Business Ethics: Beyond the Golden Rule

by Ann K. Moceyunas.

There is a new C.E.O. appearing in companies, the Chief Ethics Officer. Legal and social pressures are forcing corporations to look beyond "doing unto others" for guidance on making day-to-day and long term business decisions. Some companies, such as HCA Healthcare Corp.and The Prudential Insurance Company of America, have elevated the importance of business ethics programs in response to lawsuits or criminal investigations. Other companies, such as The Body Shop respond to social concern by implementing ethics programs that address the social impact of their business.

A Powerful Carrot and Stick

Defense contractors and securities firms have been "serious" about ethics policies for years, because of specific laws addressing those industries. The recent publicity about other companies is due, in part, to a 1991 federal criminal law that encourages corporate ethics policies and procedures and a 1996 Delaware court decision. Corporations cannot go to jail, but they can be fined or even put out of business for committing crimes. Under the Federal Sentencing Guidelines (available at http://www.ussc.gov), corporations can reduce their culpability for crimes by having an "effective program to prevent and detect violations of law." Ethics policies can reduce the exposure of corporate officers and directors to individual criminal responsibility and individual civil liability to shareholders in a derivative lawsuit. In a case against the directors of Caremark Inc., a Delaware court stated that corporate directors could be accountable to shareholders for losses paid the corporation for criminal activity. However, the Caremark directors were absolved from liability by the existence of an effective corporate ethics program.

An effective ethics program under the Federal Sentencing Guidelines must include these general steps:

1. Establish corporate standards and procedures.

2. Appoint at least one high level individual in the business organization to oversee compliance (and use due care not to appoint someone with a "propensity to engage in illegal activities").

3. Require all in the corporation to participate in training or at least read about the standards and procedures.

4. Implement regular monitoring and auditing systems.

5. Enforce the standards consistently, respond quickly to detected offenses and prevent further offenses.

Having a written policy is only the first step. Training, monitoring, and correcting are just as important. The Federal Sentencing Guidelines emphasize that the effectiveness of an ethics program depends on the individual business. Creativity can go a long way toward making an ethics program effective. For example, Lockheed Martindealt with the problem of training the workers on the line together with those in the corner offices: they developed "The Ethics Challenge Featuring Dilbert and Dogbert", a board game illustrated by cartoonist Scott Adams with accompanying videotape. Large companies, such as BellSouth, maintain a confidential ethics hotline to give employees an opportunity to discuss sensitive ethical issues. Other companies, such as Hewlett Packard, hold regular discussions on hypothetical ethics problems. Effectiveness depends, ultimately, on the commitment from management.

Reaching Above the Law

Ethics programs that meet the minimum Federal Sentencing Guidelines only address minimum legal standards. Business people make ethical decisions about questions that the law does not answer. For example, U.S. privacy law gives little guidance as to what companies may do with the data they collect on individuals customers. By contrast, European law reflects a deep concern about the misuse of information about individuals. Business ethics policies can go beyond the minimum of the law, set expectations higher, and establish a corporate culture.

Business ethics policies vary widely in form, such as printed brochures or manuals or publication on the firm intra-net. Content also varies, but effective policies address key business relationships: employees, customers, vendors, competitors, and the public. The individual topics often directly state standards for complying with laws, avoiding conflicts of interest, protecting company property and confidential information, maintaining health and safety in the workplace, avoiding discrimination and harassment, and respecting privacy. Some companies, such as Lockheed Martin, expect their contractors and suppliers to live up to the company's ethics policy and make the policy available on its website (see, http://www.lockheedmartin.com/exeth/ethset.html).

Many ethical concerns cross-over industry differences because of the ubiquity of computers and networks. An informal survey of technology firms indicates that one of the most prevalent ethical issues is copyright infringement: employees making copies of software or downloading files from the Internet. Another wide spread issue is the use of corporate assets, particularly access to the Internet and e-mail, for personal use. If computers and networks raise an issue, then they can be used to implement an ethics policy and procedure. For example, when an employee logs into her computer, the first screen includes a reminder about using the system for company business and not personal matter. As underscored by the Federal Sentencing Guidelines, effectiveness is the key, not elaborateness.

Responsible companies understand that business ethics policies and procedures are good for business. Effective policies and procedures can minimize risk of liability for wrong-doing. They can also enhance the corporate culture and the trust factor in key business relationships. Lastly, effective policies and procedures encourage communication, an essential skill for making the most of opportunities. And isn't that good business?

Opinions expressed in this article are those of the author, Ann K. Moceyunas. Copyright © 1998 Moceyunas P.C. All rights reserved.

Computer Ethics is a course taught for the CS/IS Department at Kennesaw State University by Ann K. Moceyunas

Last updated: August 25, 2002. Opinions expressed on this website are those of the author, Ann K. Moceyunas. Certain Portions Copyright © 1996 -2002 Moceyunas P.C. All rights reserved. Have Questions? Contact Ann Moceyunas at ann@moceyunas.com.