must ensure an ethical system for their
own management styles, personalities, systems, performances, plans, policies,
strategies, productivity, openness, and even risk(s) within their cultures or
industries.
Ethical System Implementation
The function of developing and implementing business ethics into an
organization is difficult. Due to each organization's culture and atmosphere
being different, there is no clear or specific way to implement a code of ethics
to an existing business. The implementation should be performed to the
entirety of the business including all areas of operations. If it is not
implemented pragmatically and with caution for the needs, desires, and
personalities (consider the Big Five personality traits) of the stakeholders, the
culture, and the employees, then problems may arise. Although a great deal of
time may be required, stakeholder management should consider the Rational
Decision-Making Model for implementation of various aspects, details, and
standards of an ethical system to the stakeholders. If implementation has been
performed successfully, then all stakeholders have accepted the newly
designed ethics system for the organization.

The Importance of Ethics in Organizations

by Luanne Kelchner, Demand Media
Ethics are the principles and values an individual uses to govern his activities and
decisions. In an organization, a code of ethics is a set of principles that guide the
organization in its programs, policies and decisions for the business. The ethical
philosophy an organization uses to conduct business can affect the reputation,
productivity and bottom line of the business.
Leadership Ethics
The ethics that leaders in an organization use to manage employees may have an
effect on the morale and loyalty of workers. The code of ethics leaders use
determines discipline procedures and the acceptable behavior for all workers in an
organization. When leaders have high ethical standards, it encourages workers in
the organization to meet that same level. Ethical leadership also enhances the
company’s reputation in the financial market and community. A solid reputation for
ethics and integrity in the community may improve the company’s business.
Employee Ethics
Ethical behavior among workers in an organization ensures that employees
complete work with honesty and integrity. Employees who use ethics to guide their
behavior adhere to employee policies and rules while striving to meet the goals of
the organization. Ethical employees also meet standards for quality in their work,
which can enhance the company’s reputation for quality products and service.

Ethical Organizational Culture

Leaders and employees adhering to a code of ethics create an ethical organizational
culture. The leaders of a business may create an ethical culture by exhibiting the
type of behavior they'd like to see in employees. The organization can reinforce
ethical behavior by rewarding employees who exhibit the values and integrity that
coincides with the company code of ethics and disciplining those who make the
wrong choices.
Benefits to the Organization
A positive and healthy corporate culture improves the morale among workers in
the organization, which may increase productivity and employee retention; this, in
turn, has financial benefits for the organization. Higher levels of productivity
improve the efficiency in the company, while increasing employee retention
reduces the cost of replacing employees.
What Are the Ethics in NonpProfit Organizations?

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Nonprofit organizations are often assumed to be perfectly ethical in their dealings

with donors, employees, volunteers and the people they serve, as nonprofits
generally exist for altruistic purposes. Surprisingly, however, nonprofits can come
under scrutiny for lapses in ethical decision-making the same as their for-profit
counterparts. The distinct structure and purpose of nonprofit organizations creates
unique ethical dilemmas that managers must be aware of and avoid.
Honesty And Transparency
Although it may be common to paint a rosy picture of the expected impact of for-
profit companies when seeking funding, nonprofit organizations have a
responsibility to portray the needs they serve and the impact their organization
makes as accurately as possible. Analysis of the organization's spending patterns
must be as accurate as possible, even if the results show that the company is
spending too much on organizational growth and too little on programs.
According to guidestar.org, nonprofits should allow public access to their financial
statements and the results of financial audits as well.
Donor Privacy
A nonprofit can collect a significant amount of personal information about its
donors, including credit card and bank account numbers. Protecting this
information is vital to the ethical maintenance of donor databases. It can be
tempting for nonprofits to sell their donors' contact information, such as mailing
and email addresses, for a quick cash inflow, but this can be considered an
unethical practice if the organization does not receive express permission from
each donor before selling the information.
Conflicts of Interest
Members on boards of directors are chosen for their connections, resources and
experience. Some of the very connections that make a board member valuable,
however, they can be a cause of a breach of ethical conduct. A classic example
arises when a nonprofit utilizes the services of a company with which a board
member has extensive ties, when the same service could be obtained at a lower
cost or with higher quality from another source.
Conflicts of interest can arise when nonprofits pander to the desires of their most
valuable donors as well. Large donors can often impact the way an organization
spends its funds, funneling money into the donor's pet projects or preferred
recipients when the money could achieve a higher impact elsewhere. Executives or
board members receiving personal gifts from large donors can influence spending
decisions as well, creating a breach of ethics.
Strategic Management
Nonprofit executives and board members have a responsibility to keep their
organizations focused on their core missions, and on achieving the highest impact
possible in their area of specialization. This mission can become blurred at times,
as organizational goals, such as market expansion and revenue growth, can take the
spotlight away from achieving meaningful impact. According to ssireview.org,
because nonprofits do not pay taxes, they carry an implied fiduciary duty not only
to their donors, but to all taxpayers, to keep their focus on meeting the needs of the
groups they serve.
Compensation
Top-level nonprofit managers dedicate the same amount of time and effort to
building the organization and ensuring its success, but common compensation
practices of the for-profit world come under scrutiny in nonprofit organizations.
Such practices as travel expense reimbursement, paid vacation time and lavish
travel packages can cause outrage among an organization's donor base. Executive
compensation is one of the elements that should be presented as transparently as
possible to donors and the public to avoid allegations of secrecy and the
mishandling of funds.
How to Analyze the Code of Ethics of an Organization
.
Related Articles
• The Advantages of a Code of Ethics in Organizations
• A Code of Ethics in the Work Place
• Importance of Creating a Code of Ethics for a Business
• How Would an Organizational Code of Ethics Help Ensure Ethical Business
Behavior?
 • What are the Sources of an Organization's Code of Ethics?
• Why Do Professional Organizations Have a Code of Ethics?

The Society for Human Resource Management states that a code of ethics raises
ethical expectations, legitimizes ethical positions, encourages ethical decision-
making and prevents misconduct while providing for enforcement. As a consumer,
vendor or business owner, it may be important to know how to analyze a
firm's code of ethics to establish an understanding of the ethical
considerations it employs in business decisions.

Step 1
Identify the tone of the organization’s code of ethics. Review the
document to get a feel if the firm buys into a position of self-righteousness. See if
the company's code of ethics gives an impression that the firm strives
to meet a higher moral standard, or whether it simply serves the
company's profit motive.
Step 2
Review the code of ethics to determine if the document is clearly written and well-
organized. See if the document flows, or is difficult to read. Decide if the verbiage
makes sense, and keep your eye out for contradictions or inconsistencies. Notice if
the language is unnecessarily complex. Look for clear, everyday language that
people at every level of the company can understand easily.

Step 3
Study the company’s mission and vision statements to determine if the
code of ethics is congruent with them, or if the code of ethics doesn’t
seem match the tone or direction that these other statements seem to set.
Step 4
Read the title of the ethics document. It should be memorable, not simply
"Our Brand Inc. Code of Ethics." Check to see if the code of
ethics contains a letter from the corporate leadership, and an introduction.
Determine if the letter and introduction provide direction about how the company
should use the code of ethics, and a commitment that the business leadership
intends to apply to the ethics rules.
Step 5
Look for a clear guidance within the sections of the code of ethics regarding its
necessity, to whom the code will apply, how the company will measure behavior
the code governs. Look also for accountability and reporting protocols for
infractions against of the code.
Step 6
Determine if the code of ethics is directed toward its intended
users–the employees of the firm--or if it is just another marketing tool.
A good code of ethics will guide the employee at any level of the firm in making
business decisions that are strategically and ethically correct for the company.
The Advantages of a Code of Ethics in Organizations
A code of ethics can become more effective when it is drawn up with input from all
employees.

Related Articles
• The Importance of Ethics in Organizations
• Importance of Creating a Code of Ethics for a Business
• Why Do Professional Organizations Have a Code of Ethics?
• What are the Sources of an Organization's Code of Ethics?
• How to Analyze the Code of Ethics of an Organization
• Marketing Code of Ethics

A code of ethics is an integral component of company culture, but organizations

must actively promote their ethical policies to fully leverage the advantages. A
code of ethics can be viewed as either an administrative formality with no practical
use or a dynamic, comprehensive guideline for making company decisions.
Realizing the advantages of a code of ethics in your organization relies on every
employee's awareness of and commitment to the code.
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Strategic Decision-Making
Small business owners make decisions at the executive level of their company. A
code of ethics in a small business can provide a foundation on which to base all
decisions that affect internal and external stakeholders, such as employees or
residents in the local community.
Ethical dilemmas faced by small business owners most often do not have the same
scope as issues faced by corporate executives, such as laying off thousands of
workers or introducing tons of pollutants into the environment. However, having a
solid code of ethics in place from the beginning can help to guide you as your
company eventually grows to a corporate size.
Day-to-Day Decisions
Company owners are not the only employees in a small business who make
decisions. Due to the size of small businesses, front-line employees often have less
supervision and more personal responsibility than employees of large corporations.
This makes it even more important for all employees to fully understand the
expectations of the company and the ethical guidelines in which to make decisions.
Related Reading: The Importance of Ethics in Organizations
Company Reputation
Small businesses work hard to gain competitive advantages. Gaining advantages
from a positive reputation in the marketplace can be enough to secure a sizable
market share from your larger competitors. Proudly displaying your code of ethics
on your website or in press releases, while taking care to ensure that your actions
are always in line with your words, can garner a positive image among consumers
and job-seekers, creating a loyal customer base and helping to develop your brand
image.
Legal Considerations
The legal benefits of having a code of ethics in place make ethics statements a
virtual requirement of doing business. All of the advantages mentioned above can
serve to keep your company out of legal trouble, which, while important to every
company, is especially important for sole proprietorships and partnerships that do
not enjoy personal liability protection.
A comprehensive code of ethics can provide extra protection if a single employee
commits a criminal act in the name of your company, as well. If a single
purchasing manager defrauds your suppliers, for example, your code of ethics can
help to convince a court that your company does not endorse that kind of behavior.
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Examples of a Code of Ethics for Business
by Lisa Magloff, Demand Media
A code of ethics sets out the values of a company and the way it does business.

A code of ethics sets out the values of a company and the way it does business.
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A code of ethics, also called a code of conduct or ethical code, sets out the
company's values, ethics, objective and responsibilities. A well-written code of
ethics should also give guidance to employees on how to deal with certain ethical
situations. Every code of ethics is different and should reflect the company's
ethos, values and business style. Some codes are short, setting out only general
guidelines, and others are large manuals, encompassing a huge variety of
situations.
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Kraft

The Kraft code of ethics contains just 10 short rules of ethical behavior that all
employees must follow. The introduction to the Kraft code of ethics suggests that
employees should let values guide their actions in all cases. The code also stresses
that if something seems wrong, it should be addressed directly. The code includes
a speaking-up policy that requires employees to speak up if they are aware of any
violations of the code, even those they have committed themselves. The 10 rules
are: Make food that is safe to eat; market responsibly; treat people fairly; respect
the free market; compete fairy; respect the environment; deal honesty with the
government; keep honest books and records; never trade on inside information;
give Kraft Foods your complete business loyalty.
Verizon

The Verizon code of ethics is a lengthy document that contains four short core
values, followed by 16 pages of specific rules and guidelines to follow in certain
situations. The core values are integrity, respect, performance excellence and
accountability. The specific guidelines cover situations, such as how to deal with
workplace violence, alcohol use and harassment. They also cover areas of integrity
and fairness, such as how to avoid conflicts of interest and how to safeguard
company information. There is also a section on protecting Verizon's company
assets, including what to do in cases of sabotage and how to create accurate
records.

Related Reading: Code of Ethics for Administrators

Colgate-Palmolive

The Colgate-Palmolive code of ethics is a long document, but is broken down into
individual areas of conduct. The code is intended as a guide to all daily business
interactions and is used in conjunction with the company's business practice
guidelines. The code covers 10 areas, including: Our Relationship with Each Other;
Our Relationship with the Company; Our Relationship with Consumers; Our
Relationship with Government and the Law; Our Relationship with Society and
Our Relationship with the Environment.
Baylor College of Medicine

The Baylor College of Medicine, in Houston, has a short code of ethics that sets
out basic rules and refers employees to other guidelines for more detail. For
example, the code instructs all employees to follow Baylor's Mission Statement,
Compliance Program and Conflict of Interest policy. The code includes basic
guidelines for how employees should handle business conduct; financial and
medical records; confidentiality; Baylor property; the workplace environment; and
contact with the government.
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What are the Sources of an Organization's Code of Ethics?
by Osmond Vitez, Demand Media

A business code of ethics is a series of established principles an organization uses

when operating in business or society. Organizations often develop these codes to
ensure that all individuals working in the company operate according to the same
standards. Most individuals have an internal code of ethics or moral principles
they follow in life. A situation one individual finds ethically reprehensible may not
seem so to another individual. Using a code of ethics in business attempts to
create a basic understanding of acceptable ethical behavior to be used when
handling situations involving the company, government agencies and the general
public.
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Business Owner

A main source for an organizational code of ethics is the business owner. These
individuals choose the ethical stance of their company since they are responsible
for all aspects of the organization. While managers and employees may not agree
with the business owner on his ethical values, the owner may choose to hire
individuals who agree with his ethical business stance. A business owner may also
develop an ethical code based on his personal or religious beliefs regarding how
individuals and organizations should operate in business or society.
Organizational Mission

Companies may use an organizational mission statement to create their code of

ethics. Once the business owner or entrepreneur leaves the company or passes
on, the organization may be devoid of its ethical compass. To rectify this situation,
current directors or managers may look at the mission statement and values the
organization was started on and develop a code of ethics based on this
information. This source of business ethics allows organizations to create a lasting
ethical code that may be present in the company for years to come. An
organizational mission statement coupled with a business code of ethics may also
be used as a training tool for new employees hired by the company.

Related Reading: A Code of Ethics in the Work Place

Society or Culture

An organizational code of ethics may be created based on the current societal or

cultural beliefs of the country in which the company is based. Many countries
have different understandings of business ethics or morals. An organization may
choose to adopt these values as the main source of its code of ethics in order to
maintain societal norms. An organization may also use a business code of ethics to
ensure that it does not alienate the consumers in the nation’s local economic
marketplace. If the organization develops international business locations, it may
need to adjust its organizational code of ethics to meet global ethical
expectations.
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Ways to Improve an Organization's Ethical Climate

by Audra Bianca, Demand Media
Ethics require employees to weigh concepts of right and wrong in decision-
making.

Ethics require employees to weigh concepts of right and wrong in decision-

making.
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Even businesses with a strong ethical culture may find employee attitudes,
behaviors and patterns of decision-making that could be improved. One key to
changing employee attitudes and behaviors is to be the best example yourself,
since employees need to see how well you practice the expectations set forth in
your code of ethics. Beyond that, there are a number of measures you can take to
improve your organization's ethical climate.
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Empowerment
One way to improve the ethical climate of your organization is to give employees
more power over their work. If employees have an ethical code and more control
over their work outcomes, they are likely to justify your trust in them to make the
right decision. Empowerment also can produce better results from employees,
such as more creative solutions to business problems, when implemented
effectively. Give employees a reason to act more ethically and to be more
innovative -- such as to keep their autonomy over their work -- and you will also
increase your company's efficiency.
Communication

Improve your communication policies and procedures so that information will

flow more smoothly and frequently between employees and managers. For
example, assign a manager, HR specialist or ad-hoc team to create a series of
training scenarios that teach employees the right thing to do in common
situations faced in your company. These scenarios will help managers
communicate the expected ethical behaviors more clearly. In addition, make it
easy for employees to report unethical behavior by contracting with an outside
service to offer a toll-free reporting hotline, and make sure any allegations are
investigated promptly.

Related Reading: What Is the Relationship Between an Organization's Culture &

Ethical Decision-Making in Health Care?
Discipline

You can't expect all employees to comply with the ethics policy without some kind
of discipline. Enforce your consequences for violations of the ethics policy evenly,
regardless of the offender's high or low status. If you don't have the time to do
this, delegate the job to a manager or HR director. Be sure to maintain careful
documentation of employee violations in case you get sued over disciplining or
terminating an employee for an ethical violation.
Change

As you look at employee behaviors and enforce your ethics policy, you might see
patterns of unethical behavior. This might indicate that some rules and procedures
need to be changed in the organization, even it affects ways of doing things that
save time or money or increase profits. From a business standpoint, the short-
term losses should be outweighed by the resulting improvement in the long-term
reputation of your business.
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QUESTIONS

Roles That Ethics & Laws Play in an Organization

Roles That Ethics & Laws Play in an Organization

What Are the Major Ethical Issues Business People Face?

What Are the Major Ethical Issues Business People Face?

How to Analyze the Code of Ethics of an Organization

How to Analyze the Code of Ethics of an Organization

Effects of a Lack of Ethics on a Business Environment

Effects of a Lack of Ethics on a Business Environment

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