Good Governance and Code of Ethics PDF

LESSON 3_Good Governance GOOD GOVERNANCE AND CODE OF ETHICS Erika Magdaong-Trinidad Presented by: Good Governance and Code of Ethics Understanding the role of ethics and good governance...

LESSON 3_Good Governance GOOD GOVERNANCE AND CODE OF ETHICS Erika Magdaong-Trinidad Presented by: Good Governance and Code of Ethics Understanding the role of ethics and good governance Concepts of Good Governance Ethics, Values, and Moral in Good Governance Individuals Influences on Ethical Behavior Situational Influences on Ethical Behavior Code of Ethics Code of Conduct  “Where do the evils like corruption arise from? It comes from the never-ending greed. The fight for corruption-free ethical society will have to be fought against this greed and replace it with ‘what can I give’ spirit -A.P.J. Abdul Kalam Introduction Governance describes the overall management approach through which senior executives direct and control the entire organization, using a combination of management information and hierarchical management structures. Governance activities ensure that critical management information reaching the executive team is sufficiently complete, accurate and timely to enable appropriate management decision making, and provide the control mechanisms to ensure that strategies, directions and instructions from management are carried out systematically and effectively. Good governance is an ideal concept which is difficult to achieve in its totality. Governance typically involves goodhearted people who bring their ideas, experiences, preferences and other human strengths and shortcomings to the policy-making table. Good governance is achieved through continues discussion so that all of the considerations involved in assuring that stakeholder’ interests are addressed and reflected in policy initiatives. Concept of Good Governance The concept of good governance has become a buzzword around the world in recent years. Currently, the term governance has become synonymous to sound development management. In the mid-1980's, the term governance only emphasizes on strict adherence to the rule of law. After the fall of the Soviet Union and the conclusion of the Cold War, governance as a word has been used to mean the reinventing of public administration, mostly on those developing countries that are open to the needs of globalization. The concept of “governance” is an ancient government itself. Both governance and government came from the French word “gouvernance” which means the act or manner of government. The government word later in the mid-16th century meant “system by which is something governed”. In the 18th century after, it came to develop the meaning as a “governing authority”. However, gradually by the 19th century, the word “governance” was considered an outdated word that was hardly used as a political term. Yet during the 1980s under economic reforms particularly with the advent of globalization, governance again became a very popular word. This time the focus is on the process and the style of governing towards the idea of sustainable development. Concept of Good Governance Basically, good governance in its generic approach is the efficient, transparent, and equitable delivery of goods and services as well as the policymaking by means of exercising authority. Good governance is a normative principle that offers well-managed and well-allocated resources to provide the needs to the collective problems or people. It is good governance that is required of a democratic platform to avoid corruption, offers rights, the ways and the capability to create decisions that touch the lives of every individual and make every organization accountable for what they had decided to do. Good governance as a principle denotes an approach in administration that could be applied in internal operations of both public and private sector organizations. Good governance is receptive to the present and future needs of the organization. Here, the decision-making strategies of the organizations incorporate the principle of good governance so that shareholders’ and stakeholders’ interests are accounted and assured. Concept of Good Governance Basic Elements of Good Governance Rule of Law Good governance requires the rule of law. Rule of law is the protection of human rights and civil liberties particularly those of minorities by the independent, unbiased and principled law enforcement agencies. It is exemplified by autonomous judiciary workers such as lawyers and judges, good legal framework, equal access to justice, incorruptible police force and tested dispute mechanisms among others. In the context of rule of law, the absence of governance in a country may give rise to political instability and widespread corruption that could have severe consequences on the investment climate. Concept of Good Governance Basic Elements of Good Governance Transparency Good governance requires transparency of the decision-making process to make certain that information is easily and freely obtainable to those who will be affected by such decisions as well as the outcomes resulting by the decision taken. This information should be provided in an accurate and easily understandable forms normally interpreted through the media so that readers get a complete view of the issues. In addition, any decisions taken, and their implementation must be in obedience with recognized rules and regulations. In the business sector, transparency can earn a level of trust in winning over shareholders, employees, and the general public. Transparency means making sure everyone is aware of what is going on throughout the organization at all times. Applying transparency in the workplace offers a lot of advantages including speedy problem solving, healthy employer-employee relationship, enhanced teamwork, and trust leading to better productivity. Concept of Good Governance Basic Elements of Good Governance Responsiveness Responsiveness is a requirement in good governance. Responsiveness simply means that organizations and their processes need to be planned in a manner that serves the best interests of all stakeholders within a practical and realistic period of time. Responsiveness is a combination of two inseparable elements which are value and speed. Value is any information in the form of questions, data, insights, research, context, case studies and so on that a company can offer, and that allows its buyer in moving closer to making decision. Speed, apparently, is the time it takes to give the demanded information to a customer. Companies must always find time to better communicate to shareholders and stakeholders within a sensible time period to provide honest answers to those crises and controversies in order to provide direction to the organization. Concept of Good Governance Basic Elements of Good Governance Consensus Oriented Good governance requires knowing the broad consensus about the best interest of the entire stakeholder group and how this can be achieved in a practical way. Reaching this consensus means seeking the many different needs, perspectives, and expectations of diverse of people. Making decision through consensus manner allows a group to produce a solution greater than any one member could reach alone. The consensus process necessitates commitment and patience, but the resulting decisions are better, more effective and, in the long term, more time efficient. With all the opposing viewpoints and different personalities in the company, assisting group decision making is easier said than done. Inside the boardroom a lot of robust discussions and debates happens which is normally expected. Most of the times, these intense and heated debates would generate the best consensus because of varying perspectives from diverse representatives of broad backgrounds and experiences. Concept of Good Governance Basic Elements of Good Governance Equity and Inclusiveness Equity and inclusiveness are based on the idea that all members of an organization or society must feel the sense of belongingness and must not have the impression of being excluded from the typical group. Those individuals and groups that are the most vulnerable must also feel the same and should have opportunities to improve or maintain their well-being. Inclusivity means individuals are expected to be treated with respect, dignity, collegiality, and kindness. Each member of the organization can and should use their voice to share their experiences and opinions and philosophies to enrich and extend discussions. Concept of Good Governance Basic Elements of Good Governance Equity and Inclusiveness Employees feel being included when they experienced both: 1. A sense of uniqueness that they are acknowledged and appreciated for their specific attributes and contributions. 2. A sense of belonging that they received and treasured member of their workgroups and among their coworkers Employees on the other hand, experience a sense of exclusion when they feel: 1. Degraded, dismissed, or discounted for the exceptional qualities they bring to the company. 2. Treated like outsiders because of their differences such gender, race/ethnicity, nationality, age, religion, sexual orientation, and, in some cases, job role or formal position of power. Concept of Good Governance Basic Elements of Good Governance Effectiveness and Efficiency Effectiveness and efficiency are vital in good governance. It is developed by making sustainable use of resources to create advantageous results to meet the needs of its stakeholders. Sustainability means guaranteeing social investments are carried through and protecting natural environment, human and ecological health for future generations while driving innovation and not compromising people’s life. Everyone in the organization from the lowest ones to top management including the board of directors must be responsible in conducting their duties effectively and efficiently. Material resources and time are the concerns of effectiveness and efficiency. Concept of Good Governance Basic Elements of Good Governance Accountability Accountability is a key requisite of good governance. Institutions such as government agencies, civil society, and the private sector ought to be accountable to one another as well as to the public and to their institutional stakeholders. Who is accountable for whatever decisions or actions should be documented in policy statements. Generally, an organization is accountable to those who will be affected by its decisions or actions whether they are internal or external. Accountability also extends to the applicable rules of law which could be violated in the course of the implementation of the decisions or actions. Accountability cannot be enforced without transparency too. Concept of Good Governance Basic Elements of Good Governance Participation Participation in good governance requires equal participation by all groups with everyone having a role in the process of decision making, either directly or through legitimate representatives. In participation everyone must be informed and organized. It consists of the freedom of association and expression. In general, it needs attentive concern for the best interests of the organization and society especially for those most weak and helpless. Even in the company boards, women and members of ethnic groups to their boards are increasingly added for the purpose of diversity. Though, well- composed boards embrace diversity of people, skills, talents, abilities, experiences, and perspectives from both gender and the minorities. Ethics, Values and Moral in Good Governance Governance is vital on how organizations relate to each other and its stakeholders. With a lot of changes in managerial settings, governance requires a highly competent, well-informed and concerned administration. Values - are an individual’s judgement or standard of behavior. They are another individual factor that affects ethical behavior. Morals - are the rules people develop as a result of cultural norms and values, and are, traditionally, what employees learn from their childhood, culture, education, religion, and others. These moral values are taught in an individual by his parents, teachers, religion, society, and the environment of workplace. Good governance cannot be successful in the absence of ethics and moral values. It is said that ethics and moral values can bring good governance and maximum public welfare. Individuals Influences on Ethical Behavior There are several individual and situational factors that may affect a person’s ethical behavior at work. The likelihood of an informed and ethical decision is based from a lot of information about a person and the circumstances. Here are some of these individual and situational factors, namely: Individual Factors Affecting Ethics: Stages of moral development - moral development is the process wherein children are able to develop their right attitudes and behaviors on how to treat other people in the society founded on social and culture norms, rules and laws. Personal values and morals - the ethical standards of people are influenced also by their individual values and morals. Locus of control is an important variable that affects ethical behavior. Locus of control is a concept in psychology that concerns how intensely people consider they have control over the situation and experiences that influence their lives. Family influences - everything starts from the family, so they say. Children form their perception from their parent’s behavior. When children see their parents and other members of the family observe high ethical standards, individuals are more likely to also embrace high ethical standards, and vice versa. Individuals Influences on Ethical Behavior Individual Factors Affecting Ethics: Peer influences - peer are those coworkers who are always around during the conduct of operations in the workplace. Sometimes and individual’s decisions in life are influenced by the behaviors and attitudes peers. Life experiences - life experiences of people help them evaluate whether their behaviors and attitudes are ethically correct, incorrect, or acceptable. These experiences help individuals discover possible bases of moral obligations that consist of God, human reason, or the goal to be happy. Social Norms - ethical behavior could also be defined through local customs and traditions in a certain culture. What is normally acceptable in one culture could be absolutely forbidden in another culture. Religious beliefs - most faith believes in life beyond death. The theme of judgement in the afterlife is a shared belief among most religions. Thus, the existence of Ten Commandments as guide to good deeds. Obeying the commandments seriously is an important factor for a person to define his overall ethical behavior. Individuals Influences on Ethical Behavior Individual Factors Affecting Ethics: Upbringing - a person’s upbringing also defines his ethical behavior. Generally, people who are raised in a loving, non-violent home environment tend to show and act ethically, and vice versa. Laws - laws, and a person abiding them, are ethically influential. Many people do not break the law because of the fear of being prosecuted and punished. The level of crime committed defines the level of punishment to be given. Situational Influences on Ethical Behavior With the intent to have a fair basis for judgements or action, one looks to personal ideals of what is appropriate to guide them, rather than an unchanging universal code of conduct, such as Biblical law under the divine theory of Kantian categorical imperative. Basing ethical behavior from the situation means going against the principle and instead making use of a comparable reason which would justify it. Two Main Situational Factors: Issue-Related Issue-related is the importance of the decision to the decision maker. Moral Intensity When facing with conflicting ethical demands or differing ethical values in very difficult situations, moral intensity is severely vital. The higher the intensity, the more likely it is that the decision maker will make an ethical rather than unethical decision. Situational Influences on Ethical Behavior Influences on moral intensity includes the following: 1. The magnitude of consequence - this is the sum of the harm or benefits that could be impacted as the consequence of a given action. 2. The social consensus - the degree that members of a society approve that an act is good or bad and the possibility of effect is the increase and decrease of moral intensity based their assumptions. 3. Temporal immediacy - this is the distance between the time an action happens and the start of consequences of the soonest the results of any effect are likely to take place. 4. Proximity - this refers to the emotional intimacy the decision maker feels to those disturbed by the decision. 5. Concentration of effect - it is to whether the effect is focused on a few people or may affect a lot people in a small extent. Situational Influences on Ethical Behavior Moral Framing A frame of reference, or point of view, refers to the way people look at a given situation. How a person views that situation can affect his appreciation of the facts and may affect how he determines right from wrong. A big problem in moral framing is the use of language in which moral issues may be made to appear harmful if described in a certain manner. The power of framing is not what is being said, but how it is said. Sometimes it might have an even stronger effect on reasoning. Hence, moral intensity could be perceived by people differently in different organizations. It is when morals are conferred openly that decision-making can possibly be more ethical. Normally, the use of moral words helps in framing because they lead to ethical decision making. Although, many businesses hardly make use of moral words that’s why often ethical decision-making suffers. This is called “moral muteness”. Situational Influences on Ethical Behavior Moral muteness usually takes place due to some concerns on perceived threats to: 1. Harmony - this is the belief that moral talk would encourage conflict and retaliation. 2. Efficiency - it is about the belief that moral talk could cloud issues which leads to a more time-consuming decision-making. 3. Image of power and effectiveness - managers consider that their image will be hurt if they would be seen as someone idealistic or making decisions for ethical reasons. Situational Influences on Ethical Behavior Context Related Sometimes ethics take into consideration the particular background of an act when evaluating it whether right or wrong, rather than judging it based on absolute moral standards. This is known as context-related situation in ethical behavior. Here are the factors under it, namely: 1. Reward - putting into practice ethical principles and standards may possibly be repeated and become contagious throughout the organization when appropriately recognized and rewarded. Ethical decision-making can be affected when the basis of the reward is achievement. When unethical behavior is left unpunished or even supported by the company, there is a great tendency that unethical decision-making would increase. 2. Authority - subordinates are likely just to follow instructions from their superiors. On the other hand, middle managers obey orders from their seniors. Hence, when senior managers create unethical decisions, their juniors are just expected to conform. 3. Bureaucracy - in an organization that has a bureaucratic set-up, most employees are likely to follow rules instead of reflecting about the ethics of decisions created. The more bureaucratic an organization is, the lower is the ethical decision-making involved, though sometimes it would depend on authority. Situational Influences on Ethical Behavior 4. Work Roles - work roles usually consist of a complete set of expectations of what to value, the manner of relating to other people and the approach of displaying behavior. While some employees elect to put more effort into their work when they are being closely observed, they are ethically obligated to contribute 100% strength to their job whatsoever. 5. Organizational Cultures - the norms of the group often define the standard or satisfactory behavior in an organization. This could mean that even an unethical behavior may be considered ethical if the group is amenable to it. 6. National Context - every country practice different way of ethics based on its culture. Culture is the basis for a decision to be considered as ethically right or not. Notwithstanding the nationality of the person making the decision, the concern is the country where the decision-making is happening. Thus, there will be differing views of what is right and wrong depending on the shared values of the country. Code of Ethics Codes of ethics govern decision-making when confronted with ethical dilemmas or questionable issues. It is often referred to as the value statement of a company designed to assist professionals in running a business fairly and with integrity. It works similar to the Constitution with general principles to direct behavior as well as outlining set of principles that influence decision-making. A code of ethics may include areas like business ethics, a code of professional practice and an employee code of conduct. Possible termination or dismissal from the organization may be the result in breaking the code of ethics. A code of ethics is imperative because it openly outlines the rules for behavior and offers the basis for a preventive cautioning. Code of Ethics Here are some examples of code of ethics that may assist companies when creating policies on ethical practices that must be practiced inside the organization: 1. Employee code of conduct - a business code of ethics is a framework of policies founded on laws and values that a company requires all employees to follow to. All companies can set their own integrity-based policies as part of the company brand. 2. Confidentiality and privacy policies - a lot of companies these days have been targets or has become victims of hackers who steal customers’ personal information or proprietary data. In order to handle properly customers’ private information, employees need to be required to preserve confidentiality as an ethical practice. 3. Professional appearance policies - a dress code or dress policy can also be made as a requirement. Numerous service providers require uniform shirt for their employees. As part of the policy employees’ clothing must be clean and pressed to look more presentable and professional. Code of Ethics 4. Promoting green business practices - promoting green and being environment friendly is a sound business practice. Regulating paper use in addition to recycling, proper disposal of waste are ways of being friendly to the environment. At the same time, companies, particularly those involve in manufacturing should follow specific environmental standards of safety for people, animals and the environment. 5. Obeying the law - obviously, complying and abiding the law is a mandatory ethical practice. Certainly, employees must follow the law throughout their stay in the workplace to protect their company’s image. 6. Caring and consideration policies - businesses must not allow their consumers to feel that they are just after profit. Companies should create as part of their code of ethics that employees should reflect a caring, considerate manner atmosphere to customers. Employees must be trained to be helpful and sympathetic staff. Code of Ethics Key Components of Code of Ethics in Business: 1. Legal issues - besides expressing to all employees that they must follow the law, this needs to be documented. In any business organizations, employees should follow local and national laws. In the code of ethics, employees must know those specific rule-breaking scenarios that may subject them to immediate disciplinary action. 2. Compliance and regulation - most industries follow certain legal requirements. They are expected to shoulder fines and penalties and face potential legal action once there is failure to conform to the rules. 3. Value-Based Components - the code of ethics normally embraces the six universal moral values that companies expect of their employees. These values consist of being trustworthy, respectful, responsible, fair, caring and good citizens. 4. Violation of the Code of Ethics - it is important to address also in the code of ethics the action to take cases of violation. The process as well as the possible disciplinary actions resulting from a specific violation must be clearly stated. Obviously, this disciplinary action must always be fair and justifiable for the violation. Code of Ethics Categories of Code of Ethics: The basic principles of writing the code of ethics for companies are under two basic categories which are the following: Compliance-Based Code of Ethics Compliance-based code of ethics is based on specific rules and distinct consequences instead of individual observing of personal behavior. Thus, even with company’s obedience to the law, some compliance-based codes of conduct do not encourage an environment of moral responsibility inside the company. This type of code of ethics increases regulation and punishes offenders by giving explicit examples of what is expected and articulates to employees what behavior is standard and what is not. Some companies engage the service of a compliance officer. A compliance officer simply keeps up to date on the various changes that may happen in regulating codes and also observe employee conduct to promote conformity. Code of Ethics Categories of Code of Ethics: The basic principles of writing the code of ethics for companies are under two basic categories which are the following: Value-Based Code of Ethics A value-based code of ethics addresses a company’s core value system. It my shape standards of accountable conduct as they communicate to the larger public good and the environment. This code of ethics may necessitate a greater degree of self-regulation than compliance-based codes. It also defines a company’s guiding values and permits the employee to make their own interpretation of those values. Some code of ethics cover language that addresses both compliance and values. Codes of Conduct Codes of conduct govern actions. A code of conduct defines how a company’s employees should act on an everyday basis. It reflects the organization’s day-to- day operations, core values and the general company culture. Moreover, a code is a vital guide and reference for employees to support routinary decision- making. Thereby, empowering employees to manage ethical dilemmas they meet in everyday work. It is often referred to as the meat and potatoes to the code of ethics. Simply, a code of conduct applies the code of ethics to a multitude of applicable circumstances. A well-written code of conduct explains an organization’s mission, values and principle, connecting them with standards of professional conduct. The code expresses the values the company needs to adopt in leaders and employees, thus defining preferred behavior. Consequently, written codes of conduct can turn into yardsticks against which individual and organizational performance can be quantified. Codes of Conduct A great code of conduct is: 1. Written for the reader - it is simple to understand and does not contain any technical or legal terminology. 2. Comprehensive - it covers all significant details that may influence the daily lives of employees and answers common questions that arise. 3. Supported by leadership - it has been recognized and ratified by the company’s senior management team. This is usually confirmed in the form of a foreword written by the CEO or President. 4. Accessible - it is available to all employees, current investors and potential investors. 5. Visually Appealing - it follows a style that is clean and reflective of the organization.  LESSON 3_Good Governance GOOD GOVERNANCE AND CODE OF ETHICS Erika Magdaong-Trinidad Presented by: