Company's Code Of Ethics By Example example essay topic

After news of the scandal of Enron, one of the hottest items on e-Bay was a 64-page copy of Enron's corporate code of ethics. One seller / former employee proclaimed it had "never been opened". In the forward Kenneth L. Lay, CEO of Enron stated, "We want to be proud of Enron and to know that it enjoys a reputation for fairness and honesty and that it is respected (Enron 2)". For a company with such an extensive code of ethics and a CEO who seemed to want the company to be respected for that, there are still so many unanswered questions of what exactly went wrong. I believe that simply having a solid and thorough code of ethics alone does not prevent a company from acting unethically when given the right opportunity.

Investors and the media once considered Enron to be the company of the future. The company had detailed code of ethics and powerful front men like Kenneth Lay, who is the son of a Baptist minister and whose own son was studying to enter the ministry (Flynt 1). Unfortunately the Enron board waived the company's own ethic code requirements to allow the company's Chief Financial Officer to serve as a general partner for the partnership that Enron was using as a conduit for much of its business. They also allowed discrepancies of millions of dollars. It was not until whistle blower Sherron S. Watkins stepped forward that the deceit began to unravel. Enron finally declared bankruptcy on December 2, 2001, leaving employees with out jobs or money.

For a company to be successful ethically, it must go beyond the notion of simple legal compliance and adopt a values-based organizational culture. A corporate code of ethics can be a very valuable and integral part of a company's culture but I believe that it is not strong enough to stand alone. Thought and care must go into constructing the code of ethics and the implementation of it. Companies need to infuse ethics and integrity throughout their corporate culture as well as into their definition of success. To be successfully ethical, companies must go beyond the notion of simple legal compliance and adopt a values-based organizational culture. Creating a Solid Code of Ethics What a Code of Ethics Should Entail The importance of having a code of ethics is to define acceptable behaviors and promote higher standards of practice within a company.

The code should provide a benchmark for members and provide a framework for behavior. A typical corporate code of ethics outlines the responsibilities of a company and emphasizes that being honest and fair should be strive d for. It can include the rules for governing the company in cases of employees being caught lying, cheating, or stealing. In creating a code of ethics, several questions should be asked. What is the purpose of the new code?

What are the needs and values of the organization it is being created for? Who should be involved in creating this code? How is the code intended to be implemented? How and when will the code be reviewed and revised?

The process of created a solid code of ethics matters just as much as the final product. The company's code of ethics must also make sense to its employees. The code must be written in a practical and understandable manner. It should provide clear action statements that indicate what should and should not be done. The code should be clearly integrated with the company's mission and vision. It should be apparent to the employees how following the code of ethics will aid in accomplishing the company's vision and the employees must see a tie that following the code aids in their personal success within the company (Hawkins 1).

Management Involvement Having a company code of ethics alone simply is not enough. As the latest news has show, Enron had a very extensive code of ethics that went ignored. A tone must be set by senior management on a daily basis. If an employee sees a member of management padding an expense report, then they feel license to do the same.

If you have a management style that is fair and equitable, it is more likely that other employees will follow that example. One of the main contributions to a successful code of ethics is the management with in the company. It must start with the very top executives and trickle down to the lowest level of management. Managers must lead by example. As soon as an employee sees an upper level manager break the company's code of ethics, they can potentially feel that the manager's action opens up the doorway for their unethical behavior. Unfortunately it does not stop with just that one employee; they most likely will tell their peers about the unethical action they have seen thus opening the doorway for others to break the company's code of ethics.

Prior to attending graduate school, I worked for an investment company for five years. The vice president of my department had very bad ethics and never worked a full forty hour work week. When she wanted to leave early, she would leave the light on in her office, cover the window, and shut the door so that she would appear busy. Then she would literally sneak out the back door thinking nobody had seen her.

One by one the employees noticed different incidents and when they got together it was mentioned and confirmed. It then became a game among my fellow associates to try to walk by and catch her as she was sneaking out, just to see what she would say. This did a lot for the camaraderie of the department, but hurt the company more in the end. Due to here unethical behavior, a vast majority of employees under her felt that if she could cheat the company out of time, then they could to.

The company's code of ethics no longer served as a guidance and suddenly there was an entire department breaking the code. Managers Discussion of Ethics Managers must not only uphold the company's code of ethics by example, they must also make a point to discuss the code with their employees regularly. If the code is referred to on a regular basis, I believe that employees will be much more likely to follow it. If the employees can see that the code of ethics is such an important part of the company and the management, then they may feel it should be important to them as well.

In addition, managers must make it a comfortable environment for whistle blowers to come forward about violations of the code. If managers are creating the right ethical environment, the company has a better chance of being an ethical minded company. Protecting the Whistleblower With any good code of ethics, a company should also have a clear outline for all employees to reference when they need to report violations to the code. The employees need to see a clear chain of command, especially in cases where the person who is the first link is the one violating the rules. The employee needs to know who else to turn to. There are numerous accounts of employees looking the other way and not coming forward with their knowledge of unethical behavior.

For many employees the fear of losing their job is enough of a deterrent to keep them quiet. At least one whistle blower was fired from Enron before Sherron S. Watkins stepped forward. It was latter learned that as Kenneth Lay was supposedly researching her claims, he was actually conducting an investigation to find grounds to fire Ms. Watkins (Flynt 1). It is simply not enough to have a code of ethics if there is not a solid, fear free path to follow to report violations.

Johnson & Johnson An Effective Code of Ethics A good example of a working code of ethics is Johnson & Johnson whose one page "Credo" has stood the test of time. The credo outlines the four responsibilities of the company. The first responsibility listed is to "the doctors, nurses and patients, to mothers and fathers and all others who use [their] products and services". Next is to the employees and then the community.

Their final responsibility is to the stockholders. Johnson & Johnson claims that if the credo's first three responsibilities are met, then the stockholders will be well served (Johnson 1). This credo was tested in 1982 when seven Chicago residents died after taking cyanide d-laced capsules. The top executives of the company immediately went into action, recalling all Tylenol products and halting all production. This was all done against the wishes of the consultants and in the end cost Johnson & Johnson $150 million. The consultants feared that Johnson & Johnson's brand name would suffer, but in the end Tylenol was able to regain its share of the market with in one year (Wee 1) Without the deep set of values and guidance of the Johnson & Johnson credo, it is unlikely that the executive's response would have been so prompt, effective and ethically sound.

Today a strong sense of ethical responsibility is still prominent within the company. Johnson & Johnson regularly surveys its employees to see how well the company is adhering to the credo. Any discrepancies are noted and addressed immediately. This is an example of how both leadership and management play an important part in a corporation's code of ethics. Code of Ethics in the Accounting Profession Sarbanes-Oxley Act of 2002 H.R. 3763-45 On April 24, 2002 in the wake of scandals like Enron and World Com, the Sarbanes-Oxley Act of 2002 was passed.

It outlined among other things a code of ethics disclosure provision. It requires public companies to disclose whether or not they have adopted a corporate code of ethics for senior financial officers. The Act specifies that if a company has not adopted such code, they issue their reason why. It requires that if there is any change or waiver in the code, the company must also disclose that immediately.

The Act defined the term "code of ethics" to mean such standards that are necessary to promote honest and ethical conduct. This includes handling conflicts of interest with respect to personal and professional relationships. It stated that the code of ethics should promote compliance with governmental rules and that periodic reports be "full, fair, accurate, timely, and understandable (United 406)". ACIP A There are two major codes in the accounting profession in the United States, The code of Professional Conduct of the American Institute if Certified Public Accountants adopted in its current for in 1973 and Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management, adopted in April of 1997. Members of the AICPA must adhere to 6 basic principles. The Code of Professional Conduct states that they should carry out their activities in a professional and moral manner.

Their primary obligation is to the public and thus they should act with the highest sense of integrity. It states that they should remain objective and free from conflicts of interest. A member should strive to meet the profession's ethical standards, with their primary concern being whatever is in the best interest of the public. Lastly a member should follow the guidelines set forth in the Code of Professional Conduct coupled with their own judgment to ensure they remain ethical in their role as professionals (Brooks 227).

The challenge of having a professional code and a corporate code creates a dilemma for accounting professionals. In a perfect world the ethical message in both codes are the same. Often times they are not and a professional must choose which one to follow. Personal Code of Ethics As an employee, we must not only look to the corporation's code of ethics, we must have our own personal code of ethics to rely on. When our personal code is violated, we must decide what needs to be done in order to remain ethical. Sometimes that may be whistle-blowing, and sometimes is may be simply leaving the company as soon as possible.

Sherron S. Watkins, the Enron whistle blower once said, "When a corporation claims to value a code of ethics, but rewards those who ignore that code, it's time to leave (Flynt 1)". I believe that every individual should follow their own personal code of ethics in addition to the company's code to dictate what is right and wrong. Conclusion A company should use a good amount of time and effort in to creating a corporate code of ethics that is unique and representational of them. The code should be distributed and reviewed often, and it should be reference on a constant basis by all levels of management.

The company should constantly look for any possible additions and revisions to the code. Most importantly though, a company should strive to live by the words they have written in the code. As a professional it is our job to look not only to a company's code but to our own code. We must make the choice of what is right and wrong and if put in a situation that is against our code we must stand up for what is right. A corporate code of ethics is a necessity in today's society, but the company cannot simply rely on just a code. For the code to be successful, the company must prove to their employees that they have the desire and drive to back the words of their code.

Bibliography

Enron. Code of Ethics. Jul. 2000.
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Flynt, Sean. "Enron Whistleblower Tells Chilling Tale of Corporate Ruin". Samford University. Ed. Donna Fitch. 19 Feb. 2004.
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Hawkins, John. "The Path to Ethical Internalization: Moving the Code from the Wall to Daily Life". Leadership Lifestyle. May. 2003 Johnson & Johnson.
Our Credo. 18 August 2004.
Wee, Hee sun. "Corporate Ethics: Right Makes Might". Business Week Online. Ed. Douglas Har brecht. 11 Apr. 2002.
United States of America. One Hundred Seventh Congress. Sarbanes-Oxley Act of 2002.
Sec 406. Brooks, Leonard J. Business & Professional Ethics for Directors, Executives, & Accountants. Mason: Thompson South-Western, 2004.