Business Ethics for SMEs

This month, Ethics Today (the Newsletter from the Ethics Resource Center) focuses on ethics initiatives in smaller organizations. More often than not, resources and new insights for organizational ethics are assumed to have universal appeal. However, their research and experience have revealed that organizations with fewer than 500 employees represent a very different mix when it comes to effective ethics program efforts.

On the one hand, small businesses exist as streamlined examples of the impact of organizational leadership on a company's ethical culture.

On the other hand, smaller organizations are much less likely than larger ones to have in place what we now consider to be "formal elements" of an ethics program, namely written ethics standards, ethics training, a dedicated ethics office/advice line, and a means to report misconduct anonymously.

In May 2004, the U.S. Department of Commerce published a manual for corporate responsibility programs that integrates corporate governance, organizational ethics, and social responsibility. "Business Ethics: A Manual for Managing a Responsible Business Enterprise in Emerging Market Economies" was co-authored by ERC Principal Consultant Kenneth W. Johnson and Igor Y. Abramov, Senior Advisor, Market Access and Compliance, International Trade Administration, Department of Commerce.

Because the bulk of businesses in all economies, especially emerging market economies, consist of small to medium-sized enterprises (SMEs), note the authors, most chapters discuss specific issues facing SMEs. Some chapters have tables comparing the best practices of large, complex enterprises and cost-effective solutions for the SME.

Chapter 6 (pages 129-140) examines business ethics infrastructure -- the structures and systems that help enterprise owners and managers address issues of responsible business conduct. The manual details the best practices that have been developed by large, complex enterprises (LCEs). While valuable for similarly situated enterprises in emerging market economies, they can also serve as models for small to medium-sized enterprises (SMEs). By considering the best practices that have been generated over countless hours by larger organizations, SMEs can design business ethics infrastructure that meets world-class standards but is tailored to the requirements of an SME.

According to the authors, leading enterprises, government agencies, and NGOs have found that an effective business ethics program addresses functions at seven levels of responsibility. Table 6.1 describes how a typical SME might staff these seven responsibility functions. Also in this chapter is a box that lists "Ten Ways Small Business Owners can Prevent and Detect Fraud."

The book contains numerous practical examples, worksheets and checklists, a bibliography, a glossary, and-in its nine appendices-numerous examples of business ethics policies adopted by various countries and organizations.

The manual can be downloaded for free at:
http://www.ita.doc.gov/media/Publications/blurbs/ethics2004blurb.html. (Printed versions are available for sale also at that site.)

More on Business Ethics in SMEs can be found at the Ethics Resource Center , a great source of information on Business Ethics.