Ethics in Businessby Simon Webley
The ethics policy
The proportion of larger UK companies with explicit ethics policies has risen over the last ten years from a third to more than two thirds. Having an ethics policy is now considered a hallmark of a well-managed company. The ethics policy is normally expressed in a code of business ethics, sometimes called a code of business conduct or given a description such as ‘the way we work’.
Unlike some other institutions, such as professional associations, business in general has no formally articulated or monitored standard of conduct. There is no generally recognised code of best practice to benchmark the way companies operate. Beyond the law, boards are left to determine their own values and the way they will conduct their affairs.
I consider ethics, as well as religion, as supplements to law in the government of man.
The spur to address ethical issues may arise from a major embarrassment following an incident of well-publicised unethical behaviour. But the best time to consider the content and procedures for implementation of an ethics policy is when there is no imminent crisis and when employees at all levels can participate in the process. In this way, they will better understand its implications. It is therefore important to gain acceptance of the policy at all levels, so that it will be embedded and act as an expression of the company’s culture.
Who is responsible?
The short (and correct) answer is everyone.
However, the functional responsibility for the company’s ethical policies and/or ethics code may rest with a human resources department manager, company secretary, Corporate Responsibility manager, risk manager, compliance officer or internal auditor. Increasingly, organisations are establishing responsibility at board level, through committees, such as the Audit Committee or a dedicated Ethics Committee.
In the USA, most large companies employ one or more Ethics Officers; they are on course to becoming an established profession.
While top management is expected to show a commitment to the company’s ethics code and set an example with their own behaviour, middle managers are given operational responsibility for implementing and upholding the organisation’s ethical standards.
Corporate values and ethics have to come from the top. Board involvement is essential if an ethics policy is to be effective. The code and other aspects of the policy should be endorsed by the chairman and/or CEO and board members should require regular reports on how the code is operating. One size never fits all. Each company needs to develop its own unique code of ethics, based on the core values of the business and particular ethical issues that it encounters.
The Combined Code on Corporate Governance (2003) states that the board should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met.
All organisations operate on the basis of a set of core values. These can be either explicit (in the form of a Statement from the board, chairman or CEO), or implicit (understood from the behaviour of the leadership and other staff). The larger the organisation, the more important it is to make the values by which it operates explicit if it is to be respected in the market place and community.
In preambles to UK company codes of ethics, two types of value words can be distinguished: those relating to the business values and goals and those relating to ethics. The lists below (taken from the IBE survey of preambles of codes of ethics, 2003) show words that senior management use to describe the aims and characteristics of the businesses for which they are responsible, and also the commonly-used words that describe corporate ethical values.
A recent survey indicates that ‘highest ethical standards’ now is the most common value, followed by ‘integrity’ and ‘honesty’.
Both business and ethical values are needed to serve as benchmarks against which behaviour can be determined and strategy tested. To be effective and meaningful, these benchmarks require consensus from the current (and future) leadership and ‘buy in’ from all staff. Without clearly enunciated core values, no corporate ethics policy is likely to be effective.
Ethical codes based on the core values of the company play an important role in creating ethically-accountable businesses. By providing guidance to staff at all levels, codes help to forge a valuable consensus on ethical behaviour across the organisation.
Companies have come to understand that their employees around the world will not necessarily share a common set of values. For example, the ‘ethical sensitivity’ of an individual may be able to accommodate the payment of a bribe to secure an export order, but the same person may be outraged by, say, the lies told by a colleague for the sake of personal advancement.
A code of ethics can clarify where lines are drawn and where discretion ends or is limited. Ultimately, it is the decisions of individuals at all levels of the organisation which will determine the ethical quality of the business. The production and implementation of a code of business ethics can act as a defining feature of any organisation.