1. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Making it Stick: Doing What’s Right in a Competitive Market McGraw-Hill

2. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 10-2 “As long as fallible human beings are in charge, we can expect more businesses to get into big trouble. Generally they’re going to fail through bad luck or bad business judgment, but sometimes they’re going to fail through negligence or active malfeasance or even active criminal behavior. The challenge our society faces is to study these events and to take lessons from them about ethical conduct personally and ethical conduct as representatives of our companies, and about public policy responses. I ask myself, what should I do differently in my job… What should my company do differently?” James A. Baker, III White House Chief of Staff for President Ronald Reagan, and Secretary of State for President George H.W. Bush

3. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. A CEO’s Life… DEMANDING CUSTOMERS who want new and better products and services at lower prices. IMPATIENT STOCKHOLDERS who want the stock price to rise each and every quarter. AGGRESSIVE VENDORS who want to sell you more of everything. DEMANDING FEDERAL, STATE, AND LOCAL OFFICIALS who want to burden you with more rules and regulations while encouraging you to hire more people and pay more taxes. DEMANDING CREDITORS who want their loan payments on time. AGGRESSIVE COMPETITORS who want to steal your customers from you. 10-3

4. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Making it Stick 1.Establish a Code of Ethics 2.Support the Code of Ethics with extensive training for every member of the organization. 3.Hire an Ethics Officer 4.Celebrate and Reward the Ethical behavior demonstrated by your employees. 5.Promote your organization’s commitment to ethical behavior. 6.Continue to monitor the behavior as you grow. 10-4

5. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Establish a Code of Ethics A well-written Code of Ethics can do several things: It can capture what the organization understands ‘ethical behavior’ to mean – your Values Statement. It can establish a detailed guide to acceptable behavior. It can state policies for behavior in specific situations. It can document punishments for violations of those policies 10-5

6. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Establish a Code of Ethics The Institute of Business Ethics recommends: –Find a champion –Get endorsement from the Chairman and the Board –Find out what bothers people 10-6

7. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Establish a Code of Ethics –Pick a well-tested model –Produce a company code of conduct –Try it out first –Issue the code and make it known –Make it work 10-7

8. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Support the Code With Extensive Training for Every Member of the Organization Since the Code can’t capture every possible example of unethical behavior, each department of the organization should take the Code and apply it to examples that could arise in their area. In these department or team meetings, employees can work on: Recognizing the Ethical Issue Discussing options for an appropriate response Selecting the best option for the organization 10-8

9. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Hire an Ethics Officer The Ethics and Compliance Officers Association documented the chief responsibilities of their members in a survey, which included some of the following: 89% Oversight of hotline/guideline/internal reporting 89% Preparation and delivery of internal presentations 88% Organization-wide communications 85% Senior management and/or board briefings/communications 84% Training Design 83% Assessing/reviewing vulnerabilities 83% Assessing/reviewing success/failure of initiatives 79% Overseeing investigations of wrongdoing 79% Management of program documentation 77% Direct handling of hotline/guideline/internal reporting 72% Preparation and delivery of external presentations 68% Establishing company policy and procedures 64% International program development 61% Training delivery 10-9

10. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Celebrate and Reward the Ethical Behavior Demonstrated by Your Employees Celebrate examples of good ethical behavior in your company newsletter Award prizes for ethical behavior – and let the employee choose the reward Award prizes for new and creative ideas – and let the employee choose the reward Recognize employees who represent the standard of behavior to which you are committing. Declare an Ethics Day and allow every department to share their successes 10-10

11. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. P romote Your Organizations’ Commitment to Ethical Behavior Offer a no-questions-asked refund like Lands’ End. Offer a 110% price-match guarantee like Home Depot. If you overcharge a client by mistake, give them a refund plus interest before their accounting department figures out the error and asks for the money. 10-11

12. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. P romote Your Organizations’ Commitment to Ethical Behavior Get your clients involved in the development of your Ethics Policies – ask them to tell you what forms of behavior or guarantees will make them feel reassured that they are dealing with an ethical company. Let your employees visit client sites to talk about your Code of Ethics in person. Share your success stories with all of your stakeholders, not just your employees. Invite your stakeholders to your Ethics Day celebration. 10-12

13. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Continue to Monitor the Behavior as You Grow Any organization’s commitment to ethical performance must be watched constantly. It is easy for other business issues to take priority and for the Code of Ethics to suddenly become ‘taken for granted’. Also, the continued growth of technology will present new situations for ethical dilemmas such as policies on email monitoring and web surfing, so your Code may need to be re-written on a regular basis. 10-13

14. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Becoming a Transparent Organization Reactive ethical policies – Policies that result when organizations are driven by events and/or a fear of future events Proactive ethical policies – Policies that result when the company develops a clear sense of what they stand for as an ethical organization Transparent organization – An organization that maintains open and honest communications with all stakeholders 10-14