Memorandum to Establish a Tone at the Top
The tone at the top involves the set standards by the leadership of the organization to help measure performance. It also involves the organizational culture where the organization members operate and the tone set by the senior management regardless of the policies and strategies written by the management. The tone at the top also includes the “Unseen hand” that controls the activities of the organization as well as the organization’s commitment to the quality of care given to the consumers. However, the tone at the top creates the guiding values and ethical climate of the organization in the context of ethics and compliance program (Zaring, 2017). The board, the chief compliance officer and the chief executive officer perform important roles in establishing the tone at the top. The tone at the top is developed in different ways.
One of the main propositions that can be executed by the management to create a tone at the top involves; hiring a competent chief executive officer, approving the strategy of the organization and overseeing the implementation of the plan, setting the risk appetite as well as monitoring the risk mitigations with an objective of creating the shareholder value. This is the responsibility of the organization’s authority or the board. Therefore it is the responsibility of the authority to set the tone of the organization in a way that it performs all these responsibilities. Nevertheless, the tone at the top is mainly driven by the selection of the chief executive officer (Zaring, 2017). Therefore, it is the responsibility of the organization’s authority to focus on different factors including the chemistry, character, and competence of an individual before recruiting the person as the CEO of the organization.
This requires the authority to establish whether the candidate posses the necessary skills and experience to help the organization move forward and whether the candidate has proper morals and character to help in the development of a strategy and business with great values. Additionally, the authority should also determine whether the candidate posses the necessary chemistry and communication skills that will help and encourage others deliver the value action plan to all the stakeholders (Barisic & Tusek, 2016). After selection, the CEO performance is monitored by the board to ensure that the ethical objectives are implemented.
The other proposition is about the CEO and other organizational leaders establishing ways of connecting with the people outside and inside the organization. The organizational leaders especially the CEO represent the face of the organization and therefore, most employees seek guidance, leadership, and vision from them. As a result, the organization’s leaders are required to overtly communicate their values consistently and through different platforms. This communication is necessary because individuals are usually suspicious of organizational leaders who secretly keep their values. However, although the leaders are required to develop their main values and principles, the employees learn what should be punished or rewarded from the behavior of the CEO (Zaring, 2017). The establishment of a common set of beliefs and values helps to create a threshold whereby the organizational decisions are tested or measured.
Creating a culture of expression where the stakeholders or the employees are allowed to speak up their challenges freely is also another proposition that contributes to the tone at the top. This is the responsibility of the chief compliance officer (CCO) of the organization. The CCO of the organization performs important responsibilities that help in enhancing and setting the tone at the top. As a result, individuals recruited for this position are required to be persons beyond critique and with high integrity. They are also required to persons who can earn personal respect at every level. The organization’s compliance and commitment to ethics are viewed from the stature and character of the person selected by the organizational leaders to execute the organizational responsibilities as the chief compliance officer (The American Accounting Association, 2018). The CCO uses the built-in platform to reinforce the values of the organization as well as striking a balance between the messaging correlated to the sales and growth.
Additionally, the CCO is available for consultations by the employees whenever they have an ethical concern in the organization. Therefore, creating a culture where employees can freely express their issues encourages them to make relevant consultations to avoid making mistakes. On the other hand, apart from conveying major ethics and compliance messages in both external and internal communications, the chief compliance officer also plays a proactive role of helping the board (Barisic & Tusek, 2016). This assistance helps the board to understand and learn how to perform their role in setting the tone at the top.
Conclusively, the tone at the top is crucial to the success of every business. However, setting a proper tone at the top may have certain challenges such as institutionalization as well as mergers and acquisitions and therefore, it is important to have special attention from the board or organizational leaders. Similarly, the tone at the top should be the ultimate responsibility of the organization’s management conveying the messages about the importance of quality and which should common among all levels of the organization’s management.
Barišić, I., & Tušek, B. (2016). The importance of the supportive control environment for internal audit effectiveness–the case of Croatian companies. Economic research-Ekonomska istraživanja, 29(1), 1021-1037.
The American Accounting Association. (2018). Retrieved from https://na.theiia.org/standards-guidance/topics/Documents/Executive_Summary.pdf
Zaring, D. (2017). The International Campaign to Create Ethical Bankers. Journal of Financial Regulation, 3(2), 187-209.
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