PROFESSIONAL ETHICS IN IT

WEEK 2
Ms. Claire C. Raterta
Chapter II (Professional Ethics)
What is Professional Ethics?
Ethics in the Business World
Creation, Update, Implementation of Ethics Policy
 What is Professional Ethics?

• are principles that govern the behavior of a person or group in a business

environment. Like values, professional ethics provide rules on how a person
should act towards other people and institutions in such an environment.
 Ethics in the different Business / Corporate

• Ethics has risen to the top of the business agenda because the risks associated with
inappropriate behavior have increased, both their likelihood and their potential negative
impact.
• Several trends have increased the likelihood of unethical behavior.
• Many organizations, greater globalization has created a much more complex work environment that spans diverse
cultures and societies, making it more difficult to apply principles and codes of ethics consistently.
• In today’s difficult and uncertain economic climate, organizations are extremely challenged to maintain revenue
and profits.
• Employees, shareholders, and regulatory agencies are increasingly sensitive to violations of accounting standards,
failures to disclosure substantial changes in business conditions, nonconformance with required health and safety
practices, and production of unsafe or substandard products. Such heightened vigilance raises the risk of financial
loss for business that do not foster ethical practices or that run afoul of required standards. There is also a risk of
criminal and civil lawsuits resulting in fines and/or incarceration for individuals.
• Why Fostering Good Business Ethics is important?

• Organizations have at least five good reasons for promoting a work

environment in which employees are encouraged to act ethically when making
business decisions.
• Gaining the goodwill of the community
• Creating an organization that operates consistently
• Fostering good business practices
• Protecting the organization and its employees from legal action
• Avoiding unfavorable publicity
 • Gaining the Goodwill of the community
Although organizations exist primarily to earn profits or provide services to customers, they also have some fundamental responsibilities to society.
Often they declare these responsibilities in a formal statement of their company’s principles or beliefs.

Ex.

As a company, and individuals, we value integrity, honesty, openness, personal excellence, constructive self-critiscm,
continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for
technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our
customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the
highest quality.

Microsoft’s statement of values

• All successful organizations, including technology firms, recognize that they must attract and maintain loyal customers.
• Philanthropy is one way which an organization can demonstrate its values in action and to make a positive connecting with its stakeholders.
• The goodwill that socially responsible activities create can make it easier for corporations to conduct their business.

Stakeholder – is someone who stands to gain or lose, depending on how a situation is resolved.
 Examples of IT Organization’s socially responsible activities

Organization Examples of socially responsible activities

Cisco Systems Inc. One of the core values at Cisco is empowering people to help themselves;
Cisco supports that value by donating networking equipment to various nonprofit
organizations. The firm also encourages employee volunteerism, resulting in
employees working over 148,000 volunteer hours.
Comcast Corporation The company made charitable contributions of more than $406 million in 2009,
representing 10% of 2008 profits.
Dell Inc. Committed to a goal of giving 1% of pretax profits to charitable causes; during 2010,
Dell team members volunteered over 201,000 hours.
Google The company’s Corporate Giving Council oversees millions of dollars in scholarships,
and the firm supports employees’ volunteerism by sponsoring an annual service called
GoogleServe.
IBM IBM’s Employee Charitable Contributions Campaign is a long-standing tradition that in
recent years has exceeded $166 million in giving.
Oracle Oracle’s charitable contributions for 2009 amount to over $2 billion – or 9.3% of its 2008
profit.
SAP North America The company supports several major corporate responsibility initiatives aimed at
improving education, matches employee gifts to nonprofit agencies and schools, and
encourages and supports employee volunteerism.
 • Creating an Organization That Operates
Consistently
Organizations develop and abide by values to create an organizational culture and to define a
consistent approach for dealing with the needs of their stakeholders – shareholders, employees,
customers, suppliers, and the community.

Although each company’s value system is different, many share the following values:
• Operate with honesty and integrity, staying true to organizational principles
• Operate according to standards of ethical conduct, in words and action
• Treat colleagues, customers and consumers with respect
• Strive to be the best at what matters most to the organization
• Value diversity
• Make decisions based on facts and principles
 • Fostering Good Business Practices
In many cases, good ethics can mean good business and improved profits.
• Companies that produce safe and effective products avoid costly recalls and lawsuits.
• Companies that provide excellent service retain their customers instead of losing them to
competitors.
• Companies that develop and maintain strong employee relations enjoy lower turnover rates and
better employee morale.
• Suppliers and other business partners often place a priority on working with companies that operate
in a fair and ethical manner.

All these factors tend to increase revenue and profits while decreasing expenses. As a result, ethical
companies should have a favorable stock price performance over unethical companies.

Bad ethics can lead to bad business results. Bad ethics can have a negative impact on employees, many
of whom may develop negative attitudes if they perceive a difference between their own values and
those stated or implied by an organization’s actions
 • Protecting the Organization and its Employees
from Legal Action

A coalition of several legal organizations, including the Association of Corporate Counsel,

the US Chamber of Commerce, the National Association of Manufacturers, the National
Association of Criminal Defense Lawyers, and the New York State Association of Criminal
Defense Lawyers argues that organizations should “be able to escape criminal liability if
they have acted as responsible corporate citizens, making strong efforts to prevent and
detect misconduct in the workplace.” One way to do this is to establish effective ethics
and compliance programs. However, some people argue that officers of companies should
not be given light sentences if their ethics programs fail to deter criminal activity within
their firms.
 • Avoiding Unfavorable Publicity

The public reputation of a company strongly influences the value of its stock, how
consumers regard its products and services, the degrees of oversight it receives from
government agencies, and the amount of support and cooperation it receives from its
business partners. Thus, many organizations are motivated to build a strong ethics
program to business partners, shareholders, consumer advocates, financial institutions
and regulatory bodies will usually regard it more favorably.
 Creation, Update, Implementation of Ethics Policy
Improving Corporate Ethics

Research by the Ethics Resource Center (ERC) found that only one in four organizations
has a well-implemented ethics and compliance program. The ERC has defined the
following characteristics of a successful ethics program.
• Employees are willing to seek advice about ethics issues.
• Employees feel prepared to handle situations that could lead to misconduct.
• Employees are rewarded for ethical behavior.
• The organization does not reward success obtained through questionable means.
• Employees feel positively about their company.

The risk of unethical behavior is increasing, so the improvement of business ethics is

becoming more important.
 Appointing a Corporate Ethics Officer

A corporate ethics officer (also called a corporate compliance officer) provides an organization with
vision and leadership in the area of business conduct. This individual “aligns the practices of a workplace
with stated ethics and beliefs of that workplace, holding people accountable to ethical standards.”
Organizations send a clear message to employees about the importance of ethics and compliance in
their decision about who will be in charge of the effort and to whom that individual will report. Ideally,
the corporate ethics officer should be a well-respected, senior-level manager who reports directly to the
CEO. Ethics officers come from diverse backgrounds, such as legal staff, human resources, finance,
auditing, security, or line operations.
Typically the ethics officer tries to establish an environment that encourages ethical decision making
through the actions described in this chapter. Specific responsibilities include the following:
• Responsibility for compliance – that is, ensuring that ethical procedures are put into place and
consistently adhered to throughout the organization
• Responsibility for creating and maintaining the ethics culture that the highest level of corporate
authority wishes to have
• Responsibility for being a key knowledge and contact person on issues relating to corporate ethics and
principles
 Ethical Standards Set by Board of Directors

The board of directors is responsible for the careful and responsible management of an
organization. In a for-profit organization, the board’s primary objective is to oversee the
organization’s business activities and management for the benefit of all stakeholders,
including shareholders, employees, customers, suppliers, and the community. In a non-
profit organization, the board reports to a different set stakeholders – in particular, the
local community that the nonprofit serves.
 Establishing a Corporate Code of Ethics

A code of ethics is a statement that highlights an organization’s key ethical issues and identifies the
overarching values and principles that are important to the organization and its decision making.
Codes frequently include a set of formal, written statements about the purpose of an organization,
its values, and the principles that should guide its employees’ actions. An organization’s code of
ethics applies to its directors, officers, and employees, and it should focus employees on areas of
ethical risk relating to their role in the organization, offer guidance to help them recognize and deal
with ethical issues, and provide mechanisms for reporting unethical conduct and fostering a culture
of honesty and accountability within the organization. An effective code of ethics helps ensure that
employees abide by the law, follow necessary regulations, and behave in an ethical manner.
A code of ethics cannot gain company-wide acceptance unless it is developed with employee
participation and fully endorsed by the organization’s leadership. It must also be easily accessible
by employees, shareholders, business partners, and the public. The code of ethics must continually
be applied to a company’s decision making and emphasized as an important part of its culture.
Breaches in the code of ethics must be identified and dealt with appropriately so the code’s
relevance is not undermined.
 Creating a Code of Ethics

Key areas to include

A. The Purpose and Values of the Business - The service, which is being provided - a group of products, or set or services -
financial objectives and the business’ role in society as the company sees it.
B. Employees - How the business values employees. the company’s policies on: working conditions, recruitment, development
and training, rewards, health, safety & security, equal opportunities, diversity, retirement, redundancy, discrimination and
harassment. Use of company assets by employees.
C. Customer Relations - The importance of customer satisfaction and good faith in all agreements, quality, fair pricing and after-
sales service.
D. Shareholders or other providers of money - The protection of investment made in the company and proper ‘return’ on money
lent. A commitment to accurate and timely communication on achievements and prospects.
E. Suppliers - Prompt settling of bills. Co-operation to achieve quality and efficiency. No bribery or excess hospitality accepted or
given.
F. Society or the wider community - Compliance with the spirit of laws as well as the letter. The company’s obligations to protect
and preserve the environment. The involvement of the company and its staff in local affairs. The corporate policy on
sponsorship as well as giving to education and charitable appeals.
G. Implementation - The process by which the code is issued and used. Means to obtain advice on potential breaches. Awareness
raising examples (Q & As) Training programs for all staff.
H. Assurance, reporting and reviews - Suggest ways of knowing if the code is effective. Report to the board or board committee
at least annually. Review procedures for updating the code.
 How to Implement a Code of Ethics

How you engage your employees in the writing and implementation of your Code is as important as what you put in
it. Below are 12 Steps for Implementing a Code, taken from The Institute for Business Ethics’ publication:
“Developing a Code of Business Ethics.”

Twelve Steps for Implementing a Code

1. Endorsement Make sure that the code is endorsed by the Chairman and CEO
2. Integration Produce a strategy for integrating the code into the running of the business at the time that it is
issued.
3. Circulation Send the code to all employees in a readable and portable form and give it to all employees joining
the company.
4. Personal Response Give all staff the personal opportunity to respond to the content of the code. An employee
should know how to react if he or she is faced with a potential breach of the code or is in doubt about a course
of action involving an ethical choice.
5. Affirmation Have a procedure for managers and supervisors regularly to state that they and their staff
understand and apply the provisions of the code and raise matters not covered by it.
 How to Implement a Code of Ethics

6. Contracts Consider making adherence to the code obligatory by including reference to it in all contracts of
employment and linking it with disciplinary procedures.
7. Regular Review Have a procedure for regular review and updating the code
8. Enforcement Employees and others should be aware of the consequences of breaching the code
9. Training Ask those responsible for company training programs at all levels to include issues raised by the code in
their programs.
10. Translation See that the code is translated for use in overseas subsidiaries or other places where English is not
the principal language.
11. Distribution Make copies of the code available to business partners (suppliers, customers etc.), and expect their
compliance
12. Annual Report Reproduce or insert a copy of the code in the Annual Report so that shareholders and a wider
public know about the company’s position on ethical matters
 Some Advice on Developing a Code of Ethics

1. Focus on business practices and specific issues. What actually ends up in a company’s code of ethics will
differ from one firm to the next. However, these are things to consider including: conflicts of interest to
avoid, accuracy of financial statements, sexual harassment, workplace safety, environmental standards,
and rules and regulations specific to your industry and company. “A good rule of thumb is that ethics
codes should call attention to key domestic and international regulations that apply to the organization,”
says Diane Swanson, professor of management at Kansas State University.

2. Tailor it to fit your business. Codes of ethics are not cookie cutters — one size definitely does not fit all.
While you can gain a sense of what your company’s code might include by looking at other companies’,
keep your thinking as singular as possible. “It’s really critical that the code of ethics fits the values and
mission of the specific company,” says Alice Peterson, president of Listen Up Group, a Chicago provider of
services for confidential employee reporting of wrongdoing. “That also means you should never go to
somebody else’s Web site and copy theirs.”
 Some Advice on Developing a Code of Ethics

3. Include employees in developing a code of ethics. Nothing may be more ineffective than a code of ethics
that comes down as an executive mandate. When considering those issues that should be part of your
code of ethics, ask others throughout your company what they think is important. Not only will that
strengthen the overall scope of the code of ethics, but employees will also be more accepting of ethical
guidelines into which they had input.
4. Train your people to be ethical. Even the most thoughtful code of ethics is of little use if a company doesn’t
know what it really means. That makes employee training particularly important. Arrange for classes,
seminars or meetings to lay out the specifics of your code of ethics and what it means to everyone’s daily
activities. “Ethics training should include vignettes and stories that come from the company, so that the
subject is real for everybody — everyone from the mailroom to the corner office,” Peterson says.
5. Post your code of ethics internally, and set up a reporting system. While you don’t want to encourage a
network of snitches and informants, employees will need a way to let someone know about any ethics
breaches they may see. Peterson recommends a two-tier system. First, she suggests a complete open-
door policy so that employees know that information is always welcome. Moreover, consider accepting
anonymous reports. That, too, may help overcome some employees’ reticence to report ethics code
violations.
 Some Advice on Developing a Code of Ethics

6. Consider appointing a compliance person. Obviously, a company’s ethics should be of concern to everyone within the
organization. But, if it’s feasible, it can be advantageous to appoint a compliance officer whose responsibilities include
investigating ethics problems. If nothing else, that can make it much simpler to know to whom employees should pass
along suspected ethics missteps.
7. Follow up on any ethics violations you uncover. Just like failing to publicize and promote your code of ethics to your
employees and others renders it virtually meaningless, failing to act on ethics violations will disable even the best
intentioned of company efforts. When drawing up your code, specify what range of penalties go with certain missteps
and violations. Lay out an appeals process. Make sure everyone in your company knows the ramifications of violating
the code. “Holding people to ethical conduct is something many people are very poor at,” says Sun. “It requires some
confrontation and a lot of leadership skills.”
8. Live it from the top down. It’s critical that no one person in a company ever appears to be above a code of ethics. That
means it’s particularly important that executives and top managers also adhere to the guidelines of an ethics code. If
managers say one thing but do something else, that’s nothing more than a license for the rest of the company to follow
suit. “Good role modeling by top managers is a must,” Swanson says. “Without it, ethics codes can be seen as mere
window dressing.”
 Conducting Social Audits

An increasing number of organizations conducts social audits of their policies

and practices. In a social audit, an organization reviews how well it is meeting
its ethical and social responsibility goals and communicates its new goals for
the upcoming year. This information is shared with employees, shareholders,
investors, market analysts, customers, suppliers, government agencies and the
communities in which the organization operates.
 Requiring Employees to take Ethics Training
An organization’s code of ethics must be promoted and continually communicated within the
organization, from top to bottom. Organizations can do this by showing employees examples
of how to apply the code of ethics in real life. One approach is through a comprehensive ethics
education program that encourages employees to act responsibly and ethically. Such
programs are often presented in small workshop formats in which employees apply the
organization’s code of ethics to hypothetical but realistic case studies. Employees may also be
given examples of recent company decisions based on principles from the code of ethics. It is
critical that such training increase the percentage of employees who report incidents of
misconduct; thus, employees must be shown effective ways of reporting such incidents. In
addition, they must be reassured that such feedback will be acted on and that day will not be
subjected to retaliation.