Hiring moral people
All previous “programming” is necessary to improve the behavior of average people who are more or less selfish and prone to opportunism.
But, as you know, all people are different. There is a variation of every personal characteristic – honesty, greed, etc.
So, is not it a good idea instead of improving average people to hire people with high morality.
Other things being equal, this strategy should increase the moral performance of any company.
At one extreme, if 100% moral people are hired then the owner may not care about other formal instruments of enforcement.
5.3 The System of Formal Enforcement
The System of Formal Enforcement Three Elements
Every company should have the system of “legal” enforcement of its “laws” which contains three vital elements:
Detection Which management routines and procedures should reveal the wrong actions?
Trial
Who is empowered to judge and define the guilt?
Punishment Which punishment is enough to prevent the misbehavior?
… let us discuss these elements one by one.
The System of Formal Enforcement Detection There are two basic systems of detection of misbehavior
Complaints and Whistle-Blowing The managers know about misbehavior of their employees from: • Unsatisfied stakeholders (consumers, suppliers, etc.) • Other employees who witnessed the fact
Very good Instrument: a hotline number
Audit The managers sets up a series of periodical check of employees integrity and consistency.
Every company may need a combination of both systems.
The System of Formal Enforcement Trial
In many cases the judgment of an employee’s or manager’s guilt may be made by a senior manager.
If the case is not typical or complicated, a special body – a Committee on Ethics – may be established for examining the problem and developing a solution.
In general this Committee may be responsible for • designing the Code of Conduct; • communicating it to employees; • examining the cases of misbehavior.
The System of Formal Enforcement Punishment
The main purpose of any punishment system is not retaliation itself and not the justice. The main purpose is to prevent misbehavior.
The probability of detection
For example,
If the bribe of $100 is detected with probability of 100%, then the size of fine should a bit more than $100
If the bribe of $100 is detected with probability of 1%, Then the size of fine should be no less than $10 000
5.4. Codes of Conduct
Code of conduct Some Facts (1)
Seventeen managers from a British bank were asked to chose an action. The presence of a code of ethics "does not appear to have significant influence on behavior in areas which the managers regard as covered by traditional banking practice" (Kitson, 1996).
The study of 29 business codes of ethics in various companies showed that "the codes often contained vague references to acting ethically, then give extensive compliance lists which serve mainly to prohibit violation of current laws" (Blodgett and Carlson 1997).
57 in-depth interviews at four large Canadian companies indicated that few respondents could give examples of situations in which they behaved differently because of a code of ethics (Schwartz 2001).
Code of Conduct Some Facts (2)
Kaptein and Schwartz (2008) reviewed 79 empirical studies that examined the effectiveness of codes of conduct: • 35% of the studies evidenced a significant positive relationship, • 16% displayed a weak relationship, • 33% showed no significant relationship, • 14% found mixed results, • and only one study has detected a negative relationship.
Kaptein, M. and M. S. Schwartz: 2008, ‘The Effectiveness of Business Codes: A Critical Examination of Existing Studies and the Development of an Integrated Research Model’, Journal of Business Ethics 77, 111–127.
Code of Conduct The characteristics of a good code
Avoid common morality Avoid including positions that are generally held in society. They discredit the code. They are deadweight.
Clarity Every statement should propose exact actions. Observable and verifiable.
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