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Corporate Code of Ethics Do They Work?

Essay by review  •  November 26, 2010  •  Research Paper  •  2,458 Words (10 Pages)  •  1,449 Views

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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 whistleblower 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 strived 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 whistleblowers 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

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