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may, 2018

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Frequently Asked Questions on Ethics

What is business ethics?

In today’s corporate world, firms must understand and comply with a wide range of laws and regulations regarding consumer protection, investor communications, fraud, and fair business practices. But rules can lead to a narrow view of compliance (“if it’s legal, it’s proper”). Misconduct exacts enormous costs to an organization’s reputation, morale, hiring, retention, and energy spent by top management on damage control rather than business development.

Why is business ethics important?

Studies have found that unethical workplace behavior can:

  • Harm sales (80 percent of people in one study said they decide to buy a firm’s goods or services partly on their perception of its ethics).
  • Harm stock price (74 percent said their perception of a firm’s honesty directly affects their decision about whether to buy its stock).
  • Worsen the risks of scandal (judges can reduce fines and jail time if a firm has an ethics program in place).
  • Worsen employee fraud (which has grown by 50 percent since 1996, costing commerce $600 billion a year or 6 percent of the GDP).
  • Worsen productivity (companies with an ethics program have up to three times greater market value- added than companies lacking one).
  • Worsen performance of the highly skilled (those who contribute the most to a company’s revenues and reputation show the greatest drop in productivity because of others’ unethical behavior).
  • Worsen efficiency (71 percent of employees who said honesty applies rarely or never in their organization have seen misconduct in the past year compared to 25 percent who reported honesty is common).
  • Worsen communication (78 percent of workers in firms with an ethics program said they report misconduct when they see it compared to 39 percent of employees at firms with no ethics program).
  • Worsen retention and recruiting (79 percent of employees said their firm’s concern for ethics is a key reason they remain).
  • Worsen absenteeism (41 percent of low-morale organizations feel absenteeism is a serious issue, while just 20 percent of high-morale firms feel the same).

Whose responsibility is business ethics?

Everyone’s, but it starts at the top. Senior management should walk the talk by modeling, communicating, and enforcing its expectations and commitment to ethical decision-making – not only to its employees but to its clients, customers, shareholders, and community.

What makes an ethics code effective?

  • It must be inclusive (everyone participates, from senior management on down).
  • It must be valid (content is consistent with standard ethical principles).
  • It must be authentic (policies are enforced and values are reinforced in both word and deed).

What sustains an ethics code?

  • It’s specific. Guidelines are explained clearly using common scenarios.
  • It’s thought-provoking. Employees are taught how to analyze situations and make good choices.
  • It’s clear. Legalese, vagueness, jargon, and platitudes are absent. Instead of saying “Avoid improper use of equipment,” explain precisely what is meant with examples and unambiguous language.
  • It’s readable. One should not need a user’s guide to wade through its provisions. Improve readability with wide margins, large type, breakout quotes, tight editing, and accurate proofreading.
  • It’s concise. The entire U.S. Constitution is shorter than many ethics codes. Avoid complex sentences. Translate dense, multifaceted paragraphs into bulleted or numbered lists.
  • It’s realistic. “Absolutely no personal phone calls” is unreasonable. “Accept no gifts or gratuities” is vague.
  • It’s enforceable. All provisions should adhere to union agreements, city or government mandates, departmental regulations, Constitutional rights, etc. Implement a process for receiving complaints and investigating charges.
  • It’s flexible. Codes should be regularly put to the test. Make changes as needed.
  • It’s a process. Most employee cynicism stems from senior management flouting ethical rules. A code’s value is not its prose but the commitment of those who implement it.

What are the 10 myths of ethics?

  1. It’s ethical if it’s legal and permissible. Loopholes, lax enforcement, and/or personal moral judgment do not outweigh what’s right.
  2. It’s ethical if it’s part of the job. Separating personal ethics from work ethics can cause decent people to justify doing things at work that they would never do at home. Everyone’s first job is to be a good person.
  3. It’s ethical if it’s for a good cause. People can be vulnerable to rationalizations when advancing a noble aim. This can lead to deception, concealment, conflicts of interest, favoritism, or other departmental violations.
  4. It’s ethical if no one’s hurt. Ethical values are not factors to be considered in decision-making; they are ground rules.
  5. It’s ethical if everyone does it. Treating questionable behaviors as ethical norms under the guise of “safety in numbers” is a false rationale.
  6. It’s ethical if I don’t gain personally. Improper conduct done for others or for institutional purposes is wrong. Personal gain is not the only test of impropriety.
  7. It’s ethical if I’ve got it coming. Being overworked or underpaid does not justify accepting favors, discounts, or gratuities. Nor is abusing sick time, insurance claims, or personal use of office equipment. These are not fair compensation for one’s services or underappreciated efforts.
  8. It’s ethical if I’m objective. By definition, if you’ve lost your objectivity, you don’t know you’ve lost it. Gratitude, friendship, or anticipation of future favors can subtly affect one’s judgment.
  9. It’s ethical if I fight fire with fire. Promise-breaking, lying, or other misconduct is unacceptable even if others routinely engage in it.
  10. It’s ethical if I do it for you. Committing white lies or withholding information in professional relationships (such as performance reviews) disregards the fact that most people would rather know unpleasant information than soothing falsehoods.

Is there a difference between a code of ethics and a code of conduct?

Not everyone draws a distinction between the two, but it can be useful to do so. A code of ethics is a short, aspirational document outlining an organisation’s core ethical values, ideals and principles. A code of conduct on the other hand, is a longer, directional document. It is very specific in describing or forbidding specific behaviour and consequently easier to enforce. Codes of conduct typically lay down procedures and rules regarding acceptable or unacceptable practices related to operational issues. In essence, a code of ethics is a value-based document, while a code of conduct is a rule-based document.