Homework answers / question archive / To prepare for this assignment, review Chapter 9 in the course text, as well as the article on compliance program auditing by Usnick and Usnick (2013)

To prepare for this assignment, review Chapter 9 in the course text, as well as the article on compliance program auditing by Usnick and Usnick (2013)

Business

Share With

To prepare for this assignment, review Chapter 9 in the course text, as well as the article on compliance program auditing by Usnick and Usnick (2013). In addition, read Chapter 10 in the course text. Review Table 10.3: Global Risks 2014, and select one of the risk areas: economic, environmental, geopolitical, societal, or technological.

For this assignment, imagine that you have been tasked with creating a proposal for the new CEO of your organization. You have been asked to create a proposal that establishes an ethics program, as well as develop a training plan, and develop a plan to conduct compliance auditing. Your proposal must include the following:

• Describe an emerging global risk that is either economic, environmental, geopolitical, societal, or technological.
• Identify all countries that might be associated with the risk.
• Describe the effects of the risk on each country.
• Evaluate the role of ethical decision-making in business organizations as the role pertains to your global risk.
• Analyze the impact of business ethics on stakeholder relationships.
• Analyze why it is necessary to create an ethics program, conduct training, and engage in compliance auditing.
• Design a training plan for ethical considerations and social responsibility as it relates to the key risk area and the countries you have selected. The training plan must include the following:
  • The goals of the training program
  • The objectives of the training program
  • The learning methods/activities of the training program
  • How the training program will be evaluated
• Describe how the training will be conducted
• Describe how compliance auditing will be conducted.
• Summarize the key findings

The assignment:

• Must be eight to ten double-spaced pages in length (not including the title page and references page) and and formatted according to APA style as outlined in the University of Arizona Global Campus Writing Center.
• Must include a separate title page with the following
  • Title of paper
  • Student’s name
  • Course name and number
  • Instructor’s name
  • Date submitted
• Must use at least three scholarly and/or credible sources in addition to the course text and the Usnick and Usnick (2013) article.
  • The Scholarly, Peer Reviewed, and Other Credible Sources (Links to an external site.) table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
• Must document all sources in APA style as outlined in the University of Arizona Global Campus Writing Center.
• Must include a separate references page that is formatted according to APA style as outlined in the University of Arizona Global Campus Writing Center.

Chaper 9 9.1 Creating a Program Structure As demonstrated by the Morgan Stanley example, simply creating an organizatio nal ethics program is not sufficient for preventing misconduct. To ensure the effe ctive implementation of an ethics program throughout an organization, a designa ted individual or group must have the authority and responsibility to oversee it. There are three components to an effective ethics program structure. The first is an appointed ethics officer who oversees compliance with legal and ethical stan dards and acts as a steward of the ethics and compliance program within the org anization (Ethics Resource Center, 2007). The second component is oversight of t he ethics and compliance function by the organization’s governing body (e.g., the board of directors). The third is the relationship between the ethics officer and w homever he or she reports to, which can help or hinder the effectiveness of the et hics and compliance program. Approaches to managing an organizational ethics program vary. Some companies have a distinct department for managing the ethics and compliance program, suc h as the Corporate Office of Ethics and Business Conduct at Lockheed Martin (Loc kheed Martin Inc., 2007). Other companies assign responsibility for ethics and co mpliance to existing functions, such as human resources or legal departments. An informal survey by the Ethics & Compliance Officer Association (ECOA) found th at less than a third of the companies (31.6%) had a separate functional area for e thics, whereas almost half (47.4%) included ethics as part of the legal/general co unsel function (Kane, 2014). Companies gain advantages by structuring ethics and compliance programs appr opriately within the organization. Organizations should consider the following qu estions when designing an ethics and compliance program: • • • • How does the ethics and compliance function relate to the business, chief executi ve officer (CEO), and top management? How does the ethics and compliance function relate to functional departments or divisions of the company? What should the ethics and compliance relationship be with external stakeholder s (e.g., customers, suppliers, regulators)? How does the ethics and compliance function relate to the board of directors or o wners? • What should the ethics and compliance function report about and to whom, how, and when? The reporting structure must allow the ethics officer to address delicate situation s in which executive management may be involved in wrongdoing. The OECD Goo d Practice Guidance on Internal Controls, Ethics, and Compliance recommends th at senior corporate officers have a duty to oversee “ethics and compliance progra mmes or measures regarding foreign bribery, including the authority to report m atters directly to independent monitoring bodies . . . with an adequate level of aut onomy from management, resources, and authority” (OECD, 2010, p. 3). The conc ept of an appropriately designed program suggests that the designated ethics offi cer have sufficient authority and responsibility to perform duties to ensure comp liance of legal and ethical standards throughout the organization. The Role of the Ethics Officer What are the responsibilities of an ethics officer? The Society for Human Resourc e Management (SHRM) states that the ethics officer “serves as the organization’s internal control point for ethics and improprieties, allegations and complaints, an d conflicts of interest; and provides corporate leadership and advice on corporat e governance issues” (SHRM, 2014, para. 1). This description provides the purpos e of an ethics officer in general terms, which may not reflect the breadth of respo nsibilities for a larger organization. The Ethics Resource Center (2007), on the ot her hand, provides an example of a job description for a chief ethics and complia nce officer with responsibilities for the conduct of employees worldwide: Corporate Officer with responsibility to provide global leadership on compliance and ethics; oversee all compliance and ethics programs and initiatives of the com pany; ensure that appropriate programs, procedures and policies are implement ed to reduce the chances of illegal or unethical conduct by the company. (p. 7) Regulatory guidelines stipulate that the ethics and compliance function be led by high-level personnel (United States Sentencing Commission, 2013) or toplevel managers (Ministry of Justice, 2011). Recall in Chapter 1 that there was a shi ft from a solely compliance focus in the early 1990s to either a combined complia nce/ethics or solely ethics focus in the 2000s. The managerial level, title, and dep artment name can reflect the organization’s commitment to the ethics program a nd its emphasis on ethics versus compliance. For example, the ethics and complia nce function at Cisco resides in an ethics office, whereas most ethical issues at Ha rleyDavidson are referred to the legal department and the chief compliance officer/g eneral counsel (Cisco, 2014; Harley- Davidson, n.d.). A study found that a title of chief, such as chief ethics officer or ch ief compliance officer, is the most common in larger companies (28%), followed by vice president (10%), executive vice president or senior vice president (9%), director (7%), manager (4%), and officer (3%) (Weber & Wasieleski, 2013). See a sample of titles for the ethics professional in the feature box Consider: What’s in a Name of an Ethics Professional? to recognize variations in naming ethical depar tments and the responsible manager. Consider: What’s in a Name of an Ethics Professional? A review of the ECOA member listing shows some of the titles that may be used f or ethics professionals: • • • • • • • • • • • • • • • • Chief compliance officer Chief ethics and compliance officer Chief ethics officer Chief risk, compliance and ethics officer Vice president, corporate responsibility Vice president, global compliance and ethics Director of business conduct Director of integrity, security and compliance Director, corporate compliance and ethics Director, ethics and integrity programs Director, ethics and regulatory compliance Senior manager, ethics and non-financial corporate policies and procedures Senior manager, global ethics and compliance Senior vice president, global [corporate social responsibility] and risk manageme nt Manager, business integrity and compliance Manager, ethics and employee issues Questions to Consider 1. Why does the ethics function vary among organizations? What company factors would lead to the wording of the ethics function? 2. Which titles reflect a focus on compliance only? Which titles reflect a focus on eth ics? 3. Does a title provide sufficient authority to oversee an organization’s ethics progr am? Does the title of the ethics professional indicate a level of autonomy in addre ssing ethical issues? The diverse titles of ethics professionals imply that the duties of the ethics officer vary among organizations. The Ethics Resource Center (2007) identifies typical r esponsibilities of ethics officers: • • • • • • • • Oversee assessment of organizational risk for misconduct and noncompliance; Establish organizational objectives for ethics and compliance; Manage the organization’s entire ethics and compliance program; Implement initiatives to foster an ethical culture throughout the organization; Supervise ethics and compliance staff embedded throughout the organization; Frequently inform the board of directors and senior management team of risks, i ncidents, and initiatives driven by the ethics and compliance program, and progr ess toward program goals; Implement a program of measurement to monitor program performance; and Oversee periodic measurements of program effectiveness. (p. 2) A key role of the ethics officer is to coordinate the ethics program with other com pany managers in the areas of human resources, finance, communications, risk m anagement, and governance. Additionally, the ethics officer may communicate re gularly with customers, suppliers, and the media on ethical issues relating to the company or industry. A survey of 800 ethics and compliance professionals from f inancial service firms in 62 countries found that the typical week of an ethics offi cer includes, on average, a little more than a day of addressing regulatory develo pments, such as tracking and analyzing regulatory developments (15% of time d uring the workweek) and amending policies and procedures (7%) (Hammond & Walshe, 2013). Another day involves communicating with the legal department, c onducting internal audit and risk functions (16%), and reporting to the board (6 %). During the rest of the week, the ethics and compliance professionals reporte d focusing on compliance tasks including monitoring activities, training, and prov ision of advice and guidance (56%). The Ethics Resource Center (2007) has identified 11 qualifications expected from the designated lead of an ethics program. They include: • • • • • Substantial business experience (15 years+); Ability to communicate (public speaking, professional writing, with executives, et c.); Ability to develop and deliver training; Familiarity with SarbanesOxley, Federal Sentencing Guidelines [FSGO] and other relevant compliance stan dards; Familiarity with leading thinking and research in business ethics and compliance ; • • • • • • Understanding of the auditing process; Understanding of the risk management/risk assessment process; Comfort with eLearning, learning management systems, and other IT [informatio n technology]; Project management skills; Substantial management experience (10 years+); and Ability to motivate and inspire people. (p. 26) As formal ethics and compliance education is only a recent offering in higher edu cation, many ethics officers come from legal, auditing, or human resources discipl ines. Over half of ethics professionals in vice president or director roles have a la w degree, while less than 5% of all ethics professionals are certified public accou ntants (Society of Corporate Compliance and Ethics, 2013). To gain knowledge in ethics and compliance, professionals seek certification from the ECOA and the So ciety of Corporate Compliance and Ethics (SCCE). According to an SCCE survey, th e average compensation for ethics professionals ranges from $214,118 for vice p residents to $71,894 for assistants/specialists, whereas compensation for certifie d professionals are slightly higher (Society of Corporate Compliance and Ethics, 2 013). See Table 9.1 for more detailed information about compensation for ethics professionals. Table 9.1: Average compensation for ethics professionals Vice President Director Average total compensation Manager $214,118 $139,582 $102,324 Certified Compliance & Ethics Professional from SCCE $230,637 $166,109 $113,875 Other certifications* $170,425 $128,571 $103,376 No certification $236,479 $134,857 $93,586 * Includes industryspecific certifications in healthcare, fraud examination, internal auditing, information systems Source: Society of Corporate Compliance and Ethics. (2013). 2013 crossindustry compliance & ethics staff survey (pp. 40). Minneapolis, MN: Society of Corporate Compliance and E thics. The relationship of the ethics officer to the governing authority of an organizatio n shifted from informal or nonexistent to a formal reporting requirement with th e enactment of SarbanesOxley (Chapter 4) and similar legislation worldwide, which placed greater respo nsibility for accurate financial reporting on the board of directors. The 2004 and 2010 amendments of the FSGO encourage companies to allow the chief ethics an d compliance officer access to the board of directors to report on observed misco nduct. To create an effective program structure, organizations ask, “What is the a ppropriate involvement of the board of directors in the ethics and compliance pr ogram and what should be the relationship between the board and the ethics offi ce?” The next section explores these questions. Board Oversight Oversight of the ethics program by the governing body of an organization differs from the daily management by the ethics officer. The role of the board of director s is to monitor management practices and performance in achieving company go als, as well as to protect the organization from reputational and financial risks re sulting from ethical misconduct. Board members may be responsible to stockhol ders for monetary damages if they fail to set up procedures guarding against mis behavior that results in fines and penalties. Recall from Chapter 1 how Medicare and Medicaid fraud resulted in scrutiny of the healthcare industry and the subse quent Caremark decision of 1996 statement that directors have a duty to assure t hat accurate information and reporting systems are in place and followed (Cohan , 2002; Robinson & Pauzé, 1997). The realization that Enron’s board of directors t wice waived its conflict of interest policy for establishing special purpose entities with its chief financial officer increased regulatory attention to the board’s respo nsibility to oversee the ethics program (Felo & Solieri, 2003). The FSGO outlines the responsibilities of the board of directors and senior manag ement relating to ethics and compliance as follows: • • • The board of directors must be knowledgeable about the organization’s ethics an d compliance program, including information on the compliance risks facing the f irm and the programs installed to combat those risks. Senior management must ensure that the organization has an effective complianc e program. Those individuals with day-today operational responsibility for ethics and compliance must “be given adequat e resources, appropriate authority, and direct access” to the board of directors or an appropriate subgroup of the board (United States Sentencing Commission, 20 13, p. 497). A board of directors faces many challenges when implementing an adequate mon itoring process to stop illegal and unethical behavior within the organization (Pr entice, 2012). One challenge is that company ethics may not receive attention on the board agenda. The CEO and management team typically set the agenda for bo ard meetings and are the primary source of information for the board members ( Sharpe, 2011). Another challenge is achieving the right degree of monitoring to d emonstrate aggressive detection and punishment for violations of ethical standar ds without creating an atmosphere of distrust that erodes innovation (Cohan, 20 02). Board members must be able to ask the right questions and provide an envir onment of trust among the ethics office and the board. The FSGO accepts that a board cannot manage every aspect of the ethics and com pliance practices within a business, allowing for “Specific individual(s) within the organization [to] be delegated day-today operational responsibility for the compliance and ethics program” (United St ates Sentencing Commission, 2013, p. 497). The board looks to the ethics officer t o create an ethical culture that emphasizes proper conduct, and that increases br and value and reputation, necessitating regular communication and reports betw een the board and the ethics officer. Table 9.2 provides sample questions that bo ard members should ask the ethics leader of the organization. Table 9.2: Sample questions the board of directors should ask the chief ethi cs officer Board Oversight Questions Do we have the right model to oversee, manage, and implement the company’s ethics and com ce (E&C) program? How do we assess adherence to company standards? How do we determine effectiveness? How do we ensure the visibility of high-risk matters arising in the business units? How do we train our employees? How do we raise employee awareness of the company’s E&C ram? Are we identifying and prioritizing the company’s compliance risk? Are we auditing for priority compliance risk? Board Oversight Questions Do we have the right systems in place to ensure observed misconduct is reported? Ensure emp es are comfortable raising issues? How do we measure E&C program effectiveness? Sources: Adapted from Tables 1 & 4, pp. 12, 18 in BonimeBlanc, A., & Brevard, J.E. Ethics and the Board: Integrating Integrity into Business Strategy. Council Perspe ctive CP-013 © 2009 by The Conference Board, Inc. The ethics officer must be able to inform the board of directors and senior manag ement team of risks, incidents, and activities related to the ethics and compliance program without fear of retaliation (Ethics Resource Center, 2007). To provide r egular updates to the board, the ethics program needs a system for collecting the statistics and qualitative findings of risks, program effectiveness, and potential m isconduct. Ethics officers should provide board members with easy to read dashb oards of quantitative information such as helpline/hotline call statistics, material investigations, training completion, communications reach, code of conduct certi fications, employee ethics culture survey results, employee turnover counts, and exit interview feedback. Qualitative information that the ethics officer should pro vide includes new laws or regulations, internal audit findings, and risk assessme nt reports. Reporting to the board can be timeconsuming, as one study found that 36% of ethics professionals spent more than four hours a week creating and amending information for the board, with more t han 70 organizations spending more than 10 hours a week preparing informatio n for the board (Hammond & Walshe, 2013). Reporting Relationship The ethics officer’s credibility and authority with the board and the company is h eavily influenced by whom he or she reports to within the organization. Michael Hoffman, a noted professor of business ethics at Bentley University, stresses that the reporting structure can affect an ethics officer’s objectivity, independence, po wer, and influence to ensure ethical integrity throughout the organization (Hoffm an, 2010). He stated, “There are many signs that the role of the day-today ethics officer, the person who really does the ethics work, is being marginaliz ed rather than strengthened” (p. 744). Hoffman describes three ways that the reporting relationship of ethics officers in fluences their objectivity, independence, power, and influence. One reason refers to the point that was made in the previous section on Board Oversight: if the ethi cs officer does not have access to the board of directors, it reduces his or her influ ence and power to provide accurate information on the organization’s ethical pro gram. Another reason is that a conflict of interest occurs should ethical miscondu ct by the ethics officer’s supervisors be observed. This conflict of interest can rest rict the ethics officer’s objectivity and independence when enforcing the organiza tion’s ethical code. The final reason is that inadequate resources or authority min imize an ethics officer’s power and influence over other departments. In some organizations, an ethics officer reports to a senior executive in a legal, hu man resources, or internal audit department. Most studies show that ethics and c ompliance officers most often report to the general counsel with increasing num bers reporting directly to the CEO (SAI Global, & Baker & McKenzie, 2013; Weber & Wasieleski, 2013). An ethics officer may be in the tenuous position of both mo nitoring the ethical integrity of and reporting to senior managers who have the p ower to have him or her promoted or fired. Senior managers may recommend ig noring unethical conduct, or fail to take action on an ethics officer’s recommenda tion. Treviño, den Nieuwenboer, Kreiner, and Bishop (2014) recounted an example w here an ethics officer was ignored: We had a big investigation . . . that involved senior officers of an alleged ethical vi olation that was quite serious. . . . Senior management didn’t take it very seriousl y. . . . A couple of years later it recurred and this time they realized the seriousnes s of it and responded fully. . . . So that was kind of a game changer . . . because seni or management, including the Board of Directors, saw how a good ethics progra m identifies and can help solve problems before they get big. (p. 196) According to the Ethics Resource Center (2007), the ideal reporting structure wil l allow the ethics officer to: • • Have employment decided and terminated only by the direction of the board of d irectors; Directly report to either the board or the CEO; • • Have direct, unfiltered access to the board; and Achieve performance goals as defined by the board and CEO. (p. 2) Consider how each of the reporting relationships in Figure 9.2 enhances or restri cts the objectivity, independence, and influence of the ethics officer. Figure 9.2: Progression of reporting relationship of the ethics offi cer The reporting relationships of the ethics officer can vary by organization. The individual that an ethics officer reports to has discretion to allocate resource s for promoting ethical standards, educating the workforce, monitoring complian ce, and investigating potential violations. The FSGO stipulate that organizations e nsure that the individual delegated with operational responsibility of the ethics a nd compliance program has adequate resources to perform his or her role effecti vely (United States Sentencing Commission, 2013). Program resources include de dicated personnel and a sufficient budget for salaries, training, the reporting hotli ne, and other expenses. The number of resources varies among organizations, including the dedicated sta ff and budget for ethics and compliance. A 2013 study found that most companie s with fewer than 1,000 employees have three or fewer ethics professionals, whe reas more than half of companies with 50,000 or more employees have more tha n 10 dedicated ethics staff members (SAI Global, & Baker & McKenzie, 2013). A 2 014 study of more than 1,000 companies found that 12% of firms do not have a s eparate budget for ethics and compliance activities, yet almost one third estimate an annual budget of more than $1 million for their ethics program (PWC, 2014). The number of ethics staff and the specific budget for the ethics program vary de pending on the size of the company and whether it is part of a heavily regulated i ndustry. How can the board ensure that an ethics officer has adequate resources? The Ethics Resources Center (2007) suggests that resources should include: • • • • • • • • Sufficient funds and content expertise to review, refresh, and distribute the corpo rate code of conduct to every employee and the board once a year; Sufficient funds to comprehensively train every employee and the board on orga nizational standards and core compliance risks; Sufficient staffing to work with management to promote the values of the organiz ation; Sufficient staffing and funds to conduct thorough compliance audits, monitoring, and risk assessments; Sufficient resources to ensure the effectiveness of ethics and compliance controls ; Sufficient staffing to maintain an anonymous helpline (or to outsource this functi on), and to investigate incidents that are reported; Sufficient staffing to separate the proactive communication and training function s from the receipt of calls and follow-up investigations; and Sufficient staffing to serve as a resource to the board and senior management. (p. 24) With adequate authority and resources, the ethics officer can encourage complia nce with legal and ethical standards found in the company’s code of conduct. 9.2 Developing a Code of Conduct The ethics office is typically responsible for creating the company’s code of conduct, which f orms the foundation of an ethics and compliance program. Employees of companies with a formal code of conduct report greater satisfaction with outcomes of ethical dilemmas than t hose working for companies without one (Adams, Taschian, & Shore, 2001). A study by Erw in (2011) found that companies with a high quality ethics code are seen as leaders in corpo rate citizenship, sustainability, ethical behavior, and trustworthiness. Despite these findings, Enron’s accounting scandal and Alcoa’s corruption scandal occurred with corporate ethics codes in place, which begs the question of whether a code of conduct has an impact on ethical behavior. One European study shared the following perspective of formal corporate codes: The head of sales at an investment bank explained, “It is very good that everyone has to rea d them, but as long as something is not illegal, people will do it anyway.” Ethics activities w ould be empty, symbolic gestures with no intention of having a practical impact. (Norberg, 2009, p. 218) Much research in behavioral ethics looks beyond the mere existence of a code of conduct to explain ethical behavior in the workplace, recognizing that the quality of the content and fa miliarity with the code are key factors for creating an ethical culture (Andreoli & Lefkowitz, 2009; Kaptein, 2011; Treviño, Weaver, Gibson, & Toffler, 1999). Individual and organizatio nal factors affect employee acceptance of a code of conduct (Andreoli & Lefkowitz, 2009). F or example, familiarity with an industry code of conduct and perceptions of usefulness less en when an uncertain business environment creates role ambiguity (Chonko, Wotruba, & L oe, 2003). Additionally, managers with a relativist ethical orientation (believing that it is im possible to make claims of right or wrong) are less likely to consider the ethics code bindin g than idealists (people who act on their moral ideals in all situations) (Chonko et al., 2003) . Even the title of the code can influence whether employees uphold the desired conduct of t he organization (see Consider: What’s in a Name of an Ethics Code?). The title should convey the purpose of the document. A rulesbased code appears punitive, with a “thou shalt not” aspect, and typically includes compan y standards and rules applicable to an issue area (Ethics and Compliance Officer Associatio n Foundation, 2008). Naming the document a compliance code sends a message to the work force that following the law is sufficient, rather than the concept of business ethics being ab out choice and judgment in following company values. Valuesbased codes like Every Day Values: The Harley Davidson’s Code of Conduct connect compan y values with employee behavior (HarleyDavidson, n.d.; Martens, 2012; Treviño et al., 1999). Multinational companies need to consider the wording of the code’s title carefully as some concepts may present difficulties in translation. For example, the term ethics can have mora listic connotations in some regions, while compliance can evoke feelings of imposition of co mpany standards (Martens, 2012). A review of the 200 largest global corporations found st rong variances in the titles of codes with 36% containing the word conduct, 17% containing principles/guidelines, 9% containing ethics, 6% containing values, and 4% containing integr ity (Kaptein, 2004). Consider: What’s in a Name of an Ethics Code? The document that summarizes the company’s ethical and legal standards can go by many names, including: • • • • • • • Code of conduct; Code of ethics; Code of business conduct; Code of ethical and legal standards; Ethics guide; Code of employee conduct; or Standards of professional and business conduct. The title of the document can create a brand for the company’s ethics and compliance. The content becomes relevant to the workforce when the code ties the ethics and compliance pr ogram to the company’s mission or business strategy. The title can make that connection an d serve as a theme throughout the document. Consider these titles for company code of con duct documents: • • • Setting Our Sights High (Bausch & Lomb Incorporated); Follow the Right Road (The Auto Club Group); and Inside the Lines (Nike). Sources: Ethics and Compliance Officer Association Foundation, 2008, p. 58; Martens, 2012. Questions to Consider 1. How does the title of a company’s ethics document affect your attitude about the content? I s one title more attractive than another? 2. What is the overall message that the title of the code of conduct conveys? Does it reflect the purpose of the document to provide employee guidance on expected conduct? 3. Propose creative titles for ethics codes for a pharmaceutical company and a restaurant. Implementing an effective code of conduct is not a simple task. One study found that a code for equal opportunity in the hiring process limits discrimination only when enforced by ma nagement and integrated into normal practice (Petersen & Krings, 2009). Enforcement of t he document requires close attention to the tone and terminology, such as phrases like “ma y result in disciplinary action.” The U.S. courts find that such ambiguous penalties for nonco mpliance negate contractual obligations to comply with a code of conduct (Kenny, 2007). T he design of the document and the communication of the code play a critical role in embedd ing the ethical standards for conduct throughout the organization (Kaptein, 2011; Verbos, G erard, Forshey, Harding, & Miller, 2007). The following sections outline best practices in de signing a code of conduct document. Code Content Designing a code of conduct includes identifying the topics and tone that will resonate with the workforce, as the code’s purpose is to guide employee behavior. This is particularly imp ortant as studies have shown that employees generally have difficulty naming specific beha viors that the code requires or prohibits (Adams et al., 2001). To make the content more m emorable, The Ethics and Compliance Handbook cautions against codes that are generic, bla nd, or legalistic (Ethics and Compliance Officer Association Foundation, 2008). In reality, th ere is no such thing as a generic organization. Therefore, those designing the code should ta ilor it to reflect the organization’s unique culture, risks, and history, which ultimately shape the ethical issues covered by the code and the manner of conveying acceptable conduct. Co ntent may vary because of the regulatory environment for the industry or geographical regi on. Some content is applicable to all employees, while others may be specific to a function s uch as accounting or sales. The code of conduct should clearly address expectations on topi cs relevant to the intended audience in language that is readily understood. Recommended Elements of a Code Given that an organization can tailor a code of conduct to meet the needs of its workforce a nd industry, the elements or sections of the code will vary accordingly. As the foundation of the ethics and compliance program, the code of conduct should provide sufficient guidance to develop an ethical culture. The Ethics and Compliance Handbook identifies eight sections recommended in a code of conduct (Ethics and Compliance Officer Association Foundation, 2008). They include: 1. An introductory letter from senior management or the CEO reinforcing top management su 2. 3. 4. 5. 6. 7. 8. pport for ethics and compliance in the organization; A mission statement, statement of values, and guiding principles of the company; An ethical decision-making framework to guide employees in making choices; Resources for seeking advice and reporting misconduct; Substantive rules and guidance for acceptable and unacceptable behavior for risk areas; Disciplinary rules and enforcement procedures for unethical behavior; Protection against retaliation for reporting misconduct; and An acknowledgment or certification that employees have received and read the company c ode of conduct. The quality of the code of conduct contributes to its effectiveness in deterring misconduct. A review of company codes in the 1970s showed limited inclusion of relevant ethical issues and few procedures for seeking advice, reporting misconduct, or taking disciplinary action s (Cressey & Moore, 1983). By sharing best practices, more companies are developing code s of conduct that incorporate all eight recommended sections. Ethisphere Institute has deve loped criteria to evaluate the quality of a code of conduct, as shown in Table 9.3. Codes of c onduct meeting these components are effective tools in setting and reinforcing expectation s for ethical behavior. Table 9.3: Evaluation components to benchmark the quality of a corporate code of co nduct Component Component Description Public Availability The code should be readily available to all stakeholders. What is the availability Tone from the Top Level at which the leadership of the organization is visibly committed to the valu Readability and Tone What is the style and tone of the language used in the document? Is it easy to rea NonRetaliation & Reporting Is there a stated and explicit non-retaliation commitment and dedicated resourc Commitment & Values Does the code embed corporate values or mission language? Does it identify the Risk Topics Does the code address all of the appropriate and key risk areas for the company’ Comprehension Aids Does the code provide any comprehension aids (questions and answers/frequen Presentation and Style How compelling (or difficult) is the code to read? This depends on layout, fonts, Sources: Erwin, 2011; NYSE Governance Services, 2014. The Morgan Stanley code of conduct titled “Doing the Right Thing” is an example of a docu ment that meets the Ethisphere Institute’s evaluation criteria. A common element in both T he Ethics and Compliance Handbook and Ethisphere Institute evaluation criteria is a demon stration of top management’s commitment to the ethics and compliance program. The first page of Morgan Stanley’s code of conduct includes a statement by James P. Gorman, the cha irman and CEO, stressing “an unwavering commitment to the highest standards of ethical c onduct” and concludes with, “Like you, I am proud to be part of a Firm that has such a distin guished heritage and promising future. Thank you for doing your part to uphold our greate st tradition” (Morgan Stanley, 2014, p. ii). The code of conduct is valuesbased, tying ethical behavior to Morgan Stanley’s values of putting clients first, leading with exceptional ideas, doing the right thing, and giving back. Throughout the document, section s begin with the word we, denoting that the code of conduct applies to everyone. The sectio n titled “We Make Ethical Decisions” includes a series of questions to assist employees in ch oosing the right action when faced with an ethical dilemma. Disciplinary procedures, resou rces for reporting, and nonretaliation procedures are presented early in the document. The following are the major he adings featured in the code: • • • • What This Code Means to Us; We Make Ethical Decisions; We Treat Others with Dignity and Respect; We Support Our Communities; • • • • • • • We Protect Our Franchise and Address Conflicts of Interest; We Protect and Prevent the Misuse of Confidential and Material Nonpublic Information; We Follow the Letter and the Spirit of the Laws and Regulations; We Protect Our Interests; We Are Honest and Fair in Our Communications with the Public; We Report Information and Cooperate with Requests Relating to Litigation, Investigations, Inquiries and Complaints; and Code of Conduct Acknowledgement. The key ethical issues and acceptable behaviors outlined in Morgan Stanley’s code of condu ct guide employees in everyday conduct through simple, concise language and concrete exa mples to aid in comprehension. The document specifically states, “Throughout this Code, w e include questions and answers that address situations that commonly arise and illustrate how particular policies apply in practice” (Morgan Stanley, 2014, p. 2). The code is 15 pages long, with detailed policies and procedures for 34 ethical topics. It is unlikely that all of the ethical issues are relevant to all employees. Therefore, in addition to the full table of conten ts, the code of conduct provides a summary listing of the 15 ethical issues that have generat ed the most questions from employees. Focusing the Code on the Organization’s Key Risk Areas The focus of company codes of conduct changes over time and varies by geographical locati on. A review of codes of conduct in the 1970s recognized a focus on misconduct that directl y impacts company profit, such as conflict of interest, rather than responsibilities to others (Cressey & Moore, 1983). A review of global companies’ codes in 2009 found that U.S. comp anies focus more on accounting fraud, conflict of interest, and insider trading, while global c ompanies tend to emphasize security, human rights, bribery, and money laundering (Sharb atoghlie, Mosleh, & Shokatian, 2013). Table 9.4 lists possible topics for codes of conduct fro m The Ethics and Compliance Handbook. The list is extensive and inclusion of all topics is ne ither practical nor necessary for most organizations. Table 9.4: Possible topics for codes of conduct • Anticorruption • Gifts, entertainment, and gratuities • Antitrust/competitive information/unfair competition • Government contracting, transactions, • Billing for services • Government relations and lobbying • Books and records/financial reporting and recordkeeping • Harassment (sexual and otherwise) • Community or civic activities • Investigations (internal and governme • Complying with laws • Licensure and professional certificatio • Confidential and proprietary information • Marketing, sales, advertising, and prom • Conflicts of interest • Media relationships • Copyrights, patents, and intellectual property • Money laundering • Customer service and customer relations • Political contributions • Discrimination • Privacy and safeguarding information • Document retention • Procurement/purchasing • Environment, health, and safety • Professional standards, competence, a • Equal employment and affirmative action • Respect and fair treatment • Expense reimbursement and time reporting • Securities trading and insider informa • External inquiries/public disclosure and reporting • Security • Family and personal relationships (e.g., nepotism) • Social media • Fraud • Work-life balance • Workplace violence Source: The ethics and compliance handbook: A practical guide from leading organizations. Copyright © 2008 The Ethics & Compliance Officer Association Foundation. Reprinted with permission. When identifying key risk areas to include in a code of conduct, executives must consider e xternal forces, internal perceptions, and historical data. The first consideration, external for ces, represents the legal, regulatory, and competitive environment that can elevate an issue to warrant attention in the formal code of conduct. For example, in the United States, regul ations provide specific topics that should be addressed, including policies on conflict of inte rest, insider trading, and bribery (Ethics & Compliance Officer Association Foundation, 200 8; NYSE Governance Services, 2014). Second, internal forces such as the industry, size, or international scope of the company can determine topics to emphasize in the code of conduct. For example, a company manufactur ing products in emerging markets may place more emphasis on environmental impact, hu man rights, and safety. Additionally, a survey of employees can reveal internal perceptions regarding what ethical issues they consider likely to occur, providing issues to include in a code of conduct. Lastly, the ethical topics that the company has struggled with in the past should be included in the code of conduct. Audit findings, regulatory investigations, or common employee viol ations are sources for historical data of relevant ethical topics. It is useful to organize the ke y issues by stakeholders, corporate values, or internal employee conduct (Kaptein, 2004). Global Considerations International companies have additional considerations when designing a code of conduct t hat applies to employees in multiple countries. The first decision is whether to develop one common code for all countries or separate documents for each country. Some organizations may consider one code impractical or unrealistic because of variations in legal requiremen ts, cultural norms, and languages among the countries. Benefits of a common code include: a) there is only one definition of what is right or wrong, b) employees are clear on expected behavior no matter where they travel on business, and c) the company avoids liability asso ciated with inconsistent practices. One solution is to create one common code with regional or country variations that bridge gaps between local laws or customs and company standa rds (Martens, 2012). Companies that intend to implement a global code of conduct that applies across the organi zation must make careful considerations during the code drafting process. Best practices di ctate that companies seek input from a legal team, managers, and workers while developin g the code. This team can help identify and address: • • • • Key ethical and legal concerns; Cultural or historical issues that affect business operations; Workforce dynamics that could either promote or interfere with the adoption of the code of conduct in their country or region; and Language or terminology issues. (Ethics & Compliance Officer Association Foundation, 200 8, p. 62) An effective code of conduct provides guidance for employees to manage contradictions bet ween individual or local norms and the company’s standards. Chapter 5 described how cult ural differences influence ethical positions and increase the potential for conflicts within a global organization. One study relates how an ethics officer investigating a report that “a hi gh-level executive had been making sexist and ageist ‘jokes’ during businessrelated conference calls” discovered that the executive, who worked outside the United Stat es, was unaware that his remarks were offensive and potentially discriminatory because th ey would be acceptable in his country (LRN, 2006, p. 3). Halff (2010) found that the majority of the world’s largest corporations fail to acknowledge contradictions between local norms and corporate norms, leading to hidden and overt viol ations of the company code of conduct. Global codes that include negative language such as “employees must never” can lead employees to feel that the company is not considering loc al norms (Martens, 2012). Organizations that do acknowledge differences take varying app roaches such as to seek advice, apply the stricter rule, follow local norms, or comply with co rporate code. Companies like Lockheed Martin and Cisco serve as role models for multinati onal companies striving for a global code of conduct. Their codes of conduct are provided in multiple languages, include symbols for navigation, and provide examples relevant to diver se employees. Global companies can follow practices suggested for a suitable global code of conduct such as: First acknowledge that sets of norms might contradict, second give clear priority to one set of norms (local or corporate) and thirdly provide specific instances and/or examples of ho w and when to apply the priority rule. They are particularly precise about giftgiving, facilitating payments, employment of relatives, and the entertainment of public serv ants. (Halff, 2010, p. 364) Global companies should avoid region- or countryspecific terms or phrases when drafting the code for an international audience. For exampl e, a U.S.-based firm should not refer to a non-U.S. government employee in anti- bribery sections as a foreign government official. The local employees would not consider t heir government officials, customs agents, or public employees as foreign. Some terms in co des of conduct relate to country regulation, such as affirmative action or equal employment opportunity in the United States. Use of countryspecific terms fails to convey the ethical standard of nondiscrimination to workers in other countries. Table 9.5 provides suggestions for replacement terms to make culturallyspecific terminology more global. Table 9.5: Replacement terms for culturally-specific language Term Country Replacement Term Equal employment opportunity United States-centric Fair hiring practices/no Antitrust United States-centric Fair competition Antimonopoly United Kingdom-centric Bullying/mobbing United Kingdom and Europe Harassment, disrespectfu Anti-bribery United Kingdom Improper payments FCPA United States Source: L. T. Martens, 2012, Globalising a Business Ethics Programme, p. 25. Copyright 2012 by the Institut e of Business Ethics. The graphic design of the document should reflect cultural sensitivity through the use of col or, symbols, and photos (Martens, 2005). For example, red print may trigger negative feelin gs of forced compliance in Western countries where red is used as the symbol for danger. U niversal symbols are preferable, although not always practical when a standard or example requires a currency amount. For example, a reference to accepting or giving gifts over $25 should include the equivalent amount in euros or yen. Photos should represent the internat ional character of the company and not be offensive in any part of the world. A global code of conduct should be a useful guide to appropriate behavior for all employees. Implementation of a Code of Conduct To implement a code of conduct, organizations must formulate a plan to ensure that worke rs receive the code and understand its purpose. The plan should include distributing the do cument to all employees, providing tools to help them apply the code in their daily activitie s, and recording their acceptance of it. All communication surrounding the code is vital to it s success. Employees become more familiar with and supportive of a code of conduct when senior management demonstrates support for the code and employs diverse communicatio n activities for educating workers on the content and application of the code (Kaptein, 2011 ). Distribution of the code can take various forms, but it should remain easily accessible to em ployees and available to all stakeholders (NYSE Governance Services, 2014). Every new em ployee should receive a printed copy upon hiring and during orientation. Current employee s could receive copies through the company mail or email communications periodically or when the code has been revised. Companies often cre ate websites to communicate information regarding the ethics program and code of conduc t. Some companies require an online course to introduce the policies and procedures contai ned within the code of conduct. To increase accessibility and use of the code of conduct, many companies have begun offeri ng an electronic version. More than just a PDF, an electronic code provides employees with an interactive tool for finding specific information, links to resources, and a variety of learni ng scenarios (NYSE Governance Services, 2014). Morgan Stanley includes a statement in its code of conduct that says “The electronic version of this Code includes links to policies and procedures” (Morgan Stanley, 2014, p. i). See Business Best: Cisco eBook Code of Conduct for an example of a company that delivers the code electronically to a global audience. Business Best: Cisco eBook Code of Conduct In 2012, Cisco released an interactive eBook version of the company code of business cond uct (COBC) to its mobile, global workforce. The online interactive COBC is able to reach the 85% of Cisco employees working from home or traveling (World Watch, 2013). The COBC e Book provides many tools to make it easier for employees to find information on ethical iss ues, such as popup frequently asked questions, links to other Cisco tools and resources, an “Ask/Report” list of ways to obtain help on any topic, embedded videos, and popup definitions (Cisco, 2014). Cisco’s 2013 Corporate Social Responsibility Report states: Our Code of Business Conduct sets out our expectation for everyone at Cisco to behave ethi cally in everything they do. Through regular training and a new interactive eBook version o f the Code, we equip employees with the knowledge and skills to make the right decisions if they are ever confronted with an ethical dilemma. (Cisco, 2013, p. B2) The eBook is easy to navigate and includes universal symbols for interactive functions. See Figure 9.3 for a snapshot of the instructions for the user on the first screen. Though the inte ractive eBook is only available in English, an introductory video features employees from al l countries stating, “I know the code” in their native languages. Translations of the Cisco CO BC are available on the Ethics@Cisco website page as a PDF with hyperlinks. Figure 9.3: Instructions for navigating Cisco’s COBC eBook Cisco’s COBC eBook contains universal symbols for the interactive functions. Source: Reprinted with permission from Cisco. (2014). Code of Business Conduct. Following the launch of the eBook, an employee survey showed improvement in almost all measures regarding the ethical culture (Cisco, 2013). More than 92% of employees in 2013 felt that Cisco was taking ethical business concerns seriously (up from 90% in 2011). In jus t two years’ time, the percentage of employees who agreed with the statement, “The manag ement team sets a good example of company values, culture, and the Code of Business Cond uct” increased from 81% to 89%. Finally, by 2013, 89% of employees knew where to report an ethics question or concern compared to 83% in 2011. Questions to Consider 1. What are the advantages and disadvantages of an interactive online code of conduct? Why s hould printed or PDF formats continue to be offered, even when there is an online version? 2. Does an electronic format provide advantages in Cisco’s ability to make further improveme nts to its code over time? 3. Access the eBook to view the table of contents and a few pages. Would the eBook meet Ethi sphere Institute’s evaluation criteria for an effective code of conduct? Many organizations require employees and management to sign a statement certifying that they have received and read the code of conduct. Certification statements are one way a co mpany can demonstrate to regulators that it is committed to the ethics and compliance pro gram (NYSE Governance Services, 2014). These statements allow companies to: • • • • • Confirm receipt of the code of conduct; Obtain acknowledgement from employees that they have read and understood the code of conduct; Establish that employee abides by, or will abide by the code of conduct; Obtain confirmation that employees reported any breaches of the code; Confirm that management has discussed the code with their team. (IBE, 2012) Code certification holds employees accountable for their actions. In a study by the Institute of Business Ethics, about half of the companies referred to code certification statements du ring disciplinary decisions involving code of conduct violations (IBE, 2012). Whether a com pany can obligate an employee to sign an acknowledgement form may depend on local labo r laws (IBE, 2012). Should an employee refuse to sign, additional ethics training or discussi ons with the employee’s manager may occur. As the foundation of the ethics and compliance program, companies recognize the importa nce in thoroughly educating the workforce on the content and use of the code of conduct. C ode certifications do not ensure that the employees have read and understood the content of the code of conduct, and explaining the code of conduct only when employees are first hi red or when the codes are first distributed is no longer a sufficient way to show a good faith effort to educate employees on ethics and compliance. 9.3 Educating the Workforce Organizations that invest in educating the workforce to comply with legal and et hical standards expect their employees to apply what they have learned consiste ntly over time. However, ethics training tends to have a similar effect on people a s when they witness a traffic accident— they slow down and drive carefully for a week or so, then gradually fall back into their old driving habits. Research has shown that onetime ethics training can have transient effects if organizations do not provide ong oing, interactive training and offer organizational support (Martin, 2010; Richard s, 1999; Warren, Gaspar, & Laufer, 2014). In order for employees to fully learn co ncepts, their formal training should include a period during which they can practi ce applying ethics in the workplace. A wellplanned ethics training program can result in the establishment of a culture of et hics and compliance (Ethics Resource Center, 2013b; Valentine & Fleischman, 20 04). In a study of bank employees before and after the introduction of formal ethi cs training, Warren et al. (2014) found that participants displayed sustained, posi tive effects in identifying unethical behavior, intentions to behave ethically, and p erceptions of organizational efficacy in managing ethics. Developing a Training Plan The objective of ethics training is to help employees make decisions that are cons istent with the organization’s values. Training should provide methods for emplo yees to manage contradictions between individual values and the company’s ethi cal standards. To address the specific challenges in ethics training, Knouse and Gi acalone (1996) outline the major components of ethical education in business th at remain relevant today (see Table 9.6). They recommend providing employees with a foundation in how ethical orientations affect ethical decision making, as w ell as offering opportunities to practice applying the company’s ethical standards. Ethics training should align with company values and connect ethical concepts to daily actions. To make that connection, some organizations are adopting a giving voice to values (GVV) approach to their business ethics training. Based on Mary Gentile’s (2010a) book, Giving Voice To Values, regarding how individuals addres s values conflicts in the workplace, the GVV approach has seven foundational pill ars that correlate to the components for ethical training in Table 9.6: 1) values; 2 ) choice; 3) normality; 4) purpose; 5) self-knowledge, selfimage, and alignment; 6) voice; and 7) reason and rationalization. Incorporating GVV in an organizational ethics program can help employees develop methods to voice their concerns. The program appears to address employee apathy and indi fference to potential and existing ethical issues. Table 9.6: Components of ethics training in business Component Provide trainees with an understanding of ethical judgment philosophies and heuristics for ma nts. Provide industry-/profession-specific areas of ethical concern. Provide trainees with organization’s ethical expectations and rules. Provide trainees with an understanding of their own ethical tendencies. Take a realistic view; elaborate on the issues that can hamper ethical decisions. Have the trainees practice and apply in the workplace. Source: GonzalezPadron, T., Ferrell, O., Ferrell, L., & Smith, I. (2012). A critique of giving voice to values approach to business ethics education. Journal of Academic Ethics, 1–19. To develop the most effective training, companies need to tailor the program to t he target audience by identifying and prioritizing key risks by employee segment. For example, training on data privacy and security are relevant to employee gro ups that use computers. Training in the proper use of company resources should consider the functions most likely to commit occupational fraud— individuals working in accounting, operations, sales, customer service, and purch asing (Association of Certified Fraud Examiners, 2012). Training on bribery is mo st relevant to executives and sales staff working in international markets. Manag ers and supervisors would most benefit from hiring policies regarding discrimina tion. All employees should receive training on reporting misconduct, social media use, and harassment. The training plan should identify the frequency and depth for each key issue. The frequency of training then depends on the level of likelihood that an ethical issue will occur. Determining how much detail and attention the training requires dep ends on whether the target group can create, identify, or simply understand the r isk. For example, discrimination is a key issue for many companies. Managers or supervisors with responsibilities to hire, promote, evaluate, and terminate emplo yees have the potential to put a company at risk of lawsuits. Therefore, their train ing requires indepth and possibly frequent instruction on policies and procedures to demonstra te nondiscriminatory practices. Training of all employees should focus on identif ying and reporting discriminatory practices. The training plan for discrimination requires awareness training supplemented with a communication program that provides regular reminders to all employees through emails, newsletter articles, and posters that help them to recognize discrimination in the workplace. While ethics training often involves asking employees to watch formal presentati ons, it is perhaps even more important for those conducting the training to listen to employees and engage them in dialogue. The workforce consists primarily of a dults with a great deal of experience and knowledge that contributes to the learni ng process (Bixby, 2011). Telling someone not to cheat on an expense report is n ot as effective as addressing rationales for the misconduct. In order to design a tr aining program that fits the needs of the workforce, ethics trainers must listen to the concerns and questions raised by employees about ethical issues or company practices. Listening is a powerful communication tool that requires being presen t in the dialogue without multitasking or succumbing to distractions (Schloss, 20 12). See Consider: Active Listening for an exercise to develop active listening skills . Consider: Active Listening Active listening requires paying attention to the content of what someone is sayi ng. Too often people focus on how to respond to someone talking before the end of the conversation. Practice listening to all of what someone is saying with this e xercise. 1. First, find a partner. 2. Then designate one person to initiate speaking (Person A). 3. Person A will begin a brief conversation of a few sentences. This could relate to t he weather, common interests, or what he or she did last weekend. 4. When Person A stops talking, Person B must begin a conversation using the LAST word that Person A spoke as the FIRST word of the first sentence. For example, if Person A stops speaking with the phrase, “I ate so much,” Person B could begin with “Much of my time is spent . . .” 5. Similarly, when Person B stops talking, Person A must begin a conversation using the LAST word that Person B spoke. 6. Repeat Steps 4 and 5 for about 10 minutes. Questions to Consider 1. How well did each of you listen to what the other was saying? Were you able to c atch the other speaker’s last word each time? 2. Did you strive to make the exercise easy for your partner or difficult? For exampl e, ending a conversation with an adjective may be more difficult to start another conversation, such as “I was so hungry.” Training Delivery To ensure that each member of the workforce receives and engages with the ethi cs training materials, organizations can incorporate a wide variety of training an d communication methods that accommodate diverse learning styles, varying ris k levels of misconduct, and a dispersed workforce. These methods include lectur es and presentations, case studies and scenarios, roleplaying, videos, and various elearning platforms. Table 9.7 outlines the pros and cons of each. Table 9.7: Pros and cons of training methods Delivery Advantages Lectures and presentations Reach a large number of people, quick to implement Case studies and scenarios Generate discussion and participation Role-playing Highly interactive and insightful Videos Realism EEasy to implement and highly flexible learning (online or computer training) Source: Ferrell & Ferrell, 2009, p. 50. Advances in technology offer innovative approaches to engaging employees in et hics training. Awareness training can include short, targeted messages on commo n ethical issues. Lockheed Martin periodically distributes its Integrity Minute seri es to employees. The series features short soap opera style videos that highlight key ethics topics of relevance to employees. The videos reinforce company polici es and generate dialogue among the workforce. If timed correctly, such as just be fore employees submit expense reports, travel to highcorruption locations, or meet with government officials, these types of videos can be particularly effective. Customizable video clips on ethical issues are available from ethics and compliance system vendors such as Corpedia and NAVEX Global. Corpedia offers a series of RealBiz Shorts featuring Second City Communications actors in funny video clips of consequences for failing to follow ethical policies. N AVEX offers Burst Learning videos, which feature engaging street interviews and humorous scenarios in which characters address ethical dilemmas. Informal training can occur through social media, company discussion boards, or regular lunch and learn sessions. Formal training sessions can be online, face-toface, or as a hybrid program (French, 2006). Classroom training can be timeconsuming for employees, increase travel expenses, slow the delivery time of cou rse material, and result in inconsistent content. Inperson training is preferable for executives who must delve into highrisk areas, or for topics that require interaction such as interview tactics for inves tigations of ethics violations. Deloitte Touche Tohmatsu Limited offers blended le arning, which requires completion of an online training of procedures prior to m eeting in person (Sweeney, 2007). For example, training on harassment policies i s online, while roleplaying and discussions take place during live sessions in a classroom setting. Ch allenges in adopting online learning in business include: • • • Resistance to change and cultural resistance to learning online, more often from senior and middle management; Cultural acceptance of online learning delivery in international training; and Insufficient bandwidth on Webbased systems, hindering the ability to provide quick and effective interactive lea rning packages. (Macpherson, Elliot, Harris, & Homan, 2004) For routine training, online instruction can be more effective than classroom inst ruction (Sitzmann, Kraiger, Stewart, & Wisher, 2006). Advantages of online traini ng include less travel and control over timing for completion of the course. Onlin e training allows users to search for supplemental information easily and avoid d istracting classmates (Sweeney, 2007). This training may be more expensive to d esign, but offers cost savings and the ability to track completion rates through au tomated systems. Regardless of the method used, frequent ethics training and re gular communications can empower employees to make ethical decisions and ide ntify misconduct. 9.4 Reporting Misconduct To support a culture that encourages ethical behavior, it is crucial that employees feel comf ortable seeking advice on ethical concerns and reporting misconduct. A simple approach is to establish an open door policy through which employees may seek counsel from any man ager. IBM began implementing this approach during the early years of their ethics program (Carroll, 1991). In the United States, SarbanesOxley and the 2004 amendments to the FSGO require that an organization create and publi cize a system to address and respond to employee inquiries about ethics and compliance is sues (SarbanesOxley Act of 2002; United States Sentencing Commission, 2013). The U.K. Bribery Act 2010 includes a provision for “the reporting of bribery including ‘speak up’ or ‘whistle blowing’ p rocedures” (Ministry of Justice, 2011, p. 22). Compliance with regulation appears to be driv ing company investments in formal reporting systems for ethics and compliance violations. A review of U.S. ethics and compliance programs has shown that more than half (55%) of th e surveyed companies created internal reporting mechanisms after the SarbanesOxley requirement (Weber & Wasieleski, 2013). Developing a Reporting Mechanism and Providing Ethical Advice Designing an advisory and reporting mechanism entails decisions on a number of details th at contribute to a successful implementation. These include: • • • • • • • What will the service be called? How will it be branded? How will the service be communicated to employees? What types of calls will not be handled by ethics and compliance (e.g., payroll questions wil l be directed to human resources)? What types of reporting formats will be utilized: phone, Internet, e-mail, fax, text message? Will “24/7” advice and reporting be available? What languages need to be supported? Is reporting unethical or illegal activities mandatory or encouraged? (Ethics & Compliance Officer Association Foundation, 2008) A system that employees are comfortable using requires providing for anonymous inquirie s, protecting confidentiality, preventing retaliation, and disclosing investigation of reports where possible. Employees may fear that an inquiry will lead to an investigation, retaliation by coworkers, or scrutiny of their own actions. Labels for those who expose misconduct include tattletale, snitch, informant, and rat, or in German, Spitzel (snitch or spy) (Riebl, 2004). To overcome b arriers for speaking up, organizations need to provide a variety of channels for obtaining et hical advice to allow inquiries to occur in the manner most comfortable for the employee. Methods should be easily accessible, simple to use, and facilitate reporting suspicious activi ty. For example, Cisco provides an ethical decision tree to help employees find information about an ethical concern, has a “Sharing Ethical Concerns” link on the Ethics@Cisco website , and the company’s interactive code of business conduct eBook has a link on each page to a sk questions or report misconduct (Cisco, 2014). Mechanisms for advice and reporting can i nclude: • • • • A dedicated telephone helpline (where technology protects anonymity); A dedicated fax number; A dedicated Web-portal or e-mail inbox; A dedicated postal address; • • • • • • • Personal phone call or meeting with members of the ethics and compliance team; An organizational ombudsman; Specific members of the human resources team; Direct supervisors and managers; Specific members of the general counsel’s office; Internal or external auditors; and Designated members of the audit committee of the board of directors. (Ethics & Complianc e Officer Association Foundation, 2008, p. 81) The name of a reporting system can affect whether employees consider it an appropriate av enue for their ethical concern. When they see the word hotline, workers may assume that th eir concern needs to be urgent or a significant violation to warrant reporting. Over the past 20 years, there has been a marked increase in the number of companies that have switched from calling their telephone reporting systems hotlines to calling them helplines (Weaver, Treviño, & Cochran, 1999; Weber & Wasieleski, 2013). Other names that organizations use for telephone reporting systems include ethics advice line, share concerns, ethics connect, e thics line, and integrity line (Ethics & Compliance Officer Association Foundation, 2008). Confidential, Neutral, and Independent It is vitally important that employees can make inquiries that are confidential and receive a dvice from a neutral and independent source. When reporting is confidential, employee ide ntities are protected and names are not revealed. Having the option to remain anonymous provides the workforce with a sense of trust in the company’s ability to maintain confidenti ality. Some companies assign a tracking number to anonymous reports so the employee can receive an update on his or her report or query (Riebl, 2004). United Technologies (2014) recommends that employees not use company computers for communications to their eDI ALOG ethics advice and reporting program in order to protect confidentiality. Neutral advice refers to clear and understandable guidance that does not advocate a specifi c party. In order for employees to receive independent advice, the telephone reporting syst em must operate separately from management. When implementing a reporting system, co mpanies can adopt one of three models—in-house, outsourced, and hybrid— all of which influence workers’ perceptions of independence (Riebl, 2004). In 1994, the maj ority of U.S. organizations managed a telephone reporting system with internal staff (Weav er et al., 1999). By 2010, 65% of the companies were using third party vendors for helpline s or hotlines, with only 26% of the organizations assigning their own employees to handle a ll calls (Weber & Wasieleski, 2013). The use of outside vendors guarantees employees the a ssurance of anonymity. Hybrid models share the duties for processing inquiries and report s between inhouse staff and outside vendors, where inquiries seeking guidance on companyspecific policies require internal staff expertise. Despite company efforts to offer confidential reporting via a neutral and independent syste m, employees still struggle with using these methods to report misconduct. In the 2013 Nat ional Business Ethics Survey®, the Ethics Resource Center found that U.S. employees prefer red to approach a supervisor regarding ethical concerns, with only 16% of those reporting misconduct using anonymous hotlines. In continental Europe, the use of anonymous report ing mechanisms is low, with one third of employees saying that their organization has an a nonymous speak up mechanism (Basran, 2012). Due to French privacy laws, employees loc ated in France have restrictions on matters that are eligible for anonymous reporting. Employees of multinational companies tend to perceive that advice and reporting mechanis ms are only for workers in the country where headquarters is located (Riebl, 2004). Call ce nters that provide translation services or have native language abilities can accommodate e mployees worldwide. Even with native language resources, a survey by the ECOA found tha t only 36% of the companies with international employees felt that employees outside of th e home country were comfortable using the resources (Riebl, 2004). The feature, Reputatio n Ruin: Olympus Hotline brings attention to many of the barriers for reporting misconduct. Reputation Risk: Olympus Hotline Olympus Corporation is a Japanese manufacturer of endoscopic medical devices as well as c ameras and other imaging devices, microscopes, and information and communications equi pment. For the fiscal year ending in March 2011, Olympus reported sales of $10.6 billion. In the same year, Michael Woodford became CEO and discovered dubious accounting at Olym pus. He shared his concerns with the board of directors and was subsequently fired. Becaus e of Woodford’s suspicions and dismissal, an independent special committee panel exposed hidden investment losses of 117.7 billion yen ($1.5 billion) dating back to the 1990s (Versc hoor, 2012). Woodford is the most visible whistleblower in the company scandal, but he is not the only one to experience retaliation for spea king up. Masaharu Hamada, a salesperson for Olympus, alleged being demoted and harasse d after making a report to the hotline in 2007. Hamada was concerned that his boss was po aching employees from a client, which would harm the client relationship and was contrary to ethical standards of the industry. Following his report, the hotline office informed Hama da’s boss of the complaint, which then led to retaliation for reporting the unethical activity. According to the independent panel report, at least one employee reported an accounting p roblem involving fake vouchers to the hotline but withdrew the report when asked to provi de his or her name (Osawa, 2012). According to The Wall Street Journal investigation, Olympus launched a compliance hotline in 2005 following the enactment of the whistleblower protection laws of 2004. The special committee found that employees attempting to make anonymous reports of misconduct to the compliance hotline were encouraged to dis close their identity or told the allegations would not be investigated. In Japan, a tradition of lifetime employment and a strict seniority system dictates that employees show unbounde d loyalty to their coworkers. Few reports made it to the hotline for fear of retaliation from c oworkers. Designers of the hotline recommended that external parties handle employee in quiries to overcome fears of retaliation. The corporate auditor, Hideo Yamada, opposed hav ing a third party manage the reporting mechanism, instead electing to manage the hotline with his staff. As a result, the special committee described the culture at Olympus as “a stuff y atmosphere that prevented people from speaking freely” (Osawa, 2012, para. 8). Since the scandal, Olympus has suffered from a damaged reputation and a volatile stock pri ce. Tsuyoshi Kikukawa, chairman and former CEO; Hisashi Mori, director and executive vic e president; and Yamada resigned and were subsequently convicted in a Tokyo court for th eir roles in the cover-up of investment losses. The costs relating to the 13year fraud was 700 million yen ($7 million) in fines, a 10 million pound (1.2 billion yen, $15 .4 million) settlement to Woodford for unlawful dismissal and discrimination, 17 billion ye n ($166.49 million) in lawsuit damages by 2014, and a pending lawsuit seeking 27.9 billion yen ($272 million) (Knight, 2014). In addition, Hamada won Japan’s first whistleblower case, and received 2 million yen ($20,000) in damages from Olympus (Kageyama, 2 013). Questions to Consider 1. Evaluate the Olympus reporting mechanism for confidential, neutral, and independent char acteristics. What should Olympus do to improve ethics reporting in the organization? 2. How does the Japanese culture impede the effectiveness of an ethics reporting system? 3. What steps could Olympus take to demonstrate a commitment to ethics and compliance? Receiving Reports Regardless of the preferred method for providing guidance on ethics and compliance issues , employees expect a response that is timely, credible, and trusted. Therefore, supervisors n eed training on how to handle inquiries regarding potential violations of ethical standards. Active listening is critical, as employees may not be able to clearly articulate their ethical co ncerns. Some companies provide employees with a list of questions that helps organize thei r thoughts before filing a report. The ethics professionals who receive the reports can use c hecklists to gather sufficient information to determine the appropriate response and action . All inquiries need to be documented for tracking purposes without compromising confide ntiality. It is crucial that employees do not fear becoming the subject of the investigation when repo rting a violation. However, they need to be aware that false accusations are subject to disci plinary action. The Ethics and Compliance Handbook provides a list of red flags that could in dicate that the motive for reporting influences the accuracy of the claims, including if the e mployee: a) makes frequent allegations, b) is involved in a work or personal dispute with th e subject of the report, or c) is facing disciplinary action or poor performance evaluation (E thics & Compliance Officer Association Foundation, 2008). The process for receiving report s must prevent dismissing an allegation as false because of a perceived motive of the accuse r. Determining the validity of the report is part of the investigation process. Investigations Investigation of an allegation of unethical or illegal behavior involves establishing exactly w hat happened and what the organization can learn about preventing future misconduct. No single investigative process can meet the needs of all organizations. A large organization wi th a dispersed workforce may require additional coordination among regional managemen t. A small organization may have an accelerated process. Some allegations will move throug h an investigative process quickly, while others may require extensive resources and time t o complete. The four steps to investigating a report of unethical or illegal activity (shown in Figure 9.4) are: 1) determine the nature of the allegation, 2) make a plan, 3) develop the fa cts, and 4) document the investigation. Figure 9.4: Steps for investigating a report of unethical activity The four steps to investigate a report of unethical or illegal activity are the same for l arge and small companies. Source: Tracy GonzalezPadron, representation of material in Jones, E., O’Neill, K., & Winter, G. (2013). Conducting lawful an d effective global investigations. Paper presented at the ECOA 21st Annual Ethics & Compliance Con ference, Chicago. In most companies, the ethics and compliance staff are responsible for investigating allegati ons. Small companies that do not have dedicated ethics professionals may rely on legal cou nsel or human resources to conduct investigations. The investigation process is triggered b y the documentation of the allegation, which may originate from an external helpline, the et hics office, or a functional supervisor. The individual receiving the report must make an im mediate assessment to determine if the alleged conduct endangers life or property and req uires immediate attention. It is important that all points of reporting know when calling 91 1 or notifying security is necessary. Determining the nature of the allegation includes identifying the scope and seriousness of t he issue, which can establish who should be involved in the investigation. It should first be determined whether the ethics and compliance function should conduct the investigation. S ome reports are handled more efficiently at a functional level, such as a production safety is sue in which an employee is not following scheduled equipment checks. The person conduc ting the investigation should have skills that match the type of misconduct. Questions to as k during this stage in the process include: • • • • • • • • • • • • • • • • What specific misconduct or actions have been reported or alleged? Who is the source of the allegation, if known? Does the allegation seem to be a plausible and legitimate concern? What are the initial facts? Are there any inconsistencies in the initial facts? What evidence suggests that the misconduct did not occur? Are there any mitigating circumstances? How serious does the potential violation appear to be? Is the scope broad enough to enable the company to take appropriate remedial action, inclu ding determining the extent to which internal processes should be modified? Will the investigation findings likely be reported to third parties such as law enforcement o r regulators (Jones, O’Neill, & Winter, 2013)? The next step is to develop a plan that outlines the parameters to guide the investigation. T he plan builds from the analysis in Step 1 to address the questions that must be answered b y the investigation. Once the investigator has the information, he or she must determine wh at information is missing. A detailed plan should answer the following questions: “Who will be interviewed as witnesses and in what order?” What topics will be addressed in witness interviews? “Which documents will be examined?” Which documents will be shared with witnesses? “At what stage of the process will the subject(s) of the allegation be told what she or he is, o r they are, being accused of?” “Beyond interviewees, who will be notified of the investigation?” (Ethics & Compliance Offi cer Association Foundation, 2008, p. 100) Implementation of the investigation plan involves gathering the facts of the case through va rious methods. The first task is to identify and review the policies, procedures, regulations, and ethical codes that relate to the alleged misconduct. The second task is to assemble rele vant documents such as personnel files, emails, security video, and business records. The third task is to prepare questions for interv iewing witnesses and schedule adequate time to meet with each witness. Investigators sho uld explain to witnesses that they are only gathering information at this time and that witn esses should not discuss their interviews with coworkers. During the interview, active liste ning must be used to obtain a witness’s full story. An approach to interviewing known as th e funnel technique can be helpful, which begins with openended questions to encourage the witness to talk, prompting with questions to gather all in formation possible. Once the witness feels that all the facts have been conveyed, he or she s hould be asked for specific details to clarify the story. The interview should end with the qu estion “is there anything else?” to confirm that all information has been exhausted. The final step is to document the investigation to deliver to management. The facts should be stated clearly, and supported by documentation and interview notes. Investigators shoul d avoid making conclusions or inserting personal opinions. They must consult with manage ment to determine if sufficient evidence is available to reach a conclusion and determine if disciplinary action will occur. Once the document step is completed, the investigation can b e closed. Disclosing the results of an investigation demonstrates a commitment to enforce e thical standards. At a minimum, it is important to inform the person who made the initial re port. If confidentiality can be maintained, the results may be disclosed to the supervisor of t he subject of the investigation. The results of ethics investigations may be reported to the b oard of directors. Another way of disclosing the results of ethics investigations is to present them as learning cases during training, even if disguising the subjects to maintain confiden tiality. Chapter 10 10.1 Identifying Ethical Risks of the Future Business leaders can detect early warnings of the ethical risks of the future by m onitoring an organization’s internal and external environments for the ethical di mensions of business strategies. Recall from Chapter 3, ethical dimensions of busi ness are described as what ought to be and include value judgments rather than datadriven factual dimensions (Grier, 2013). Exploring the ethical dimensions of busi ness requires reflection beyond the immediate business activity and considers th e longterm effects on stakeholders and the organization. Additionally, Chapter 3 introd uced environmental scanning as an organizational process that enables compani es to identify political, social, and technological trends that could influence misco nduct in the workplace. Business strategists recognize environmental scanning t hat incorporates stakeholder analysis as the foundation for corporate planning of successful organizations (Bluedorn, Johnson, Cartwright, & Barringer, 1994; Kim iagari, Keivanpour, Mohiuddin, & Van Horne, 2013). As discussed in Chapter 1, social issue life cycle theory asserts that attention to et hical issues changes over time, progressing from relative inattention to an ethical issue, to awareness of the issue, and finally to an expectation for responsible beh avior by the public or other company stakeholders (Ackerman, 1975; Zyglidopou los, 2003). Therefore, ethical issues become more important to certain stakehold er groups. Ethical issue intensity describes the perceived relevance or importan ce of an ethical issue to individuals or groups (Ferrell, Fraedrich, & Ferrell, 2013). Managers need to develop capabilities to identify the ethical issues that require a ttention and action. This section provides strategies for managers to identify future ethical issues tha t require a response from their organization. Environmental scanning for ethical dimensions includes engaging stakeholders and recognizing that ethical issue int ensities will shift over time (Bowie & Dunfee, 2002; Crittenden, Crittenden, Pinne y, & Pitt, 2011). A framework is offered to determine appropriate company respo nses to moral pressures from the public and company stakeholders. The section c oncludes with a guide of credible and reliable resources to identify emerging ethi cal issues. Recognizing Relevant Ethical Issues Managers may not have the time and resources to prepare for every potential eth ical issue. Meyer and Kirby (2010) have identified three factors that create dema nd for businesses to address an ethical issue: 1) the growing scale of companies a nd their impacts, 2) improvements in sensors that measure impacts, and 3) heigh tened sensibilities of stakeholders. Managers should consider these factors in pre dicting ethical issues that are relevant to their business. Scale reflects the recognition that a firm or industry can have a large impact on th e environment, people, and the economy. Larger companies are often under great er public scrutiny as irresponsible actions (e.g., pollution, labor violations, or fals e advertising) impact a larger number of people. For example, a Chinese media re port exposed the unsafe practices of a meat factory supplying American fast food chains in Shanghai, China, including reusing meat that had fallen on the floor and selling expired meat products (Solomon, 2014). The factory was not acting with i ntegrity and misrepresented the safety and freshness of meat sold to customers. The food safety violations may not have been noticed if it were not for the factory ’s connection to McDonald’s and KFC restaurants in the Shanghai area. The two fa st food chains have more than 8,000 restaurants in China and have struggled wit h food safety scandals in their supply chain since 2012. Companies can predict future ethical issues relating to the scale of their business by recognizing the resources that comprise the largest part of the company’s pro duct or service. For example, beef and chicken are main ingredients for McDonal d’s flagship items, making unsafe food practices of a meat supplier a relevant ethi cal issue to which the company must respond. Increasingly, consumers and the p ublic tend to hold a firm responsible for not only its own but also its suppliers’ un ethical behaviors (Hartmann & Moeller, 2014). Ethical issues in global supply cha ins include unsafe work environments, human rights violations, harmful environ mental outputs, and poor product quality or output. Ethical issues with procurem ent of other key ingredients, such as potatoes, may warrant attention by fast food companies. These companies and others may find that their global workforce ha s grown so large that monitoring ethical conduct becomes more challenging. Sensors refer to technology that measures actual outcomes of an industry or indi vidual company and provides the ability to track sources of misconduct directly t o the source company. As discussed in Chapter 3, new technologies, such as keyst roke monitoring, global positioning systems (GPS), and radio frequency identifica tion (RFID) chips, can detect misuse of proprietary data or fraud. These sensors c an track misconduct throughout a company’s supply chain or measure the impac t of a company’s misconduct. For example, radiation sensors and GPS tracking on moving vehicles provided an accurate reflection of the damage to residents from Japan’s nuclear plant explosions in 2011 due to a safety failure of emergency syst ems (Hemmi & Graham, 2014). Heightened sensibilities for an ethical issue relate to the expectation for responsi ble behavior by the public or other company stakeholders. Managers should seek ethical issues that could arise from the business strategy, including the entire val ue chain. For example, Oxfam International and Human Rights Watch enacted a b oycott to force Indian rug producers to abandon the use of child labor that violate s global ethic standards (see Chapter 4) such as the Global Sullivan Principles, the Fair Labor Association Workplace Code of Conduct, the United Nations Global Co mpact’s Ten Principles, and Social Accountability International’s SA8000 Standar d (Ballet, Bhukuth, & Carimentrand, 2014). The boycott affected importers and re tailers of Indian rugs as well, and encouraged them to purchase only from certifie d rug producers. Managers can recognize relevant emerging ethical issues by loo king for future shifts in stakeholder priorities, potential legal action by stakehold ers, and ethical misconduct throughout the supply chain. Environmental Scanning of Stakeholders and Ethical Issue Intensi ty Responding to the moral judgments of consumer, labor, and investor stakeholder s is a challenge for many companies that may be pressured to address societal iss ues, such as animal testing, abortion, homosexuality, equal opportunity, alcohol a nd tobacco use, human and worker rights, and gun control. Management should a sk, “How have stakeholder expectations changed?” to recognize shifts in stakehol der attitudes toward an ethical issue (Meyer & Kirby, 2010, p. 43). As the intensit y of an issue grows, company stakeholders increase pressure for a business to act responsibly by expressing their moral judgment on the issues. However, despite the pressure, a company may not be able to act on the moral judgments of all stak eholders. Bowie and Dunfee (2002) provide a framework to categorize moral pre ssures on business and appropriate responses as depicted in Table 10.1. Table 10.1: Strategies for responding to moral expressions of company stak eholders Type of Mora l Expression Moral Expression Is . . . Exampl Benign Inarguably consistent with universal principles (ethical principles with which most people agree) Pressur Disputed A contested issue within the relevant community that is not resolve Shareho Type of Mora l Expression Problematic Moral Expression Is . . . Exampl d by manifest universal principles; an idiosyncratic contextspecific issue ees obje Inarguably inconsistent with universal principles Employ Source: Adapted from Bowie, N., & Dunfee, T. (2002). Confronting morality in markets. Journal of Business Ethics, 38(4), 381–393. Benign moral pressures reflect widely accepted ethical principles, such as a des ire to protect human wellbeing and provide a safe workplace. As introduced in Chapter 1, these universal p rinciples are hypernorms, described as “principles so fundamental that, by defini tion, they serve to evaluate lowerorder norms, reaching to the root of what is ethical for humanity” (Donaldson & Dunfee, 1999, p. 46). Managers may consider that a business activity is widely ac cepted by most people when it is mandated by regulation, industry practice, or gl obal ethical standard. For example, the right to a safe and healthy working enviro nment is recognized as a fundamental human right by the International Labour O rganization, a United Nations agency (ILO, 2011). In response, many nations have regulations on occupational health and safety. Bowie and Dunfee (2002) encoura ge companies to comply with benign moral pressures, especially those mandated by law. Disputed moral pressures arise when one segment of the public opposes the po sition of another segment. In addition to the societal moral issues that have been mentioned, disputes on the fairness of employee policies or corporate governanc e practices can create emerging ethical issues. The best course of action for comp anies is to follow their core values in determining appropriate actions. Problematic moral pressures center around what is “ethical for humanity” (Do naldson & Dunfee, 1999, p. 46), and typically occur when a company or its stakeh olders demand an activity that violates a universal ethical standard, such as discr iminating according to race or engaging in slave labor. Even organizations with st rict policies consistent with universal values can experience a shift in ethical stan dards in response to influential dominant stakeholders (Sawaoka, Newheiser, & Dovidio, 2014). One example is supplier pressure to allow child labor in order to reduce manufacturing costs. Credible and Reliable Resources Responsive companies may be able to anticipate benign, disputed, and problemat ic pressures by regularly scanning the credible and reliable resources available w ithin the internal and external environment. Regular review of company sources, such as common helpline topics, misconduct reports, exit interviews, and employ ee/supplier surveys, may offer valuable insight into ethical issues that are emergi ng internally within the organization. There are numerous sources to gather info rmation from the external environment, including news media and business jour nals. A suggested practice is for managers to subscribe to newsfeeds of business, ethics, and compliance outlets for alerts to regulatory shifts, industry practices, a nd reported misconduct. These daily or weekly reminders can generate dialogue among management as to possible application within the organization. Credible public news outlets can indicate shifts in public opinion especially with t he recent growth in usercreated content on news media online editions. The Organisation for Economic Co-operation and Development (OECD) defines usercreated content as: “a) content made publicly available over the Internet, b) whic h reflects a certain amount of creative effort, and c) which is created outside of pr ofessional routines and practices” (OECD, 2007, p. 4). A 2014 Pew Research Cent er study reports that “11% of all online news consumers have submitted content (including videos, photos, articles, or opinion pieces) to news websites or blogs” ( Mitchell, 2014, p. 5). Usercreated content on social media (websites for social networking) provides manag ement with valuable information on the opinions of customers, employees, suppl iers, competitors, and the public. Fan and Gordon (2014) recommend the use of s ocial media analytics, which ‘involves a threestage process: capture, understand, and present” (p. 74) (see Figure 10.1). Social media analytics is the interpretation of social media data to “extract useful patter ns and intelligence,” going beyond simply tracking traffic to an Internet site (Fan & Gordon, 2014, p. 74). The first step is to discover and collect messages from social websites through so cial media monitoring. One challenge encountered in this step is sifting through the large amount of irrelevant material that may be collected. The second step is to interpret the meaning of the social media content using techniques for categor izing opinions, and analyzing sentiments and trends in an effort to predict shiftin g customer, supplier, employee, and community expectations of the company (Ka lampokis, Tambouris, & Tarabanis, 2013). Finally, when presenting trends in em erging ethical issues, companies will focus on identifying potential risks and opp ortunities. For example, increasing public concerns about improper disposal of c onsumer electronics leaking toxic chemicals into the environment encouraged co mpanies to offer tradein or removal services when purchasing a new product (Fan & Gordon, 2014). While useful, organizations should consider usercreated content with care as it tends to reflect the beliefs of individuals with stro ng convictions rather than those of the general population (Eveland & Shah, 2003 ; Yildirim, Gal-Or, & Geylani, 2013). Usercreated content also tends to reflect a younger and more technologicallysavvy individual who may not represent public opinion. For example, during the days following the 2012 elementary school shooting in Newtown, Connecticut, th e Pew Research Center found that while nearly two thirds of those who posted re lated comments on Twitter expressed support of stricter gun control, its public o pinion polls during the same period indicated a more equal split with 49% suppo rting gun control and 42% opposing stricter gun controls (Matsa & Mitchell, 201 4). In addition, when interpreting reader reactions to media coverage of various i ssues, companies must bear in mind the potential for bias in the U.S. news media toward liberal or conservative social causes (Eveland & Shah, 2003; Sutter, 2012) . Figure 10.1: Social media analytics process A social media process entails three stages designated to capture, understand, and pr esent information on consumer and social trends affecting the business. Source: Weiguo, F.A.N., & Gordon, M.D. (2014). The power of social media analytics. Communication s of the ACM, 57(6), 74–81. Reprinted with permission of The Association for Computing Machinery. A wide range of nonmedia organizations, such as nonprofit research centers, communities of practice , nongovernmental organizations (NGOs), and think tanks, provide valuable informati on on emerging ethical issues that may affect businesses. The U.S.based Ethics Resource Center and the Europeanbased Institute for Business Ethics are examples of nonprofit ethics research org anizations that offer insight into misconduct in the workplace. A community of p ractice is often described as a group of people “who share a concern, a set of pro blems, or a passion about a topic, and who deepen their knowledge and expertise in the area by interacting on a regular basis” (Wenger, McDermott, & Snyder, 20 02, p. 4). Some communities of practice are informal social networking groups, w hile others are members only, requiring an annual fee to participate. An example of an organization that provides executive networking opportunities to understand and address critical issues is The Conference Board, Inc. (The Conf erence Board, 2014). Another community of practice is the Corporate Executive Board Company (CEB), which offers networking opportunities by function, inclu ding ethics and compliance officers (CEB Compliance & Ethics Leadership Counci l, 2014). These networking opportunities allow professionals to discuss what eth ical issues create concerns for their businesses. As an NGO, the United Nations Gl obal Compact provides companies with guidance on responsible business practic es worldwide with special working groups to explore key issues. Think tanks are groups of experts who research technological and social proble ms with the goal of generating creative solutions and offering advice. Think tanks ...