What Do Accountability, Responsibility, And Risk Have To Do
What Do Accountability Responsibility And Risk Have To Do With Ethic
What do accountability, responsibility, and risk have to do with ethics in business? Everything. In today's transparent society, there is no place for dishonesty, arrogance, or greed in the executive ranks of a corporation or its board. Increased media exposure and the speed of information exchange will ensure that the work of directors is scrutinized far greater than ever before. Due to greater media and public scrutiny, and the accountability and legal liability inherent in executive roles, many qualified individuals are reluctant to take on the responsibility of being a director.
In a speech given by United States Treasury Secretary Paul H. O'Neill to the University of Chicago Graduate School of Business, Mr. O'Neill addressed the future leaders and future business leaders about the challenges they face (O’Neill, 2002). He commented on how corporate leaders have fallen from their moral roots during the 90s, driven by greed and hubris, abandoning moral direction in pursuit of short-term gains. O'Neill emphasized that making a new era of personal responsibility and public integrity is necessary, advocating for honest, accountable leadership as essential for restoring public faith in business. According to him, honesty in business should be viewed as a patriotic act that benefits the country and its economic fabric.
Scenarios such as corporate financial collapses, environmental disasters, layoffs, and consumer lawsuits often stem from poor risk management. Proper management of risks to stakeholders and shareholders can prevent many such problems. Effective corporate governance is essential in this context. Brian Brown, president of the Winnipeg Chapter of the Institute of Internal Auditors, highlights four pillars vital for good governance: the board of directors, management, internal auditors, and external auditors, all operating independently to prevent issues (Diplock, 2002).
In the realm of law, tort law protects societal interests by providing remedies for injuries caused by wrongful acts, and damages are meant to compensate the injured party. Tort law has evolved to address contemporary societal challenges, covering intentional torts (like assault or defamation), unintentional torts (negligence), business-related torts (such as false advertising), and strict liability activities. Crimes are acts that violate duties owed to society, with classifications ranging from felonies, misdemeanors, to violations, each with differing degrees of severity and corresponding penalties. White-collar crimes, often committed by professionals using deception rather than force, include mail fraud, embezzlement, insider trading, and tax evasion (Carper & Heimer, 2011).
Ethics, Morals, and Values in Business Decision Making
Ethics constitute a set of principles or standards that guide conduct within a profession or organization. Morals relate to personal habits shaped by cultural influences, while values are the individual perceptions of what is important. In business, ethics influence decision-making significantly, especially when organizational culture emphasizes ethical behavior. Factors affecting ethical decision-making include top management’s stance on ethics, organizational consequences of unethical behavior, consensus among managers on ethical standards, potential harm caused by unethical actions, timing of consequences, and scope of affected parties (Lamb, Hair, & McDaniel, 2003).
Developing and Implementing a Code of Ethics
Organizations should include various issues in their codes of ethics, such as acceptable business practices, internal controls, decision-making policies, and open dialogue about ethical and unethical behavior. Enforcement of these policies relies heavily on management’s commitment to uphold and promote ethical standards. Many professional bodies, like the American Marketing Association and Society for Human Resource Management, provide standardized codes of ethics to ensure consistent ethical conduct across industries (ACA, 2005).
When Does an Action Become a Crime?
An action is considered criminal when it involves both actus reus (the prohibited act) and mens rea (the intent or mental state). Not all unethical or immoral conduct is criminal; negligence, for example, is not a crime unless accompanied by criminal intent or reckless behavior. Evidence types—direct (eyewitnesses, confessions) and circumstantial—are used to establish guilt. Criminal laws distinguish between levels of offenses, from infractions and misdemeanors to felonies, with penalties that may include fines, imprisonment, or both (Carper & Heimer, 2011).
White-Collar Crime Overview
White-collar crimes involve deception for economic gain by professionals, contrasting with violent crimes. These offenses include fraud, embezzlement, market manipulation, and insider trading. Such crimes can result in severe penalties, including lengthy imprisonments and heavy fines. White-collar crime’s complexity often challenges enforcement due to the intricate nature of financial deception and the need for expert investigation (Sutherland, 1949).
The Pyramid of Corporate Social Responsibility
The pyramid of corporate social responsibility comprises four levels: economic, legal, ethical, and philanthropic responsibilities. The foundation is economic responsibility: a business must be profitable to survive. Next is legal responsibility—adherence to laws and regulations. Ethical responsibility emphasizes doing what is right beyond legal requirements, fostering trust and integrity. The top layer, philanthropic responsibility, involves voluntary contributions to improve community welfare and demonstrate corporate citizenship (Lamb, Hair, & McDaniel, 2003).
Guidelines for Codes of Ethics
Many professional organizations have established codes of ethics to promote consistency and integrity within their fields. These guidelines serve to unify professionals by establishing shared standards, such as honesty, confidentiality, competence, and conflict of interest management. Such codes support members in ethical decision-making and help uphold the organization’s reputation (ACA, 2005).
Levels of Ethical Development
Ethical development progresses through three stages: preconventional morality (self-centered, focused on avoiding punishment), conventional morality (concerned with societal rules and approval), and postconventional morality (guided by internal principles and personal ethics). Mature ethical behavior involves moving beyond rules to a thoughtful understanding of moral principles, fostering responsible decision-making in complex situations (Kohlberg, 1981).
Conclusion
Ethics, morals, and values form the backbone of responsible business conduct. They influence decision-making at all organizational levels, guiding behavior amidst complex legal and social environments. Establishing clear ethical standards and a culture that promotes transparency and accountability is essential for sustainable success. Effective risk management, sound corporate governance, and adherence to ethical codes bolster public trust and support long-term organizational resilience. As highlighted by influential leaders and legal frameworks, ethics in business is vital not only for compliance but also for fostering a trustworthy and equitable marketplace.
References
- American Counseling Association. (2005). ACA Code of Ethics. Retrieved from https://www.counseling.org/resources/ethics
- Carper, C. & Heimer, C. (2011). Introduction to Criminal Law. Oxford University Press.
- Kohlberg, L. (1981). Essays on Moral Development, Volume One: The Philosophy of Moral Development. Harper & Row.
- Lamb, C. W., Hair, J. F., & McDaniel, C. M. (2003). Essentials of Marketing (3rd ed.). South-Western/Cengage.
- Sutherland, E. H. (1949). White Collar Crime. Dryden Press.
- O’Neill, P. H. (2002). Remarks to the Harvard Business School. U.S. Department of Treasury Office of Public Affairs.
- Diplock, J. (2002). Clarity begins at home. New Zealand Securities Commission Web site.