The bottom-line benefits of ethics code commitment

Recent corporate scandals highlight that an exclusive focus on financial performance, to the exclusion of broader stakeholder-related performance criteria, can be detrimental to overall firm value creation. Among the ways to enhance leaders’ focus on stakeholder value creation is the development and executive championing of an effective code of ethics. Such “Ethics Code Commitment” (ECC)—which incorporates characteristics of the code and behaviors by top management—affects a broad number of organizational stakeholders, yielding value for them, thus increasing their psychological and/or financial commitment to the organization while strengthening the firm's corporate culture. This article develops a model highlighting the various benefits of ECC to key stakeholders and the subsequent effects on an organization's culture and competitiveness. In particular, we focus on the need to include community leaders and key employees in the ethics code development process; the importance of moving away from a purely legalistic document to one that inspires stakeholders; the importance of linking ethics to strategy; and managerial approaches that can enhance the effectiveness of the code of ethics through ethics-related dialog. When developed and implemented correctly, ECC can prove to be an important source of competitive advantage via the effects it has on relationships between the firm and key stakeholders.     

A Code of Ethics for CorporateCode of Ethics

Are corporate codes of ethics necessarily ethical? To challenge this notion, an initial set of universal moral standards is proposed by which all corporate codes of ethics can be ethically evaluated. The set of universal moral standards includes: (1) trustworthiness; (2) respect; (3) responsibility; (4) fairness; (5) caring; and (6) citizenship. By applying the six moral standards to four different stages of code development (i.e., content, creation, implementation, administration), a code of ethics for corporate codes of ethics is constructed by which companies can be ethically audited for compliance. The newly proposed code of ethics for corporate codes of ethics was then applied to four large Canadian companies representing a variety of industries: telecommunications; banking, manufacturing, and high technology. The ethical audit of the four companies' ethics programs based on the proposed code indicates that all four companies have room to improve the ethical nature of their codes of ethics (i.e., content, creation, implementation, administration).     

‘The Impact of Corporate Ethical Values and Enforcement of Ethical Codes on the Perceived Importance of Ethics in Business: A Comparison of U.S. and Spanish Managers’

This two country study examines the effect of corporate ethical values and enforcement of a code of ethics on perceptions of the role of ethics in the overall success of the firm. Additionally, the impact of organizational commitment and of individual variables such as ethical idealism and relativism was examined. The rationale for examining the perceived importance of the role of ethics in this manner is to determine the extent to which the organization itself can influence employee perceptions regarding ethics and social responsibility. Results indicate that all of the variables tested, except relativism, impacted upon one’s perceptions of the importance of ethics and social responsibility. Perceptions of the importance of ethics and social responsibility also varied depending upon country of residence with the U.S. sample having somewhat higher perceptions concerning the importance of ethics and social responsibility than their counterparts in Spain. Furthermore, when comparing the two samples, the U.S. sample had significantly higher corporate ethical values, greater enforcement of ethical codes, less organizational commitment and both lower idealism and relativism.     

Ethics Programs in Global Businesses: Culture's Role in Managing Ethics

Even if there were widespread cross-cultural agreement on the normative issues of business ethics, corporate ethics management initiatives (e.g., codes of conduct, ethics telephone lines, ethics offices) which are appropriate in one cultural setting still could fail to mesh with the management practices and cultural characteristics of a different setting. By uncritically adopting widely promoted American practices for managing corporate ethics, multinational businesses risk failure in pursuing the ostensible goals of corporate ethics initiatives. Pursuing shared ethical goals by means of culturally inappropriate management practices, in short, can undermine the effectiveness of ethics management efforts. This article explicates how several important dimensions of culture can influence the effectiveness of common ethics initiatives, and recommends the development and application of a culture-structure contingency analysis in the task of encouraging ethical behavior in global businesses.     

Ethics Audits and Corporate Governance: The Case of Public Sector Sports Organizations

This article presents a theorized and conceptually informed method for the undertaking of an ethics audit organization. At an operational level, the overall integrity of an organization, it is argued, may be evaluated through the application of a conceptual framework that embraces the inter-related themes of individual responsibility, social equity and political responsibility. Finally, a method is presented for ethics audit which was developed in the auditing of a national public sector sports organization: sportscotland. This emphasizes the significance of key personnel (individuals and in groups) in producing and reproducing the organizational ethos, whilst recognizing the importance of anonymity and confidentiality throughout the process. The theoretical terrain of the ethics audit is articulated through a consideration of ethics as applied moral philosophy, equity as social justice and corporate governance as the moral health (or otherwise) of a public sector sports organization.     

Universal Moral Values for Corporate Codes of Ethics

How can one establish if a corporate code of ethics is ethical in terms of its content? One important first step might be the establishment of core universal moral values by which corporate codes of ethics can be ethically constructed and evaluated. Following a review of normative research on corporate codes of ethics, a set of universal moral values is generated by considering three sources: (1) corporate codes of ethics; (2) global codes of ethics; and (3) the business ethics literature. Based on the convergence of the three sources of standards, six universal moral values for corporate codes of ethics are proposed including: (1) trustworthiness; (2) respect; (3) responsibility; (4) fairness; (5) caring; and (6) citizenship. Relying on the proposed set of universal moral values, implications are discussed as to what the content of corporate codes of ethics should consist of. The paper concludes with its limitations.     

Ethics in Business: Answering the Call

What might happen if business leaders across the globe viewed their work as a sacred calling in a religious sense? Might not the world be a far better place? This paper is an effort to stimulate debate and discussion on this topic. Concepts addressed include: (a) ethics in business, (b) ethical standards in business settings, (c) the role of law, (d) levels of corporate responsibility, (e) the role of religion in business ethics, (f) the idea of business as a calling in a religious sense, (g) the elements of modern corporate culture, (h) creating an ethical corporate culture, (i) demonstrating corporate social responsibility, and (j) providing servant leadership. The introduction to the paper shows how these concepts interrelate; its conclusion offers a challenge to business leaders to answer their call to business in the truest sense.     

Striking a Balance Between Rules and Principles-based Approaches for Effective Governance: A Risks-based Approach

Several recent studies and initiatives have emphasized the importance of a strong ethical organizational DNA (ODNA) to create and promote an effective corporate governance culture of trust, integrity and intellectual honesty. This paper highlights the drawbacks of an excessively heavy reliance on rules-based approaches that increase the cost of doing business, overshadow essential elements of good corporate governance, create a culture of dependency, and can result in legal absolutism. The paper makes the case that the way forward for effective corporate governance is to strike an optimal balance between rules-based and principles-based approaches. The recent corporate scandals have demonstrated that the ethical ODNA is critical to the driving force and basis of legal and regulatory requirements. Effective governance means adhering to ethical principles, not merely complying with rules, and is a crucial guardian of a firm’s reputation and integrity. It is through an effective corporate governance program (that is, one that optimally captures and integrates the appropriate aspects of rules-based and principles-based approaches, and identifies and assesses the related risks) that an organization can reconfigure its ODNA for improved performance. Focusing on the ethical ODNA as the basis of new governance measures provides an opportunity to develop a competitive advantage as it represents a potential source of differentiation, strengthens the relationship with all stakeholders of the organization by building a culture of trust and integrity, and re-instills investor confidence. This paper employs dialectical reasoning that links the ODNA through principles-driven rules in developing a risks-based approach. A comparison from a risk assessment perspective between rules-based and principles-based approaches is presented. Although there have been few applications employing dialectical reasoning in business research, this methodology can be extremely useful in isolating ethical issues and integrating them into the business process. The risks-based approach captures the benefits of both rules-based and principles-based approaches, and incorporates trust-based principles such␣as solidarity, subsidiarity and covenantal relationships.Sundera Arjoon is a Senior Lecturer in Ethics at the Department of Management Studies, The University of the West Indies, Trinidad, He has served as Head of Department (2002–2005) and as Deputy Dean of the Faculty of Social Sciences (1996–2002). His publications have appeared in the Journal of Business Ethics, Journal of Markets and Morality, Global Development Studies, Social and Economic Studies, Applied Financial Economics, and the Journal of Eastern Carribean Studies. His current teaching and research interests include ethical decision-making, corporate governance, virtue ethics and familial ethics.     

Developing,Communicating and Promoting Corporate Ethics Statements: A Longitudinal Analysis

This paper reports on the findings of the third in a series of surveys of large U.S.-based and multinational corporations on their ethics statements. Focusing on four types – values statement, corporate credo, code of ethics and Internet privacy policy – we find growth in the use of these statements over the last decade. We discuss the external communication of these statements, including the avenues that are now used for promotion and their intended audiences. The paper concludes with a number of research issues to be addressed.     

Tone at the Top: An Ethics Code for Directors?

Recent corporate scandals have focused the attention of a broad set of constituencies on reforming corporate governance. Boards of directors play a leading role in corporate governance and any significant reforms must encompass their role. To date, most reform proposals have targeted the legal, rather than the ethical obligations of directors. Legal reforms without proper attention to ethical obligations will likely prove ineffectual. The ethical role of directors is critical. Directors have overall responsibility for the ethics and compliance programs of the corporation. The tone at the top that they set by example and action is central to the overall ethical environment of their firms. This role is reinforced by their legal responsibilities to provide oversight of the financial performance of the firm. Underlying this analysis is the critical assumption that ethical behavior, especially on the part of corporate leaders, leads to the best long-term interests of the corporation. We describe key components of a framework for a code of ethics for corporate boards and individual directors. The proposed code framework is based on six universal core ethical values: (1) honesty; (2) integrity; (3) loyalty; (4) responsibility; (5) fairness; and (6) citizenship. The paper concludes by suggesting critical issues that need to be dealt with in firm-based codes of ethics for directors.     

The State of Business Ethics in Israel: A Light Unto the Nations?

Whether the nation of Israel has become a “light unto the nations” in terms of ethical behavior among its business community remains in doubt. To examine the current state of business ethics in Israel, the study examines the following: (1) the extent of business ethics education in Israel; (2) the existence of formal corporate ethics program elements based on an annual survey of over 50 large Israeli corporations conducted over 5 years (2006–2010); and (3) perceptions of the state of business ethics based on interviews conducted with 22 senior Israeli corporate executives. In general, and particularly as a young country, Israel might be considered to have made great improvements in the state of business ethics over the years. In terms of business ethics education, the vast majority of universities and colleges offer at least an elective course in business ethics. In terms of formal business ethics program elements, many large companies now have a code of ethics, and over time continue to add additional elements. Most respondents believed they worked in ethical firms. Despite these developments, however, there appears to be significant room for improvement, particularly in terms of issues like: nepotism/favoritism; discrimination; confidentiality; treatment of customers; advertising; competitive intelligence; whistle-blowing; worker health and safety; and the protection of the environment. When compared with the U.S. or Europe, most believed that Israeli firms and their agents were not as ethical in business. A number of reasons were suggested that might be affecting the state of business ethics in Israel. A series of recommendations were also provided on how firms can better encourage an ethical corporate culture. The paper concludes with its limitations.     

Global Business Citizenship and Voluntary Codes of Ethical Conduct

This article describes the theory and process of global business citizenship (GBC) and applies it in an analysis of characteristics of company codes of business conduct. GBC is distinguished from a commonly used term, “corporate citizenship,” which often denotes corporate community involvement and philanthropy. The GBC process requires (1) a set of fundamental values embedded in the corporate code of conduct and in corporate policies that reflect universal ethical standards; (2) implementation throughout the organization with thoughtful awareness of where the code and policies fit well and where they might not fit with stakeholder expectations; (3) analysis and experimentation to deal with problem cases; and (4) systematic learning processes to communicate the results of implementation and experiments internally and externally. We then identify and illustrate the three attributes of a code of conduct that would reflect a GBC approach. The three attributes are orientation, implementation, and accountability. The various components of these attributes are specified and illustrated, using website examples from six global petroleum companies.     

The Empirical Assessment of Corporate Ethics: A Case Study

Empirical analyses of the ethics of corporations with the aim to improve the state of corporate ethics are rare. This paper develops an integrated, normative model of corporate ethics by conceptualizing the ethical quality of organizations and by relating this contextual quality to various expressions of immoral behavior. This so-called Ethics Qualities Model for organizations, which contains 21 ethical qualities, allows one to assess the ethical content of institutional groups of individuals. A proper conceptualization is highly relevant both for the empirical corroboration of business ethics theories and for managerial purposes, such as judging individual and group performance or informing external stakeholders. The empirical applicability of the model is illustrated by an explorative case study of a large, globally operating financial institution. This case-study demonstrates that the corporate ethical qualities differ with respect to their perceived optimality as well as to their estimated impact on (un)ethical conduct. The various results provide managers with many clues to understand their organization and to take effective measures to improve the ethical content of their organization.     

Organizational Factors Encouraging Ethical Decision Making: An Exploration into the Case of an Exemplar

What factors in the organizational culture of an ethically exemplary corporation are responsible for encouraging ethical decision making? This question was analyzed through an exploratory case study of a top pharmaceutical company that is a global leader in ethics. The participating organization is renowned in public opinion polls of ethics, credibility, and trust. This research explored organizational culture, communication in issues management and public relations, management theory, and deontological or utilitarian moral philosophy as factors that might encourage ethical analysis. Our understanding of organiza tional ethics is enhanced by elucidating factors the case revealed as encouraging ethical analysisan organizational culture that emphasizes the importance of ethics, Theory Y management, a symmetrical worldview valuing innovation and dialogue, a counseling role for issues management or public relations in the dominant coalition, rewarding ethical behavior, ethical analysis using moral philosophy, consistency between individual values and organizational philosophy, and ethics training. These factors, and perhaps others as yet unidentified, worked together to create an environment that encouraged ethical decision making at the exemplar organization.     

Corporate Identity,Ethics and Reputation in Supplier–Buyer Relationships

Multi-national corporations (MNCs) have been criticised for not behaving ethically in some situations, which could have a negative effect on their reputation. This study examines the ethics of a large MNC in its relationship with its suppliers. A brief literature review of corporate identity, business ethics and buyer–supplier relationships is undertaken. The views and perceptions of the buying staff and the suppliers to a large South African MNC are obtained and discussed. The results indicate that this MNC has a good corporate reputation among both its suppliers (an important stakeholder) and its own buying department. The existence and implementation of formal codes of ethics was found to be a necessary, but not sufficient condition for good ethical practice. Candid relationships with suppliers emerged as a second and important factor. Ethical perceptions of buyers by suppliers are driven by the management of corporate identity, through the elements of ethical standards and candid relationships. We present a model of corporate identity/reputation in Buyer–Supplier Relationships. Michael Bendixen is a Professor of Research Methodology and Statistics at the H. Wayne Huizenga School of Business at Nova Southeastern University, Florida. His research interests include business ethics, governance and culture. His articles have appeared in the European Journal of Marketing, Industrial Marketing Management, Journal of Business Research, Journal of International Business Studies and Journal of Marketing Management amongst others. Russell Abratt is a Professor of Marketing at the H. Wayne Huizenga School of Business at Nova Southeastern University, Florida. His research interests include corporate identity management and business ethics. His articles have appeared in the Journal of Business Ethics, Journal of Business and Psychology, European Journal of Marketing, Journal of Marketing Management, Industrial Marketing Management, and Business Horizons amongst others.     

On Changing Organizational Cultures by Injecting New Ideologies: The Power of Stories

Recent corporate legal and ethical meltdowns suggest that avoiding such harms to companies and to society requires a significant culture change within the organization. This paper addresses the issue of what it takes to change a corporate culture. While conventional wisdom may suggest that a change requires only the institution of an ethics office with proper reporting paths and an ethics code, such an approach is only a beginning. Many large corporations, especially those in danger of legal and ethical catastrophes, need to undertake multiple initiatives to generate a new culture that manifests new values and new vocabularies. A cultural change accomplished by changing large numbers of personnel is expensive in financial and human terms. One component of a less costly approach is to tell new and different stories within the corporation because stories establish the cultural DNA that gives organizations, families, and individuals their identities. Such changes in individual firms, however, are influenced by the ideological assumptions within which and under which the industry and the society operates.     

Ethical Codes of Conduct and Organizational Context: A Study of the Relationship Between Codes of Conduct, Employee Behavior and Organizational Values

Codes of ethics are being increasingly adopted in organizations worldwide, yet their effects on employee perceptions and behavior have not been thoroughly addressed. This study used a sample of 613 management accountants drawn from the United States to study the relationship between corporate and professional codes of ethics and employee attitudes and behaviors. The presence of corporate codes of ethics was associated with less perceived wrongdoing in organizations, but not with an increased propensity to report observed unethical behavior. Further, organizations that adopted formal codes of ethics exhibited value orientations that went beyond financial performance to include responsibility to the commonweal. In contrast to corporate codes of ethics, professional codes of ethical conduct had no influence on perceived wrongdoing in organization nor these codes affect the propensity to report observed unethical activities.     

Professional Ethical Standards,Corporate Social Responsibility,and the Perceived Role of Ethics and Social Responsibility

This study explored several proposed relationships among professional ethical standards, corporate social responsibility, and the perceived role of ethics and social responsibility. Data were collected from 313 business managers registered with a large professional research association with a mailed self-report questionnaire. Mediated regression analysis indicated that perceptions of corporate social responsibility partially mediated the positive relationship between perceived professional ethical standards and the believed importance of ethics and social responsibility. Perceptions of corporate social responsibility also fully mediated the negative relationship between perceived professional ethical standards and the subordination of ethics and social responsibility. The results suggested that professions should develop ethical standards to encourage social responsibility, since these actions are associated with enhanced employee ethical attitudes. Sean Valentine (D.B.A., Louisiana Tech University) is an Associate Professor of Management in the College of Business at the University of Wyoming. His research interests include ethical decision making, organizational culture, and job attitudes. His research has appeared in journals such as Human Relations, Behavioral Research in Accounting, Journal of Personal Selling & Sales Management, and Journal of Business Research. Gary Fleischman (Ph.D., Texas Tech University) is an Associate Professor of Accounting and the McGee Hearne and Paiz Faculty Scholar in Accounting at the University of Wyoming. His teaching expertise is in accounting and entrepreneurship, and his research interests are in business ethics and behavioral business research. He has published in journals such as Behavioral Research in Accounting, The International Journal of Accounting, and Journal of Business Ethics.     

Corporate codes of ethics: necessary but not sufficient

While most large companies around the world now have a code of ethics, reported ethical malpractice among some of these does not appear to be abating. The reasons for this are explored, using academic studies, survey reports as well as insights gained from the Institute of Business Ethics' work with large corporations. These indicate that there is a gap between the existence of explicit ethical values and principles, often expressed in the form of a code, and the attitudes and behaviour of the organisation. The paper suggests that two basic reasons appear to be at the heart of the problem: ineffective ethics programmes and deficiencies in corporate culture. The paper concludes that successfully embedded corporate ethical values requires well‐designed ethics policies, sustained ethical leadership and incorporation of ethics in organisational processes and strategy as part of an ethical culture at all levels of the organisation. It makes some practical suggestions on how this can be achieved.     

Codes of Ethics as Signals for Ethical Behavior

This study investigated effects of codes of ethics on perceptions of ethical behavior. Respondents from companies with codes of ethics (n = 465) rated role set members (top management, supervisors, peers, subordinates, self) as more ethical and felt more encouraged and supported for ethical behavior than respondents from companies without codes (n = 301). Key aspects of the organizational climate, such as supportiveness for ethical behavior, freedom to act ethically, and satisfaction with the outcome of ethical problems were impacted by the presence of an ethics code. The mere presence of a code of ethics appears to have a positive impact on perceptions of ethical behavior in organizations, even when respondents cannot recall specific content of the code.