Ethics, CSR and Leadership Report - Business Must Act Ethically The WritePass Journal

Ethics, CSR and Leadership Report - Business Must Act Ethically 1.Introduction Ethics, CSR and Leadership Report Business Must Act Ethically , p. 2). 3.Lessons Learnt from News Corporation Scandal This question will discuss the different lessons companies can learn from the News Corporation Scandal. In doing so, a review as to what led to the scandals taken place will be undertaken, followed by a discussion relating to the importance of ethical polices with respect to Corporate Social Responsibility. The 2011 News Corporation phone hacking scandals have taught businesses a valuable lesson to ensure that they have effective compliance programmes in place. This is because the scandals that took place clearly illustrated that compliance risks were not being managed appropriately, which subsequently led to corrupt practices being undertaken by the News Corporation properties. Whilst the scandal initially appeared to involve a single journalist, it soon became apparent that there was a much wider pattern of wrongdoing that took place. The News of the World newspaper was subsequently closed as a result of the scandals, which demonstrates just how serious unethical business practices are. Businesses that have personal ties to political parties are at a higher risk of being bribed and in cases such as this, it is imperative that effective controls are in place to deal with this. This could be achieved by creating policies that deal with compliance risks appropriately and red flags should be raised by compliance departments if such relationships exist (Wrage, 2013, p. 2). In addition because the majority of employees found to be wrongdoing were at the top end of the hierarchal system, businesses must ensure that all of their employees are committed to compliance regardless as to what level they are at. Businesses could also compel their employees to take part in compliance and ethics training (Daft and Marcic, 2011, p. 153). This will not only allow the business to test its employees on compliance risks but it will also allow employees to test their abilities in dealing with ethical issues, such as bribery.   Another lesson that companies can learn from the scandal is the need to undertake internal investigations on a regular basis by an independent investigator. This appears to be something that News Corporation had in place, which allowed the investigations to take place efficiently (Romm, 2011, p. 1). Since news of the scandals broke out, it seems as though there has been a furore of internal investigations taking place across the whole industry. This is common practice for a corruption scandal and often sees organisations taking a more robust approach with their compliance responsibilities (Urofsky et al, 2012, p. 1145). Although the lessons to be learned have been known for some time, it seems as though businesses are now starting to take compliance risks more seriously than they had done previously after seeing the consequences of non-compliance (Cobert and Pascal, 2012, p. 14). It is particularly important for businesses to have in place corporate social responsibility (CSR) policies since the concept of corporate governance has become a significant issue over the years. Many corporate collapses have lef an overhaul in the way corporations are to be regulated and as put forward by Gobert and Pascal (2012, p. 14); â€Å"it is timely to think further about how best not just to regulate but to control corporations and their directors, whether to use and in what combination, administrative, civil or criminal laws to address corporate misconduct.† The Organisation for Economic Co-Operation and Development (OECD) is just one of many organisations which seeks to ensure that governments can tackle the economic, social and governance challenges that frequently emerge within a globalised economy. Nevertheless, because there are no specific rules surrounding CSR it is generally up to the organisation to ensure compliance. It has thus been said that there is a â€Å"lack of prescription as to how the company’s board organises itself and exercises its responsibilities† (McColgan, 2001, p. 16). Still, the Combined Code on Corporate Governance (UK Corporate Governance Code 2010), that was issued by the FRC in 2003 does seek to ensure that good corporate governance practices are being adhered to by all companies. It is questionable just how effectiv e this is, however, since companies can employ a different approach than that encouraged by the Code. 4.Role of Corporate Leadership in Ethics and CSR This question will discuss the role a company’s leadership should play in the promotion of ethics and Corporate Social Responsibility. The primary feature of good governance is the relationship between the company and its stakeholders. A company’s leadership therefore plays an important role in making decisions and conducting business with the interests of the company’s stakeholders in mind (Bryan, 2012, p. 14). The provisions under the Code demonstrate the need for leadership; accountability; remuneration and relations with shareholders. However, it cannot be said that these principles are always being adhered to (PIRC, 2007, p. 2), yet it is apparent that compliance with the Code is on the rise. All companies need to be managed appropriately, whilst also providing accountability to its shareholders. This will certify that appropriate safeguards are in place for a company’s shareholders whilst also preserving a company’s ability to develop. Hence, as pointed out in the Cadbury Report (1992, p. 32); â€Å"the effectiveness with which boards discharge their responsibilities determine Brit ain’s competitive position. They must be free to drive their companies forward but exercise that freedom within a framework of effective accountability.† Accordingly, a system of good governance is important for any organisation if CSR and ethics are to be promoted. In order for CSR and ethics to be promoted an appropriate corporate structure needs to be implemented that is individually suited to the business needs as one approach will not be suitable for all. Although, this enables corrupt practices to be employed more easily, companies are still required to adhere to the Code and other legislative provisions. The UK thereby imposes duties upon all organisations to conduct business in an ethical manner, yet because of the difficulty in identifying whether this is being achieved additional strategies need to be implemented by businesses themselves. This can be achieved by a more robust management and control system. A number of precautions may be taken by organisations in order to eliminate or reduce compliance risks and preserve the interests of the company as a whole. This will inevitably benefit the economy overall and fewer corporate scandals and corrupt practices will be undertaken. Such precautions include risk management strategies, the conduction of regular reviews and internal investigations. As put by Ferran (2008, p. 95); â€Å"to minimise the risk, policymakers contemplating the imposition of higher minimum capital requirements for companies generally would need to take on the complex task of designing a carefully set of requirements that achieved a degree of commensurability between the specific risks undertaken by individual companies and the amount of capital that each of them was required to hold.† All companies should therefore minimise any risks by implementing various controls that assess the risks associated with the business. CSR does help to promote business ethics t o a large extent since the actions of a company will be strictly monitored under CSR policies. This will prevent unlawful and unethical conduct from taking place and will also assist in sustainable development (European Commission, 2011, p. 3). Corporate transparency is one of the most important traits a business can have since it will allow greater transparency and accountability to be effectuated. Hence, as pointed out in the Cadbury Report (1992, p. 32); â€Å"the lifeblood of markets is information and barriers to the flow of relevant information represent imperfections in the market.† Not only will this benefit the economy but it will also benefit the organisations as investors will be more likely to invest in a transparent company than a non-transparent one. As such, all companies should ensure that they are fully compliant and transparent when it comes to disclosing their business affairs. 5.Conclusions Overall, in considering the recent corporation scandals that have occurred in recent years, it is imperative that all businesses act ethically by managing compliance risks in an effective manner. Because of the importance business ethics has on the community and on the business itself it is integral that policies and procedures are in place that are aimed at dealing with the main risks that are applicable to the business in question. This will ensure that the interests of the business and society are being protected. Given the increasing emphasis that is being placed upon business ethics, those that are not found to be compliant will suffer the consequences as stakeholders will not be interested in any aspect of the business. This will have a major effect upon the business as a whole which is why adequate procedures need to be in place that deals primarily with business ethics. 6.Recommendations It is recommended that the organisation implements policies within the day-to-day running of the business so as to avoid any possible risks that may arise. When agents are being used organisations must ensure that they receive prior approval from a senior executive who will be able to perform a risk assessment as to whether there is any likelihood of corruption. When considering facilitation payments organisations must also ensure that conditions are attached if they are a necessary requisite of the business activity. In addition, internal reviews and investigations should be undertaken frequently and appropriate training should be given to all staff on how to deal with business ethics. 7.Bibliography Brown, M. E., and Mitchell, M. S., (2001) Ethical and Unethical Leadership: Exploring New Avenues for Future Research, Business Ethics Quarterly, Volume 20, Issue 4. Bryan, C. S., (2012) The role of leadership in fraud deterrence, Financial Executive. Cobert, J., and Pascal, A., (2012) European Developments in Corporate Criminal Liability, Taylor Francis US. Daft, R. 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