Ethics in Businessby Simon Webley
Implementing an ethics code
This page assumes you have developed a code (see An ethics code programme).
Decisions about how to use a code are as important as the decision to publish one. Implementation is critical. The code must be seen to be endorsed by the board and so should be launched by the CEO and cascaded down to all levels and locations.
Summary of actions to take
- Secure the support of senior staff as early as possible. It is crucial to involve the legal, human resources, compliance, public affairs and internal audit functions from the outset.
- Take time to explain to staff the meaning and principals of the code and the values underlying it. This will make the difference between having an effective code or one that is largely ignored.
- Publish and send the code to all employees. The code should be distributed in booklet form or included in a staff manual.
- Include guidance on the use of the code. Introduce help lines and Q&A boxes.
- Practical examples of the code in action should be introduced into all company internal (and external) training programmes as well as induction courses.
- Introduce procedures to deal with violations of the code, and ensure that these comply with current disciplinary procedures.
- State publicly that the company has a code and an implementation programme that covers the whole company. Put the code on your website and send it to suppliers, joint-venture and other business partners.
- Introduce processes to assess the effectiveness of the code in practice, to review and revise content, and to ensure regular reports to stakeholders and other interested parties (see Monitoring and reporting).
- Establish a system of regular reports to the board on how the code is working and create a board committee, giving it oversight of the policy.
Familiarisation and communication
It is essential that employees perceive the code as important, relevant and useful. Decisions on how the code should be positioned and promoted to staff are therefore critical for its success. At a minimum, each employee should be provided with a personal copy. Merely posting the code on notice boards or including it in the staff manual will have little effect.
Linking the code to employment policies and performance appraisals can be beneficial. For example, many firms have conformity to their codes as an integral part of their employees’ contracts. This enables companies to use the code in any grievance or disciplinary procedures. Those companies including or referring to their code in employment contracts find that the code is generally better known and followed more closely.
It is also vital that existing and new joint-venture and other businesses partners are introduced to the code and understand its importance to the company. The same is true for suppliers: tendering documents, for example, should refer to the code.
Employees are unlikely to grasp the full meaning and implications of the code or their obligation to uphold it unless it is explained to them personally:
- Companies may choose to explain the code in departmental meetings or to groups of diverse employees from across the organisation
- The code should be included in joining instructions and induction training for new employees, as well as being published in staff manuals
- A new employee’s initial introduction to the code should be followed up with regular reference to it in company training programmes, on intranet sites and in departmental meetings.
Indeed, many companies find that it is hard both to sustain interest in the code and to ensure that it percolates through the company’s culture. A continuous awareness programme is required. An effective way of overcoming ethical apathy is to include ethical dilemmas (perhaps in the form of short case studies) in company training and development programmes. Studies have shown that the perceived usefulness of a code depends on a knowledge of and familiarity with the content of a code and not simply on an awareness of its existence. Above all, an ethics policy and code need constant reinforcement in order to become an integral part of the company’s culture.
Embedding the code
It is important that companies introduce a programme to embed the values and the code into the life of the company. Otherwise the code will have little or no effect on corporate attitudes and behaviour.
The day-to-day responsibility for a code and the other parts of an ethics programme usually rests with a senior departmental head. The company secretary or general counsel most commonly fills this role, but heads of corporate affairs, internal audit, compliance and human resource executives are sometimes given the job.
In the United States, it is now normal to find designated ethics officers at head office and other divisional locations. In the UK, one or two companies have appointed corporate responsibility managers. What matters is that there is a strategy for embedding the message throughout the organisation and that a particular person, who has access to a board member, is given responsibility for corporate values and ethics policies.
The role of those in charge of ethics programmes is to provide advice, investigate apparent breaches of codes, provide training in ethical dilemma solving and ensure that managers are operating their departments in accordance with the standards set out in the company’s code. But beware of generating a ‘tick box’ culture; one based on understanding and applying corporate values and principles is generally far more successful.
Violations of the code
If an ethical code is to have credibility, a company must be willing to discipline employees in breach of any aspect of the code. The procedure should be kept simple. It would normally involve the human resources and legal officers of the company. To help avoid potential individual bias or prejudice, other personnel should join these executives to make up a small panel.
The panel must carefully follow the company’s disciplinary procedure and must ensure that all employees involved understand the facts of the alleged breach. The individual or individuals suspected of unethical practice may benefit from having the support of a trade union representative or other relevant people. Depending on the seriousness of the case, relevant consequences could range from a warning to dismissal (see the topic on Discipline and Grievance).
One difficulty that arises in these cases is to distinguish between genuine breaches of the code and a complaint involving a grudge or revenge by a discontented employee or ex-employee.
A young barman at a large hotel was dismissed for stealing a bottle of gin. He felt that as this was a first offence he had deserved a warning and held a grudge against his boss.
He decided to go to the local Trading Standard’s office and tell them about a practice he knew that was going on, namely filling part-full bottles of whisky with other brands of whisky remnants at the end of each day.
A subsequent formal investigation found this was being done and the hotel was threatened with the loss of its licence to sell alcohol. The head barman, who had been there thirty years, was asked to retire early.
Companies should have a procedure to cover any situation where an employee feels that he or she is being asked by a senior employee to act unethically. Many larger companies operate confidential helplines, otherwise known as hotline or advice lines, that can be used for this purpose. They can also be used to alert senior management to some dubious practice or simply to ask for help in handling an ethical issue.
Some companies prefer to outsource their helpline facility to reassure staff that comments will be treated confidentially.
At the extreme, whistleblowing cases involve an individual taking their concern to an outside body, such as a newspaper.
If an individual decides to ‘go public’ about a situation in their place of work that they consider to be illegal or unethical, the Public Interest Disclosure Act of 1999 provides some protection for the individual to ensure that they are not discriminated against, provided they have followed proper procedures.
Our lives begin to end the day we become silent about things that matter.
The best policy to prevent ‘whistleblowing’ is to develop an open corporate culture and to encourage staff at all levels to feel free to speak up about things that concern them, without the fear of reprisal, and to put in place an effective and trusted grievance procedure. Having sufficient safety valves within companies should ensure that employees are able to discuss issues and raise complaints internally, without resorting to external whistleblowing.
Having an effective code of ethics can help to maintain a company’s reputation. Copies of the code should therefore be made available to shareholders, recruitment agencies, suppliers, sub-contractors, regulators, competitors and other organisations with which the company has dealings. The code should be posted on the company website and reported upon in the Annual Report or elsewhere.
Customers are also among those stakeholders who are entitled to know how the company does business. Some firms provide separate ‘consumer charters’ or codes with their products. Others include details on the back of invoices or receipts. Such public statements openly invite customers to measure a company’s performance according to the standards it espouses.
Those who set out their position publicly usually find that it can be a means of sustaining customer and employee loyalty as well as an incentive to management to see the standards are observed. Currently, growing numbers of customers are asking for assurances that suppliers in developing countries observe minimum requirements for health and safety, avoid child labour and maintain International Labour Organisation and other human rights standards.
It follows that suppliers should receive details of any relevant parts of a code in order to ensure that they understand what is expected of them. Some firms ask suppliers to report any possible code breaches that are noticed in the course of doing business with the company. In this way, a company’s code can help to build trust with suppliers and other business partners, such as sub-contractors and joint venture partners.