Page 145 - Introduction to Business

CHAPTER 3 Business Governance, Ethics, and Social Responsibility 119

reality Have you ever been involved in what might be viewed as unethical
CH ECK behavior?

LEARNING OBJECTIVE 8
Discuss the development of business codes of ethics and business ethics training.

Business Codes of Ethics

Increasingly, many companies today are adopting formal written business codes business codes of ethics Formal written
of ethics. These codes may deal with a wide number of topics ranging from work- documents adopted by businesses
regarding ethical conduct standards
place romance to the personal use of company property. Lee Enterprises, for
example, is an Iowa-based company that owns 44 local daily newspapers through-
out the United States. Some of the papers Lee Enterprises owns include the Lin-
coln Journal Star in Lincoln, Nebraska; the Missoulian in Missoula, Montana; and
the Southern Illinoisan in Carbondale, Illinois. In 2002, the company’s board of
directors adopted a five-page, 11-point Code of Business Conduct and Ethics to
guide its employees. This code puts special emphasis on potential employee con-
flicts of interest, often a very important issue in the field of journalism. The com-
pany’s code very strictly limits the ability of Lee employees to accept gifts from
individuals they interact with, in order to clearly prevent potential conflicts of
38
interest from arising. It is likely that more and more companies will be adopting
detailed and comprehensive business ethics codes along the lines adopted by Lee
Enterprises in the future.

Dealing with Business Ethical Breaches

While the instinctive reaction of many top business executives when there is an
ethical breach is to deny the problem and then clam up, experts today generally see
this as not being the right approach to such situations. Frequently it’s best, just as
Johnson & Johnson did during the Tylenol crisis in the 1980s, to quickly acknowl-
edge the existence of a problem and calmly attempt to solve it. Sometimes it may
even be appropriate to issue a public apology. If a public apology is made, it should
be stated clearly (plain English, no legalese, loopholes, etc.) and should definitely
come from the top, that is, be issued by the company’s CEO or chairperson of the
board. 39

Penalties for Business Ethical Breaches

The penalties for corporate ethical breaches obviously need to be formulated to
properly fit the “crime.” To date, this doesn’t seem to have always been the case.
While the penalties for some types of business ethical breaches—up to five years in
prison for individual violations of the Foreign Corrupt Practices Act—seem to have
been far too high, other ethical breaches, like accounting fraud or insider trading,
have sometimes been met with only a slap on the wrist. The recently enacted
Sarbanes-Oxley Act, with its increased penalties on company executives and direc-
tors for accounting misstatements and other actions, appears to be a step in the
right direction in this regard. Under Section 1107 of the Sarbanes-Oxley Act, for
example, corporate officers can be sent to prison for up to ten years if they inten-
tionally act against employees who assist federal law enforcement officials in inves-
tigating certain types of corporate wrongdoing. 40

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