Question

Assignment Details This assignment has 3 parts: Ethical behavior is important to the accounting profession as well as the general business environment. Most companies have code of conduct policies and ethical training to ensure all employees understand the company's behavior expectations and responsibilities. 1. What are the advantages and disadvantages of a company having a formal code of conduct that employees are obligated to follow? 2. What are your thoughts about whether employees should have to participate in mandatory ethical trainings each year? 3. How might having a code of conduct help an employee make decisions when faced with an ethical situation?

Answer 1

1. The advantages and disadvantages of formal code of conduct
. THE PROS OF CODES OF CONDUCT
During the last decade, codes of conduct have been mostly voluntarily adopted by companies that are trying to protect their interests and, also, in some cases, the public Journal of Public Administration, Finance and Law Issue 9/2016 127 interest. Thus, having a code of ethics has become the rule in corporate culture. However, how well these codes serve companies goals and public interest alike needs to be seen. Pros and cons have been outlined by business community, civil society, academia representatives and different NGOs representatives.
The reasons companies develop codes of conduct are many and different, illustrating their business conduct policy: to respond to consumer pressure and social concerns, to avoid negative media, to improve and protect corporate reputation by emphasizing corporate social responsibility and community involvement, to limit negative externalities, and to actually provide for the public good. At the same time, codes of conduct can be an effective tool against corporate corruption by keeping under control employees’ behaviour in order to prevent wrongdoing that could have social and economic adverse effects.
Thus, codes of conduct can be useful for the corporation, its stakeholders, and the community that bears the effects of corporation activity.
Empirical studies show that codes of conduct will help cement a corporation’s good reputation, improve the working climate inside a corporation and its business performance (Kaptein & Schwartz, 2008). At the same time, the rules of conduct will prevent unethical and illegal wrongdoing, making employees’ behaviour more predictable.
As studies show, the main reason companies develop codes of conduct is to self protect themselves, usually preventing conflict of interests at company level (Stevens, 1994). Also, a code of conduct may be used as evidence in a criminal case to show that an employee had knowledge of a prohibited activity or action and the company was proactive in preventing it. Main sanctions for the employees that are breaking conduct rules are: termination, suspension, demotion, probation, appraisal comments, and other penalties.
THE CONS OF CODES OF CONDUCT
The existence and the use of corporate codes of conduct have been under scrutiny and critiques have been raised due to the corporate scandals that in recent years have augmented. These companies had codes of ethics but they have chosen to ignore them.
Arguments against codes of conduct come both from the public but also from the business representatives as well.
Codes of conduct proved inefficient since massive scandals such as Enron accounting scandal or Volkswagen emission scandals occurred.
It seems that codes have been developed as a mere response to public and governmental pressure on corporate social responsibility, generating a trend. In reality, the public believes that ethics are just ignored by corporations and codes are often used as a marketing tool, attracting customers’ and investors’ sympathy and thus, promoting the business on ethical grounds.
Codes of conduct are not binding by nature; they are just stating internal rules that have to be followed by employees. How well these rules are obeyed remains a matter of internal control and sanctioning since there is no “ethics police”, external to the company. Thus, if the company does not encourage its employees to respect rules of conduct and efficiently monitor it, then they remain futile (Baker, 2007).
Other criticism focuses on the broad, vague language of the codes, especially when it comes to stating the rights of the employees and explaining the mechanism used by the company for self-evaluation. As a result, codes are not specific enough in order to shape moral behaviour and to sanction misconduct. At the same time, codes could be used against employees, containing provisions that limit their freedom to speak out and unveil unethical behaviour for fear of retaliation. In short, the content of codes varies greatly since corporations usually ignore international standards when they draft their rules of conduct. This makes their worldwide enforcement difficult, if not impossible.
Codes of conduct should address all employees, not only top management, since ethics concerns the company as a whole. Also, the codes that use a top-down approach proved to fail for a number of reasons. For instance, moral principles and rules are ignored by management at investors’ pressure. It is the case of Enron management that choose to ignore the code, serving its interest. Thus, unless there is commitment from all employees, no matter their rank, to implement and respect rules of conduct, codes remain useless.

2 . Should employees participate in mandatory ethical training ?
Answer: Yes, All employees should participate in the mandatory ethical training because
Consumers today are more conscious of ethical business practices than ever before. In today’s business world, there is easy access to information about companies and how they conduct business. Consumers have become acutely aware of this information and have made it an important part of where they decide to invest their money.
Due to the ease of access to information provided by modern communication, people have become very aware of ethical businesses and the impact that they have. There are even businesses that were created to showcase and give awards that highlight companies who are ethical leaders in their industries. This includes lists like EthiSphere’s annual ethical company ratings that consumers use to determine the ethical standing of a company. Companies will promote these achievements in their corporate literature and their websites because it has become an essential part of being a successful company.
Avoiding unethical business practices will not only help to create a good reputation, but keeps the company safe from litigation. Money scandals and poor business practices can cause a major loss in profit. These can lead to a loss in motivation in employees and ultimately bankruptcy. Maintaining quality and productivity by not cutting corners can only create a good reputation and preserve a good code of ethics for the company.
This is why having training in ethics is necessary for a successful business. They not only help promote awareness to the ethical practices in the company, but ethics training programs boosts morale so that employees work more effectively and harmoniously with their co-workers. Being ethically aware helps to maintain a positive corporate culture and upholds a strong public image.
Ethics trainings are essential to preserving a positive business culture and responsive to any ethical dilemmas that could arise. Communicating ethical business behavior and implementing that behavior into the workplace is an important business strategy that can only improve a business. By having these programs in place and updating them when necessary, companies will flourish and grow into a thriving and respected business for years to come.

3. How might having a code of conduct help an employee make decisions when faced with an ethical situation?
Trust is important in all relationships. Can it be further developed in your work setting? Yes and one way to do so is to develop a code of ethics.
A purposeful business code of conduct establishes an atmosphere of commitment in an organization. It not only lays down a strong cultural foundation for the business, but also helps companies enforce and implement legal as well ethical policies and procedures for all kinds of decision making. A purposeful code can build trust between the organization and a variety of stakeholders affected by its actions including employees, suppliers, customers, and the general public. An effective code of conduct establishes the values of the organization that drives its actions and the principles that underlie decision making
The business code of conduct becomes the most important part of the companies 'ethical framework.' A business code of conduct is a 'rule book/guide' that contains all do's and don'ts from legal as well as ethical point of view and act as check list on what companies as well as employees can and must enter into. The main purpose of the conduct code is to act as a detailed description of what is the most legal and ethical behavior expected out of the business.
A few advantages of having a business code of conduct are:
It enhances the company's core values, beliefs and sets the right culture
Gives a vision and a mission to the company
Builds a reputation of the company in the market
Keeps the company and its employee's from violating laws and regulations
Fosters an environment of trust and ethical behavior