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Codes of MNE What Do They Say

Codes of MNE What Do They Say

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Published by: isabelle on Nov 19, 2007
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ABSTRACT.Business codes are an oft-cited man-agement instrument. But how common are codesamong multinationals? And what is their content? Inan unprecedented study, the codes of the largestcorporations in the world have been collected andthoroughly analyzed. This paper presents the resultsof that study. Of the two hundred largest companiesin the world, 52.5% have a code. More than half of these codes describe company responsibilitiesregarding quality of products and services (67%),adherence to local laws and regulations (57%) and theprotection of the natural environment (56%). Manycodes make reference to principles governing stake-holder relations (e.g. transparency (55%), honesty(50%) and fairness (45%)), corporate core values (e.g.teamwork (43%)), appropriate conduct amongemployees (e.g. discrimination (44%) and intimida-tion (43%)) and treatment of company property byemployees (e.g. conflict of interests (52%), corruption(46%) and fraud (45%)). Monitoring compliance withthe code is addressed in 52% of the codes. Based onthis content study, three types of codes are distin-guished: the stakeholder statute (72%), the valuesstatement (49%) and the code of conduct (46%). Theresults of this inquiry present a benchmark for theevaluation and development of both individual andinternational business codes.KEY WORDS: business code, business principles,code of conduct, compliance, ethics management,international business ethics, mission statement, multi-nationals, norms, values
The interest in corporate social responsibility,sustainable business practice, corporate gover-nance, business ethics, and integrity and com-pliance management has grown markedly in thepast decade (Waddock et al., 2002). It is not onlystakeholders who expect companies to paygreater attention to norms, values and principles;companies themselves are acknowledging theimportance of responsible business practice(Waddock et al., 2002). But what are a company’sresponsibilities? And how can the board andmanagement ensure that the company meets itsresponsibilities? A much recommended manage-ment instrument to achieve this is a business code(also referred to as a corporate code of ethics (e.g.Cressey and Moore, 1983), a code of conduct(e.g. White and Montgomery, 1980) or anintegrity code (e.g. Petrick and Quinn, 1997)).Scholars (see for example McIntosh et al., 2002),international governing bodies (e.g. the UnitedNations, the European Union and theOrganization for Economic Cooperation andDevelopment), business associations (e.g. theInternational Chamber of Commerce) as well asspecial interest groups (e.g. the InternationalLabor Organization and TransparencyInternational) have been calling on companiesto develop their own business codes. But whatis a business code and what is its function?A business code is a policy document thatdefines the responsibilities of the corporationtowards its stakeholders and/or the conduct thecorporation expects of employees (Kaptein andWempe, 2002). A code clarifies the objectives thecompany pursues, the norms and values itupholds and what it can be held accountable for.
Business Codes of Multinational Firms:What Do They Say?
Muel Kaptein
 Journal of Business Ethics
: 13–31, 2004.© 2004
Kluwer Academic Publishers. Printed in the Netherlands.Muel Kaptein is professor of Business Ethics and IntegrityManagement at the Erasmus University, Rotterdam, The Netherlands. He also works as a consultant for KPMG Integrity, where he assisted about thirty companies in the development of their code of business.
A code aims to reduce the occurrence of incidents, to improve the extent to which stake-holder expectations are realized, to boost stake-holder confidence in the company and toencourage the authorities to relax regulations andcontrols (see, for example, Ethics ResourceCenter, 1980; Raiborn and Payne, 1990).How common are codes among companies?And what is their content? Many studies havebeen conducted into the prevalence of codes inspecific countries (see Table I). Various publica-tions have also appeared on the content of codesin specific countries. Research has also beenconducted into the content of business codes of multinational firms with reference to one or more issues such as bribery, child labor andhuman rights (see Table II).To date, no research has been conducted toexamine the prevalence and full content of business codes of the largest corporations in theworld.This paper presents the results of an analysis of the codes of the two hundred largest multina-tional firms. What do they tell us? What are themost cited issues? Which issues are barely men-tioned? What wording do companies choose toexpress their responsibilities? How uniform anddiverse are the codes? Is there a core set of 14
Muel Kaptein
TABLE IResearch conducted on the prevalence of business codesCountryMost recent ResearcherResearch methodPercentagestudyof codesUnited States1999Weaver et al.Survey of Fortune 1000 with a78%response rate of 26%Canada2002KPMG CanadaSurvey of largest 800 companies and 77%200 public sector organizations witha response rate of 13% Japan1997NakanoSurvey of largest 2199 companies 37%with a response rate of 7.2%India2002KPMG IndiaSurvey of largest 800 companies with 78%a response rate of 20%South Africa2002KPMG Survey of 1026 public and private 71%South Africaorganizations with a response rate o16%Australia1996Farrell and Cobbin Survey of largest 537 companies with 42%a response rate of 42%England1999London Business Survey of largest 350 companies with 78%School and a response rate of 12%Arthur AndersenGermany1999KPMG Germany Survey of largest 1000 companies 54%and the University with a response rate of 25%of Erlangen-NürnbergBelgium2002KPMG BelgiumTelephonic survey of all of the largest 53%100 companiesNetherlands2003Employer associationTelephonic survey of all of the largest 54%VNO-NCW, KPMG 100 companiesand Ethicon
universal norms that multinational firms upholdand, if so, how can they be described?A content analysis of business codes delineatesthe responsibilities multinationals proclaim. To besure, the existence of codes does not imply thatcompanies strictly adhere to them (Sims andBrinkmann, 2003), but an analysis of the contentof business codes nevertheless reveals what kindof ethics companies claim to uphold. The resultscould, among other things, serve as benchmarkin evaluating and developing individual andinternational business codes (e.g. the OECDGuidelines for Multinational Enterprises, theUN’s Global Compact and the Caux Principles).
Business Codes of Multinational Firms
TABLE IIResearch conducted on the content of codesResearchersYearObject of research Themes researchedWhite and Montgomery198030 codes of U.S. companiesSeveral issuesCressey and Moore1983119 codes of largest companies Several issuesin U.S.Mathews1987202 codes of 485 companies in U.S.Several issuesSchlegelmich and Houston198931 codes of the largest 200 Several issuescompanies in EnglandLanglois and Schlegelmich1990189 English, French and West Several issuesGerman company codesEmployer association 1991, 1999 Respectively, 21, 38 and 54 codes Several issuesVNO-NCW, KPMG and 2003of the largest 100 companiesand EthiconLefebvre and Singh199275 of the largest 500 companies in Several issuesCanadaFarrell and Cobbin199695 codes of the largest 537 Several issuescompanies in AustraliaCouncil of Economic 199771 codes of 360 companiesSourcing GuidelinesPrioritiesfor Labor RightsOECD199898 codes of randomly chosen Fair business practice,companieslabor rights, environ-mental stewardship andcorporate citizenshipILO1999215 codes of multinationalsLabor rightsVan Tulder and Kolk200013 international companies in the Several issuessporting goods industryAshridge Centre for 200052 business codes of Fortune 500 Human rightsBusiness and SocietycompaniesGordon and Miyake2001246 codes of international companiesBriberyKolk and Van Tulder200255 business codes of Fortune 500 Child labocompaniesKPMG Belgium200253 codes of the largest 100 companiesSeveral issues

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