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Retirement Planning > Spending in Retirement > Required Minimum Distributions

The Options Available In Ethics Programs

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What are the general types of ethical statements your organization could develop, along with their relative strengths and weaknesses? And how do you go about developing such a statement and implementing it day to day?

There are four general types of ethical statements: a Code of Ethics, a Code of Conduct, a Conflict of Interest Agreement, and a Statement of Values. Each is intended to serve the general public by guiding the behavior, methods and manners of communications of those subject to the ethical statements in their long-term and day-to-day activities.

Yet each is different in the time necessary to create them, the resources required for compliance, and the degree of involvement of individuals in the creation of the ethical statement.

A Code of Ethics is the most comprehensive and difficult to generate and maintain. Most codes contain at least “Canons” and “Rules of Conduct.”

Canons are general standards. They are lofty, altruistic and indicate inspirational goals for the individuals subject to the code. They serve as principles and the basis for the Rules of Conduct.

Rules specify the minimum level of conduct required. Disciplinary action may result from a rule violation. In some cases, intermediate statements are included in codes. These may be called “Guidelines” and fall below canons and above rules in offering specific guidance to professionals subject to the code.

Canons and related rules are difficult and time consuming to develop. After each iteration during their creation, they are subject to review and revision by those who will be subject to them.

Further, because rule violations dictate punishments, methods of reporting of violations, punishment standards and a structure of due process must be created. These activities require an increased commitment of manpower.

Once codes are in place, further time and effort is required for their enforcement and for offering specific guidance. For example, The American Institute for Chartered Property Casualty Underwriters, in addition to canons and rules, provides guidelines, advisory opinions and summaries of previous opinions.

Codes of Ethics are generally impractical for all but professional societies and the largest organizations. Most organizations cannot afford the manpower and monetary resources required to develop and enforce a code.

A Code of Conduct is a second type of ethical statement. The code could be written as general principles, and hence be aspirational. At the other extreme, a Code of Conduct could be statements of acceptable, unacceptable or both types of behavior, and hence, more like legislative or regulatory sets of rules.

Codes of Conduct are easier to write given that there tend to be fewer arguments about pure aspirations for good actions or about specific actions that are deemed either acceptable or unacceptable.

Codes of Conduct that tend toward a set of rules usually are reinforced with penalties for violations. In many cases, due process is either ignored or left to whatever due process is inherent in any human resources action.

A potential problem with Codes of Conduct is that they tend to be developed without broad-based participation of those subject to the code. This tends to diminish the individual commitment to the code so often found in Codes of Ethics or Statements of Value. However, a Code of Conduct can be developed more quickly than the other types of ethical statements.

The third type of ethical statement is a Conflict of Interest Statement. These may be incorporated into any of the other types of ethical statements.

For example, actions that would be considered conflicts of interest may be similar to the rules that would accompany a Code of Ethics. A Conflict of Interest Statement may also be stated as more generalized principles of conduct, such as, “any appearance of conflict is to be avoided.”

Conflict of Interest Statements are usually easier to create than a Code of Ethics because they tend to arise because of a special situation and their creation is assigned to one person or small group. They tend to be easy to enforce because employees may be asked to sign and date the statement. In some cases, an annual signing of the statement is required.

One problem with a Conflict of Interest Statement is that they usually are internal documents, and whatever benefits of the statement for the general public are not made known to the public.

A fourth type of ethical statement is known as a Statement of Values. Ethics and values are intimately related, so use of the word “values” does not diminish the importance of the statement. The top managements of commercial entities typically institute statements of values.

As an expression of ethics, Statements of Values serve the general public. However, the real value of Statements of Values is that they address all distinct groups, or “stakeholders,” that come into contact with the organization.

Statements of Values are usually conceived by management, but born with the employees. They reflect a belief of what the organization is and what drives the organization toward its goals. It can be a powerful recruiting tool in that the statement shows the type of person the organization is seeking, and allows one who does not share the same values to back out early, before a hiring decision.

The heart of a Statement of Values is expressions of those values that the organization seeks to embody in all of its activities with all of its stakeholdersemployees, owners, customers, suppliers, regulators and so forth.

As with any general policy statement of an organization, the statement can be developed either by top management for adoption by employees or by employees for consent of top management.

There is a third way a Statement of Values can be developed. That method begins by asking customers and other stakeholders, “what do you want from us?” (See related story on page 53.)

Ethical statements of any kind will require a commitment of time and money. However, if we truly want to serve the public, we need to be aware of activities they consider valuable, recognize those values in the statement and deliver on those values.

Peter R. Kensicki is a professor of insurance at Eastern Kentucky University in Richmond, Ky., as well as a member of the Ethics Committee of the CPCU Society in Malvern, Pa.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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