Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be 300 words in length. respond to two additional posts from your peers.
From your readings in Chapter 9, please review the Video Case Study on BP. After your review of the video case study, please post a summary on your thoughts about the case study. Please correlate your thoughts to the readings from the chapter and one peer-reviewed article from the GU library.
Please provide 1-2 examples to support your viewpoints that other learners will be able to assess and debate within our weekly discussion forum.
Viewing a business ethics program as a part of strategic planning and management activities is critical to the success of any firm. However, for such programs to be successful, firms must put controls and systems in place to ensure they are being executed effectively. Controls include input, output, and process controls. Input controls are concerned with providing necessary tools and resources to the organization, such as good employees and effective ethics training and structural systems. Process controls include managerial commitment to an ethics program and the methods or system for the evaluation of ethics. Output controls involve comparing standards with actual behavior. One of the most popular methods of evaluating ethical performance is an ethics audit.
An ethics audit is a systematic evaluation of an organizations ethics program and/or its ethical performance. Such audits provide an opportunity to measure conformity with the firm’s desired ethical standards. The concept of ethics auditing emerged from the movement toward auditing and reporting on companies’ broader social responsibility initiatives. Social auditing is the process of assessing and reporting a business’s performance in fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected of it by its stakeholders. An ethics audit may be conducted as a component of a social audit. Auditing is a tool companies can use to identify and measure their ethical commitment to stakeholders and demonstrate their commitment to improving strategic planning, including their compliance with legal, ethical, and social responsibility standards.
The auditing process can highlight trends, improve organizational learning, and facilitate communication and working relationships. Audits help companies assess the effectiveness of their programs and policies, identify potential risks and liabilities, improve compliance with the law, and demonstrate progress in areas of previous noncompliance. One of the greatest benefits of these audits is improved relationships with stakeholders. Ethics auditing may help prevent public relations crises associated with ethical or legal misconduct. Although ethics audits provide benefits for companies and their stakeholders, they have the potential to expose risks; the process of auditing cannot guarantee a firm will not face challenges. Additionally, there are few common standards for judging disclosure and effectiveness or for making comparisons within an industry.
An ethics audit should be unique to each company based on its size, industry, corporate culture, identified risks, and the regulatory environment in which it operates. This chapter offers a framework for conducting an ethics audit that can also be used for a broader social audit.
The first step in conducting an audit is securing the commitment of the firm’s top management and/or its board of directors. The push for an ethics audit may come directly from the board of directors in response to specific stakeholder concerns, corporate governance reforms, or top managers looking for ways to track and improve ethical performance. Whatever the source of the audit, its success hinges on the full support of top management.
The second step is establishing a committee or team to oversee the audit process. Ideally the board of directors’ financial audit committee would oversee the ethics audit, but in most firms, managers or ethics officers conduct auditing. This committee recruits an individual from within the firm or hires an outside consultant to coordinate the audit and report the results.
The third step is establishing the scope of the audit, which depends on the type of business, the risks faced by the firm, and available opportunities to manage ethics. This step includes defining the key subject matter or risk areas important to the ethics audit.
The fourth step is a review of the firm’s mission, values, goals, and policies. This step includes an examination of formal documents that make explicit commitments with regard to ethical, legal, or social responsibility issues, and informal documents including marketing materials, workplace policies, ethics policies, and standards for suppliers or vendors. During this step, the firm should define its ethical priorities and articulate them as a set of parameters or performance indicators that can be objectively and quantitatively assessed.
The fifth step is identifying the tools or methods used to measure the firm’s progress, and collecting and analyzing the relevant information. Evidence-collection techniques include examining internal and external documents, observing the data-collection process (such as discussions with stakeholders), and confirming the information in the organization’s accounting records. During this step, a company’s stakeholders need to be defined and interviewed to understand how they perceive the company. This is accomplished through standardized surveys, interviews, and focus groups. Once information is collected, it should be analyzed and summarized. Analysis should include an examination of how other organizations in the industry are performing in the designated subject matter areas.
The sixth step is having an independent party—such as a social/ethics audit consultant, a financial accounting firm that offers social auditing services, or a nonprofit special interest group with auditing experience—verify the results of the data analysis. Verification is an independent assessment of the quality, accuracy, and completeness of a company’s audit process. Such verification gives stakeholders confidence in a company’s ethics audit and lends the audit report credibility and objectivity. The verification of the results of an audit should involve standard procedures that control the reliability and validity of the information.
The final step in the audit process is reporting the audit findings to the board of directors and top executives and, if approved, to external stakeholders. The report should spell out the purpose and scope of the audit, methods used in the audit process (evidence gathering and evaluation), the role of the (preferably independent) auditor, any auditing guidelines followed by the auditor, and any reporting guidelines followed by the company.
Although the concept of auditing implies an official examination of ethical performance, many organizations audit informally. Ethics audits should be conducted regularly. Although social auditing may present problems, it can also generate many benefits. Through the auditing process, a firm can demonstrate the positive impact of ethical conduct and social responsibility initiatives on its bottom line, which may convince stakeholders of the value of adopting more ethical and socially responsible business practices.
>> That smell is, it’s the smell of destruction.
>> Matthew Lepetich owns rights to oyster beds in the direct path of BP’s renegade crude. His oysters need a few more months to mature. There’s not one big enough in this entire bunch?
>> That is.
>> But if the oil reaches them before he can harvest, Lepetich says he will use $4,500 a day.
>> It’s a domino effect and it starts right here.
>> Lepetich sells oysters to suppliers in seven states from the Gulf Coast all the way up to Maryland.
>> It brings a lot of anxiety amongst our customers.
>> New Orleans seafood supplier, Cliff Hall, has already raised prices. In the last week, his oysters are up by $10. Gulf Coast fish rose a dollar a pound. And shellfish like shrimp and crabs are up $6. Restaurants as far away as New York City are feeling it. Head chef Sandy Ingber doesn’t even buy Gulf Coast seafood. Still, prices at his oyster bar rose 10%.
>> It’s up considerably and it’s really scary what the future entails.
>> While seafood prices are rising, back along the Gulf Coast tourism is falling. The mere threat of oil is causing thousands of hotel cancellations.
>> I’m now pushing, oh, close to $100,000 worth of cancellations for May and June.
>> In the Florida panhandle, Memorial Day occupancy rates are usually 90% or higher. But reservations are off by 50% and some have occupancies as low as 15 to 19%. After two long years of recession, many business owners thought this would be a breakout year. Instead, so far it’s looking more like a bust.