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Directors, managers set company’s ethical tone

Directors, managers set company’s ethical tone

by Toby Lucich on May 29, 2007

Contrary to a popular saying, ignorance is not bliss.

The business scandals of the 1990s and early 2000s revealed ignorance by business leaders and employees about ethical and legal behavior.

Congress responded by passing the Sarbanes-Oxley Act of 2002, which all but mandates corporate codes of conduct for the top managers of publicly traded corporations. The New York Stock Exchange and Nasdaq require those same corporations to create corporate codes applicable to all employees.

To encourage compliance and ethics training, Congress amended Section 8B2.1(B)(4) of the federal sentencing guidelines.

All organizations are to take reasonable steps periodically to communicate their standards and procedures to employees, high-level personnel and members of the governing body.

Compliance with the guidelines is valuable to organizations. Effective compliance and ethics programs impact employee behavior and often prevent illegal and unethical actions. If wrongdoing occurs, compliance with the guidelines can lessen penalties by 95 percent.

Directors, managers set company’s ethical tone

(thanks to Dan Swanson for sharing reference to this article)

{ 1 comment… read it below or add one }

Glyn Holton July 17, 2007 at 2:58 am

In my experience, corporate wrongdoers know right from wrong already. They just don’t care. In their view, ethics training and ethics itself is for the little guy, not for masters of the universe like them. Sentence reductions for ethics training confuses ethics and law. Is it ethical for a corporate manager to arrange a merger so he can pay himself $100 million as part of the deal? It is, unfortunately, legal. Is it ethical for a corporation to disrupt a native population to put a pipeline and associated infrastructure through their unspoilt land? It is legal. With examples like these, and many others, managers will hide behind the lie of maximizing shareholder value. At the end of the day, they won’t care about ethics. They want to know 1) is a given behavior legal? 2) If it is illegal, what is the likelihood of their being caught? and 3) If they are caught, will the cost of the penalty be less than the advantage gained from breaking the law? When they are making that third assessment, I am sure the potential 95% reduction in penalty they can receive for holding ethics training will contribute nicely to their assessment.

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