Ethics Auditing
Ethics Auditing: Identify the benefits and limits of ethics auditing. Is there a strategic role that ethics auditing may play in a company?
Ethics Auditing
By definition, an ethics audit is a “systematic evaluation of an organization’s ethics program and/or performance to determine its effectiveness.” (1) This concept of ethics auditing is fairly new and few companies have conducted an ethics audit. However, performing such audits will likely become more mainstream as recent legislation encourages greater ethical accountability for companies to demonstrate they are abiding by the law and have established programs to improve their ethical decision making.
The U.S. Sentencing Commission (the “Commission) has amended the Federal Sentencing Guidelines for Organizations (“FSGO”) whereby an effective compliance and ethics program must “exercise due diligence to prevent, detect, and report criminal conduct and otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with all applicable law." (2) The Commission noted there are seven minimum requirements of an effective ethics program: (1) Standards and procedures to prevent and detect criminal conduct; (2) Responsibility at all levels of the program, together with adequate program resources and authority for its managers; (3) Due diligence in hiring and assigning personnel to positions with substantial authority; (4) Communicating standards and procedures, including a specific requirement for training at all levels; (5) Monitoring, auditing, and non-retaliatory internal guidance/reporting systems, including periodic evaluation of program effectiveness; (6) Promotion and enforcement of compliance and ethical conduct; and (7) Taking reasonable steps to respond appropriately and prevent further misconduct upon detecting a violation.
These requirements should be addressed through the ethics audit.
Framework for an Ethics Audit
In addition to
Ethics Auditing
By definition, an ethics audit is a “systematic evaluation of an organization’s ethics program and/or performance to determine its effectiveness.” (1) This concept of ethics auditing is fairly new and few companies have conducted an ethics audit. However, performing such audits will likely become more mainstream as recent legislation encourages greater ethical accountability for companies to demonstrate they are abiding by the law and have established programs to improve their ethical decision making.
The U.S. Sentencing Commission (the “Commission) has amended the Federal Sentencing Guidelines for Organizations (“FSGO”) whereby an effective compliance and ethics program must “exercise due diligence to prevent, detect, and report criminal conduct and otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with all applicable law." (2) The Commission noted there are seven minimum requirements of an effective ethics program: (1) Standards and procedures to prevent and detect criminal conduct; (2) Responsibility at all levels of the program, together with adequate program resources and authority for its managers; (3) Due diligence in hiring and assigning personnel to positions with substantial authority; (4) Communicating standards and procedures, including a specific requirement for training at all levels; (5) Monitoring, auditing, and non-retaliatory internal guidance/reporting systems, including periodic evaluation of program effectiveness; (6) Promotion and enforcement of compliance and ethical conduct; and (7) Taking reasonable steps to respond appropriately and prevent further misconduct upon detecting a violation.
These requirements should be addressed through the ethics audit.
Framework for an Ethics Audit
In addition to
Cited: Materials: (1) Business Ethics: Ethical Decision Making and Cases, Ferrell, Fraedrich, Ferrell, Eighth Edition, p. 243 (2) Ethics Resource Center, FSGO, Part 2 Article: http://www.ethics.org/resource/fsgo-series-part-2 (3) Corporate Governance & Social Responsibility Class Slides, 9/26/2011 (4) Business Ethics: Ethical Decision Making and Cases, Ferrell, Fraedrich, Ferrell, Eighth Edition, p. 252 (5) Business Ethics: Ethical Decision Making and Cases, Ferrell, Fraedrich, Ferrell, Eighth Edition, p. 245 (6) Business Ethics: Ethical Decision Making and Cases, Ferrell, Fraedrich, Ferrell, Eighth Edition, p. 248 (7) Business Ethics: Ethical Decision Making and Cases, Ferrell, Fraedrich, Ferrell, Eighth Edition, p. 265