A selection of interesting articles we came across recently on ethical systems.
Regulation of ethics: Compliance or comfort zone?
The effective implementation of regulation in organisations is an ongoing concern for both research and practice, in order to avoid deviant behaviour and its consequences. However, the way compliance with regulations is actually enacted or “performed” within organisations instead of merely executed, remains largely under-characterised. Evidence from an ethnographic study in the compliance unit of a French investment bank allows us to develop a detailed practice approach to how regulation is actually implemented in firms. They characterise the work accomplished by compliance analysts who are in fact, “curving” the script of regulation within what the authors conceptualise as a “comfort zone”.
Beyond agency, ethics appears as a key element in linking the “letter of the law”, which serves as a referential anchor to guide action, with the complex nature of specific situations. The authors analyse the way individuals and compliance teams cope with, interpret, struggle and in fine, perform regulation within this comfort zone. A particular interest is thus given to the work of embedded ethics in this process, as an enabler to partly recouple compliance with the regulated activity.
The authors find that blind execution is not only impossible, but also devoid of meaning both from regulatory, risk management, and business perspectives in organisations. They highlight and characterise a hermeneutic dimension to this work, essential to effectively perform regulation in complex environments, and the authors suggest some directions for further research.
For more see: Mar Pérezts & Sébastien Picard. 2015. Compliance or Comfort Zone? The Work of Embedded Ethics in Performing Regulation.
Journal of Business Ethics, 131(4), 833-852.
Do formal systems fix ethics?
This paper investigates the effect of the countervailing forces within organisations of formal systems that direct employees toward ethical acts and informal systems that direct employees toward fraudulent behaviour. The authors study the effect of these forces on deception, a key component of fraud.
The results provide support for an interactive effect of these formal and informal systems. The effectiveness of formal systems is greater when there is a strong informal “push” to do wrong; conversely, in the absence of a strong push to do wrong, the strength of formal systems has little impact on fraudulent behaviour. These results help to explain why the implementation of formal systems within organisations has been met with mixed results and identifies when formal systems designed to promote ethical behaviour will be most efficacious.
More details are available at: Kristin Smith-Crowe, Ann E. Tenbrunsel, Suzanne Chan-Serafin, Arthur P. Brief, Elizabeth E. Umphress & Joshua Joseph. 2015. The Ethics “Fix”: When Formal Systems Make a Difference.
Journal of Business Ethics, 131(4), 791-801.
Do control systems reduce the likelihood of fraud?
All kinds of fraud are costly for the people engrossed both financially and often in terms of the time needed to clear their name when illegal use has been made of their personal details. The relationship among ethics, internal control, and fraud is important in the understanding of corporate social responsibility (CSR). This article uses an Ethical Process Throughput Model embedded in the Fraud triangle in order to better understand the interconnectedness of ethical positions and internal control systems that handle fraudulent situations.
Ethical positions are utilised to underscore how ethical behavioural control systems can be appropriately applied, which can provide unparalleled security, enhanced convenience, heightened accountability, better fraud detection and is very effective in depressing fraud, thereby improving CSR among organisations.
Find more at: Waymond Rodgers, Arne Söderbom & Andrés Guiral. 2015. Corporate Social Responsibility Enhanced Control Systems Reducing the Likelihood of Fraud.
Journal of Business Ethics, 131(4), 871-882.
The Effectiveness of Ethics Programs: The Role of Scope, Composition, and Sequence
Organisations are faced with the question, not only whether to adopt an ethics program, but also which components to adopt when. This study shows that unethical behaviour occurs less frequently in organisations that have an ethics program than in organisations that do not have an ethics program. Nine components of ethics programs were identified and examined. The results show that there is a direct relationship between the number of components adopted and the frequency of observed unethical behaviour.
No relationship was found between pre-employment screening and unethical behaviour, while the strongest relationship was discerned between accountability policies and unethical behaviour. The study further reveals that the best sequence for adopting components of an ethics program is (1) a code of ethics, (2) ethics training and communication, (3) accountability policies, (4) monitoring and auditing, and (5) investigation and correction policies—all of which are directly related to less unethical behaviour—followed by (6) an ethics office(r), (7) ethics report line.
More details are at: Muel Kaptein. 2015. The Effectiveness of Ethics Programs: The Role of Scope, Composition, and Sequence.
Journal of Business Ethics, 132(2), 415-431.
Disclosure standards, auditing infrastructure, and mitigating bribery
Using a sample of 15,174 firms from 24 countries included in the 2009 World Bank Enterprise Survey, the researchers investigate the impact of disclosure standards and auditing infrastructure on the bribery of public officials to secure government contracts. They find that firms are less likely to grant gift to secure a government contract in countries having more extensive financial reporting requirements and countries where audit firms face a higher litigation and sanction risk.
Findings also show that firms are less likely to bribe bureaucrats in case financial statements are reviewed by an external audit firm. These results are economically significant and are robust to several sensitivity analyses. These findings support certain policies that are currently being implemented or discussed to mitigate bribery within the public sector across the globe.
The full paper is at: Samer Khalil, Walid Saffar & Samir Trabelsi. 2015. Disclosure Standards, Auditing Infrastructure, and Bribery Mitigation.
Journal of Business Ethics, 132(2), 379-399.