Breaking Laws in Business - Essay Example

Breaking laws in business is not unusual, and illegal activities like corporate misconduct cause serious financial losses. Because of the economic decline and the need to excel, many businesses engage in practices that are defined subsequently as illegal conduct. The line between acceptable and unacceptable and legal and illegal practices is blurred consequently and shifting constantly. The case of Galvatrens vividly portrays the importance and crucial role of codes of conduct, codes of ethics and strict ethical policies aimed to protect the company and its employees from unethical behavior and misconduct. It is possible to state that senior management and the leaders did not know about unethical behavior of the employees because the company had not maintained and implemented strict codes of ethics and independent committee aimed to monitor and control employees’ performance and their compliance with legal laws and regulations. The problems discussed by Sheila and Arch show that there is a need for strong corporate culture and morale1. Many problems in Galvatrens are caused by high rates of turnover and low motivation, poor culture and ineffective communication. Primarily, Galvatrens should change its corporate culture and maintain health climate and positive culture. This allows the corporation time to assess the problem and respond appropriately. More importantly, early detection prevents the conduct from continuing into the future, thus, enabling the corporation to minimize its exposure to higher penalties and increased liability2. Galvatrens should strengthen its system for uncovering misconduct a strict code of ethics and training of all employees. The task of the training is to familiarize employees with ethical principles and rules of the code, help them to recognize misconduct and respond effectively to any violations. Companies that adopt a code of ethics, and commit themselves to observing it, gain several benefits3. Their staff know that they are operating openly and honestly; second, it is good for their business reputation in both the medium and the long term; and third, adopting and committing to a code could be a powerful defense in any court case in which the company might be accused of improper behavior. These tangible and intangible reasons for ethical behavior in business have beneficial outcomes4. The case of Galvatrens unveils that the law has one function; a code of ethics has another. Code of ethics is defined as “an official corporate document approved by the board that forms the underpinning of a comprehensive program for helping to ensure ethical behavior and decision making at all levels in the organization. Here are some suggested ways to think about a Code of Ethics, both what it is and what it is not”5. Perhaps the best guiding principle for Galvatrens is not that of strict liability but rather that whatever ethical solution is adopted it should improve the ethical position. It is recognized that in a somewhat contentious and difficult world whatever solution is adopted should leave the ethical position at least improved. In addition to the substantive issues of the law there is also the ethical issue of how legal processes are used. For Galvatrens, writing ethical codes in the spirit of the law may be helpful6. One of the difficulties is to ensure that strict formal codification does not lead to 'creative' opportunities to subvert the intentions of the code. It is common for the prescriptions of law to be so precisely worded that the precision is used as a means of subverting the intention of the legislation. According to Elfstrom, an organization that has taken the trouble to develop and implement a code may be able to use it as a persuasive defense when faced with allegations of impropriety7. The company and its management and exhaustive team should recognize that ethics lead, inform, and persuade rather than be a passive follower. “Criteria should include specific examples of common or routine situations as exemplars so that there are clear cut “models” of what criteria are expected to govern or guide decisions and behavior for employees regarding what is (or is not) considered consistent with the company’s expectations”8 I suppose that self-regulation is another important issue which could help Galvatrens to strengthen its ethical conduct. Self-regulation does monitor the performance of members of associations, and serves as a means of developing rules that may eventually be given legal force. One of the most significant changes in recent times has been the institution of a number of legal safeguards9. These include such institutions as the ombudsman, administrative appeals tribunals, and privacy commissioners, as well as industrial complaints councils. On balance there is much to be said for self-regulatory codes; they have all the mentioned merits of ethical systems, with the backstop of the law to support them10. Actually, the position of ombudsman was proposed by the independent consultants but Dale Willis rejected it. In this case, Chip Brownlee should provide a strong leadership in order to improve current practices and performance. The role of the leader is to give a personal example to employees and support effective ‘innovations’ within the company11. The position of ombudsman will ensure independent monitoring and control, analysis and evaluation of the current situation. Galvatrens must accept the idea that professional or business codes that are properly monitored or prepared should be accepted as the legal standard12. Only in this case, the corporation is able to detect questionable conduct before a crime is actually committed. If the crime is committed the corporation may detect the crime before the government does or an employee file a suit. Galvatrens should broadly and effectively disseminate the code, that is, do something more than post it on the bulletin boards. "The organization must have taken steps to communicate effectively its standards and procedures to all employees and other agents, e.g., by requiring participation in training programs"13. Through training and learning procedures, the written code should be disseminated to all employees, in person, on a regular basis, and employees should be required to sign a statement verifying their receipt and knowledge of the code. The guidelines require corporations to use "due care not to delegate substantial discretionary authority to individuals whom the organization knew, or should have known through the exercise of due diligence, had a propensity to engage in illegal activities"14 This requirement means that employers should require employees who perform duties involving sensitive decisions that could expose the corporation to potential criminal liability to use extra caution. It may be appropriate for the corporation to consider the employee's tenure with the company, education, training, past performance, and company disciplinary record. Anonymous reporting is a particularly effective method of enticing employees to report criminal conduct without fear of retribution. Some companies have gone as far as periodically sending out detailed questionnaires to be filled out anonymously asking all employees whether they are aware of any specific criminal violations having occurred15. Another possibility is to inform employees that they may report suspect conduct to an appointed ombudsman who will maintain the anonymity of all sources of information16. After receiving a report of suspected misconduct an investigation must be undertaken, possibly by a committee of independent directors of the board, for more serious reports. The fact that an investigation was undertaken should be well documented by the corporation to later demonstrate that it seriously enforced the program17. A corporate code can be established either by in-house counsel or by outside counsel. Once the code and its concomitant program have been implemented routine compliance reviews can often be done by in-house staff who are familiar with the company's policies, practices, and procedures. These routing reviews can be conducted by the department concerned, such as some combination of the in-house legal, finance, personnel, audit, and other departmental staffs determine whether operations such as estimating, procurement, material management, and record retention comply with company procedures and whether other compliance mechanisms, such as ethics training and hotlines, are operating effectively18. A company should not rely exclusively on internal personnel to review its compliance programs. Their very familiarity with company policies, procedures, and practices may make in-house reviewers less sensitive to potential problems or to deficiencies in those very procedures with which they are so familiar19. For this reason, utilization of outside counsel and auditors to take a fresh look at the existing compliance program may be needed. In sum, corporate codes of conduct will serve at two legal functions. They will help Galvatrens meet the various reporting requirements that are increasingly being imposed. They will help the corporation avoid or limit civil and criminal liability. Corporate codes of conduct should be an integral part of business operations for Galvatrens. Because HRM activities play such an important role in the development of an employee's perceptions of the company culture personnel are an important force in determining whether a company develops an ethical or unethical climate. Because of this there is a need for increased understanding and emphasis on the role HRM can play in countering corporate fraud and unethical employee behavior. Endnotes Read More