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The Business Ethics Twin-Track: Combining Controls and Culture to Minimise Reputational Risk

ISBN: 978-1-118-78534-8
336 pages
April 2015
The Business Ethics Twin-Track: Combining Controls and Culture to Minimise Reputational Risk (1118785347) cover image

Description

Institute a proactive reputational management framework that matches individual behaviour to organizational values

The Business Ethics Twin-Track is a practical guide to reputational risk management. A deep exploration of the concept of reputation, the ways in which it can suffer, and the consequences when it does, the book outlines an ethics controls framework that can mitigate risk and improve business performance. Readers will learn how to identify and manage weaknesses, and how to institute a system of governance that embeds proper, ethical conduct into the corporate culture. A clear set of controls and procedures provides actionable instruction that can be customised to suit the organisational structure, and discussion of historical and international ethics provides the context for implementation. Case studies illustrate the real-world applications, while interviews with executives from a variety of sectors provide important practical insights into some of the key issues discussed in the book.

The law regulates behaviour in health and safety and financial crime, but otherwise, conduct is largely determined by the culture, ethics and values of an organisation. Effective reputation management is complex, and often difficult to achieve, as much of the available information on the topic is more theoretical than practical. This book bridges the gap by providing the tools that will help managers to:

  • Implement a modern ethics control framework, encompassing codes, officers, reporting lines and training
  • Consider the role of the media and social media in reputational damage to individuals and organisations
  • Analyse the key controls in responsibility and governance frameworks from around the world
  • Determine the causes and controls of conduct risk, including incompetence, negligence and criminality

Today's fast-paced media environment means corporate reputations can be obliterated in moments, and damage limitation is often too little, too late. Adopting the measures set out in this book will embed ethics into the culture, and match people's behaviours to the organisation's values.

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Table of Contents

Acknowledgements xv

Prologue xvii

Opening xvii

Corporate values: an old story xvii

The ‘say-do’ gap xviii

About The Book xviii

Original idea xviii

2012 effect xix

Structure and methodology xx

My Experience xxii

Audit, risk and forensics xxii

Governance xxii

Business ethics xxiii

Speaking and writing xxiii

The Book: Key Messages xxiv

Overarching principles xxiv

Twin-track approach xxiv

Role of compliance xxv

Reference points xxvi

Summary xxvii

Personal perspectives xxvii

Road test xxviii

‘Simply the way we do things here’ xxx

Closing xxx

Value statements: a modern story xxx

Chapter 1: The ethics project

The Opportunity 1

Initial contact 1

Coaching session 2

An unexpected request 3

Hot talk, cold chicken 4

The Stronach Group Plc 6

Background research 6

Corruption allegations 8

Recent trading difficulties 9

The board of directors 10

An Offer From The Chairman 12

The meeting 12

Strategic review 13

The ethics project 16

Key takeaways 17

Disclaimer 18

Chapter 2: The business ethics framework

The Ethics Project: First Workshop 19

Opening 19

The ground rules 20

Personal approach to business ethics 20

Agenda 22

Key questions 22

The Business Ethics Framework 23

Overview 23

Purpose 24

Mission statements and value statements 26

Responsibilities of directors 27

Pragmatic approach 29

Key Terms 32

Ethics 32

Business ethics 33

The golden rule 35

Integrity 37

Trust 40

The law 43

Compliance 46

Corporate culture 48

Business Dilemmas 49

Setting the scene 49

Ethical dilemmas 50

Business dilemmas 51

Workshop Conclusion 53

Closing 53

Key takeaways 54

Next workshop 55

Reflections 55

Chapter 3: Bribery, corruption and adequate procedures

Business Ethics in Action: Second Workshop 57

Opening 57

Agenda 58

A business dilemma 58

Bribery and Corruption 59

Overview 59

Bribery and corruption in business 62

Examples of anti-corruption laws and conventions 63

Case Study 65

The Siemens corruption case part 1: scandal and penalties 65

The Bribery Act 2010 (UKBA) 70

Background 70

Summary of the UKBA offences 72

The other main provisions 73

Adequate procedures 74

Official guidance on adequate procedures 76

Caution: beware of paying lip-service 80

Personal Experiences 82

Introduction 82

Example 1: UK subsidiary of a global energy group 83

Actions 84

Example 2: medium-sized UK business in the defence industry 85

Workshop Conclusion 87

Closing: bribery dilemma 87

Key takeaways 88

Next workshop 89

Reflections 89

Chapter 4: Reputation, risk and conduct

Reputational Risk: Third Workshop 91

Opening 91

Agenda 91

Risk 92

Risk awareness quiz 92

Reputation 96

Reputation and brand 96

Consequences of damaged reputation 99

The Human Factor: People, Behaviour and Conduct Risk 103

Overview 103

The concept of conduct risk 104

People Risk 106

Introduction 106

Incompetence 107

Criminality and counter-productive workplace behaviours 108

Lack of engagement, complacency and negligence 111

‘Custom and practice’ 113

Case Study 115

The Siemens corruption case part 2: remedial actions to rebuild trust and reputation 115

Case study: conclusion 118

Ethical Risk in the Stakeholder Base 119

Overview 119

Key stakeholder expectations 119

Importance of stakeholder experience 123

Workshop Conclusion 126

Closing 126

Key takeaways 126

Next workshop 127

Reflections 127

Chapter 5: The governance dimension

Effective Governance: Fourth Workshop 129

Opening 129

Governance soundings 130

Agenda 131

Importance of corporate governance 132

Why Good Governance Matters 132

Overview 132

Two governance examples 133

Governance case study one: Manchester United 133

Corporate Governance Overview 137

Definitions 137

Board composition, relationships and agency risk 138

The Development of Corporate Governance Codes and Legislation 141

Rules-based and principles-based regimes 141

The US Position 142

The Sarbanes–Oxley Act 2002 142

The Fraud Enforcement and Recovery Act 2009 145

The Dodd–Frank Wall Street Reform and Consumer Protection Act 2010 146

Conclusion 147

The UK Position 147

The UK Corporate Governance Code 147

Creating an Effective and Talented Board 149

Overview 149

Board compliance: the key processes 149

Board performance: the key improvement drivers 154

Workshop Conclusion 161

Closing 161

Key takeaways 161

Next workshop 162

Reflections 162

Chapter 6: Aspects of leadership: ethics, tone at the top and handling a crisis

Ethical Leadership: Fifth Workshop 165

Opening 165

Agenda 166

A business dilemma 166

Leadership 167

Two examples: theory 167

Another example: practice 168

Summary 169

The Components of Ethical Leadership 169

Overview 169

The ethical person 169

Case study two: the Co-operative 173

The ethical manager 180

Ethical leadership in action: the Westpac banking corporation 181

Handling a Crisis 190

Background 190

The impact of digitisation and social media 192

The leader’s role in a crisis 195

Workshop Conclusion 197

Closing 197

Key takeaways 197

Business dilemma 198

Next workshop 198

Reflections 199

Chapter 7: Risk, compliance and the controls framework

A Three-Stage Process: Sixth Workshop 201

Opening 201

Agenda 202

Risk Management 202

Background 202

Risk management models 204

Compliance and Controls 206

Overview 206

Compliance 207

Internal controls 209

Controls in action: anti-fraud measures 212

Internal Audit 215

Overview 215

Workshop Conclusion 218

Closing 218

Key takeaways 218

Next workshop 219

Reflections 220

Chapter 8: The business ethics toolbox

Ethical Development: Seventh Workshop 221

Opening 221

Agenda 223

Corporate Social Responsibility (CSR) 223

Background 223

CSR in action 225

Pay, Bonuses and the Balanced Scorecard 227

Observations 227

The balanced scorecard 229

The governance dimension 230

The Business Ethics Toolbox 231

Overview 231

Value statements 231

Codes of ethics and/or conduct 235

Confidential reporting lines 239

Ethical Training and Development Programmes 239

Framework 239

The training market: an overview 241

Training and development: general principles and observations 242

Training in business ethics 246

Examples of training exercises 250

Workshop Conclusion 254

Closing 254

Key takeaways 254

Next workshop 255

Reflections 255

Chapter 9: Whistle-blowing: encouraging a culture of openness

Creating an Open Culture: Eighth Workshop 257

Opening 257

Agenda 259

Introduction and Background to Whistle-Blowing 259

Definitions 259

Background 261

Issues and Controversies 262

Examples of whistle-blowing cases 262

Key issues arising: why report externally? 264

Whistle-blowing controversies 265

Scepticism and fear in the workplace 267

The Law as it Applies to Whistle-Blowing 268

Overview 268

Different approaches 269

The EU 269

The UK: The Public Interest Disclosure Act (PIDA) 270

The USA 271

Whistle-Blowing in Action 272

Introduction 272

Personal experience 273

The ethics officer 275

The 10 Steps 277

How to implement an effective whistle-blowing process 277

Workshop Conclusion 281

Closing 281

Key takeaways 282

Next workshop 282

Reflections 283

Epilogue 285

Another Surprise 285

Notes 287

Index 295

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Author Information

STEVE GILES is a chartered accountant with over 20 years' experience of advising directors on business issues concerning governance, risk and compliance. After leaving Deloitte in 1997, Steve has set up and run two companies and has worked with directors and senior managers in the UK, Continental Europe, and the US to achieve successful solutions to a variety of business problems resulting from corruption, inappropriate conduct, incompetence or negligence. Now an independent consultant, he continues to advise his clients but also speaks extensively around the world on corporate governance, risk management and business ethics. Steve holds an MA from Christ Church Oxford, is an Associate Member of the Institute of Chartered Accountants in England and Wales, has been a Visiting Lecturer at the University of Hertfordshire and is the author of Managing Fraud Risk: A Practical Guide for Directors and Managers published in 2012 by John Wiley & Sons.

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