Sunday 13 November 2016

Ethical corporate conduct flows from the top down

  • Culture flows top down from macro to meso, and then from meso to micro.
  • Similarly culture of a corporate unit will generally represent an adaptation to a particular environment of the institutional domain.
  • The spotlight on corporate corruption is more intense than it has ever been. Whether the activity under investigation is bribery, falsifying financial statements, policy breaches or money laundering, the general public is much more vocal in their demands for accountability, and governments continue to tighten laws pertaining to white collar crime.
  • The Occupy movement, student demonstrations and pipeline protests are making it clear companies face increased scrutiny on what companies are doing. In response, businesses must make sure they are conducting themselves ethically.
  • The bigger risks for many companies are not so much deliberate actions as grey zones. Our society has been complacent towards conduct that may not have been perceived as illegal, but has certainly been pushing the envelope.
  • A constant for all businesses is that corporate culture flows from the top down. If you have a culture of tolerance for this type of behaviour, employees, managers and even board members get accustomed to turning a blind eye and bending the rules.
  • The growing concern over white collar crime is putting increasing pressure on businesses of all sizes to put stringent compliance programs in place.
  • Officers and directors need to think about proactively reducing risks of white collar crime and taking swift and decisive action when issues arise. In that way, they can demonstrate to their employees and the outside world they have a strong culture of ethical conduct. This starts with a thorough review of their organizational policies and procedures.
  • Assessment comes down to looking at four basics: detection, prevention, investigation and remediation. In other words, it involves understanding what the problem is, how big it is, how to fix it and, most importantly, how to keep it from happening again.
  • A full-scale professional risk assessment is typically a one-time event, internal follow up is essential to ensuring that the organization’s processes are evolving and adapting to new risks that may arise.
  • Smaller organizations may not necessarily need a risk-mitigation strategy. There are simple and cost effective things you can do to cut risk, such as developing a clearly communicated code of conduct that outlines ethical business practices all the way from board members to warehouse employees, or providing a whistle blower line for employees to report unethical practices.
  • Experienced auditors can assess risk in terms of what kinds of payments are being made, the public officers involved and any history of fraud.
  • Whether looking to internal or external activities. Every board of directors or audit committee should be asking themselves: Have we done everything possible to identify any irregularities or illegal transactions an employee may have committed.
  • Engaging in an assessment is especially important for companies bidding on public contracts. Companies need to have a spotless reputation to be an official supplier to a government agency, so it pays to do your homework beforehand to identify weaknesses in controls.
  • Taking stock of your corporate culture is a matter of competitive survival and credibility. In the past, corporations may have swept situations under the carpet. Now, tolerance has moved to zero because there is much more of a public spotlight on these things. Boards are finally coming around to the idea that they have to be cleaner than clean.

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