Business and Society Review 108:1 71– 94

EMILY BUSINESS Original 0 1 2002 Publishing AND 108 2003 UK AND ©00 Business and Society Review BASR Center SOCIETY Ethics SINGH Oxford,F.Article for Business REVIEW BlackwellCARASCO Ltd JANG Bentley College

The Content and Focus of the Codes of Ethics of the World’s Largest Transnational Corporations

corporate code of ethics, as defined by Langlois and Schlegelmilch, is “a statement setting down corporate principles, ethics, rules of conduct, codes of practice or company philosophy concerning responsibility to employees, shareholders, consumers, the environment or any other aspects of society external to the company.”1 It is a statement of principles a business agrees to abide by voluntarily over the course of its operations.2 Berenbeim argues that three trends affirm the growing importance of codes. First, the globalization of markets is pressuring companies to develop codes as public statements of core principles that are universally applicable.3 Thus, posted common standards will apply in a firm’s operations around the world. According to a 1990 Conference Board report on global corporate ethics practices, the rapid internationalization of business, coupled with pressure from nongovernmental organizations, has resulted in more comprehensive global business ethics programs.4 Such programs enable managers in different countries to act in consonance with the values of their corporations. Second, the increased participation of boards in developing codes is a signal that these codes are an accepted part of the governance process. A Conference Board study of companies
Emily F. Carasco and Jang B. Singh are both on the faculty of the University of Windsor, Windsor, Ontario, Canada. Professor Carasco is a member of the Faculty of Law and Professor Singh is in the Odette School of Business.


© 2003 Center for Business Ethics at Bentley College. Published by Balckwell Publishing, 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.



in 22 countries found that in 1999, 78% of boards of directors were involved in establishing ethics standards compared with 41% in 1991 and 21% in 1987.5 The third trend identified by Berenbeim as indicative of the growing importance of corporate codes of ethics is the improved ethical literacy of senior managers as illustrated by the increasing sophistication of the codes.6 Underlying the growing importance of codes are at least five business reasons.7 First, a code of ethics is thought to enhance corporate reputation and brand image. A 1998 survey of British companies found that three quarters of the respondents identified supporting the company’s reputation as the motivation for developing an ethics code.8 An ethics code is regarded as sending the right message about good business practices, internally and externally. Second, a code of ethics serves the purpose of signaling to shareholders, activists, and the media that a company is committed to ethical behavior so that in times of crisis, when a company is accused of unethical behavior, that will be seen as the exception, not the rule. Third, a corporate code of ethics can help to create cohesive corporate culture and provide a mechanism for a corporation to operationalize its values. It helps to build a sense of community among the company’s employees whether they work at one or several locations. Fourth, a code of ethics can help a corporation avoid fines, sanctions, and litigation. For example, the U.S. Federal Sentencing Guidelines for Organizations states that a company that demonstrates due ethical diligence can potentially see reduced penalties, or no prosecution at all, when misconduct occurs.9 Fifth, it is also thought that sound business practices, rooted in strong ethical foundations, will enhance development prospects in emerging economies in Africa, Asia and Latin America by establishing universal standards which transcend differences in laws and cultures.10 Despite several business reasons for establishing codes of ethics, studies are not unanimous in the conclusion that these codes are effective in influencing behavior within organizations. Ford, Gray, and Landrum, in an empirical study on the effectiveness of codes of conduct on employees’ behavior, found that they were essentially ineffective.11 Similarly, Clark and Leonard found that corporate codes of ethics are not influential in determining a person’s ethical decision-making behavior.12 M. Cash Mathews, in a study of the most profitable manufacturing corporations in the United States,



found that there is little relationship between codes of conduct and corporate violations, contrary to the expectation that the codes serve as an effective form of self-regulation.13 Her findings are based on a comparison of civil action taken by four U.S. regulatory agencies against corporations with codes and those without. Adams, Tashchian, and Stone, in a study on the effects of codes on perceptions of ethical behavior, found differently.14 They found that respondents from companies with codes rated top management, supervisors, peers, and self as more ethical than respondents from companies without codes. Moreover, they found that individuals from companies with a code rated company support for ethical behavior higher and expressed higher levels of satisfaction with outcomes of ethical dilemmas they had faced.15 Similarly, Somers, in a study of the relationship between codes, employee behavior, and organizational values, found that codes of ethics were associated with less perceived wrongdoing in organizations.16 However, the codes were not associated with an increased propensity to report observed unethical behavior. He also found a statistically significant higher level of employee commitment to organizations with codes. Although the research findings on the effectiveness of codes are mixed, the potential value of these instruments in decision-making, together with other benefits, symbolic and otherwise, cannot be ignored. Perhaps, the importance of codes of ethics is most pronounced in transnational corporations operating in an increasingly internationalized business environment.

Some argue that global corporations such as Diageo, Shell, and BPAmoco (whose codes of ethics are in the sample analyzed later in this paper) are imitating smaller companies such as the Body Shop in placing corporate citizenship at the heart of strategic planning.17 Others suggest there has been a major shift in global capitalism such that profitability can no longer be based on consumerism and competition, and being seen to be a responsible corporate citizen is a competitive issue. Competitive issue or not, it is imperative that transnational corporations be responsible corporate citizens because of the dominant position they now occupy in world affairs.



UNCTAD’s World Investment Report states that international production by transnational corporations, now numbering some 63,000 parent firms with around 690,000 foreign affiliates and a plethora of inter-firm arrangements, spans virtually all countries and economic activities, rendering it a formidable force in today’s world economy.18 UNCTAD further reports that the world’s top 100 nonfinancial transnational corporations (the codes of the top 50 represent the population of this study) are the principal drivers of international production, with the $2 trillion in assets of their foreign associates accounting for one-eighth of the total assets of all foreign affiliates worldwide in 1998. The foreign sales of these affiliates amount to $2 trillion and they employ in excess of 6 million persons. Virtually all countries are actively seeking foreign direct investment and have facilitated the expansion of international production through more investor friendly regulatory environments. International production has expanded massively with affiliate sales worldwide and gross product associated with international production (two measures of international production) reaching $14 trillion and over 10% of global GDP, respectively, in 1999.19 Foreign direct investment inflows stood at $865 billion in 1999, 14% of gross domestic capital formation, which is a significant increase from 2% in 1979. It is believed that foreign direct investment flows are currently in excess of $1 trillion. The growth in foreign direct investment and the proliferation of transnational corporations have given rise to several challenges, not the least of which is the need for self-regulation through the articulation of core principles that are applicable and applied in a vast array of cultures and industries. One way transnational corporations have responded to this challenge is by establishing global codes of ethics. The emergence of transnational codes of ethics is part of what has been called the “new geography of power” and the “privatization of norm-making”; and transnational corporations are seen as “strategic agents” providing the perfect network for the implementation of global standards.20 An attempt in the 1970s to regulate the conduct of powerful global corporations through international law, the United Nations Draft Code of Conduct for Transnational Corporations, failed to gain the acceptance of the international community. One reason for the failure was the inability to agree on the principles that would be binding upon transnational corporations. Even the Organization



for Economic Cooperation and Development (OECD), a more homogeneous group of nations, responded to the continuing need for regulation of global corporations with Guidelines for Multinational Enterprises and not with binding legal principles. More recently the international action in this area has moved away from intergovernmental efforts and international law and toward coalitions of interested parties coming together to develop voluntary ethical standards, for example, the Sullivan Principles and the Minnesota Principles. Among the noteworthy developments: business leaders from Europe, Japan, and North America formed the Caux Round Table in 1986 and created the Caux Principles of Business, addressing four broad areas of concern: the employment dilemma; sustainable practices and values; trust, honesty, and transparency; and collaboration and partnership for action.21 Most recently, in response to a challenge by the UN Secretary General to world business leaders, the UN’s Global Compact was created. The Global Compact is a voluntary adherence to nine principles which relate to human rights, labor, and the environment. While the Global Compact and the principles it encompasses does not have the binding effect of treaties and their provisions, it should be noted that the nine principles were derived directly from international instruments such as the Universal Declaration of Human Rights, the ILO Conventions, and the Rio Declaration. Vogel suggests that while globalization has led to increasing similarities in business practices, the move to globalized business ethics has been slow and the norms of ethical behavior still vary widely among nations.22 He further contends that while public and academic interest in the morality of business conduct has increased in the capitalist nations of Europe and Japan, it remains considerably greater in the United States. He attributes this to a number of factors including the relatively large exposure in the United States of both individual executives and corporations to legal prosecution. As stated before, federal sentencing guidelines in the United States, which lessen penalties for companies found guilty of crimes, are regarded as an important reason for the establishment of ethics codes by so many American corporations. Donaldson and Dunfee state that normative theories and concepts such as stakeholder approaches, or philosophical deontology and utilitarianism, provide general guidance but fail to reflect the context-specific complexity of business situations.23 They seek to



remedy this by presenting a normative theory, called integrative social contracts theory (ISCT), which recognizes ethical obligations to a theoretical “macrosocial” contract (appealing to all rational contractors) and to real “microsocial” contracts by members of numerous localized communities. This resolves the ethical conundrum posed by cultural differences. Donaldson and Dunfee apply ISCT to global problems via a Global Values Map.24 This scheme categorizes most corporations ethical codes as consistent norms, consistent in the sense that, while more culturally specific, they conform with hypernorms such as fundamental human rights and other legitimate norms, including those of other economic cultures. Furthermore, from the core hypernorms the scheme identifies moral free space where norms inconsistent with some legitimate norms in other economic cultures are located. The fourth category in the scheme is illegitimate norms which are incompatible with hypernorms. Donaldson and Dunfee conclude that managers must reject any form of relativism and respect moral free space and cultural diversity.25

In light of their growing importance, the purpose of this study was to examine, according to a specified method, the codes of ethics of transnational corporations. The study sought to identify the issues addressed in the codes of the world’s 50 largest transnational corporations (ranked by foreign assets) and the similarities and differences that exist among them. The sample for the study was drawn from UNCTAD’s World Investments Report 2000 ranking of transnational corporations by foreign assets. An initial effort was made to retrieve the codes of ethics of these corporations via the Internet but this proved to be extremely inefficient. Subsequently, a letter was sent to the CEOs, presidents, or chairs of the boards of the top 50 corporations requesting copies of their codes of ethics or precise Internet addresses where they could be obtained. This proved to be more fruitful than the Internet search and a total of 32 codes were obtained (see Table 1), representing a response rate in excess of 64% since some of the 50 corporations have merged and some do not have codes. A few codes were retrieved via the Internet but the vast majority was received directly by mail from the corporations. Both methods



used to obtain the codes allowed the corporations to select what they regard as their codes of ethics. The corporations from which codes were received are representative of the industries in which the world’s largest nonfinancial firms participate and employ approximately 2,300,000 foreign employees. The contents of the codes were analyzed according to a technique derived from Cressey and Moore and Mathews.26 This technique was used in previous studies by Lefebvre and Singh on codes of Canadian corporations and Wood on codes of Australian corporations.27 Cressey and Moore examined codes of ethics of U.S. corporations according to several criteria:28 (1) policy area—the specific issues addressed in the code (i.e., conduct on behalf of the firm, conduct against the firm, and integrity of books and records); (2) authority—“precepts, trends, or principles that make a code’s policies seem ethical, morally necessary, or legitimate” (p. 59): and (3) compliance procedures—the methods “specified for monitoring, enforcing, sanctioning or otherwise ensuring compliance with a code’s provisions” (p. 64). Further to the Cressey and Moore study Mathews content-analyzed the codes of the most profitable U.S. corporations in three broad areas:29 (1) categories of behavior and actions covered by the code, (2) enforcement procedures, and (3) penalties for noncompliance. These areas were further broken down into 64 smaller categories and analyzed according to four levels: (1) not discussed—the category was not discussed in the code, (2) discussed—contained one or two sentences on the subject, (3) discussed in detail—contained more than two short sentences and up to one full paragraph or two short paragraphs, and (4) emphasized—contained two or more full paragraphs on the category.30 The 64 categories were grouped under the following 10 major areas: 1. Conduct on behalf of the organization (i.e., environmental concerns, product quality and safety, relations with government, competitors, consumers); 2. Conduct against the organization (i.e., conflict of interest, insider trading prohibition, and other forms of white-collar crimes); 3. Integrity of books and records; 4. The basis of the code—legal or ethical in nature; 5. Reference to specific laws (i.e., anti-trust, securities, etc.);



6. Reference to government agencies (e.g., Food and Drug Administration); 7. Internal and external compliance or enforcement practices; 8. Codes mentioning enforcement/compliance procedures; 9. Penalties for noncompliance and illegal behaviors (e.g., dismissal, legal prosecution); 10. References to the need to maintain the corporation’s “good reputation.” The content analysis technique used in the current study was derived from Cressey and Moore and Mathews and is similar to that used by Lefebvre and Singh and Wood. It has been modified for application to the transnational environment: it consists of 60 categories, those specific to the United States were removed while three categories not previously examined by Cressey and Moore or Mathews were added (acceptance of bribes, kickbacks, gifts and entertainment; giving of bribes, kickbacks, gifts and entertainment; and letter/introductory remarks from the President/ CEO/Chair of Board). The 60 categories assessed are shown in Tables 2a–j.

Letters were sent to the CEO, the president, or chairman of the board of the world’s top 50 corporations ranked by foreign assets. Codes of ethics were received from the 32 corporations identified in Table 1. These corporations are representative of the industries in which the world’s largest nonfinancial corporations operate: electronics and electrical equipment, automobiles, petroleum, chemicals, and pharmaceuticals.31 In 1999, the 32 corporations shown in Table 1 had foreign assets in excess of $700 billion and approximately 2,300,000 foreign employees. Moreover, included in the 32 are 8 of the top 10 transnational corporations ranked by foreign assets: General Electric, General Motors, Royal Dutch/Shell Group, Exxon, IBM, BPAmoco, DaimlerChrysler, and Nestle. Therefore, the codes analyzed in this study represent the world’s most powerful corporations and the industries in which they operate.



TABLE 1 Industry Breakdown of Codes Analyzed
Automotive (Volkswagen, BMW, GM, DaimlerChrysler, Fiat) Petroleum (BPAmoco, Royal Dutch/Shell Group, ENI, Exxon, Elf, Chevron, Texaco) Computers/Electronics (HP, IBM, Sony, Siemens, Philips, General Electric) Pharmaceuticals/Chemicals (Roche, Novartis, Aventis, Dupont, BASF) Food/Beverages (Unilever, Nestle, Diageo, Philip Morris) Telecommunications (Bell Canada, Cable and Wireless) Trading (Itochu) Diversified (Mitsui, Suez) TOTALS 5 7 6 5 4 2 1 2 32

The contents of the codes of ethics were comprehensively analyzed within the following seven broad categories: (1) conduct on behalf of the organization; (2) conduct against the organization; (3) integrity of the books and records; (4) the basis of the code; (5) reference to specific laws and to government agencies; (6) internal and external compliance or enforcement practices (codes mentioning enforcement/ compliance procedures, penalties for noncompliance, and illegal behaviors); and (7) general information (country to which code is specific, introductory letter from CEO/president/chair of board, need to maintain corporation’s good reputation). The analysis was manually done by one person and randomly checked for accuracy by a second. The complete results of the content analysis according to the ten categories is presented in Tables 2a–j and discussed according to seven broad categories derived from the ten major areas used by Mathews and an amalgamation of related areas: reference to specific laws and government agencies were combined, as were “internal and external compliance or enforcement practices,” “codes mentioning enforcement/compliance procedures,” and “penalties for noncompliance and illegal behaviors.” Conduct on Behalf of the Organization The frequency of mention (discussed, discussed in detail, emphasized) in this broad category ranged from 22% for relations with consumers to 69% for relations with customers/suppliers, relations



TABLE 2a Content Analysis Results: Conduct on Behalf of Firm (percentages in brackets)
Not Discussed (ND) Discussed (D) Discussed In Detail (DD) Emphasized (E)


More than Contained two sentences, This two or more up to one full topic not One or full paragraphs or two short discussed two on the subject paragraphs in the code sentences 1. Relations with customers/suppliers 2. Relations with employees —health/safety 3. Relations with foreign govt 4. Relations with competitors 5. Relations with investors 6. Civic and community affairs 7. Rel’ts with consumers 8. Environmental affairs 9. Product safety 10. Product quality 11. Payments or political contribution to govt or govt officials/employees 12. Acceptance of bribes, kickbacks, gifts/ entertainment 13. Giving of bribes, kickbacks, gifts/entertainment 10 (31%) 10 (31%) 14 (44%) 17 (53%) 22 (69%) 19 (59%) 25 (78%) 10 (31%) 20 (63%) 20 (63%) 18 (56%) 5 (16%) 4 (13%) 4 (13%) 9 (13%) 5 (16%) 4 (13%) 1 (3%) 7 (22%) 6 (19%) 7 (22%) 1 (3%) 6 (19%) 6 (19%) 4 (13%) 5 (16%) 4 (13%) 3 (9%) 4 (13%) 4 (13%) 4 (13%) 4 (13%) 6 (19%) 11 (34%) 12 (38%) 8 (31%) 6 (19%) 1 (3%) 6 (19%) 2 11 2 1 6 (6%) (34%) (6%) (3%) (19%)

14 (44%)

2 (6%)

8 (25%)

8 (25%)

14 (44%)

1 (3%)

6 (19%)

11 (34%)

with employees, and environmental affairs (see Table 2a). 56% of the codes mention the acceptance of bribes/gifts/entertainment, and the same percentage the giving of bribes/gifts/entertainment. The items most often emphasized are relations with customers/ suppliers (34%), relations with employees (38%), relations with foreign governments (31%), environmental affairs (34%), and giving of bribes/kickbacks/entertainment (34%). It is significant that the items most often not discussed in this broad category are relations with investors (69%), civic and community affairs (59%), relations with consumers (78%), product safety (63%), and product quality



(63%). The clear indication here is that the corporate codes of ethics are not focused on social responsibility. The emphasis on environmental affairs (34%) which is also discussed in detail by 13% of the codes and discussed by 22% is significant. The 69% of the codes that mention environmental affairs is significantly higher than the 12.9% found by Mathews, 21% found by Lefebvre and Singh, and 37.3% found by Wood.32 This is perhaps a reflection of the greater salience of environmental issues today and the pressure on transnational corporations to address this very sensitive issue in global business. It is also noteworthy that 69% of the codes mention relations with employees, with 38% emphasizing this item. This may be a reflection of the growing recognition of the crucial role played by human resources in transnational corporations. The Dutch electronic firm Philips addresses this issue in its code as follows: Within Philips every employee has an equal opportunity for personal recognition and career development, regardless of personal background or belief. The same policy applies to recruitment of employees. No form of discrimination or harassment will be tolerated. An important part of this policy is selecting, rewarding and promoting people who demonstrate entrepreneurial behavior and show individual initiative in combination with a high degree of knowledge and experience of the product market and culture. —Philips General Business Principles Conduct Against the Organization The codes that were examined mentioned (discussed, discussed in detail, emphasized) the items constituting conduct against the firm an average of 43% (see items 14–18 of Table 2b). This is close to the proportion mentioning conduct on behalf of the firm (49%). However, the codes emphasizing conduct against the firm are considerably higher (27%) than those emphasizing conduct on behalf of the firm (20.8%). The implication of this is that while the transnationals whose codes were analyzed in this study are concerned about both conduct on behalf of the firm and conduct against the firm they are more concerned about the latter. This is consistent with the findings of Mathews, Lefebvre and Singh, and Wood.33 Conflict of interest, one of the items in the broad category of conduct against



TABLE 2b Content Analysis Results: Conduct Against the Firm (percentages in brackets)
Not Discussed (ND) 12 (38%) 14 (44%) Discussed (D) 3 (9%) 2 (6%) Discussed In Detail (DD) 2 (6%) 5 (16%) Emphasized (E) 15 (47%) 11 (34%)

Categories 14. Conflict of interest 15. Divulging trade secrets/propriety information 16. Insider trading info 17. Personal character matters 18. Other conduct against the firm

24 (75%) 24 (75%) 17 (53%)

0 2 (6%) 2 (6%)

3 (9%) 2 (6%) 5 (16%)

4 (16%) 4 (13%) 8 (25%)

the firm, was the most emphasized (47%) of all the items examined in this study. It was also the most emphasized in the Mathews and Lefebvre and Singh studies. Diageo, the food and beverages giant, places particular emphasis on conflict of interest: All employees owe a duty of undivided business loyalty to Diageo. This duty is violated if you engage in activities that cause a conflict of interest. A conflict of interest may arise when you are influenced by considerations of gain or benefit for yourself or your family members which conflict with your obligation to serve Diageo’s best interest. Conflicts of interest can take many forms, all of which cannot specifically be addressed by the Code. —The Diageo Code of Business The Code then goes on to provide some examples of conflict of interest situations. Integrity of Books and Records This category was measured by one item (see Table 2c). 53% of the codes do not discuss the integrity of books and records, 3% discuss this category, while 19% discuss it in detail and 25% emphasize it. Therefore, 47% of the codes mentioned (discussed, discussed in detail, emphasized) this item. This is considerably lower than the frequency of mention of this item found by Mathews, Lefebvre and



TABLE 2c Content Analysis Results: Integrity of Books and Records (percentages in brackets)
Not Discussed (ND) 17 (53%) Discussed (D) 1 (3%) Discussed In Detail (DD) 6 (19%) Emphasized (E) 8 (25%)

Category 19. Integrity of books and records

Singh, and Wood who found frequency of mention of 75.3%, 82.7%, and 57.8%, respectively. Mathews speculates that frequency of mention was higher on this item because most of the codes she analyzed were written or revised in response to the revelation of extensive overseas bribery in the mid 1970s when it was discovered that many corporations kept two sets of books: one for auditors and one secret set that showed the amount of money given as bribes.34 While the findings of the current study indicate that frequency of mention is lower on this item for transnational corporations, it is nevertheless a very important issue. The Italy-headquartered Eni Group emphasizes the importance of integrity of books and records as follows: Accounting transparency is based on the use of true, accurate and complete information for construing entries in the books of accounts. Each employee shall cooperate in order to have events properly and timely registered in the books of accounts. For each transaction the proper supporting evidence has to be maintained in order to facilitate registration of the accounting; identify the different degrees of responsibilities; provide accurate representation of the transaction so as to avoid any errors in interpretation of the facts. —Eni Code of Ethics Basis of the Code Two items constitute the broad category “Basis of the Code.” 31% of the codes discuss legal responsibility as the basis of the code, 6% discuss it in detail, and 25% emphasize it. 38% of the codes discuss ethical responsibility as the basis of the code, 13% discuss it in detail, and 13% emphasize it (see Table 2d). Clearly, as the findings



TABLE 2d Content Analysis Results: Basis of the Code (percentages in brackets)
Not Discussed (ND) 12 (38%) 12 (38%) Discussed (D) 10 (31%) 12 (38%) Discussed In Detail Emphasized (DD) (E) 2 (6%) 4 (13%) 8 (25%) 4 (13%)

Categories 20. Legal responsibility 21. Ethical responsibility

indicate, there is an overlap between the legal and the ethical bases of the codes. However, the distinction between the two is important because “if the basis of the code is legal, it imitates the criminal law (law, criminal justice procedures, sanctions), but if it is ethical only, no legal apparatus, including sanctions, is called for (one doesn’t “enforce” the Golden Rule).”35 Nevertheless, the foundation of many of the codes is in both law and ethics, as illustrated by the Bell Canada Code of Business Conduct: Many aspects of business at Bell are governed by particular laws, and compliance with such laws is basic to ethical conduct. Ethical behavior, however, goes beyond the law. It involves thinking through the possible impact of our decision on all interested parties—customers, employees and their unions, pensioners, the communities in which we live and work, suppliers, alliance partners, investors, government and shareholders—even when legal and regulatory decisions do not require it. —Bell Canada Code of Business Conduct Compared to previous studies, the 62% of codes that mention legal responsibility as their basis is considerably higher than the 32% found by Lefebvre and Singh but considerably lower than the 90% and 79% found by Mathews and Wood, respectively. 62% of the codes mention ethical responsibility as their basis. Mathews found 88%, Lefebvre and Singh found 71%, and Wood 63%. References to Specific Laws and Government Agencies As may be expected, the codes of ethics of transnational corporations with operations in various countries make infrequent mention



TABLE 2e Content Analysis Results: References to Laws Cited (percentages in brackets)
Not Discussed (ND) 20 (63%) 28 (88%) 26 (81%) 32 (100%) 28 (88%) 26 (81%) 24 (75%) 32 (100%) 17 (53%) Discussed In Detail (DD) 2 (6%) 2 (6%) 2 (6%) 0 3 (9%) 4 (13%) 6 (19%) 0 4 (13%)

Categories 22. Competition Act/Anti-trust 23. Securities 24. Environment 25. Food and drug 26. Product safety and quality 27. Worker health and safety 28. Bribes or payments to government officials 29. False advertising 30. Other laws

Discussed (D) 1 (3%) 0 0 0 0 1 (3%) 0 0 2 (9%)

Emphasized (E) 9 (28%) 2 (6%) 4 (13%) 0 1 (3%) 1 (3%) 2 (6%) 0 8 (25%)

of specific laws and governmental agencies. Laws relating to competition/anti-trust receive the most mention (37%), with 28% of the codes emphasizing this item, a finding consistent with Mathews, Lefebvre and Singh, and Wood. Another area receiving a moderate amount of mention is the environment—13% emphasized and 6% discussed in detail. Laws relating to bribing or payments to government officials are mentioned in 25% of the codes (see Table 2e). Laws relating to false advertising and food and drug controls are not mentioned by any of the codes. Similarly, none of the codes mentioned competition tribunals in referring to specific government agencies (see Table 2f ). However, 18% of them refer to other agencies. For example, the Nestle Corporate Business Principles make frequent reference to organizations such as the World Health Organization, the International Labour Organization, and the International Chamber of Commerce. Nestle’s code states, inter alia, that Nestle is aware that increasing globalization is leading to more and more international recommendations. Although as a general rule these recommendations are addressed to governments,



TABLE 2f Content Analysis Results: Commissions Referred to Government Agencies (percentages in brackets)
Not Discussed (ND) 32 (100%) 26 (81%) Discussed (D) 0 0 Discussed In Detail Emphasized (DD) (E) 0 3 (9%) 0 3 (9%)

Categories 31. Competition tribunal 32. Other agencies

they inevitably impact on business practices; Nestle has taken such recommendations as the ILO Basic Rights and the International Code of Marketing of Breast milk substitutes (WHO) into account in its policies. —Nestle Corporate Business Principles Compliance Only 25% of the codes do not mention enforcement or compliance procedures (see Table 2h). While 6% discuss the item, 34% discuss it in detail and a similar percentage emphasize it. These numbers are encouraging because, as Berenbeim argues, “companies need to strengthen code compliance–verification procedures. Precatory words are insufficient weapons for effective action.”36 The frequencies of mention of the various types of compliance/enforcement procedures are shown in Table 2g. Internal Oversight, items 33 to 39 of the content analysis, refers to individuals, groups of individuals, and measures aimed at monitoring the behavior of employees. Supervisor surveillance, internal audits, reading and understanding affidavits, and other oversight procedures are the most frequently mentioned items in this group (28% each). 16% of the codes emphasize internal audits as internal oversight measures. Internal– Personal Integrity measures (items 40–46) are concerned with actions taken when one has questions about a policy or when one wants to report misconduct of self or others. “Supervisor” is the most frequently mentioned item in this category (34%), followed, at 28% each, by legal counsel, other (in firm), and senior management role models. Internal watchdog committee was mentioned by three of the 32 codes of ethics analyzed. Employee integrity, mentioned in



15% of the codes, is of importance to compliance as it “is basically a nom de plume for the expectation of companies that individuals will engage in whistleblowing.”37 Item 46 examined mention in the codes of senior management as role models: 9% discussed it, 13% in detail, and 6% with emphasis. This is significant, for, as Mathews states, “senior management as role models is considered to be important in establishing the criminal or anti-criminal behavior patterns of a corporation.”38 Senior management sets the tone for the rest of the organization. External compliance measures, such as independent auditors and law enforcement (see items 47–49, Table 2g), are addressed by only a few of the codes analyzed. Only one code, Nestle’s, discusses the issue of independent auditors and does so as follows: Nestle compliance with its Corporate Business Principles is regularly monitored by its internal auditors on the basis of clear auditing instructions, which are certified by the external auditing firm KPMG. Four of the codes mention law enforcement as an external compliance measure. Eni’s Code of Practice addresses the issue as follows: Respect for the Code’s rules is an essential part of the contractual obligation of Eni employees as per article 2104 of the Italian Civil Code. Any violations of the code’s rules may be considered as a violation of primary obligations under labour relations or of the rules of discipline, and can entail the consequences provided for by law, including termination of the work contract and reimbursement of damages arising from any violation therefrom. —Eni Code of Practice Whether similar laws govern the violation of codes in other jurisdictions is beyond the scope of this paper. However, it must be noted that only four of the codes mention law enforcement as an external compliance measure. This, together with the sole mention of independent auditors by Nestle, is understandable in light of the value of codes of ethics as self-regulatory instruments. Moreover, as Lefebvre and Singh contend, perhaps corporate administrators are reluctant to take external courses of action (e.g., legal action or complaints to professional bodies) because of the risk of negative publicity.39



TABLE 2g Content Analysis Results: Types of Compliance Enforcement Procedures (percentages in brackets)
Not Discussed (ND) Discussed (D) Discussed In Detail (DD) Emphasized (E)

Categories Internal Oversight 33. Supervisor surveillance 34. Internal watchdog committee 35. Internal audits 36. Read and understand affidavit 37. Routine financial budgetary review 38. Legal dept review 39. Other oversight procedures

23 (72%) 27 (84%) 23 (72%) 23 (72%) 30 (84%) 25 (78%) 23 (72%)

1 (3%) 2 (6%) 3 (9%) 1 (3%) 0 3 (9%) 3 (9%)

6 (19%) 3 (9%) 1 (3%) 5 (16%) 2 (6%) 3 (9%) 5 (16%)

2 (6%) 0 5 (16%) 3 (9%) 0 1 (3%) 1 (3%)

Internal-Personal Integrity for questions re policy or reporting misconduct of self or others to: 40. Supervisor 21 (66%) 2 (6%) 6 (19%) 41. Internal watchdog 29 (91%) 2 (6%) 1 (3%) committee 42. Corporation’s legal 23 (72%) 3 (9%) 5 (16%) counsel 43. Other (in firm) 23 (72%) 4 (13%) 3 (9%) 44. Compliance 29 (91%) 0 2 (6%) affidavits 45. Employee integrity 27 (84%) 3 (9%) 1 (3%) 23 (72%) 3 (9%) 4 (13%) 46. Senior management role models External 47. Independent auditors 48. Law enforcement 49. Other external 31 (97%) 28 (88%) 32 (100%) 1 (3%) 3 (9%) 0 0 1 (3%) 0

3 (9%) 0 1 (3%) 2 (6%) 1 (3%) 1 (3%) 2 (6%)

0 0 0

The final set of items relating to compliance is that regarding penalties for violating provisions of the codes (see Table 2i—items 51–57). The most commonly mentioned is dismissal/firing, which is discussed by 16% of the codes, discussed in detail by 9%, and



TABLE 2h Content Analysis Results: Codes Mentioning Enforcement or Compliance Procedures (percentages in brackets)
Not Discussed (ND) 8 (25%) Discussed (D) 2 (6%) Discussed In Detail (DD) 11 (34%) Emphasized (E) 11 (34%)

Category 50. Codes mentioning enforcement or compliance procedures (a composite measure of items 33–49)

TABLE 2i Content Analysis Results: Penalties for Illegal Behavior (percentages in brackets)
Discussed Not Discussed Discussed In Detail Emphasized (DD) (ND) (D) (E) 28 (88%) 29 (91%) 28 (88%) 23 (72%) 29 (91%) 28 (88%) 31 (97%) 2 (6%) 2 (6%) 2 (6%) 5 (16%) 3 (9%) 3 (9%) 1 (3%) 2 (6%) 1 (3%) 2 (6%) 3 (9%) 0 1 (3%) 0 0 0 0 1 (3%) 0 0 0

Categories 51. Internal reprimand 52. Fine 53. Demotion 54. Dismissal/Firing 55. Other internal penalty External 56. Legal prosecution 57. Other external penalty

emphasized by 3%. Four of the codes mention reprimand and demotion as penalties for code violation (2 each), while three mention the imposition of a fine. Four of the codes mention legal prosecution as a penalty for code violation and one mentions other external penalty. General Information Three items, 58, 59, 60 (Table 2j), are included in this broad category of the content of the codes analyzed. Thirty (94%) of the codes are aimed at the global operations of the corporations while two (6%), Bell Canada and Sony Canada, were deemed to be specific to Canada. Bell would have been ranked



TABLE 2j Content Analysis Results: General Information (percentages in brackets)
Discussed Not Discussed Discussed In Detail Emphasized (DD) (E) (ND) (D) 7 (22%) 4 (13%) 9 (28%) 12 (38%)

Categories 58. Need to maintain corporation’s good reputation 59. Letter/Introductory remarks—President/CEO/ Chair of the Board 60. Code specific to which country (Canada, USA, World/General)

NO 14 (44%)

YES 18 (56%)

WORLD: 30 (94%) CANADA: 2 (6%)

among the top 50 transnationals (according to foreign assets) because of its Nortel holdings (which it has since divested). The request for Sony’s code was sent to Japan but a response was received from Sony Canada. Item 58 investigated statements included in the codes that express the need to maintain the corporation’s good reputation. Of the 58 items investigated for frequency of mention in this study, this item ranked the highest. It is mentioned in 78% of the codes— 13% discuss it, 28% discuss it in detail, and 38% emphasize it. The 78% of codes that mention the need to protect the good reputation of the corporation is higher than the 46% found by Mathews, 51% found by Lefebvre and Singh (1992), and 63% found by Wood. This high rate of inclusion in the codes of the need to protect the reputation of the corporation is reflective of the significance attached to a good public image. The DaimlerChrysler Integrity Code addresses the issue as follows: Each employee has a responsibility to be familiar with and comply with the detail and spirit of the DaimlerChrysler Code and the company’s policies and guidelines. Also, where applicable, compliance is required with employment contracts, worker’s rulebook and standards of conduct. Protecting DaimlerChrysler’s reputation means abiding by the code around the clock. Even off the job, you are perceived by others as a representative of DaimlerChrysler.



It is also important that you encourage other employees to uphold the DaimlerChrysler Code and cooperate with the Company in enforcing its provisions. The reputation and viability of DaimlerChrysler may be at stake. —DaimlerChrysler Integrity Code In highlighting the value of codes of ethics, a letter of introductory remarks from the CEO/president, or chair of the board recommending the code to employees is as important as an expression of the need to maintain the good reputation of the firm. This signals the commitment of senior management to upholding the code of ethics. Yet only 56% of the codes analyzed in this study contain a letter or introductory remarks from a member of senior management: earlier studies by Lefebvre and Singh and Wood found 42.7% and 50.6% , respectively. ExxonMobil’s Standards of Business Conduct begins with a letter to employees signed by both the Chair and Vice Chair of the Board. It states, inter alia, that ExxonMobil Corporation’s goal is to be the world’s premier petroleum corporation. Consequently, we must continuously achieve superior operating and financial results while adhering to our “Standards of Business Conduct.” No one in the ExxonMobil organization has the authority to make exceptions to these policies. Regardless of how much difficulty we encounter or pressure we face in performing our jobs, no situation can justify their willful violation. ExxonMobil’s reputation as a corporate citizen depends on the complete understanding of, and compliance with, these policies. —ExxonMobil’s Standards of Business Conduct

Berenbeim observes that commentators of divergent views agree that the development of global markets for capital, goods, and services erodes national sovereignty.40 Globalization, with increasing internationalization of business at its fore, is viewed by some as bringing great benefits to all nations and by others as being of advantage only to a handful of developed nations. Recent protests in Genoa, Quebec City, and Seattle are evidence that some view globalization as an unfair imposition on the poor nations of the world. However, there is no denying that transnational corporations



are today more powerful and pervasive than ever before, and as Berenbeim suggests, “there is little doubt that the global financial, product and service markets have blurred the distinction between public and private sector rule-making.”41 Transnational corporate codes of ethics, in establishing global ethics, have the potential to succeed where inter-governmental organizations have failed. However, the impact on corporations of principles enunciated by international organizations such as the United Nations through the Universal Declaration of Human Rights, the International Labour Organization Conventions, and international environmental law is not inconsequential. In the codes studied, there is evidence of a clear correlation between private and public rule making. In order to discern the direction global business ethics is headed in and the themes in the codification of ethics by transnational corporations, this study examined the content and focus of transnational corporate codes of ethics. It was found that the corporations, as demonstrated by their codes of ethics, are concerned about conduct both on behalf of the firm and against the firm, but concerns relating to the latter play a larger role in the codes. While the current study examined the content and focus of a sample of transnational corporate codes of ethics future research could compare codes according to home countries, size, and industry. Moreover, the effectiveness of the codes may be investigated in order to establish possible relationships between the content and focus of codes and their impact on corporate behavior. Finally, the processes used in the development of codes may be investigated for possible links between them and effectiveness in shaping behavior.

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4. The Global Business Responsibility Resource Centre, Ethics Codes, 1–11. Retrieved July 16, 2001 from the World Wide Web: http:/ / /resource (hereafter BSR, 2001). 5. Ibid. 6. Berenbeim, “Global Ethics.” 7. BSR, 2001. 8. Ibid., 1. 9. Ibid., 2. 10. Ibid. 11. R. Ford, B. Gray, and R. Landrum, “Do Organizational Codes of Conduct Really Affect Employees’ Behavior?” Management Review 77 (1982), 53 –54. 12. M. A. Clark and S. L. Leonard, “Can Corporate Codes of Ethics Influence Behavior?” Journal of Business Ethics 17(6) (1998), 619–630. 13. M. C. Mathews, Strategic Intervention in Organizations: Resolving Ethical Dilemmas (Newbury Park, CA: Sage, 1998), 76. 14. J. Adams, A. Tasachian, and T. Stone, “Codes of Ethics as Signals for Ethical Behavior,” Journal of Business Ethics 29(3) (2001), 199–211. 15. Ibid., 204. 16. M. J. Somers, “Ethical Codes and Organizational Context: A Study of the Relationship Between Codes of Conduct, Employee Behavior and Organizational Values,” Journal of Business Ethics 30(2) (2001), 185–195. 17. M. McIntosh, D. Leipziger, K. Jones, and G. Coleman, Corporate Citizenship: Successful Strategies for Responsible Companies (London: Financial Times/Pitman, 1998). 18. UNCTAD, World Investment Report: Cross-Border Mergers and Acquisitions and Development (Geneva: United Nations, 2000), xv. 19. Ibid. 20. R. Berenbeim, “Ethics in the Global Workplace,” Vital Speeches of the Day 66(5) (1999), 138 –139. 21. J. M. Beyer and D. Nino, “Ethics and Cultures in International Business,” Journal of Management Inquiry 8(3) (1999), 287–297, 291. 22. D. Vogel, “The Globalization of Business Ethics: Why America Remains Distinctive,” California Management Review 35(1) (1992), 30–49. 23. T. Donaldson and T. W. Dunfee, “Toward a Unified Conception of Business Ethics: Integrative Social Contracts,” Academy of Management Review 18(2) (1994), 252–284, 255. 24. T. Donaldson and T. W. Dunfee, “When Ethics Travel: The Promise and Peril of Global Business Ethics,” California Management Review 41(4) (1999), 45 – 63.



25. Ibid. 26. D. R. Cressey and C. A. Moore, “Managerial Values and Corporate Codes of Ethics,” California Management Review 25(4) (Summer 1983), 53 – 77; Mathews. 27. M. Lefebvre and J. Singh, “The Content and Focus of Canadian Corporate Codes of Ethics,” Journal of Business Ethics 11 (1992), 799–808; G. Wood, “A Cross-Cultural Comparison of the Content of Codes of Ethics: USA, Canada and Australia,” Journal of Business Ethics 25 (2000), 287 – 298. 28. Cressey and Moore. 29. Mathews, 52. 30. Ibid. 31. UNCTAD. 32. Mathews; Lefebvre and Singh; Wood. 33. Ibid. 34. Mathews, 54. 35. Ibid. 36. Berenbeim, “Ethics in the Global Workplace,” 139. 37. Wood, 294. 38. Mathews, 60. 39. Lefebvre and Singh, 807. 40. R. Berenbeim, “The Divergence of a Global Economy: One Company, One Market, One Code, One World,” Vital Speeches of the Day 65(22) (1999), 696 – 698, 697. 41. Berenbeim, “Ethics in the Global Workplace,” 138.