Question

there are many aspects of fraud.  One of the important issues is the establishment of an ethical culture.  The terms tone at the top, tone in the middle, etc are often used.  As a future leader, what will you need to know and understand to prevent fraud, and establish an ethical culture.  will you please put yourself in the role of your major, CFO, Director of Marketing, Director of Human Resource, Chief Treasury Manager, etc.

Answer 1

Organizational culture is a system of shared assumptions, values and beliefs that determines how people behave in organizations.

An organization with the positive and ethical culture promotes the growth of the organization values, development and growth of employees and positive image of the orgnization in the society.

Ethics is a key component of good governance and is very important to affect public trust in all forms of an organization, society, government.

An Unethical behaviour of any person in an organization is any behaviour which does not confirm with the organization's policies and set standards.

The two aspects which determine the ethics and positive attitude in a organization is its strong culture and content of the same. The strong culture implies the the clear and strong rules that are defined and are clearly understood by all the members of the organization. The unclear and weak with vague and inconsistent rules would promote unethical behaviour thus leading to frauds and unethical behaviour of the members.

There are three traits that encourage ethical behavior to promote positive organization culture:

1. high in risk tolerance,

2. low in aggressiveness and

3. concerned with the methods

Tone at the top is the term which describes the orgnization's general ethical climate as established by senior management through their behaviour and passed down to the the lower level through policies, rules, rewards etc.

This is very critical for the sucess of any orgnization culture.

The middle level management plays a vital role in the execution of the above policies and rules and they play a vital role and are the face of the organization and carriers of the voice of the top management to lower levels. Hence tone in the middle is still important for an orgnization ethical culture.

The tone set by frontiline employees is as important as the middle and top level management. It is the frontline employees who implement the decisions and policies prepared at top level and hence are very critical for the success.

The senior mangaement at top level like CFO, Director marketing, human resources etc are to play a vital role. Below are some of the suggested practices:

1. Role model: The senior management should be a role model in the ethical behaviour for their employees and ensure that the ethical culture is visible in the organization.

2. Communicate ethical expectations: The ethics policy / code of ethics should be clear and all the associates of an organization should be having a knowledge of the same.

3. Offer ethics trainings: Regular trainings should be conducted for the ethical code of the organization to all the assocaites.

4. Rewards for ethical acts and punishment for unethical ones

5. Transparant and fear free approach: Organization should provide a transperant atmosphere and associates should have a link, where they can freely approach for complaining any unethical behaviour.