8.1 Corporate Responsibility and Ethics

There are many reasons to responsibly and ethically run an organization. Perhaps the strongest reason is legal compliance. Anti-corruption laws (Sarbanes Oxley in the U.S. and UK Bribery Act 2010 in Britain to name two) have refocused business accountability; businesses must now proactively ensure that their employees’ activities are legal. In other words, being unaware of employee actions or employees acting without direct instruction or approval are no longer adequate excuses.

8.1.1 Compliance

Many corporations require employees to be familiar with their codes of ethics and business conduct. From a business perspective, this potentially can lead to cost savings. For example, workplace harassment can result in large settlements, not to mention lost productivity as the issue is reviewed and possibly litigated. A prominent ethics program can reduce negligence exposure if a claim comes to court or a regulatory agency weighs an action. Similarly, false advertising and verbal assurances can be expensive to settle, especially if they become a class action. Under these circumstances an effective ethics program can mitigate the situation.

8.1.2 You’re Compliant until You’re Caught

In today’s wired society, social media and other outlets increase the likelihood of non-compliance being brought to regulators’ or the public’s attention. Even if these do not result in legal or civil actions, from a public relations standpoint, the perception of non-compliance can be disastrous in the marketplace. Again, a strong code of ethics can be your insurance in these situations.

8.1.3 Ethical Management Can Be Good Management

The jury is still out as to whether managers should be held to professional standards similar to those for the legal, accounting and medical professions: Business graduates are not required to recite the equivalent of medicine’s Hippocratic Oath. However, doing so could be good business. Consider one of the most successful and fastest growing companies of all time, Google. Their corporate motto is “Don’t be evil.” Obviously Google is successful for many reasons beyond their official outlook, but no one can say they are less successful because of it.

In the simulation, you might be asked to weigh solutions to difficult situations. If you are working as a group, you will be required to come to a consensus. Your decisions will have a direct impact on your financial results.

As an optional exercise, your team could consider writing a code of ethics for your company.

8.1.4 Making Decisions

Your simulation might ask you to make decisions when a situation arises that requires a judgment of values. Your task is to find ways to ensure compliance and minimize exposure while returning value to all stakeholders. Group discussion and consensus is imperative because your decisions will affect your financial results.

Your simulation Dashboard will notify you if your company needs to make Corporate Responsibility and Ethics plug-in decisions. In the following round, the results will appear in the Capstone Courier. If your instructor permits it, an expanded impact debrief will be available from the Reports link on the website.