The concept of ethics is a branch of philosophy, and it is concerned with living well. More specifically, ethics is concerned with actions such as doing the right thing and establishing an environment that is conducive for all people. It is essential for a society to establish ethical practices that promote harmony within it and with neighbors. This indicates that ethics has both a social and personal dimension. In the constantly changing corporate world, the practice of ethics is even more complex. Given that what may be acceptable in one country is forbidden in another, making the task of doing business very complicated. Recent years have revealed instances that have drawn public attention to the importance of ethics and good governance at all levels.
In the last few years, there has been much controversy about corporate ethics caused by high-profile failures and, in turn leading to regulatory reforms. The wave of corporate scandals, which began with Enron in 2001, led to an increase in the demands placed on companies and more stringent regulation of business within these entities. These reforms have spread across a wide spectrum and now include even organizations that traditionally did not receive much regulatory attention. At the same time, many companies are establishing some form of ethics or compliance infrastructure, and many are considering whether these steps are sufficient.
To shed some light on why ethics is important, the discussion will provide a case to illustrate. Consider an organization such as a public traded company where the leadership is authoritarian and runs the company by fear. Any form of dissent among the workforce is met by immediate termination of employment. In this organization, the dominant culture has few written policies or procedures, and internal controls are looked down upon.
Essential practices such as training are either absent or occur in a sporadic fashion. The company’s executives meet and arrange to fraudulently recognize revenue to meet or exceed the stock market expectations. After a few years of fooling both investors and government, investigations begin, and the truth is discovered. Several senior executives plead guilty to fraud, and the company loses large sums in penalties. The employees are left totally demoralized, and shareholders are horrified at how quickly their investment has been devalued.
Such scandals became very popular in the period between 2000 to date, and the main reason behind them is the lack of adequate checks and balances at the organizational level to ensure such practices get detected and stopped in time. It would appear that there is a need to realign focus to address issues of training at all levels in order to restore the value of integrity in employees at all levels.
In the course of the report, it was mentioned that the role of the leader is very crucial to the success of the program. In a similar study, the role of the integrity of a leader in the overall task of leadership was assessed. In the study, it was indicated that the followers tend to have trust in their leaders. They tend to perform better and exhibit more organizational-oriented behavior. In a similar fashion, the same study indicated that the level of integrity shown by the leader was directly proportional to the level of integrity the group will exhibit.
Given this position, it is possible to suggest that organizations with the intention of succeeding in either compliance or integrity programs should begin the implementation from the top down. This approach with the selection of high-ranking members acting as the drivers of the process seems more likely to bear fruit. It would appear that there is almost unanimous support for the implementation of ethical leadership within organizations.
The reasons behind this support, however, may remain unclear. For instance, is it because of the recent losses that this support has emerged? Or are there other underlying causes? This was the objective of a study to establish whether there is indeed a need for change in leadership as opposed to fear of loss. In the study, it was revealed that there had been rapid growth within the global market economy, and with it have come many new challenges.
The money markets are today accessed by individuals from all over the world owing to technological advances. This in itself has increased the volumes that are transacted on a daily basis on the global money market. Unfortunately, other than the globally accepted rules for trading, there is little else in terms of controls that exist in this global market. Regional variations are incentives to indulge in illegal activity. It has been reported that about 300 corporations control 70% of the international trade and 98% of all foreign direct investment.
This degree of influence on entire economies in the hands of a few has led to a situation where instead of these corporations having to be accountable, it is nations that are being forced to be accountable to them. The situation is somewhat like the state that prevails when a business is run by cartels. In such a situation, the degree of influence defines the direction of accountability.
The corporation today is facing a very complex situation, and survival within this environment has often taken precedence over other considerations. The fact that corporations span across so many nations implies that they have shareholders from all corners of the globe. This mixed constitution is a blessing in that it has forced these corporations to make efforts to change to continue attracting the foreign investment and support they have enjoyed for a long time.
In a study on the issue of governance, it is mentioned that though external regulations may play a role in improving industry-wide behavior, the real effort to reform must be seen as taking place from within the organization. In addition to this, it was also established that within the circles dominated by multi-national corporations, it was essential to establish accountability with regards to financial reporting and transparency with regards to strategic decision making.
Financial disclosure by these mega-corporations should include not only shareholders but regulatory bodies, customers, employees, creditors, and even suppliers. The magnitude of the losses that characterized the Enron-type scandals calls for much greater accountability given the stakes involved. Most of these mega-corporations value executives who are able to generate profits. This tendency to place emphasis on profitability at the expense of accountability also needs to be addressed to curb further losses. There must be an inclination within the organization towards maintaining a good financial picture and a picture of accountability.
The above position was reiterated in an article on valuable insights that can be of use in the prevention, detection, and deterring unethical practices in an organization it was reported that organizations should strive to attain the following; the use of the language of ethical decision making within its ranks; develop structural supports and procedures that enable ethical decision making; a culture where openness, commitment, and responsibility to business goals has been created and is sustained; and lastly an employee environment where development is value-added. In addition to these, it was also found that the company needed operational controls to assist in managing processes and providing a known guideline that explains to employees what is considered by the organization as ethical behavior.
Also noted among the main points that the organization must share and ensure the staff fully understand is the way of integrity. It is not enough to merely inform the staff on integrity as this is likely to cause dissent. It is better to make efforts to provide comprehensive information on the importance of integrity. This involves the use of various media in presenting this information to staff, and vital information regarding changes in ethical guidelines needs to be clearly stated. In addition to that, senior or management staff must all be in a position to state the organization’s case for change. As indicated several times in this report, seriousness at the top goes a long way in developing integrity within an organization.