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White Papers
Ethics Codes/Values
Introduction
Business Importance
Recent Developments
External Standards
Implementation Steps
Leadership Examples
Sample Policies
Awards
Resources
Introduction
A growing range of stakeholders - including customers,
investors, activist groups, and the media - are paying close
attention to the ethical behavior of companies and their
employees. In addition, companies are recognizing the
business benefits of creating comprehensive ethics programs.
The cornerstone of any company's ethics program is its set of
values. The key mechanism for articulating those values are
ethics codes, also known as codes of business practices or
principals. Ethics codes and business principles are
instrumental in enhancing brand name and reputation,
creating a cohesive corporate culture, avoiding litigation and
fines, and helping to stabilize volatile markets. Ethics codes
also help create globally consistent "fixed reference points"
for employees. Ethical decision-making procedures, spelled
out in an ethics code, arm employees with the information
needed to act in accordance with the values that are at the
core of a company. Increasingly, companies are also seeing
the value of sharing their codes with suppliers, business
partners, shareholders, and other stakeholders. The code
serves as a set of concrete statements about how the
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companies conduct business.
Companies' codes are supported by differing philosophies
which influence their development, presentation, and
distribution. These codes range generally range from a
compliance-based to a values-based approach, and
companies usually fall somewhere along the spectrum
between the two. At the most progressive end are "valuesbased" codes, which are not as a list of "do's and don'ts," but
rather state certain principles that are at the base of what it
means to be an employee of that particular company.
"Instrumental" codes stress that employee behavior directly
affects the company's bottom line. "Compliance" codes
usually only address employee conduct, and are designed
primarily to protect a company from prosecution or litigation.
Business Importance
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Enhance Corporate Reputation/Brand Image: A
company's reputation and brand image are some of its
most valuable assets. A 1998 survey of 178 British
companies known to have ethics codes conducted by the
Institute of Business Ethics entitled "Company Use of
Codes of Business Conduct" found that 75 percent of
respondents cited supporting the company's reputation
as the motivation for developing an ethics code.
Establishing a code is an effective way to communicate
the value a company places on good business practices
internally and externally.
Improve Risk and Crisis Management: In times of
crisis, having an ethics code can help make the case to
shareholders, activists, and the media that a company
has made a good faith commitment to ethical behavior,
and that a mistake or transgression is the exception, not
the rule. Also, developing and promulgating a code of
ethics can help all employees be more alert to potential
problems, and bring them to the attention of
management before a crisis occurs.
Create Cohesive Corporate Culture and Make
Values Come Alive: Ethics are central to every
decision an employee makes, and affect every facet of
an organization's operations. Whether a firm's
employees all work at one location, or whether they are
scattered around the world, a widely distributed code of
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ethics can help build a sense of community in the
workplace. Many companies see their ethics codes as
the vehicles which turn broad, conceptual values into
tangible guides for employees. For instance,
pharmaceutical company SmithKline Beecham used the
development of its code in 1998 as a way to articulate
the five core values that define its culture: customers,
innovation, integrity, people, and performance.
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Avoid fines, sanctions, and litigation: Companies
and their employees are required to comply with local,
national, and international laws governing their
operations and actions. An effective ethics program with a clearly presented code at its center - greatly
reduces the likelihood of fines resulting from a range of
illegal activities including fraud, conflict of interest,
corruption and bribery, and insider trading. As an
example, the U.S. Federal Sentencing Guidelines for
Organizations state that companies that develop "good
corporate citizenship" actions can potentially see
reduced penalties, or no prosecution at all, when
misconduct occurs. The guidelines state specifically that
in order to demonstrate due ethical diligence, a
company "must have established compliance standards
and procedures to be followed by its employees and
other agents that are reasonably capable of reducing the
prospect of criminal conduct."
Boost Development in Emerging Economies: A
1999 Conference Board report on global ethics codes
found that a consensus is developing among business
leaders throughout the world that sound business
practices, stemming from ethical foundations, will help
improve development prospects in Africa, Asia, and
Latin America. Global codes set an ethical standard
which can be followed despite differences in cultural and
national approaches, and in laws and standards between
jurisdictions. (For more information, see Corruption and
Bribery Issue Brief)
Recent Developments
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Globalization of business: According to a 1999
Conference Board Report on "Global Corporate Ethics
Practices," the rapid internationalization of business and
increased pressure from non-governmental
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organizations (NGOs) has led to more comprehensive
business ethics programs on a global scale. More and
more, companies face the challenge of communicating
values and ethics programs to thousands of employees
in dozens of countries with many legal systems,
cultures, and ethical priorities. Global company ethics
codes enable managers to act in ways that are morally
consistent with the values and principles of the
company. For example, the U.K. Foreign Office plans to
produce a "practical, down to earth" ethics manual on
best practices for British companies investing and
operating overseas that addresses issues such as
protecting the environment and preventing child labor.
The Foreign Office is consulting with large companies
such as BP Amoco, Cadbury, and Royal Dutch/Shell, as
well as with NGOs, and is gearing the guide to smaller
companies which may not have the resources to conduct
environmental assessments or link up with local NGOs.
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Boards Setting Up Ethics Codes: A 1999 Conference
Board study of 124 companies in 22 countries found that
78 percent of boards of directors are setting up ethics
standards, up from 41 percent in 1991 and 21 percent
in 1987. The study also found that one-third of those
surveyed said that their board of directors' participation
in the development of ethics codes is "heavy."
Technology/Cyber-Ethical Dilemmas: Employees
now have access to a range of new technologies including the Internet and e-mail - that have created
new ethical dilemmas and accelerated the pace at which
ethical decisions must be made. In response, companies
have targeted issues such as appropriate use of office email and viewing of inappropriate websites and
incorporated them into existing codes. For example,
while Bell Atlantic's Code of Business Conduct
recognizes that personal use of company communication
and computer systems are permissible, it also addresses
"proper" employee use of these technologies.
Expanded Content: Until recently, the majority of
ethics codes addressed two major sets of issues, those
that deal with contracts (such as conflict of interest,
bribery, security of proprietary information, and
receiving gifts) and those that are mandated, either
legally or through other generally-accepted standards
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(sexual harassment, workplace safety, political
activities). Increasingly, however, companies are seeing
the value of codes that address additional issues such as
the environment, child labor, and human rights
External Standards
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UN Global Compact, UN Human Development
report on globalization. UN Secretary-General, Kofi
Annan, has called upon the international business
community to enact nine principles in the areas of
human rights, labor standards, and the environment to
be used as the base for ethical codes of conduct which
address issues of inequality in the global marketplace
and the widening gap between the world's poor and
wealthy. http://www.unglobalcompact.org/
Relevant Legal Standards: Full compliance with
relevant laws regarding labor rights is typically
incorporated into company codes. This occurs most
frequently with respect to issues such as wages,
benefits, working hours, anti-trust, and corruption and
bribery.
Industry/Business Association Standards:
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Defense Industry Initiative (DII) on Business
Ethics and Conduct: A number of U.S. defense
industry companies have signed the DII Principles of
Business Ethics and Conduct that address their
corporate responsibilities under federal procurement
laws and to the public. The six DII principles address:
(1) written code of business ethics and conduct, (2)
employees' ethical responsibilities, (3) corporate
responsibility to employees, (4) corporate responsibility
to the government, (5) corporate responsibility to the
defense industry, and (6) public accountability.
Implementation Steps
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On the surface, many company ethics codes look similar.
What sets an effective code apart is how well it is
institutionalized and implemented. Companies planning to
develop and implement an ethics code should consider the
following steps:
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DRAFTING THE CODE:
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Start With Values: When ethics codes are congruent
with clearly stated values, many companies find them
more effective.
Involve Employees Early in the Process: The
ultimate success of an ethics code depends on the
extent to which employees embrace and relate to its
language and spirit. For instance, before drafting its
code, Merck & Company embarked on an organizational
analysis in which it asked 10,000 employees (22 percent
of its total workforce) in 21 countries: "How do we want
to be perceived as a company by shareholders,
customers, suppliers, employees, and the general
public?" The original draft of the code was based on the
results of this survey, as well as information from
employee focus groups and interviews. After an advisory
board composed of senior executives completed a final
draft, it was tested on focus groups of employees
throughout the globe, then implemented.
Include public endorsement of CEO, Ethics Office:
Make explicit the involvement of senior management in
the drafting of the codes. A 1999 study by Arthur
Anderson found that employees' perception of senior
management's commitment was the most important
component of a successful ethics program. The above
mentioned 1999 Conference Board report on global
ethics codes found that of the companies surveyed, 95
percent of CEOs were involved in drafting codes. Also,
some ethical practitioners have found value in making a
list of the cost of other companies' ethical lapses to
make the case to senior management of the importance
of funding comprehensive ethics programs.
Involve Key Company Managers: Companies have
found that drafting a code in conjunction with the
functional area representatives responsible for some
aspect of its enforcement is critical in getting the "buyin" necessary for its effective implementation.
Departments to involve may include: Community Affairs,
Sourcing, Product Development, Quality Assurance,
Purchasing/Buying Agents, Sales, Legal Affairs, Human
Resources, Public Affairs/Communications, and
Government Affairs.
Make Codes Both Global and Local in Scope:
Involve international personnel as early as possible in
the development of the code to make sure it is
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understood and embraced by all employees. Ensure that
codes are translated into the native languages of
employees working abroad.
Cover All Relevant and Important Issues: Outright
bans on certain practices are found most often on
subjects where clear, internationally-accepted principles
are applied. This is the case with child labor, forced
labor, or bribery. On issues where practices vary, and
widely-accepted, measurable standards are less
available - such as conflict of interest -- companies are
more likely to insert language which permits some
flexibility.
Include Enforcement and Implementation
Mechanisms: A 1998 Institute of Business Ethics
survey of 178 British companies found that while many
companies have codes of ethics, a large percentage do
not enforce or implement them. The survey found that
30 percent of those polled had no formal whistleblowing
procedures, 30 percent do not give a copy of their code
to every employee, and only one-third make their codes
available to the public.
Include Resources in the Code: Ethics codes by
definition deal with issues that contain gray areas.
Employees must know where to turn in case of a need
for clarification on certain issues. Consider including
contacts or other information resources where
employees can go when ethical questions arise.
Include Staffing Plans and Implementation
Efforts: A code's effectiveness depends on successful
enforcement mechanisms, which vary from company to
company. Some companies dedicate staff solely to
overseeing implementation of codes of conduct. Other
companies assign implementation duties to personnel
whose core job responsibilities lie in other areas such as
sourcing, quality assurance, or production engineering.
DISTRIBUTING THE CODE:
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Ensure Wide Distribution of Code: The code should
be sent to all company employees in a clear and
readable form, and should be given to new employees
upon joining the company.
Communicate Code Clearly Both Internally and
Externally: Communicating the code to all key
company managers, as well as to business partners,
workers, and the public, is essential to clarifying the
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provisions of a code and its importance. Communication
can take several forms, including workshops for internal
staff and vendors, meetings and signed agreements with
business partners, posting codes on office and factory
walls, and making the codes available to the general
public so as to demonstrate a company's dedication to
creating an ethical climate.
EVALUATING THE CODE:
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Revise and Update Code as Appropriate: The code
must evolve so that it remains applicable to the daily
operations of the business. The above mentioned 1998
Institute of Business Ethics survey on company uses of
codes of conduct found that 86 percent of companies
have a formal procedure for reviewing their code.
Consider Involving External Stakeholders: Royal
Dutch/Shell considers discussion with external
stakeholders "essential" to creating and maintaining a
dynamic of trust between the company and society. The
company asks NGO representatives and academics to
discuss the effectiveness of its code and to hear how
they view the company's adherence to its ethics
statements.
Leadership Examples
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These "leadership" practices have been chosen as illustrative
examples in the area of corporate social responsibility
addressed by this Issue Brief. They are intended to represent
innovation, higher than average commitment, unusual
industry practice or a comprehensive approach to this issue.
Periodically, the examples listed may be changed. If you wish
to share information about your company's leadership
practices or policies, please contact [email protected] with the
relevant information. (Many of the company examples and
policies cited in this report have been verified and approved.
Final approvals for others are pending and information will be
modified if necessary.)
McMurry Publishing : In its early years, Phoenix, Arizonabased McMurry Publishing did not have any written ethics
codes; its values were passed along orally and through the
actions of its employees. When the company decided it was
time to codify these values, its management invited the
entire staff to spend a day brainstorming values the company
held to be important in how it does business. Employees and
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mangers came up with: Do the Right Thing, Help One
Another, Deliver Raving Customer Service, Produce Quality
Always, Embrace Change, Accept Social Responsibility, Earn
a Reasonable Profit. Each new employee spends half a day
becoming oriented to the code, and employee performance
evaluations are based on how well employees adhere to the
values set out in the code. To ensure the statements do not
grow stale, every employee sets aside an hour a month to
discuss one of the values with colleagues. In addition, the
company has instituted a scorecard system in which
employees can give themselves or their colleagues points redeemable at local stores - for shows of teamwork.
(Small/Midsize, Publishing, United States)
Sample Policies
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The following sample policies represent the broad approaches
companies have taken to develop effective and thorough
ethics codes. If you would like to submit your own, please
click the button at the bottom of the screen to send an email.
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Dow Chemical Company :
http://129.33.63.85/about/aboutdow/ethics.htm
Royal Dutch/Shell : General Business Principles:
http://134.146.1.138/royalen/directory/0,5029,25461,00.html
Boeing :
http://www.boeing.com/companyoffices/aboutus/ethics/epolicy.h
Bell South : Commitment Booklet:
http://ethics.bellsouth.com/
Nortel Networks :
http://www.nortelnetworks.com/corporate/community/ethics/
Lockheed Martin :
http://www.lmco.com/exeth/html/code/print.html
Awards
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At this time, BSR is not aware of any awards given to
companies specifically for their ethics codes.
Resources
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The following list is not comprehensive. It is an illustrative
group of the many nonprofit, public sector and/or academic
resources working with the private sector in the area of
corporate social responsibility addressed by this Issue Brief.
The resources identified below have been included because
they provide information or support that is relevant to
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companies, and they are national or international in scope.
Periodically, the examples listed may be changed. At this
time, the list does not include for-profit resources. If you
would like to provide information about additional helping
resources that meet our criteria, please contact
[email protected].
Business for Social Responsibility
http://www.bsr.org/
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Organizational Overview: Founded in 1992, Business for
Social Responsibility (BSR) helps companies of all sizes and
from all sectors achieve commercial success in ways that
respect ethical values, people, communities and the
environment. A leading global business partner, BSR provides
information, tools and advisory services to make corporate
social responsibility (CSR) an integral part of business
operations and strategies. BSR promotes cross sector
collaborations and contributes to global efforts to advance
the field of corporate social responsibility. BSR member
companies have nearly $2 trillion in combined annual
revenues and employ more than six million workers around
the world.
Products and Services:
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Membership. BSR membership provides companies
with access to information resources, advisory services,
and collaborative and networking opportunities.
Advisory Services. BSR helps companies to plan,
implement and measure the impact of strategies,
policies and practices across the full spectrum of CSR
issues.
Conferences. BSR's annual conference convenes more
than 1,000 business leaders from around the world.
Participants stay informed of changing requirements of
CSR, network with peers and thought-leaders in the
field, and learn to apply innovative strategies and
practices that add value to their companies and to
society.
Resources. BSR provides information resources to
members, clients and the general public. Members enjoy
a weekly summary of CSR news from around the world
in the News Monitor. In addition, BSR Magazine, a free
online magazine, offers CSR-related interviews, columns
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and trend analyses. A range of reports, guides and
training modules can be purchased online at the BSR
Store.
Contact Information:
609 Mission St., 2nd Floor
San Francisco, CA 94105
United States
Phone: 415.537.0890
Fax: 415.537.0888
Email: [email protected]
Ethics Officer Association
http://www.eoa.org/
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Organizational Overview: The Ethics Officer Association
(EOA) is a U.S.-based non-profit professional group for
leaders of corporate ethics and compliance programs. For its
more than 650 members, the EOA serves as a "forum for the
exchange of information and strategies among individuals
responsible for setting ethics, compliance and business
conduct programs in their organizations."
Products & Services:
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Research on Corporate Ethics & Compliance: The
EOA conducts research on ethical issues, including
workplace pressure and ethics, and new technologies
and ethics.
Online Forums and Information: A member-only
online discussion group, and on-line ethics and
compliance libraries.
Annual Conference: EOA's annual conference
addresses current ethics and compliance issues.
Professional Development Program: In conjunction
with the Center for Business Ethics at Bentley College,
the EOA offers "Managing Ethics in Organizations," a
week-long professional development program for ethics
officers and others with responsibilities for their
organization's ethics, compliance, or business conduct
programs.
Ethics Administration Software: The EOA has
developed an ethics software program that "assists
ethics officers in collecting, managing, reporting and
graphing details regarding ethics allegations, inquiries
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and human resources."
Corporate Ethics and Compliance Library: The
library contains codes of conduct from member
companies, as well as videos and other internal
communication tools.
EOA News: The EOA News is published four times a
year.
Website: Provides information on its activities and services,
and provides links to other ethics organizations and to a
selection of corporate members' websites.
Contact Information:
Ethics Officer Association
30 Church St., Suite 331
Belmont, MA 02478
United States
Phone: 617.484.9400
Fax: 617.484.8330
Ethics Resource Center
http://www.ethics.org/
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Organizational Overview: The Ethics Resource Center
(ERC) is a "nonprofit, nonpartisan educational organization
whose vision is an ethical world. Its mission is to be a leader
and a catalyst in fostering the ethical practices in individuals
and institutions." The ERC focuses on institution and coalition
development, research and knowledge building, education
and advocacy, and consulting and technical Assistance.
Products and Services:
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Institution & Coalition Development: The ERC has
created or provided assistance to international ethics
centers including the Hong Kong Ethics Development
Centre, the Gulf Centre for Excellence in Ethics, and
centers South Africa and Colombia.
Research and Knowledge Building: Members of the
ERC Fellows Program, a group of business leaders,
ethics officers, and ethics scholars meet biannually to
research a range of topics such as compliance in a
global economy and ethics as a leadership issue.
Education and Advocacy: The ERC serves as an ethics
advocacy center for companies; publishes a quarterly
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newsletter, Ethics Today; shares information and
research through its website and speakers bureau; and
convenes conferences and meetings worldwide.
Consulting & Technical Assistance: The ERC
provides consulting for U.S. and international companies
on effective ethics and compliance programs.
Website: The organization's website provides information on
its publications, videos, management tools, surveys, and
research.
Contact Information:
Ethics Resource Center
1747 Pennsylvania Avenue NW, Suite 400
Washington, DC 20006
United States
Tel: 202.737.2258
Fax: 202.737.2227
Hong Kong Ethics Development Centre
http://www.cuhk.edu.hk/icac/edc.htm
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Organizational Overview: The Hong Kong Ethics
Development Centre (EDC) was established in 1995 under
the auspices of the Community Relations Department of the
Independent Commission Against Corruption (ICAC), which
was established in 1974 to fight corruption in both the public
and the private sectors in Hong Kong. The EDC operates
under the guidance of the Hong Kong Ethics Development
Advisory Committee, comprising members from leading
chambers of commerce in Hong Kong.
Products and Services:
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Resource Centre: The Centre has more than 1,000
local and overseas reference publications on business
ethics. These include books, journals, teaching and
information packages, videos, and sample codes of
conduct from different trades and professions.
Consulting Services: The Center provides consulting
services on various ethics issues including the
formulation of codes of conducts for companies.
Ethics in Practice: This newsletter is published on a
quarterly basis and is distributed free of charge both
locally and internationally.
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Website: The Center's website provides past issues of the
newsletter. Other products and services are not profiled on
the site. However, the site does provide a link to Hong Kong's
Independent Commission Against Corruption.
Contact Information:
Hong Kong Ethics Development Centre
1/F, Tung Wah Mansion
199-203 Hennessy Road
Wanchai, Hong Kong
Phone: 852.2587.9812
Fax: 852.2824.9766
Institute of Business Ethics
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Organizational Overview: The Institute of Business Ethics
was launched in 1986 by Sir Allan Davis, then Lord Mayor of
London. It seeks to "clarify ethical issues in business, to
propose positive solutions to problems and to establish
common ground with people of goodwill of all faiths." The
Institute holds consultations and conferences, undertakes
research, and offers practical advice to companies wishing to
establish and implement ethical policies.
Products & Services:
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Publications: The IBE's publications cover areas such
as ethics and information technology, codes of ethics,
ethics and the environment, and global ethics.
Website: The IBE's website provides information on the
organization's history, objectives, and publications, as well as
"Twelve Steps for Implementing a Code of Business Ethics."
Contact Information:
Institute of Business Ethics
12 Palace Street London
SW1E 5JA
United Kingdom
Phone: 44.171.931.0495
Fax: 44.171.821.5819
Center for Business Ethics, Bentley College
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Organizational Overview:The mission of the Center for
Business Ethics CBE) at Bentley College is to provide an
"international forum for the advancement of business ethics.
The Center is committed to developing strategies for ethical
business conduct and providing a bridge between theoretical
research and practical business activity."
Products and Services:
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Annual Conference: Addresses a range of in-depth
and emerging ethics issues.
Corporate Education and Training: CBE provides
companies, organizations, and their employees with
specialized ethics education and training programs.
Kallman Executive Fellows Program: CBE hosts
academic and executive scholars to assist "in building
relationships with the business community, to create an
atmosphere of intellectual discourse on matters of
business ethics, and to recognize and respond to public
concerns on ethical business practices."
Consulting: CBE consults with companies in setting up
ethics guidelines and programs.
Surveys: The Center conducts surveys on a range of
business ethics issues.
Research Library: The CBE's library has a database of
business ethics books and articles.
CBE News: The Center's newsletter is published
biannually.
Website: Provides information on membership, publications,
activities, and advisory board
Contact Information:
Center for Business Ethics
Adamian Graduate Center, Room 108
Bentley College
Waltham, MA 02452
United States
Phone: 781.891.2981
Fax: 781.891.2988
E-mail: [email protected]
Author: BSR Staff
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