Codes of Conduct and Ethics

– self regulation mechanisms

Corporate Responsibility session 11

12/05/2023 Business ethics 1

 “ Lots of companies have core
values, but they usually end up as
posters on the wall that nobody ever
looks at. Zappos has ten core values
and we make sure everyone in the
company has those core values, and
lives them”

Tony Hsieh (CEO, Zappos)

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Boeing- Does the personal conduct of the CEO
Really Matter?

Number one aerospace company

Employs 155.000 people in 70 countries

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Boeing- Does the personal conduct of the CEO
Really Matter?
Background

In 2003, Boeing was banned from bidding on Air force

rocket launcher contracts and was alleged to have
stolen secrets from competitors

Boeing´s chairman resigned and Harry Stonecipher

became CEO to recover the reputation of the company

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Boeing- Does the personal conduct of the CEO
Really Matter?

The Scandal
Stonecipher introduced the new code of conduct
encouraging everybody to be very strict with even the
most minor unethical behaviour
Stonecipher, a married man, had an affair with Debra
Peabody, 48 years old, who was vice-president of
Boeing
Stonecipher used company funds and a company jet
for Ms Peabody

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Boeing- Does the personal conduct of the CEO
Really Matter?
The aftermath
The American press published a series of articles
saying that Boeing “had failed to send a clear signal
about its ethical behaviour because of the CEO´s
moral relativism”
Debra compensated Boeing for unjustifiable benefits
received from Stonecipher and resigned
Stonecipher was fired by the board of directors
receiving a bonus of $2.1m for 2004

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Boeing- Does the personal conduct of the CEO
Really Matter?
The arguments to fire Stonecipher

How a CEO could ask his employees to show loyalty to

the cause when he was unable to demonstrate loyalty
to his own wife and family?
The executives´ personal conduct was important for
Boeing´s reputation
A CEO must set a standard for both professional and
personal behaviour

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 CEO was fired in
November 2019 after
the company revealed
that he had been
involved in a romantic
relationship with an
employee

Kevin Tsujihara, the

head of WarnerMedia's
movie and television
studio, left the company
in March amid an
investigation into
allegations about an
improper relationship
with an actress.

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 Corporate Values and Guiding Principles
Corporate values are the essential and permanent
motives for acting within an organization
Corporate values are found explicitly in value
statements or as part of a corporate code of conduct or
“credo”
Values have to do with mission
The mission itself, as with the vision, can include
some values, at least implicitly
Corporate values provide guidelines about how the
mission is to be achieved
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 Worldwide survey on values
in corporate value statements (%)
source Booz Allen/ Aspen Institute
North Europe Asia/Pacific Global
America
Ethical behaviour/integrity 95 84 85 90
Commitment to employees 87 90 86 88

Teamwork and trust 81 77 69 78

Commitment to shareholders 79 64 83 76

Accountability 67 74 68 69

Honesty/Openness 77 64 56 69

Social Responsibility 67 74 62 68

Corporate citizenship 58 69 74 65

Environmental responsibility 34 55 56 46

Commitment to diversity 50 41 23 41
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 Organizational Culture
Organizational Culture:
o “The way we do things around here” or
o “amalgam of beliefs, ideology, language, ritual and
myth”

Organizational Culture is different from Corporate

Culture, the real versus the ideal desired by a
corporation

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 CONDUCT RISK
Corporate Statements
Corporate (Corporate Mission and Vision,
Values, Guiding Principles and Code
Culture (desired) of Conduct)
GAP

Shared Beliefs & Values

CONDUCT RISK (people within the organization)

Organizational
Behaviours
Culture (real) (people within the organization)
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Factors for shaping an ethical organizational
culture
Corporate mission, vision and values, codes
Leaders´ moral behaviour
Ethical criteria for recruiting, selection and promotion
Applying ethical values to decision-making
Ethics in both the formal and the informal organization
Ethical criteria in customer relations
Symbols and events

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 Three aspects of formal
organizations can be especially
influential in ethical (or unethical)
behaviour:
• Organizational rewards/compensation system to
foster certain behaviors
• Performance appraisal, evaluation process and
monitoring
• Decision-making rights and responsibilities

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 Principle of Principle of
participation subsidiarity

Acting with freedom, and the Do not allow a large

corresponding responsibility, organization take over what
is crucial for personal growth can be done by smaller
groups or organizations
Means respecting human Give the smaller units support
rationality and freedom for developing their potential

Motivates employees and Autonomy of employees

gives the company a superior should be respected and
social performance harmonized with the
achievement of the
company's more general goal
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 Codes of Business Conduct/
Ethics
A corporate document that develop the core values
and the guiding principles of a firm
In many countries and industries are legally mandated
for listed companies
The immediate goal of these codes is to articulate the
institutionalization of certain rules of conduct within
the firm and to facilitate their internalization by
managers and staff

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 Benefits
Helping to express and articulate values and criteria
Sending an ethical message to the organization
Providing guidelines for decision-making and
dilemmas
Preventing abuses within the firm
Fostering corporate identity
Favoring corporate reputation
Helping to avoid litigation against the firm

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 Effectiveness
 The purpose of a code should be clear, achievable and
realistic
 A strong senior management commitment should
exist
 The code should arise from a real need and strong
motivation
 The code should form part of a broader ethical outlook
 The code should be well written and well implemented

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 Practices
 Making explicit a top management´s expression of
commitment
 Implementing a broad and effective process of
communication and dissemination
 Creating the position of ethical affairs officer or “head
of compliance”
 Providing a direct line
 Training
 Monitoring and auditing

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 Are codes effective for improving ethical
behaviour?

Having a code of conduct in place is no guarantee that

everyone will act ethically at all times

Using these codes along with others means of

improving ethical behaviours

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 Ethical training programmes
• To communicate and explain
the company´s policy on
business ethics
• To train people to implement

Goals the code of conduct

• To communicate to employees

: the importance senior

management places on ethical
behaviour in the workplace
• To enhance employees´
awareness of ethical challenges
they may face at work
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 Ethical training programmes
• Compliance-based
rooted in avoidance of
legal sanction,
Types insufficient to prevent
wrongdoing
: • Integrity-based
oriented to values, based
on the concept of self-
governance
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 Ethical training programmes
• Decreases if employees
believe that it exist only to
protect top management and
the employer´s self interest
• Increases when is a real
Effectiveness leader´s commitment to
: ethics, fair treatment of
employees, rewards for
ethical conduct, concern for
external stakeholders and
consistency between policies
and actions
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 Infosys Technologies-
One of India´s most admired companies
Background

• Established in 1981 with capital of US$ 250, Infosys

has grown to a US$ 7 billion IT services and consulting
company by living the values of the founders:

“When in doubt, disclose”

 Lead by example
“Exceed expectations, consistently”
 Infosys Technologies-
One of India´s most admired companies

Mission-driven company:

“To achieve our objectives in an environment of

fairness, honesty and courtesy towards our
customers, employees, vendors, and society at
large”
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Implementing CSR
 Corporate Responsibility= ONE

• Leading by example
• Empowering employees
• Customer centric
• Hires and trains persons with disabilities
PURPOSE and those with a below average socio-
economic background
• Protection of the environment by water
CULTURE management
• Youth development
• Supports the health system in India
STRATEGY • Involvement in culture and education
 TDIndustries- A culture of trust and
servant leadership
Background
• Texan company involved in heating, air
condition, electricity and construction
maintenance with 1,400 employees
• Fortune´s Magazine top 10 companies
to work for
• In 1952, the concept of employee
ownership was established
• Jack Lowe, the founder, adopted, at the
end of the 1970s, “Servant Leadership”
as TDI´s corporate philosophy
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TDIndustries- A culture of trust and servant
leadership
Servant Leadership
Development
• Genuine leaders does not
dependent on one´s title
• Everyone may become a leader by,
first serving and then, through
conscious choice, leading
• Most workers participate in
seminars on servant leadership
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TDIndustries- A culture of trust and servant
leadership

Acid Test
• In 1988, the company suffered a severe
financial crisis
• Jack Lowe Jr, founder´s son, spoke with
many “partners” (workers) and they agreed
to loan money to save the company
• In 1990, the culture of trust and servant
leadership also played a significant role in
quality implementation
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TDIndustries- A culture of trust and servant
leadership
One Culture, No Gap
• Mission, Vision and Values: “providing
outstanding Career opportunities by
exceeding Our Customers´ Expectation”
• Implementing People´s development efforts
through substantial training budgets
• A community where partners (workers)
trusted management and listened to their
thoughts and ideas;
• And management trusted the judgment of
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the partners
Business ethics 33