Apau Chemist Ltd is a company engaged in the manufacturing of various drugs for the local market. There have been series of ethical infractions within the company. Some top management have been accused of insider trading, bribing of some key staff of the regulatory authorities and attempts to cover up alleged distribution of expired drugs. There is total breakdown of ethical standards within the company. The board of directors have expressed grave concerns about the current happenings in the company. At its last quarterly meeting, the board resolved to engage the services of a corporate governance expert to help address the situation. The board understands that there are two major approaches to managing ethics in an organisation.
Required:
As a corporate governance expert, you have been engaged by the board to advise it on TWO approaches to the management of ethics in organisations. (8 marks)
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There are two approaches available to the board in its effort to resolve ethical issues in Persiba Chemist Ltd. These are Compliance-based approach and integrity-based approach. Each of these approaches are discussed below:
Compliance-based approach
A compliance-based approach is basically designed to ensure that the company acts within the letter and spirit of the law, and that violations are prevented, detected and punished. Generally, organisations faced with the legal consequences of unethical behaviour take legal precautions such as the following:
- Follow laid down compliance procedure to detect misconduct on the part of any employee. The board should activate its compliance system by taking suspected employees through compliance procedures.
- Institution of audits of various contracts within the company to unravel any unethical conduct by management.
- Put in place whistleblower mechanism or systems to encourage employees to report unethical and criminal conduct/behaviour without fear of retribution.
- Strict disciplinary procedures should be instituted to deal with transgressing employees.
Integrity-based approach
An integrity-based approach combines a concern for the law with an emphasis on managerial responsibility for ethical behaviour. Integrity-based approach strives to define company’s guiding values, aspirations and patterns of thought and conduct. When integrated into the day-to-day operations of the organisation, it helps prevent damaging ethical lapses, while tapping into powerful human impulses for moral thought and action. The company may pursue the following strategies: - Consciously building/inculcating ethical values and conduct into the culture of the organisation so as to become taken-for-granted assumption.
- Regular ethical based training programmes for all levels of staff in the company.
- Encouraging staff to whistle blow any unethical conduct and offering necessary protection for such staff.
Incorporating serious ethical background checks in the recruitment process in order to weed out recruitment of unethical joiners.