TABLE OF CONTENTS An ethical framework is a combination of procedures and written guidelines that help a company to actively manage its ethical behavior, and through that behavior, its risk. It is predicated on the idea that the best way to deal with an ethical dilemma in the modern corporation is to avoid it in the first place. To do that, a company must ensure that its employees from the board to the shop floor recognize when something is unethical, illegal, or potentially damaging to their corporate reputation. Beyond this, employees at all levels have to see it as their responsibility to act on these types of issues. It is critical that the company makes it as easy and effective as possible for its employees to do this.
The idea of managing corporate ethics, of course, is not new. Most companies have some sort of ethical framework, usually based on ethical value statements and a short introduction to corporate ethics that takes place during new employee orientation. Nearly 75 percent of all U.S. companies have a code of conduct, and about one third of all corporations with 500 employees or more offer some sort of introductory ethical training.
Given the continuing number of corporate incidents, are these codes of conduct simply ineffective? To a large extent, yes, particularly if not coordinated with a fuller risk management process. There are many reasons for this. An ethical policy fails if:
Employees feel that ethical conduct is relative, depending on the trade-off...
