admindirectorship, environmental concerns, industry rules and regulations, etc, is of paramount importance.
Failure to comply with applicable laws and regulations needlessly put the business at risk, which may include paying heavy fines to regulatory authorities, or facing complete closure.
In like manner, it is important that a firm should establish a set of values or an ethical framework that directs the behaviour of its staff. What is disturbing however is that compliance and ethics are concepts that in some cases have been construed to mean one and the same thing.
Some companies have the wrong perception that by having a compliance function in place, the firm’s ethics needs are automatically covered.
Companies need to recognise first that there is a material distinction between ethics and compliance.
Ethics is an approach to managing business and people issues, and is built around the overarching values of the firm.
It is about the company’s culture and the choices and decisions employees make when dealing with the company’s stakeholders.
An organisation’s ethical values must permeate daily business conduct at every level in the organisation to make sure the organisation is branded around these ethical values.
This means each organisation must come up with behavioural standards and codify them to provide a practical guide to staff on what is expected of them when dealing with company stakeholders be they clients, customers, suppliers, creditors, etc.
On the other hand, compliance is a series of systems and processes that are designed to ensure conformity to applicable laws and industry rules and regulations.
The first piece of legislation that a company has to abide by at its inception is the Companies Act, which provides a detailed guide on how companies should legally be run.
This distinction between compliance and ethics is important because it is possible to operate in legal compliance while still acting unethically, or in conflict with the firm’s values and ethical principles.
However it cannot be denied that ethics and compliance do co-exist. On its own the law is inherently insufficient to encourage appropriate ethical behaviour in the workplace because potential loopholes will always exist in that the law encourages employees to merely comply with the letter as opposed to the spirit of the law.
What this means is that the law naturally forms the basis of sound ethical practices in any organisation.
Ethics builds upon the law by reinforcing the spirit of the law. Sound ethical practices are premised on self-regulation whose thrust goes beyond compliance with the law.
Ethical practices are intrinsic, they start with the organisation, whereas the law is extrinsic, that is, it is imposed from outside the organisation.
Yes, employees in companies are expected to be in compliance with set guidelines as stated in the code of ethics.
However this “compliance” has in most cases been the source of confusion on the difference between compliance and ethics since “complying with set ethical standards” is itself part of the compliance function.
In like manner, workplace discrimination laws that prohibit employment based on race, sex and any such suppositions supports both the legal and the ethical considerations.
It is obviously unethical to discriminate people seeking employment on the basis of their race, religion, political affiliation, etc, and legally our laws criminalise workplace discrimination.
Companies should understand that regulatory compliance is critical as it is to the wellbeing of the firm, it forms the foundation upon which an ethical culture can be built and sustained. Compliance starts the process and ethics finishes it. This means that while the two are different, they cannot exist without the other.
Bradwell Mhonderwa is an Ethics Coach and Trainer with the Business Ethics Centre. Send feedback to [email protected],or visit www.businessethicscentre.co.zw, or call 0772 913 875
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