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Business Ethics

Business Ethics

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Ethical values in business practice

Dr Nicole Dando, Project Manager Institute of Business Ethics

Workshop for UPEACE Centre for Executive and Professional Education London, Nov 2007
© IBE

About the IBE
The IBE was established to encourage high standards of business behavior based on ethical values. Research Publications Training Forums Education

© IBE

www.ibe.org.uk

Today¶s session
What is Business Ethics? Recognising an ethical issues and dilemmas How can companies strengthen their ethical culture?
© IBE

1. 2.

3.

a cameo

Handout 1
© IBE

What is business ethics? IBE definition is «..1. The application of ethical values to business behaviour««« It concerns how you do all aspects of your business © IBE .

FAQ: what are examples of ethical values that can apply in business « Honesty Transparency Integrity Openness Pride Trust Respect Fairness Responsibility © IBE .

Whereas business values include « Quality Efficiency Profitability Reliability Customer service Value for money Vision Teamwork Good governance © IBE .

you are obliged to obey ‡ Ethics is discretionary ± you have choice ± determined by values © IBE .what it must do Ethical responsibility of a business .how it does it Remember: ‡ Law is mandatory.Business Ethics & the Law Legal position of a business .

Business Ethics & Compliance different approaches What is the right thing to do? UK/Europe USA Principles based decision making framework Compliance with rules Values Rules Company Secretary HR Corporate Affairs Risk Dept Who deals with business conduct? Ethics Officer Legal dept © IBE .

Business Ethics & Corporate Responsibility BE « the application of ethical values to business behaviour CR «the framework for demonstrating and implementing value based commitments © IBE .

relationships with stakeholders Governance Core business strategy Goals. Policies & Codes Business Behaviour the way we do business .to whom we have responsibilities .ways of working .Business Ethics is about « Ethical Values Ethical commitments / Corporate Responsibility .

Business Ethics is not the same as CSR Ethical Values underpin«. approach to Corporate Responsibility Ethics Policy & Code CSR policy/department doing things ethically doing ethical things sustainability Ethics programme Environmental programmes © IBE Philanthropic programmes Social programmes .

Dilemmas © IBE .2. Recognising Ethical Issues. Challenges.

discrimination & bullying © IBE . corruption ‡ Data protection ‡ Governance ‡Procurement/ Supply chain ‡ Money laundering ‡ Facilitation payments ‡ Child.What are the current business ethics topics? ‡ Whistleblowing ‡ Ethical Investment ‡ Lobbying and political donations ‡ Use of company computers ‡ Environmental responsibility ‡ Human rights ‡ Employee Security ‡ Gifts & hospitality ‡ Exec Pay ‡ Work/home balance ‡ Conflicts of interest ‡ Bribery. sweatshop labour ‡ Advertising and sales practices ‡Harassment.

Speaking up. bullying work/home . incentives etc. environment etc. governance. People issues. privacy.A quick classification of business ethics problems ‡Ethics of the economic system issues in the boardroom issues facing managers dilemmas of employees © IBE Profit v service ‡Ethical ‡Ethical ‡Ethical Values.

Values and ethical dilemmas for individuals Societal values Professional values Personal values © IBE Corporate values .

© IBE .How do I know when a business problem involves ethics? When the issue is not covered by the law If it raises moral problems for you or a member of the team When a correct and incorrect response is not clear If you are forced to consider where your obligations and duties lie.

´ ³No one will get hurt. maybe just this once.´ ³I don¶t want to know.´ ³No one will ever know.´ ³This will destroy the competition.´ ³Shred that document. you can expect something unethical is about to happen! ³Well.´ ³It doesn¶t matter how it gets done as long as it gets done.Some red flags If you hear someone say any of these.´ ³It sounds too good to be true. it¶s part of the culture.´ ³We didn¶t have this conversation.´ ³Everyone does it.´ ³We can hide it.´ ³What¶s in it for me?´ ³There are already enough competitors in this market.´ ³Don¶t worry.´ © IBE .

Ethical tests for a business decision Transparency: Do I mind others knowing what I have decided? Effect: Who does my decision affect or hurt? Fairness: Would my decision be considered fair by those affected? © IBE .

3. Why is the subject increasingly important? © IBE .

Some pressures on organisations to address their business ethics Corporate governance Growth of socially responsible investment Media & NGO interest Public perceptions Board of Company Legislation Conspicuous corporate misbehaviour © IBE Employee concerns .

Good Corporate Governance Standards of Conduct It is important that all employees should know what standards of conduct are expected of them. We regard it as good practice for boards of directors to draw up codes of ethics or statements of business practice and to publish them both internally and externally 1992 The Committee on the Financial Aspects of Corporate Governance (The Cadbury Committee) © IBE .

© IBE .A clause in the revised (2004) US Sentencing Guidelines states that: An organization shall promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

Source: Ipsos Mori/RCP .Trust in the integrity of business Who would you generally trust to tell the truth? Doctors Teachers Professors Judges Clergymen/Priests Scientists TV news readers The Police Ordinary man/woman in street 9 % 88% 80% 75% 75% 7 % 66% 61% 56% 1% 0% © IBE Business leaders Politicians Journalists 19% % Trust Base: 2.074 British adults aged 15+. November 2006.

Recruitment The Role of Company Values when Choosing a Job I would not work for an organisation whose values I did not believe in I chose my current organisation because I believe in what it does and what it stands for I do not care if the company I work for behaves responsibly or not What I do and the organisation I work for gives people an idea of what I am like % agree 82 ³To Whose Profit? Building a Business Case for Sustainability´ WWF. 2001 © IBE .

uk/publications .ibe.Business ethics pays! IBE research has shown that: Having a code of ethics enhances financial performance (2003) staff on ethics enhances financial performance (2007) Training © IBE Does Business Ethics Pay: www.org.

Summary of the Business Case Trust & reputation Core values Expressed in a Code of Ethics Ethical culture Financial performance Reduces risk © IBE Guides behaviour .

4. What are companies doing about it? FAQ : How can companies encourage a culture of ethical behaviour? © IBE .

The Way We Work Around Here« Their purpose is to help decision making when boundaries of correct and incorrect behaviour are not clear Provide guidance to staff Public statement of commitment © IBE .Ethics Policies and Codes Sometimes called: Business Principles. How we Do Business.

3. 5. .How does a code support ethical culture? 1. 4. Creates a shared understanding of what is right and wrong business practice Encourages right behaviour (beyond compliance) Supports good example from leaders and accountability Encourages trust and openness (speaking up) Reduces operational risk © IBE 2.

why. business review« Embed values -> behaviour . CSR « surveys. polices. implement. on-line. strategy. stakeholder engagement. resources. compliance.Elements of an effective ethics programme Ethical Values -> Ethics Policy embed. understanding as well as information « Training & Reinforcement Supporting context and Culture Monitoring & Accountability induction. business goals. sdr. dilemmas. incentives « leadership. CR. how. operationalise « Code of Ethics cf code of conduct ‡Guidance for Staff ‡The Way We Work ‡ Business Principles ‡Our Commitments & Standards « Communication & Awareness Campaigns what. debate.

One in five employees has noticed behaviour by their colleagues that does not accord with their organisation¶s expected standard. of these.Why are codes ineffective? Increasing numbers of larger companies have codes of ethics/practise/conduct« yet reported ethical malpractice continues. only a quarter say they have reported the case of misconduct to their management« © IBE .

Ineffective ethics programmes 2. Deficiencies in corporate culture © IBE .Good and bad practice Our analysis of research. surveys and practice suggests two basic reasons: 1.

ineffective ethics programmes Two examples:  Inadequate codes Lack of relevant ethics training  © IBE .First.

¶ language Some are large & glossy while others are memorandums Many had no mention of board support © IBE .Codes Few are written with the user in mind Some are collections of company polices on different issues Some are couched in µdo this or else«.

and the lack of relevant. meaningful training The proportion of UK companies that provide training on the meaning and use of their code of ethics 2004 Yes No No answer 45% 50% 5% 2001 41% 59% 1998 46% 54% © IBE .

Secondly. by as much as 10 percentage points. ‡ Ethics-related actions of co-workers can increase employee willingness to report misconduct. employees are 50% less likely to have observed misconduct. the importance of corporate culture « ERC National Business Ethics Survey. ‡ When employees perceive that others are held accountable for their actions. ‡ A strong ethical culture is needed to achieve most positive outcomes from ethical programmes. ‡ Where top management displays certain ethics-related actions. their overall satisfaction with their organisation increases by 32%. 2005 (US) concluded that contextual organisational culture is more influential in determining outcomes than ethics programmes: ‡ Formal programmes play a key role in the creation and maintenance of a strong culture. © IBE .

5 33.5 8.Pressures to act unethically What are the top three factors most likely to cause people to compromise an organisation¶s ethical standards? Pressure to meet unrealistic business objectives/deadlines Desire to further one¶s career Desire to protect one¶s livelihood Working in environment with cynicism or diminished morale Working in environment with cynicism or diminished morale Improper training/ignorance that the the act was unethical Improper training/ignorance thatact was unethical Lack of consequence if caught Lack of consequence if caught Need to follow boss¶s orders Needto follow boss¶s orders Peer pressure/desire to be a team player Peerpressure/desire to be a team player Desire to steal from or harm the organisation Wanting to help the organisation survive Desire to save job A sense of loyalty The Ethical Enterprise ± A Global Study of Business Ethics 2005-2015 American © IBE Management Association.9 .5 14. New York.9 6.3 23.7 38.7 24.9 9.8 31. 2006 69.7 7.1 27.

Aspects of culture indicating a risk of ethical misconduct © IBE .

2006: conducted by the Human Resource © IBE Institute among 1. business processes and strategies ‡ Ethics are part of the performance management system ‡ Ethics are part of recruitment process and selection criteria.What are the characteristics of an ethical culture? ‡ Leaders support and model ethical behaviour ‡ Consistent communications come from all leaders ‡ Ethics are integrated into the organisation·s goals. New York. American Management Association. The Ethical Enterprise ± A Global Study of Business Ethics 2005-2015.100 managers and HR experts around the world. .

Discussion: Does Corporate Responsibility encompass ethical business practice and csr management in your organisation? Thank you Nicole Dando www.uk doing business ethically« « makes for better business © IBE .org.ibe.

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