Offering a necessary framework for maintaining transparency and integrity — while also making progress toward key business objectives — corporate governance plays a powerful role in supporting ethical practices and helping businesses live up to their full potential.
Although they represent separate priorities, business ethics and corporate governance are inextricably linked. Both must be purposefully built into compliance programs, not to mention aligned with corporate visions and objectives.
Thankfully, today's knowledgeable and passion-driven compliance professionals are equipped to handle such matters. The right training can help, especially if it provides a thorough overview of relevant legislation, along with engaging learning experiences to help students explore the ethical implications of various business activities.
Explore additional insights into corporate governance and ethics below, and discover how you can further expand upon these topics while pursuing a Master of Legal Studies.
What Is the Relationship Between Business Ethics and Corporate Governance?
Ethics are central to the concept of corporate governance, which, according to the Organisation for Economic Co-operation and Development (OECD), "guides how a company is directed." OECD reveals that, if done right, this "enables companies to create an environment of trust, transparency, and accountability, which promotes long-term patient capital and supports economic growth and financial stability."
Business ethics involves specific principles or standards that help organizations demonstrate qualities such as transparency or accountability. American Institute of Certified Public Accountants (AICPA) CEO Barry C. Melancon refers to this as "the bridge — the gap — between what is required in the law and what is the right thing to do … it is this notion of, 'What's the right thing?'"
In AICPA's overview, The Economist's business editor Thomas Lee-Devlin adds that, "While some business ethics decisions are about big strategic choices that are made at the C-suite, a lot of it actually comes down to the everyday choices that are made further down the line." He believes that leaders need not only to set a positive example but also offer practice resources and oversight so that employees at all levels can "navigate the tough decisions that they encounter on a day-to-day basis."
Corporate governance provides a practical framework for living up to the principles that form the basis of business ethics. This helps create a bridge between ethical principles and day-to-day business functions.
The Importance and Benefits of Ethics in Corporate Governance
Corporate governance goes beyond business ethics to encompass effective management practices, guided largely by regulatory requirements. Ethics remains a crucial component, however, as this ensures that organizational objectives and behaviors align closely with overarching missions, visions, and values. Additional benefits of integrating corporate governance and ethics include:
Building Trust and Reputation
When ethical principles are purposefully embedded into corporate frameworks, businesses achieve greater transparency and accountability — both of which are vital to building trust with employees, clients, and the public. What is more, when ethics are built into the very fabric of the organization, it becomes evident that leadership has implemented ethical policies and practices not merely because they are required but rather because they are intrinsically valued and have been deemed a priority.
Mitigating Risks and Ensuring Compliance
While intrinsic qualities will ideally guide organizations in their efforts to adopt moral frameworks, this is also important from a practical perspective: Businesses that are committed to ethical practices are more likely to build these into everyday tasks, not just developing policies that reflect ethical concerns but also consistently abiding by them and upholding core principles. These policies may be driven by both ethical priorities and compliance concerns, but they have the ultimate effect of preventing strategies or pursuits that might otherwise elevate the risk of non-compliance.
Fostering a Positive Corporate Culture
Many employees cite a strong desire to work for ethical businesses, with insights from professional services network PwC revealing that 86% of employees "prefer to support or work for companies that care about the same issues they do." However, when professionals do not share core values with their employers (or feel that their employers actually live up to purported values), they are more likely to feel disengaged and disconnected.
Over time, this can have a detrimental impact on the organization's culture and employee morale. Those who share values with their businesses and their fellow employees enjoy a common sense of purpose, which, in turn, can foster unity within teams or departments. This promotes greater collaboration and could have major implications for everything from productivity to innovation.
The Role of an M.L.S. in Promoting and Integrating Ethical Corporate Governance
There is much to learn from a Master of Legal Studies (M.L.S.) program, with high-level coursework offering a deep dive into many concepts that shape business ethics and corporate governance. These programs also encourage people to think critically about how ethics play out in the workforce — and to navigate numerous cases from an ethical perspective while also understanding what it would take to abide by various rules and regulations. Topics covered through core courses and relevant electives include:
Understanding Legal and Regulatory Frameworks
Effective corporate governance is not possible unless professionals possess a thorough understanding of current regulatory frameworks. Many of these are sector-specific or tied to geographic locations, but many federal regulations warrant deeper discussion. M.L.S. programs reveal not only which federal regulations are relevant but also how they transpire in numerous business applications. Ethical discussions can be further built into these conversations, with case studies and projects helping students apply their newfound regulatory understanding.
Analyzing Complex Ethical Dilemmas
Ethical dilemmas can be difficult to fully grasp until professionals must navigate these in the real world. An M.L.S. can provide powerful preparation through case studies and other thought-provoking learning experiences that invite students to take a closer look at the nuances of ethical concerns and how they might play out in a range of settings or situations.
Developing and Implementing Compliance Programs
In addition to exploring the ethical implications of corporate governance, M.L.S. programs provide practical tools and insights to help future compliance professionals develop programs that align with organizations' ethical priorities — and that also improve regulatory compliance. This may involve guides or documents that clarify policies regarding ethical concerns. A code of ethics in corporate governance may outline core values, standards of conduct, and procedures for reporting behaviors that deviate from those standards.
M.L.S. programs can also delve into the details that focused compliance programs may incorporate. Through practical coursework, students learn about specific strategies that can be used to boost financial or environmental compliance, all while keeping ethics at the forefront.
Key Challenges in Upholding Ethics in Corporate Governance
While businesses overwhelmingly purport to be ethically driven, many fall short of these ideals by not living up to core ethical principles that they have identified or even built into their code of ethics. This often reflects a broader struggle to align ethical priorities with business objectives and management practices. Common challenges that stand in the way include:
Navigating Conflicts of Interest
Business leaders frequently feel beholden to their stakeholders, but stakeholder objectives do not always reflect the priorities established by executives — or values held by target customers or clients. Often, leaders feel pressured to prioritize organizational interests over fiduciary duties, with high-stakes situations, in particular, increasing the potential for unethical behavior if such pressures exist.
Potential conflicts of interest may involve investment decisions or vendor selection (such as when executives have personal stakes in specific suppliers). Access to insider information can also pose ethical dilemmas while increasing the risk of legal repercussions. Compliance professionals must be capable of navigating these conflicts of interest while still helping businesses make progress toward their strategic objectives.
Ensuring Compliance Amid Changing Regulations
A complex series of regulations shape modern compliance practices. As difficult as it can be for organizations to consistently abide by these requirements, compliance becomes even more complicated as new legislation consistently enters the picture. Thus, aspiring compliance professionals must develop strong legal literacy in order to quickly gain a thorough understanding of emerging rules and regulations as well as promptly yet strategically build these into compliance programs.
The first step to ensuring compliance (even amid legal changes) involves forming a culture that emphasizes both ethics and compliance. Employees at all levels must fully understand the importance of adhering to critical regulations, and they should also be committed to upholding ethical standards, especially when these are closely tied to regulatory frameworks. Risk assessments, internal audits, and compliance management systems (CMS) can aid in ongoing efforts to maintain full compliance.
Addressing Ethical Dilemmas
Ethical dilemmas abound within the modern corporate world. Some of these reflect the aforementioned conflicts of interest, although others may emerge even when such conflicts do not exist. These could involve everything from truthfulness in marketing to environmental responsibility, employee treatment, and data privacy.
As with conflicts of interest, however, what is financially in the organization's best interests may not always align with the most ethical practices. Corporate governance can boost accountability to help leaders make ethical decisions and establish ethics-based policies, but comprehensive employee training may also be required, along with reliable reporting mechanisms. Open communication should ensure that employees feel comfortable discussing ethical concerns — but leadership must be open to change.
Develop a Strong Ethical Framework with the University of Miami School of Law
If you feel driven to make a positive difference by promoting business ethics and corporate governance, you could have a bright future in compliance. This is an essential field, holding significant implications for not only the business environment but also entire communities. As a compliance professional, you enjoy the unique opportunity to shape codes of ethics and ensure that organizational practices align with both ethical standards and state or federal regulations.
The University of Miami School of Law is here to support you in this journey. Offering an online Master of Legal Studies program, we promote a tailored educational experience, complete with compelling electives and even the opportunity to pursue a healthcare track that delves into many of this sector's unique ethical challenges. Request more information today to learn about our M.L.S. and the role it could play in preparing you for a meaningful career in compliance.
Sources
https://admissions.law.miami.edu/academics/mls/
https://admissions.law.miami.edu/academics/mls/curriculum/
https://www.oecd.org/en/topics/policy-issues/corporate-governance.html
https://www.youtube.com/watch?v=dRQoIeMTFPU
https://www.investopedia.com/terms/c/corporategovernance.asp
