Managing Ethics: 161

5.3
Company C o d e s

Codes o MOst S p e c i f i c e n e r a l i t y

practice
increasees
Codes of
May be called Conduct
33 you
| 9
down
Codes of Ethics
Company Codes

Mission
Statement
Most
Value
General
Statement

Fig. 5.3 Company Codes

of conduct tend to be the most

Codes of practice and codes
between the two a r e less
riptive in time. The dillerences
than the lact
that they exISt at
all. Some might argue that
ionificant ne such a code, where a s the
ol
need
dood people will
not
guidance
malicious, selfish or even stupid will ignore it. In both the c a s e s , the
existence of
a
code makeS
no
aterence. From this, we understand
hat sood people always know what to do. and that those who do the
reasons., It depends o n the
wrong thing always
do
so 1or reprelhensible and the
assumption that w e can divide the
people neatly into the good
bad. though this is m o r e transparently false.
We all need to know, or try to work out, how general principles are
to be made to apply to concrete particular cases. Dillerent people may,
in good faith and quite justifiably, come to different conclusions about
the rightness of a particular act in particular circumstances, and in

private life this may not matter.

For example: A judgement to promote a particular person may be
totally defensible, but it has to be seen in the light of a company's record
on promoting, say, women or members ol the minorities. The persons
promoted. or not promoted, have a right to be treated not yet reasonably
but equitably. Those who operate the procedures, must not be seen as
personally responsible for the outcome.
One way of seeing codes is by analogy with the law. Just as case
law and rules of process are needed in order to make it possible for
statuteand common 1law to be implemented. a code of practice mediates
between general.
Surveys conduetedd ICar No.ol Usable Company codes
in UK&USA companies esponses Jound tn

Surbeye COnpaies

wesley's Survey 1988 300 100

in UR 1992 400 159 113
Langlols and Schlegel 1990 1481 370 186
milch
Weaver's Survey 1992 NA NA 8:36 of the
1992 Fortune 1000 IO00 comparnies

surveyed 930
 162: Business Ethics

statement on ethics
22.8% had policy
42.6% had guidelines for the proper conduct of siness.
the USA, the me
From the above, it may be noted thatolin
of companies having codes ethics is higher rs
percentages
found in the UK.
than and
tha
The summary found by Weaver in 1993 1s as under:

Survey at Codes found in

companies
USA companies 83 % (Second survey showed 939
European companies 50%
Nash in 1992 made a comparative survey of USA and Eur.
companies and observed as indicated below:
European
USA Companies Ethics activity is more widespread. more
sophisticated, moving deeper into the
organisation
European Ethics activity is still not attracted
to lormalise ethics statements and codes.
Companies Codes and
Ethics progriammes appeared to be less
Irequent. These are new and more lound in large
companies but more
widely disseminated than in the
USA
Reasons for adopting a Code of Conduct
(a) One of the reasons
for adopting a cocde of conduct may be to
see themselves as sell-regulatory in order to avold regulation
by government.
E.g. Strategy adopted by press, customs, stock market,
industries like tobacco, liquor sellers in regard to advertising
(b) This may be a wish
by a profession or a company to
improve
its image with the general public. or with its peers in thie
industry. Reasons might be prudential, since they are
at aimed
beneliting (or avoiding harm to) the company or profession
in question.

c) In some cases, drawing up codes of behaviour are clearly mora

in character. Companies where they feel that they have to
face specíal problems
with
or particular temptations and canna
cope up ordinary moral judgement.
successful code is the result
of following three conditions:
Three major concerns.
How business may make
effective use of company codes
The impact of company codes on business practice no
varlety of perspectives?
To analyse company codes using theories of ethics
 170

coordinatlon and
for the ersh
ol the codc
responsible need
Those
problems lcading to
of implenentation
the
production
Irom The Very beglnning
mented AWare
processes

cainot be eflectively
Imple the
sliould repllcate th
which
a code
Producing
of production les
"The process 1or inplementation
cynicism." the basis
codificd and lay
are being intertwined.

inextricably
arc
product

5.6 Codes of Ethics and prine

Codes of ethics are statements ol values
i r s t step In de
of the conpany. The
deline the purpose hat sone companles ,
and the only slep
ethics programme, 1s a statenent of the nors
code of ethics. A
code of ethics organisations have a respone
Managers of
of a n organisation. environment that encura
organisational
creating a healthy ethics. The most co
decision by making by
institutionalising
comon
of institutionalising ethics
In
the organisallon,
apart Irom the
a Code of Ethics.
Statement, is to establish

"Code of Ethics" and

"Code of Conduct" and
The terms
Practice" are often used interchangeably. The comparison of the s Code
as under:

Codes o/ Ethics Codes o Concduct Codes of Prtee

Statements of values
principles which delineTypically conprised of a
purp0Se of the
co
we expect you to bEenave
The codes scek to clarify
the ethics of the
corporation and to
deline its responsi-
Dilities to diflerent
groups ol stakeholders
as well as delining the
responsibillties of its
employees. Code says
This Is who we and
this is what we stand
for and with the word
We including thee
and its
company
employees,
all
whose
behaviour and actions
are expected to conform
to the ethics and
and Statement ol rules Interprelalons a
illustrations of
set of rules, stated either corporale values æ
airmatively principles; addresw
prohibitions. or as
This 1s to the
enployee as
what you must (or must individual decisia
maker. This is ko
not) do" we do things arut
Penalties for here
transgresslons may be
The codes setk to
identified and systems of
shape the expressi
compliance and appeal
of the corporations
defined.
stated values throu
Potential conflicts of the practices of is
interest are often
described, with
employees. codes
practice tend to re
approprlate rules lor on guidelines lor
guidance. This approach
decision making
take a vicw ot ethics as
what is not to be done lor
using such rules o
thumb as act and
Seen not to be done) in disclose or scek
view of the
consequences. advice. This appro

principles staled In the Specify actions in the takes the view

o

we o
work place: Focussed at as "what
code. ethics
lower levels in because It is our

General guides to companies. character.

decislons about the Contain examples of
acting In the work place. approprlate behaviour to
be
meaningful.
Fig. 5.13 Comparision of Codes of Ethics, Codes of Conduct Codes

of Practice
 To c o n t y O ncrease es
at local, et and
state, natin
lOcal, state.
the protession
i c a l odes are statements of
national and recognition
international
for
Ethi the norms levels
els.
n i s a t í o n
which are
generaly proposed, discussed,
and beliefs of an
orgaddle and top eveo tne management in the and
delined by
he ed and distributed t0 all its members. irm and
are Norms are standa then
Paviour: they the ways the senior
people in the of
nt the o when conlronted with a given organisation
an ethic code are situation.
ne
generally
1t is easier to list the expressed as
Normally
statementsS, 1or
staten a negative
thingSperson
precise about person should do. should
De
the things a not do
than t

Employees
E.Btary
ol
our
of overCOmpany Should not
accept
with a monetary
value value Rs.200 in total rom
ersonal gifts
tate, and they are
expected
meet the to
any business friend
or costs for meals or
a5tertainment cost
(concepts,
per no drama, sporting
rama, spo
events
any
have a
value over Rs.200 etc.) that

develop a Code of Conduct?

How to

Carter McNamara suggests the

lollowing three guide lines:
1Identify key behaviours (needed to adhere to the ethical values
proclaimed in your code of ethics).
2 Include wording (that indicates all
conform to behaviours specilied in employees
are
the code of
expected to
conduct).
3 Obtain review from key members of the
confined organisation and not
to legal or HRD (such reviews to ensure these policies
are in accordance with laws and
regulations).
Topics covered in Code of Conduct
These are as under:

Following instructions of superiors

Maintaining confidentiality
Not accepting costly gifts from stake holders as a result of
company rule

Complying with laws and regulations

N o t using company's property for personal use, etc.
 178:Business Ethics

The "group19."
Contributed at fullthen-the sum toa on
force-depends o every
the person's
roup's DesStsl lalera,
intelligence, as shown in s ny.A leaderot
collaboration can keep cooperalion high and thus en Skil
Broups decisions will be worth the ellort of meetina e th
know how to balance the groups locCus on the task ath ea
attention
to the quality of members relattonships. Thev with
create a friendly but effective climate that lifts eve
natura
Spirits
5.8 Ethics Training Programmes
Elements of Programmes for uilding Commitment to Ethic
The following six
elements ot programmes for build.
commitment to ethics are needed. Out ot which ethics
one among them.
trainin
aining is

Ethics
Training
Constructive
Steps to be laken Commitnent
by the
of top
Management Programmes for Management
buildina
commitment to
ethics
Building syslems Assignment of
tnat support Hesponsibility lor
implementation c
Ethical Behaviour Ethics
Programme tD
Clarifying he
company's Managerne
Elhical Commite
Standards

Fig. 5.16
Programmes for Building Commitment to Ethics

(1) Commitment of Top

Management
Top management to ensure
the following:
adequate resources are
ethical invested
behaviour is
truly
to provide leadership supported
through example
 Managing Ethics: 179

is folded int0
every aspect of corporate
including straeBCplanning process e.g. ((i)
1) D
Strategic management, (i) HRM. Un g.
Partie
management. (iv)
9uality pative
management, (v) Ethical
decision making

involving the chairman ot the company to

ethics programme and also announce it ully
and upport
ensure
its implementalion

Gormation of an ethics committee at board of director's

After establishing it has to oversee
development
and operation of ethies programme

iment of responsibility for implementation of Ethics

to Ethics Management Committee
Progran
me senior level manager is to be made responsible for
development. coorainanon o eucs proBramme. He is to be assisted
by full tme manager t0 1mpiement tne ethics programme. The full
tine manager is well versea i n business aspects and as well as act
as a business ethics Specialist and tunction as ombuds person.
He can also have ethics management committee of senior officers
for administrating policies and procedures. The most
important
aspect is the process ol rellection and dialogue while preparing
codes. policies and procedures etc. The ethics
management
committee takes decisions in groups, which should be cross
functtonal teams. These code ol ethics can avoid the occurrence of
ethical dilemmas.
(n clarlfying the Company's Ethical Standards
nthis includes:
written statements or ethical code or credos. "codes of ethics.
Company's mission. beliels.
purpose or
Main stockholders, employees, suppe nany
nsumers.
n i t y etc. are stakeholders to whom company
Cd.Specific obligations to above groups or benaviou
quired or permitted are to be laid.
dutles lor violation of thefirmly
by tosational code ofobligations
An ethics is toofbe manag
supportea
reward gement and equitably enforced through th
vard sad
*punishment system (Robert Kreitner has
 178: Business Ethics

The "group 19." then-the sum total ol every person t

Contributed at full force-depenaS On the group e s t al

as shown in its Cmo

harmony. A lea
ntelligence,
COllaboration cam keep cooperation high and thus eSkil
will be o r t h the
decisions meeting Cha ellort ol lled
group's
know how to balance the group s locus on the task at holea
attention to the quality ol members relationships.eryone's
Th with
create a Iriendly but effective climate tha: lifts evervonatura
spints
5.8 Ethics Training Programmes
Elements of Programmes for Bulding Commitment to Ethics

The following six clement o1 progTammes for buil

commitment to ethics are needed. Out of which ethics
one among them. training

Eies
Training

Constructivetaken Comnitment
Sieps to be ol Top
Management Management
Programmes for
building
commitment to
ethics
SSignment
Sudding syslems Responsibilily
Ethiea port mplementation ol

Ethical Behaviour Ethics

Programme t

Clarilying the Ethics

company's
Ethical
Managemen
Committee
Standards

Fig. 5.16 Programmes for Building Commitment to Bt

(i) Commitment of Top Management
Top management to ensure the
adequate resources
following
are invested
ethical behaviour is truly supported
to provide leadership through example
 Managing Ethics: 179

ethics
1s folded into
every aspect of
ifc-including trategic
corporate
ic management,
planning
(ii) HRM. process c.g. (i)
(i)
aagement. (iv) guanty management.Participative
Strate
manage ()
decision making thical
involving the chairman ol the compan
and also announe Support
ethics programme ensure
its implementation

nation of an ethics commitee at board of director's

olevel. After establishing
it has to oversee
and operation of ethies programme development
ent of responsibility for implementation of Ethics
sramme to Ethics Management Committee
Some senior level manager 1s to be made responsible for
developme coordination ol ethics programme. He is to be assisted
w full time manager tO mpiement tne cthics programme. The full
time manager is well versed in Dusiness aspects and as well as act
as a business ethicsS Speclalist and function as ombuds person.
He can also have ethics
management
committee ol senior officers
foradministrating policies and procedures. The most
aspect is the process ol rellection and dialogue while important
codes, policies and preparing
procedures etc. The ethics management
committee takes decisions in
groups, which should be
functional teams. These code of ethics can avoid the cross
ethical dilemmas. occurrence o

y
Clarifying the
Company's Ethical Standards
thisIn written statements
includes or ethical code or credos, "codes
of ethics,
Company's mission. purpose or beliels.
ain stockholders. employees, suppliers.
Uty etc. are
stakeholders to whom consumet
company
ged.Specilic
Teguired obligations to above groups or Denav
or
permitted are to be laid.
A SOr violation of obligations of the management.
by top mtional code of ethics is to be firmly supported
Teward andement and equltably enforced through thne
d Punishment system (Robert Kreitner has sald
 is the
that

to
selective

kill the
or
uneven

elfectiveness
ehoreenent
ol an ethical code).l c k

Behaviou
quickest Way
that support
Ethical
iour
(iv) Building Systems

The two aspects are

are established e.g.
that systems t is d
Ensuring
monitor and
entorce
the
etnical
behaviour lone
are being iniormed
of ethical.
Newemployees
Annual
standards
pertormance
and
appraisal

deviations
includes ob
noted in fil
in ervanstandards
ance of
files Tcorrective
or
nave taken
not?
actions. managers

Ethical guidelines also indicates that

i b r e a r e as imPerson
integrity a n d moral
technical competenc ce
onal
advancement as (as per
Corporalion, USAJ GTE
Communicating the company s values to all emn

vital
mployees is
Employees should alert the company about any
behaviour that is "Internal whistle-blowing" ma unethica
made higher
h
management aware ol violations in time.

(v) Constructive steps taken by the Management

The challenge for today s management 1s to create a suitable

organisational climate wherein the whistle blowing" necd is reduced
The various steps are
Encourage the free expression ol controversial and
dissenting view points
Streamline the organisation's grievance procedure so that
problems receive a prompt and lair hearing
Find out what employees think about the organisation's
5OClal responsibility policies and make appropriate changs

Make the employees aware that management respects them

and is sensitive to their individual consciences

Recognise the harsh treatment of a whistle blower W

probably lead to adverse public opinion
Company to doubis/
provide advisory service in case
clarification.
 E t h l c sT r a l n i n g

business firms train their

employees
and

disciplines
all
In
, a c c o u n t i n gm e t h o d s

marketing
techr iques
and
.
sales
p u r c h a s i n g p r o c e d u r e s

s a f e t yp r o c e d u r e s

technical S y s t e m s e t c .

arises why not training in ethics als0? More

I n e
question

p r o v i d i n g training
in ethics also. Mana gers are given
are
rations e ompanies like General Dynamics, McDonnell Douglas
well who
ingin
rA, Even
the supervisorsat work as as
others are likely to
ethical
question are provided with training. The
an
acquaint employees with:
nc DrOgrammes
pau ffcial company policy on.ethical Issues; How such policies
translated 1nto tne Specilics ol every day decisic
can be
making
Simulated case studies based on actual events in the company
used to illustrate hoW to appiy ethical principles on the job

problems of everyday.
and to make
Arrange Workshops
1or
employees irequenuy aware
to ethiCS. may be for half days
1nese workshop
ofandcompany commitmernt
are arranged by line managers, Thus concerted and systematic
atention to ethies will reduce and eliminate such risks. Carefully
tesigned and administered ethics training programems can bring
pesltive contributions to the company.
Rober Kreitner has specified key features of elfective training
programnes.
Top management support
Open discussion on resolving of realistic cases/dilemmas
A clear focus identification on ethical themes in all training

violations
Amechanism for anonymously reporting ethicalconduct
n organisation climate that rewards ethical
rOvide all staff with a copy of code of ethics and also code
o COnduct. Also explain all employees the woTAE
same with their
role.
 1 8 2 : Business Ethics

5.9 Ethics Committees

corporations. a standing connmttee
is for
n certain
consider the ethical dimensios ol compancs and policiet
committee is appointed and includes Doara ot director The
ctors, The
committee is important for two reasons
Ethics can be injected to the hignest ievels of policy

in the company making

They serve as a symbolic function that communi
external
the
stakeholders companv.St
employees and
commitment in making etnics as an important heara

5.10TheLaws Enforcing Ethical Conduct

code of conduct has already been explained earlier two st
How to develop? and Topics covered in codes ot conduct. We find
with the conduct, discipline and a p p e a l Tuies are to be studie

Majority of the corporations in India whether it is private or pubir

sectors have laid down elaborate rules olten termed as 'Condue
Discipline and Appeal Rules' which indicates do's and dont's for Ddes
of behaviour.

8 Review Employees to:

Maintain absolute
integrity. devote to
Appeals duty, do nothing
unbecoming of an
6 Special procedure in employee
certain Cases

Conviction on criminal 2 Acts and omissions

charge, cases where it
is Salent Features ot Constituting misconduct
Conduct, Discipline and (such acts are
not
practicable to old an
hold an APpeal Rules mentioned as illustrative in
security of erest of nature)
pedient to hold a
enquiry Certain do's and don's

Unauthorised communication of
Penalties and procedure rofmation, employment of relatives
tor imposing penaities O employees in 1irms enjoying
Suspension company's patronage, private trade
rules
oF empioyment, Bigamous marriage.
inventions, Movable, immovable and
valuable property. Gifts acceptance

Fig. 5.17 Salient Features

Discipline and AppealofRules
Conduct,
about whether tiere is any
objective right or wrong, and how we knoW
il there is. Although not what
think
everyone agrees on
philosophy is, let us
of it as a discipline or study in which we ask and attempt to
answer-basic questions about key arcas or subject matters of human
1ife and about pervasive and signilicant aspects of experience.

22.6Ethics Hot Lines

Ethics Hot Li direct channel of communication between
s are
the affected employee on ethical issues and a member of ethics
committee, who on recelving the confidentlal call, quickly investigates
the problem.
Steps are taken the identity of the caller as secret, in order to
encourage more and more employecs to report any deviant behaviour.

To overcome problems, an ethical organisation should

adopt the
following system krnown as Ethics Hotline.
The organisation should install a toll-free
telephone number
that any employee can call to report
suspected legal or ethical
violations to an 'ethics oflicer' whose full-time responsibility
is responding to any calls that come in. Ifthe employee wishes
 550: Business Ethics

she 1s assigned a numbe.

remain anonymous he
or er
to
ruture that
can be used for identification
in any communic
The ethics officer should be empowered to conduct a
ull edpr
investigation of the allegations
and to take the resuits of the
management
allegations to the higher cOTporate
management.
Such a toll-free telephone iscalled the Bthics Hotline. The
organisation must ensure tnat all employees
are aware of
the
to u s e it.
hotlines and are encouraged

Corporate Governance and Marketing Ethics

2.7 in global trade and
is a vital requirement
Corporate governance
marketing.
Moral Framework
Under wnic
represents