The company that I have chosen to analyze the code of ethics practices is Lowes. They are one of the top leaders of home improvement needs. They have over 1,800 stores in the United States, 300 in Canada and 10 in Mexico. Lowe’s employees over 265,000 employees.
The code of conduct and business ethics applies to everyone that works for Lowe’s as well as third parties who act on behalf of the company. The primary focus of the code of ethics is to help eliminate possible liabilities to the company, such as bribery and corruption, compliance issues of laws and regulations, conflicts of interest, employee relations, maintaining accurate records, social media requirements, and working with confidential information.
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The code of conduct and business ethics was put into place for employees focuses on ethical, legal, and regulatory issues; it doesn't focus on the aspects of Corporate Social Responsibility – most essential relationships with the community, environmental and sustainability commitments, and philanthropic efforts. However, being just as important as the Code of Conduct and Business Ethics, Lowe’s maintains and updates a website on Corporate Social Responsibility annually. It links to the commitments and efforts they have by giving back to local communities by preserving sustainability and excellence in operations
Legal Mandate Compliance
The Code of Conduct and Business Ethics at Lowe's is set in place to help cover ethical, legal, and regulatory issues. It states who the code is for, what activities are included, and what solutions are required to fix the non-compliant problems. The code of conduct does not cover everything; Lowe’s code of conduct states that any situation that is confusing should be referred to the Chief Compliance Office for advice or understanding.
Lowe’s Code of Conduct and Business Ethics complies with legal mandates such as Sarbanes-Oxley (Canary & Jennings, 2008). It has the expectations for ethical behavior, mandatory anonymous reporting, prohibits good-faith reporting retaliation of criminal or unethical behavior. The code also outlines the role of both external and internal auditors and the consequences of false statements to the auditors. The Code also has a copy of Lowe’s disclosures and financial reports as well as rules for insider training and that it must comply with federal securities laws and regulations, Securities and Exchange Commission requirements, and the requirements of the New York Stock Exchange.
Implications of Non-Compliance
The Code of Conduct and Business Ethics at Lowe's outlines the consequences for the violation of the codes and applies them equally and fairly to everyone, regardless of their position. The severity of the code violation will depend on how the punishments are handled; they can range from being reprimanded, suspended, terminated, or possible legal action. The code demands that retaliation against good-faith reports creates a code violation, as well as tolerating or failing to report a known code violation.
Legal or Ethical Safeguards
There are many safeguards Lowe's has in place to make sure their employees are obeying The Code of Conduct and Business Ethics. To be employed at Lowe’s, it is required for all employees to read, review, and understand it, and to make sure other employees do the same. The Code is to be reviewed annually as well as validation of not know of any actual or suspected violations.
If an employee has concerns or a situation arises that requires clarification, the employee needs to talk to the Chief Compliance Office before engaging in the activity. When they become aware of a violation, they must report it to the Chief Compliance Office. There are many methods available for reporting, such as email, phone numbers, and independent third party who is responsible for taking complaints. Lowe’s provides options for anonymous reporting, and no retaliation can be made against employees making good faith reports to ease employee’s minds in making the complaints.
Development of an Ethical Culture
There is a welcome message from the Chief Executive Officer Robert Niblock on Lowe's code of conduct business ethics page. In this message, he praises the reputation of Lowe's as a long-time responsible corporate citizen, and the pride they have with this achievement. The welcome message outlines the expectations that the stakeholders have for Lowe's to deliver these results ethically and responsibly. Having unethical conduct can quickly ruin any trust that the company has built.
Having support from the executive-level of The Code of Conduct and Business Ethics, and having it apply to all employees; will show that the company values this behavior. Lowe's is proud of this reputation. Niblock feels that having business success is just as important as achieving it ethically.
Raising an Ethical Concern
Unlike organizations that use a progressive path for ethical concern reporting of going to the human resource manager, Lowe's gives the responsibility for ethical reporting and investigation on the Office of the Chief Compliance. This will allow employees to report any possible concerns at any time day or night, no matter where they are located by using a third-party company. Having a non-retaliation policy in place makes it easier for an employee to make a good faith report.
Available Resources
To report ethical concerns and violations to the Office of the Chief Compliance, Lowe’s makes it an easy process by providing several ways. The first is called Ethics-Point from Navex, a third-party website, available for reporting issues and keeps it anonymous and confidential. Lowe's also provides specific telephone numbers throughout the country for reporting concerns 365 days a year, 24 hours a day, seven days a week that is kept confidential. The Office of the Chief Compliance also has available direct email and toll-free phone number for reporting ethical concerns and violations.
Preferred Resources
Given these options, I prefer the use of the third-party provider to make a report. The website has the Code of Conduct, and Business Ethics posted and provides easy step by step directions for creating a report. A confidential report is an option that the third-party provider offers. They offer a claim number and password protection to allow a person that reports a concern to follow up on the report. Since this option is available 24-7, and the operation is confidential and private, I feel this is the best option.
Whistleblowing Conditions
It can be stressful and an emotional decision to report an ethics violation, even though organizations forbid retaliation for good faith reporting. Having evidence and facts are the most important for an ethics investigation. If it’s not done correctly, the person who has done the whistleblowing could lose their job, the consequences of filing the report may follow them throughout their career with the company.
Several conditions must be present for an employee to report unethical behavior. An issue that could harm the organization's reputation, discrimination or harassment, false records or statements violation of a law, breach of a customer or employee's rights, or a threat of safety violations or violence.
You must consider many factors before reporting any violations. First is to decide how you feel about the situation. Second, is to consider if your power and influence can affect the change and weigh the benefits and risks of making the report. You must decide if the report is undetermined, the person's reputation can suffer dramatically. If you are concerned about the situation, then it is essential to know what your rights are. Another factor is timing; if it's not an emergency issue, time can be used to gather more facts to help support the report being made. The last factor that should be considered is to have a contingency plan if the report doesn’t meet the outcome that was expected.
Whistleblowing Process
The whistleblowing process first step is to report the issue to the direct supervisor, especially if the supervisor isn’t aware of the problem. Most of the time, this can be resolved quickly by getting the supervisor involved. If this solution is unsatisfactory, talking with someone uninvolved is recommended such as a counselor, family, or friends. This can serve as a way to help to handle concerns and frustrations and may give some advice to help manage the issue.
If there still isn't any solution to the issue, further help may be needed; this could be done by calling the organization’s ethics hotline, talking to human resources, or the legal department. If this step is taken, it may be best to research local whistleblowing advisable to examine state and local whistleblowing rules for more guidance. Contacting government agencies will be done if there still isn’t an acceptable outcome, especially if the issue involves violations of laws and regulations. If there are no resolutions, it may be best to leave the company to stay away from the ethical and legal issues.
Advantages and Disadvantages of Paying Whistleblowers
Giving whistleblowers a financial reward will encourage more people to report illegal activity. If the whistleblower knows that they will receive one as part of the government sanction, it could be enough to help outweigh the risk of losing a job. Also, with having anti-retaliation laws, this could entice employees to report the violations.
Disadvantages also come with paying whistleblowers. If it is a low-level fraud with a minimal reward, the whistleblower may allow it to continue and ignore it. A second issue with the reward program might encourage people to report problems that may not be a violation hoping it might result in a reward. The investigations and reports will take a considerable amount of resources and time away from real cases.
Impact of United States Sentencing Guidelines
The United States Sentencing Guidelines have a significant influence on how companies develop and maintain the code of conduct and ethical programs. The company can face penalties with convictions of just one employee. The United States Sentencing Guidelines covers a vast range of federal crimes, such as anti-trust, bribery, money laundering, securities fraud, or tax evasion (Trevino & Nelson, 2014). In rare instances, a company could face liquidation or stop its operations in the United States.
With the possibility of having severe repercussions, companies have an interest in establishing codes of conduct and ethics programs. Maintaining programs that are effective and requiring employees to acknowledge and review them periodically, the company can lessen its legal risk and liability if a company or employee has committed a crime.
Culpability Factors
Like other crimes, an individual or business has aggravating or mitigating factors that can impact a culpability score, as well as its resulting fine. A base score starts at five and can either increase or decrease by five points based on aggravating or mitigating factors (Trevino & Nelson, 2014). This result in a multiplier applied to the base fine ranging from 0.05 to 4.00.
Reasons for an increase of a culpability score above five can include the size of the company, the level of involvement, or ignorance of leadership. A company that has more than 5,000 employees where the leadership may be involved in criminal activity can have an increase up to five points. Hindering an investigation or being prosecuted can increase up to three points. Another factor is the history of the company if they have had civil or criminal findings in the past five years; the culpability score can increase up to two points.
An organization can take to lessen the culpability score in a few ways. They can admit fault for criminal activity, cooperate with the investigation, and self-report violations, this can result in a culpability score decrease up to five points. Having a code of conduct and an effective ethics program that recognizes and puts a stop violation can decrease up to three points.
Sources
- Canary, H. E., & Jennings, M. M. (2007). Principles and Influence in Codes of Ethics: A Centering Resonance Analysis Comparing Pre- and Post-Sarbanes-Oxley Codes of Ethics. Journal of Business Ethics,80(2), 263-278. doi:10.1007/s10551-007-9417-1
- Trevino, L. K., & Nelson, K. A. (n.d.). Managing Business Ethics: Straight Talk about How to Do It Right 7th edition | 9781119194309. Retrieved from https://www.vitalsource.com/products/managing-business-ethics-straight-talk-about-how-linda-k-trevino-katherine-a-v9781119298519
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