Leaders have a great role in establishing and sustaining an ethical climate in an organization. According to Randall (2012), ethical climate is the perception of what the correct way to behave is and how ethical issues should get handled in an organization. There are two broad dimensions of sources of power; positional and personal. Positional power is the kind of power acquired due to the position one holds while personal power is from someone’s personality or skills. Positional power further divides into legitimate, reward and coercive power. Personal power includes expert and referent power.
There are different types of leadership powers used to attain an ethical climate in an organization, but in my opinion, expert power is the most effective. Expert power bases itself on the skills and knowledge possessed by the leader. A leader with the knowledge about ethical issues in an organization and aware of the ethical challenges is more effective in the establishment of an ethical climate than one who is ignorant (Randall, 2012). An expert leader will ensure that all organizational members understand all ethical issues and challenges by creating awareness. The leader will not only need to have the expertise, but also exert firm leadership and recognize all employee concerns. With this kind of expertise and great leadership skills, the employees are more likely to approach him or her for guidance regarding ethical matters. Most executives undervalue decisions on ethical issues due to lack of knowledge on those matters.
Stakeholders are the people interested in the organization’s actions and are also affected by them. Primary stakeholders directly affect the success or failure of the organization while secondary stakeholders affect the organization indirectly (Saylor Foundation, 2014). Paradigm Toys primary stakeholders are the customers and the employees. The secondary stakeholders are government agencies and regulation agencies since they can take actions that impede an organization’s success.
According to Saylor Foundation (2014), corporate social responsibility is the self-regulation mechanisms that a company uses to monitor its environment, society, ethical principles and legal standards. Paradigm Toys has a responsibility to not only the primary stakeholders’ requirements but also the secondary stakeholders’ needs. The Board of Directors should ensure the company’s economic and legal responsibility. The Board of Directors can ensure the company is economically responsible by monitoring the company’s profitability against the corporate social responsibility targets. All decisions passed by the board should be those that will make the company more profitable. With more profits the company can give back to the society, for instance, by creating more job opportunities. The board can also ensure the company achieves legal responsibility by obeying the law. The board is responsible for designing, updating and monitoring the Corporate Social Responsibility policies (Strandberg, 2008). By doing this, they ensure that all decisions passed are in line with the government and regulators’ laws and regulations. As a result, the company remains responsible to all its stakeholders.
An ethics audit is the evaluation of a company’s ethics program and its performance to determine whether it is effective or not (O. Ferrell, Fraedrich, & L. Ferrell, 2014). For an ethics audit to occur, it requires the top management’s commitment and willingness so that the company undertakes the audit. It also requires the committee to oversee the entire audit and to analyze its findings. The scope and subject matters of the audit should be clear before the audit commences. The audit’s aim is to review the organization’s missions, policies, and procedures in order to define its ethical priorities. All the relevant information gathered during the audit gets analyzed and a report on the findings given to the management.
Conducting an ethics audit in a company is a smart move. It is a way to show the society that the company is a responsible corporate and that it cares about them and environmental issues (Bernard, 2013). Through an audit, the company ensures that it prevents any reputational damage that may arise due to ethical issues. Also, by agreeing to conduct this audit, the management highlights its commitment to ethics and social values in the organization. The organization may also impress customers who buy products and services only from businesses with a track record on social issues; referred to as ethical consumerism.
Performing an ethics audit on Paradigm Toys will help the organization recover from any ethical crisis management issues it might have. It will help the organization identify any potential risks and liabilities and address them, as well as, review its current practices, procedures and policies (Reamer, 2007). The audit will also help the company determine whether the current policies are adequate and what improvements or changes should take place. If the auditing committee together with the management deem it necessary to modify the current practices, the ethics audit report will shed light on the issues to address. Also, the management will know about any complaints from the employees and what to do in order to avoid ethics-related lawsuits.
According to Hillstrom (2014), a balanced scorecard is a systematic approach to performance measurement, and it is a way to translate an organization’s strategy into clear objectives, measures, and targets. Unlike other performance improvement initiatives, it helps the management understand the complex interrelationships among different areas of the business. Using it helps one to point out situations where improvement in one area of business can come at the expense of another. The four perspectives included in a balanced scorecard are financial, customer, process and learning and growth.
The inclusion of financial performance factors in the balanced scorecard deals with the way stakeholders get viewed. The developers of the balanced scorecard, Kaplan and Norton, also gave arguments on the importance of performing financial measures. Critics claimed that financial measures tend to look backward on past actions instead of focusing on future responsibilities. However, Kaplan and Norton explained that measuring the customer, internal business performance, and innovation only shows one view of the company (Hillstrom, 2014). Performing financial measures that improve the quality, productivity and response time only benefit the company if sales and market shares, reduced operating expenses and high assets turnover also improve. Financial performance measures such as returns on assets or earnings per share indicate whether the company’s strategy and its implementation has resulted to increase in shareholder value. If these measures are incorporated alone, they can be deceptive but when incorporated to a balanced scorecard, they become valuable information that eventually leads to improvements in the organization.
Non-financial measures focus on the customers, process and learning and growth perspectives. The company can measure whether they are building or destroying their capabilities with processes and customers for future growth and profitability by monitoring non-financial measures (Hillstrom, 2014). Non-financial measures are also key indicators of the financial performance in the future. A decrease in customer satisfaction or process quality and increased response time will predict a decrease in financial performance in the company’s future. Kaplan and Norton also explained that additional perspectives in certain types of business is important. For instance, an oil company might need to perform an environmental regulation perspective. Balanced scorecard is a framework for describing how the combination of different assets creates value for the organization.
Purpose of Corporate Social Responsibility
According to an article by The Executive Connection (2013), corporate social responsibility is the strategic practices by an organization that indicates it keeps the best interest of the society in mind. One of the purposes of CSR is boosting the organization’s image and reputation. An organization with a good public image enjoys increased customer sales and loyalty. A good image not only makes the company more profitable but also makes its performance compared to that of its competitors stronger giving it a competitive advantage. Corporate social responsibility also ensures that the interests of all stakeholders are taken care of including employees and customers. It helps enhance the relationships with employees, satisfaction, productivity, retention and also builds a strong company culture. Also, the relationships with society and legal regulators get improved by providing more job opportunities and adhering to regulatory laws.
Practicing CSR
There are certain practices that an organization can use when practicing Corporate Social Responsibility. Setting measurable goals is one of the practices on what the company intends to accomplish (Lu, 2010). Paradigm Toys can start making small changes such as improving employees’ policies or minimizing waste and being mindful of the environment. It is also important to engage stakeholders in these practices. It is important that Paradigm Toys articulates its values, missions, strategies, and implementation in the creation of the CSR plan. Involving stakeholders in the process will help in regulatory approvals, enhancing relationships and preventing potential crises. The inclusion of stakeholders will also ensure that it meets their interests and needs.
Creating a sustainability management system is important when practicing CSR. According to Lu (2010), a framework that ensures environmental, social, and economic concerns should get considered throughout the decision-making process. Paradigm Toys should identify and prioritize sustainability aspects and impacts. The company should also ensure that those impacts are according to the legal requirements. It is also important that the employees get educated to ensure the achievement of the company’s goals and objectives. Holding of occasional audits ensures that the system runs effectively in meeting the company’s corporate social responsibility and any necessary improvements. Paradigm Toys can also ensure that its customers and shareholders have access to their Corporate Social Responsibility reports. For instance, the reports can get posted on the company’s website in an easy to download format. Stakeholders’ and other people’s feedback on the report should be encouraged.
The Coca-Cola company is listed and traded on the New York Exchange. It is also a separate entity from Coca-Cola enterprises. The Coca-Cola Company is careful on maintaining the company’s image and reputation. It has a code of business conduct to act as a guide on the appropriate conduct on the company (The Coca-Cola Company, 2009). After carefully analyzing the company’s code of ethics, it lacks in the area of Corporate Social Responsibility. The conduct has focused more on how the employees should not violate certain guidelines and laws to ensure the company’s reputation does not get damaged. Although the conducts explain how employees should not violate legal standards and ethical principles, it does not focus on the company’s responsibility to the society, global trends, or the environment. In the code of business conducts, there is a section that explains the company’s integrity when dealing with others. The conduct states that when conducting with various governments, adhering to the different legal rules is necessary. It clearly states the prohibition of any form of bribery and all employees should always refer to the anti-bribery policy for guidance about making payments to government officials or other third parties. The conduct also gives clear guidelines on complying with trade restrictions by various governments in the regions they conduct business. The laws on dealing with competitors, customers, and suppliers is also clearly outlined in the code of conduct. In my opinion, Coca-Cola Company code of ethics is exhaustive in the area of legal compliance.
In the area of developing an ethical culture, Coca-Cola Company delivers. There is a section on acting with integrity around the globe and being a good representative of the company. The section clearly explains the demands expected from employees and the management when written approval is necessary and how to raise any ethical concerns. Employees are encouraged to evaluate their actions and ensure they reflect positively on the company’s values and reputation (The Coca-Cola Company, 2009). The development of an ethical culture occurs by ensuring all employees are obligated to uphold ethical standards of the company. The code of ethics encourages employees to raise any ethical concerns they may have. The company also ensures that any reports made remain anonymous and confidential and also that the matter gets investigated without any retaliation to the employee who raised the honest violation of the ethics code.
Ethics Training Program
When conducting an ethics training program in Paradigm Toys, one of the key areas that require inclusion is the ethical judgment philosophies and heuristics. Employees should understand the different philosophies applied in the organization and other areas of work. Most people believe that it is more appropriate to train employees on the philosophical approaches. However, the most important aspect of ethics training is to use critical thinking skills. They will help them determine their actions (Knouse & Giacalone, 1996). Employees should receive training on the ethical values among employees and those between employees and the organization.
Trainees should also receive training on the organization’s ethical expectations and rules. Paradigm Toys should provide all its employees with an employee handbook and code of ethics document. According to Knouse and Giacalone (1996), by providing these documents, the employees will be aware of what the organization expects from them. They should also get trained on the importance of raising any concerns that they might have to ensure the company develops a strong ethical culture.
The training program should also educate employees on how investigations on the violation of ethics code complaints occurs. The identity of the employee raising the complaint should always remain confidential and no retaliation on them even after the investigation is carried out. By employees knowing this, they will be more confident to approach the management with their concerns.
Communication is an important factor in a training program. Employees of Paradigm Toys should receive encouragement to have effective listening skills and ensure they understand what the trainee is communicating. Creating a safe training environment, ensures the employees feel more comfortable to ask questions or any clarifications that they might require from the trainee. The trainer should also have great presentation skills and a good understanding of the subject they teach. Knowledgeable in the area of training gives trainees the confidence to trust and rely on the information provided to them.
Training delivery methods consists of techniques and materials used by trainers to maximize the learning experiences (Blanchard, 2008). The use of simulation delivery methods in decision-making scenarios like case studies is effective in an ethics training program. The trainee gets presented with an authentic or fabricated organizational case. The trainees are supposed to answer a number of questions regarding the situation being discussed. They are required to analyze the information and come up with the best situation. The trainer then facilitates a discussion where they examine possible alternatives ad consequences. The importance of this approach is to examine the employees’ application of the ethics philosophical principles. The solution of the case study is irrelevant. However, the employees’ effective application of the principles and use of logic to develop a solution is important.
Ethical Consequences
The first form on intellectual property was patent law. The four areas by intellectual property are patents, copyrights, trademarks and trade secrets. Patents are grants from the government giving special rights in using, selling and making a product. Copyrights are a protection of all written pieces including and not limited to books, periodicals, and theater productions. Trademarks protect the production of counterfeit goods and services. Paradigm Toys should ensure that the information about intellectual property is not known to all employees. They can also ensure that all employees that know this information may for the purpose of their job, sign Non-Disclosure Agreements. Such legal documents can protect the company against any leakage of important information and will also allow the company to take any legal action against anyone who violates such agreements.
The company is responsible for all its employees’ and clients’ information. Such information should not be available to everyone and be well protected to maintain both the employees’ and clients’ confidentiality. The organization should ensure that not all information is disclosed to employees, and only employees who require such information for their jobs should know it. Implementing a good security system in the information technology department of the organization is important. Most security breaches today are carried out by Information technology experts. The company should ensure that skilled personnel handle the system security, and that information technology security is a priority. Policies should also get implemented such as not using personal devices to access the organization data and random system security checks.
In the modern world, the monitoring of employees’ internet or company’s resources usage has become a necessity. It has, however, raised a lot of ethical concerns especially about the employees’ privacy. For an organization to deal with these concerns and also monitor employees, it should approach these issues in a more ethical way. Employees should know that they are being monitored, and the monitoring should only happen during working hours or if the employee is using company resources such as a vehicle. Employees should also get reports on the monitoring to ensure that they realize the monitoring is not only to the company’s benefit but can also help them become more productive and effective in their work.
The ethical climate of an organization is very important, and for it to develop, involvement of many parties is necessary. Paradigm Toys should ensure it creates a great ethical culture not only to maintain a good reputation and image but also to the benefit of its employees and other stakeholders.
References
Bernard, C. (2013, April 9). Ethical Assurances to Avoid Reputational Damage: The Ethical Audit. KPMG. Retrieved from http://www.kpmgfamilybusiness.com/ethical-assurances-avoid-reputational-damage-ethical-audit/
Blanchard, P. N. (2008). Training Delivery Methods. Encyclopedia for Business (2nd ed.). Retrieved from http://www.referenceforbusiness.com/management/Tr-Z/Training-Delivery-Methods.html
Ferrell, O. C., Fraedrich, J., & Ferrel, L. (2014). Business Ethics: Ethical Decision Making and Case (10th ed.). Stamford, CT: Cengage learning.
Hillstrom, L. C. (2014). Balanced Scorecard. Encyclopedia of Business (2 ed.).Retrieved from http://www.referenceforbusiness.com/management/A-Bud/Balanced-Scorecard.html
Knouse, S. B., & Giacalone, R. A. (1997, January 1). The Six Components of Successful Ethics Training. Business and Society Review, 98, 10-13. Retrieved from http://www.instituteforethicalawareness.org/img/pdf_files/The%20six%20components%20of%20successful%20ethics%20training.pdf
Lu, C. (2010). Corporate Social Responsibility’s Seven Best Practices: Avoid Green washing through Stakeholder Engagement. The Green Economy Post. Retrieved from http://greeneconomypost.com/csr-best-practices-11001.htm
Randall, D. M. (2012). Leadership and the Use of Power: Shaping an Ethical Climate. The Journal of Applied Christian Leadership, 6(1), 28-35. Retrieved from http://www.andrews.edu/services/jacl/article_archive/6_1_spring_2012/04-featurearticles/jacl_6-1_randall.pdf
Reamer, F. G. (2007). Conducting an Ethics Audit. Social Work Today 7(1). Retrieved from www.socialworktoday.com/archive/EoEJanFeb07.shtml
Saylor Foundation. (2014). Stakeholders and Corporate Social Responsibility. Bus208: Principles of Management. Retrieved from http://www.saylor.org/site/wp-content/uploads/2013/02/BUS208-3.3.7.1-Stakeholders-and-CSR-FINAL.pdf
Strandberg, C. (2008, June). The Role of the Board of Directors in Corporate Social Responsibility. The Conference Board of Canada. Retrieved from http://www.corostrandberg.com/pdfs/08-169The_Role_of_the_Board_of_Directors_in_%20CSR_Report_WEB28.pdf
The Coca-Cola Company. (2009, April). Code of Business Conduct: Acting with Integrity around the Globe. The Coca-Cola Company. Retrieved from http://assets.coca-colacompany.com/45/59/f85d53a84ec597f74c754003450c/COBC_English.pdf
The Executive Connection. (2013, October 14). Why Corporate Responsibility is so important. Strategy and Leadership. Retrieved from http://www.tec.com.au/resources/blog/october-2013/why-corporate-social-responsibility-is-so-important/
