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Executive Summary
As business ethics and corporate social responsibility move from mere concepts on paper to actual business action items, it is imperative that corporate top leadership understand the impact that each of these issues has on profits, stakeholders and reputation. With the implementation of the Sarbanes-Oxley Act and revisions made to the Federal Sentencing Guidelines for Organizations, top leadership has become responsible for corporate behavior and culture. Understanding and implementing programs that can develop a positive ethical culture within the organization are more critical than ever.
Contemporary business leaders face the challenge of not only being role models for every employee within their organization, but they must also ensure that all stakeholders’ needs are considered and addressed. The power to shape corporate culture and values lies with top leaders. Their every decision and action is a signal to what is ethically acceptable and what is not. Corporate managers must walk the walk, make tough calls and above all else make ethics a priority in everyday business decisions. A successful ethics program ensures that employees will have the knowhow to act accordingly, incorporating company values into their every day decision making processes.
Recognizing the significance that stakeholders play in developing corporate ethics programs can provide a much needed competitive advantage in today’s business environment. Assessing stakeholder needs and implementing business strategies to address these needs, provides an environment of trust, increases loyalty and instills investor confidence and satisfaction with the corporation. Creating a two way interaction between the corporation and its stakeholders can provide the opportunity for increased growth, increased profits and solidify the company’s good reputation.
Top leaders today are facing more and more pressure to make socially responsible decisions, adhere to legal requirements and generate ever increasing profits. Corporate social responsibility is now being viewed as a strategic business opportunity. Implemented correctly, social responsibility programs can provide opportunities for new markets, increased profits, and access to new innovations and cutting edge technology. Today’s business’ have the ability to maximize positive impacts on society while at the same time minimizing the negative impacts. It is critical for top leadership to select the appropriate social issue or issues that the corporation has both the resources and ability to make a positive impact on.
Taking action is the key to success for both positive ethics programs and successful corporate social responsibility action items. Words alone will fall far short of achieving desired corporate goals. Leading by example, making decisions with integrity, top leadership will determine the direction the corporation will take. Developing and implementing performance objectives are key components to ensure that business directives remain on track.
Introduction
Corporate ethics and social responsibility are changing the way corporations are competing in today’s business world. Business ethics is rapidly becoming “institutionalized” due to the recent number of corporate scandals involving organizational misconduct. The purpose of this report is to present the importance of top leader role modeling, the importance of developing a strong ethical culture and the importance in developing a business strategy that incorporates social responsibility. As acting human resource manager, this information is being presented to CEO of C.W.O. Corporation, per request, and will provide recommendations for action.
Much has been learned from watching the trials of executives from Enron and other high profile companies. With implementation of the Sarbanes-Oxley Act and the 2004 amendments of the Federal Sentencing Guidelines for Organizations, it is clear in today’s business world that top business leaders will be held responsible for the culture they create within their organizations as well as the conduct that occurs within the organization. Today’s leaders must lead by example. Their every day actions and decisions send the message to their employees on what is considered ethical and what is not.
Developing strong ethical business practices is critical in maintaining stakeholder satisfaction and loyalty. Stakeholders can be defined as anyone who has an interest or stake in the company. Their interest or stake in the organization can be tangible or intangible. Understanding stakeholder needs and demands requires the corporation to develop a stakeholder perspective or orientation. From this stakeholder perspective, top leaders can assess the needs of the business and include the needs of its stakeholders, utilizing this information to build a strong ethics program built on mutual integrity and trust.
Corporate social responsibility requires top leadership to understand not only the responsibilities that are demanded of them by the corporation, but also the need to begin recognizing the opportunities that these demands are introducing. Corporate social responsibility, while still a voluntary effort, often has a large determining factor on corporate profits, reputation and stakeholder satisfaction and loyalty. Successful top leaders are beginning to look at corporate responsibility from a strategic viewpoint. There is no single right way to incorporate social responsibility; however, with proper assessments of the corporate environment, companies can engage in sophisticated ways to influence its stakeholders.
Business ethics and corporate social responsibility make good business sense. A corporation’s reputation may be its greatest asset. Practicing good business ethics and increasing social responsibility sends a clear message that acting with integrity is of utmost importance. In today’s turbulent world of business, integrity may become synonymous with reputation.
Research Findings
After researching a variety of relevant and credible sources on business ethics and corporate social responsibility, three main issues should be considered: 1) Establishing a positive ethical business culture begins with top leadership; 2) Sound ethical practices increase stakeholder satisfaction and loyalty; 3) Corporate social responsibility enhances company reputation and increases profitability.
Establishing a positive ethical business culture begins with top leadership
Creating a positive business culture involves a long term approach which incorporates a set of ethics into an organizations core values. “The ethical component of a corporate culture relates to the values, beliefs, and established and enforced patterns of conduct that employees use to identify and respond to ethical issues” (Ferrell, Fraedrich, & Ferrell, 2008, p 17). Developing shared values and supporting ethical decision making promotes a working environment that relies less on enforced compliance of the rules into one that relies more on respect and responsibility. A strong ethical culture empowers employees to use ethical reasoning when confronted with new and difficult situations (Ethics Resource Center, 2006).
There are several steps involved in creating a more ethical corporate culture. Top leaders can begin by being role models and communicating core values to their employees. Ethics officers can be appointed to design, implement and oversee corporate ethics plans. Training is provided for all employees from top management down. A system of rewards and punishment should be evaluated. Formal protective mechanisms need to be established to allow employees to report observed unethical behavior without fear of retaliation or reprimand. An effective ethics program will be customized by top leaders to incorporate the unique values and beliefs of their organization (Cohen, 2010).
Top leaders who emphasize strong ethical standards have the ability to create an organizational culture that has a very influential and positive impact on employee behavior (Robbins & Judge, 2013). Top leader attitudes, decisions, and actions are all important aspects in the development of an ethical culture. Employees look to top leaders to determine what appropriate and acceptable behavior in the work place is. “A study of 195 managers demonstrated that when top management emphasizes strong ethical values, supervisors are more likely to practice ethical leadership” (Robbins & Judge, 2013, p. 527). Demonstrating through daily actions and communications, top leadership conveys the priority and importance of making business decisions within a positive ethical framework.
Effective ethics programs result from actions carried out throughout the entire organization. Discussing ethical behavior without promoting positive actions can fall short of creating the desired ethical culture, attitudes and behaviors. Communicating expected ethical codes of conduct to each employees and providing appropriate training sessions creates an environment of confidence, trust and mutual respect. Through their actions, top leaders provide the catalyst for change within their organization. Top leaders act as role models, conveying core values, beliefs and behaviors, setting clear expectations for how each employee should act and make decisions.
Ethical Culture and Corporate Social Responsibility: Impacts on Contemporary Business
Wendy Ostrander, 283861
Establishing a positive ethical culture begins with top leadership
Cohen, E. (2010). CSR for HR: A necessary partnership for advancing responsible business practices.Sheffield, UK: Greeleaf Publishing Limited.
Ethics Resource Center. (2006, December 31). Critical elements of an organizational ethical culture. Retrieved from Ethics.org: http://www.ethics.org/files/u5/lements_of_an_Organizational_Ethical_Culture.pdf
Ferrell, G. F., Fraedrich, J., & Ferrell, L. (2008). Business ethics: ethical decision making and cases. Boston, MA: Houghton Mifflin Company.
Robbins, S. P., & Judge, T.A. (2013).Organizational behavior, 15th ed.Upper Sadle River, NJ: Prentice Hall.
Sound ethical practices increase stakeholder satisfaction and loyalty
Ethics Resource Center. (2011, October 12). A discussion guide for executives about communications and ethics. Retrieved from Ethics.org: http://www.ethics.org/resource/building-corporate-reputation-integrity
Ferrell, G. F., Fraedrich, J., & Ferrell, L. (2008). Business ethics: ethical decision making and cases. Boston, MA: Houghton Mifflin Company.
Ferrell, O. (2004). Business ethics and customer stakeholders. Academy of Management Executive, 18, 126-129.
Phillips, R. (2003). Stakeholder theory and organizational ethics. San Francisco, CA: Berrett-Koehler Publishers, Inc.
Corporate social responsibility enhances reputation and increases profitability
Doorley, J., & Garcia, H.F. (2007).Reputation management: the key to successful public relations and corporate communication. New York, NY: Taylor & Francis Group, LLC.
Kemper, A., & Martin, R. (n.d.). Best practices in corporate social responsibility. Retrieved from QFinance.com: http://www.qfinance.com/contentFiles/QF02/g1xtn5q6/12/0/best-practices-in-corporate-social-responsibility.pdf
Kotler, P., &. Lee, N. (2005). Corporate social responsibility: doing the most good for your company and your cause.Hoboken, NJ: John, Wiley & Sons, Inc.
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