Business and Society Review 108:1 71– 94

The Content and Focus of

Blackwell
Oxford,
Business
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2003
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BUSINESS
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JANG
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Ethics
B.at
SINGH
Bentley College

the Codes of Ethics of

the World’s Largest
Transnational Corporations
EMILY F. CARASCO AND JANG B. SINGH

A
corporate code of ethics, as defined by Langlois and
Schlegelmilch, is “a statement setting down corporate prin-
ciples, ethics, rules of conduct, codes of practice or company
philosophy concerning responsibility to employees, shareholders,
consumers, the environment or any other aspects of society exter-
nal 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 compa-
nies 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 comprehens-
ive global business ethics programs.4 Such programs enable man-
agers 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.
72 BUSINESS AND SOCIETY REVIEW

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 cor-
porate reputation and brand image. A 1998 survey of British com-
panies found that three quarters of the respondents identified
supporting the company’s reputation as the motivation for develop-
ing 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 share-
holders, 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 corpora-
tion to operationalize its values. It helps to build a sense of commun-
ity 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 emer-
ging economies in Africa, Asia and Latin America by establish-
ing 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,
EMILY F. CARASCO AND JANG B. SINGH 73

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 agen-
cies against corporations with codes and those without. Adams,
Tashchian, and Stone, in a study on the effects of codes on per-
ceptions 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 associ-
ated 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 pro-
nounced in transnational corporations operating in an increasingly
internationalized business environment.

GLOBALIZATION AND BUSINESS ETHICS

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.
74 BUSINESS AND SOCIETY REVIEW

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 invest-
ment 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 cor-
porations 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
EMILY F. CARASCO AND JANG B. SINGH 75

for Economic Cooperation and Development (OECD), a more homo-

geneous 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 inter-
governmental 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 busi-
ness 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 bind-
ing effect of treaties and their provisions, it should be noted that the
nine principles were derived directly from international instru-
ments 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 estab-
lishment of ethics codes by so many American corporations.
Donaldson and Dunfee state that normative theories and con-
cepts 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
76 BUSINESS AND SOCIETY REVIEW

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

THE STUDY

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 cor-
porations (ranked by foreign assets) and the similarities and differ-
ences that exist among them. The sample for the study was drawn
from UNCTAD’s World Investments Report 2000 ranking of trans-
national 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
EMILY F. CARASCO AND JANG B. SINGH 77

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 approx-
imately 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., con-
duct 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) enforce-
ment 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 sen-
tences 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 para-
graphs 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 con-

cerns, 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.);
78 BUSINESS AND SOCIETY REVIEW

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., dis-
missal, 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 enter-
tainment; and letter/introductory remarks from the President/
CEO/Chair of Board). The 60 categories assessed are shown in
Tables 2a–j.

THE SAMPLE

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, chem-
icals, and pharmaceuticals.31 In 1999, the 32 corporations shown
in Table 1 had foreign assets in excess of $700 billion and approxim-
ately 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.
EMILY F. CARASCO AND JANG B. SINGH 79

TABLE 1 Industry Breakdown of Codes Analyzed

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

CONTENT ANALYSIS RESULTS

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 accord-
ing 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 com-
bined, 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, emphas-

ized) in this broad category ranged from 22% for relations with
consumers to 69% for relations with customers/suppliers, relations
80 BUSINESS AND SOCIETY REVIEW

TABLE 2a Content Analysis Results: Conduct on Behalf of Firm

(percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

More than
This two sentences, Contained
topic not One or up to one full two or more
discussed two or two short full paragraphs
in the code sentences paragraphs on the subject

1. Relations with 10 (31%) 5 (16%) 6 (19%) 11 (34%)

customers/suppliers
2. Relations with employees 10 (31%) 4 (13%) 6 (19%) 12 (38%)
—health/safety
3. Relations with foreign 14 (44%) 4 (13%) 4 (13%) 8 (31%)
govt
4. Relations with 17 (53%) 9 (13%) 5 (16%) 6 (19%)
competitors
5. Relations with investors 22 (69%) 5 (16%) 4 (13%) 1 (3%)
6. Civic and community 19 (59%) 4 (13%) 3 (9%) 6 (19%)
affairs
7. Rel’ts with consumers 25 (78%) 1 (3%) 4 (13%) 2 (6%)
8. Environmental affairs 10 (31%) 7 (22%) 4 (13%) 11 (34%)
9. Product safety 20 (63%) 6 (19%) 4 (13%) 2 (6%)
10. Product quality 20 (63%) 7 (22%) 4 (13%) 1 (3%)
11. Payments or political 18 (56%) 1 (3%) 6 (19%) 6 (19%)
contribution to govt or govt
officials/employees
12. Acceptance of bribes, 14 (44%) 2 (6%) 8 (25%) 8 (25%)
kickbacks, gifts/
entertainment
13. Giving of bribes, kick- 14 (44%) 1 (3%) 6 (19%) 11 (34%)
backs, gifts/entertainment

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 for-
eign 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
EMILY F. CARASCO AND JANG B. SINGH 81

(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 dis-
cussed 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 reflec-
tion 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%). How-
ever, the codes emphasizing conduct against the firm are consider-
ably 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
82 BUSINESS AND SOCIETY REVIEW

TABLE 2b Content Analysis Results: Conduct Against the Firm

(percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

14. Conflict of interest 12 (38%) 3 (9%) 2 (6%) 15 (47%)

15. Divulging trade 14 (44%) 2 (6%) 5 (16%) 11 (34%)
secrets/propriety
information
16. Insider trading info 24 (75%) 0 3 (9%) 4 (16%)
17. Personal character 24 (75%) 2 (6%) 2 (6%) 4 (13%)
matters
18. Other conduct 17 (53%) 2 (6%) 5 (16%) 8 (25%)
against the firm

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 inter-
est 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
EMILY F. CARASCO AND JANG B. SINGH 83

TABLE 2c Content Analysis Results: Integrity of Books and

Records (percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Category (ND) (D) (DD) (E)

19. Integrity of books 17 (53%) 1 (3%) 6 (19%) 8 (25%)

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 account-
ing; 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
84 BUSINESS AND SOCIETY REVIEW

TABLE 2d Content Analysis Results: Basis of the Code

(percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

20. Legal responsibility 12 (38%) 10 (31%) 2 (6%) 8 (25%)

21. Ethical responsibility 12 (38%) 12 (38%) 4 (13%) 4 (13%)

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 corpora-

tions with operations in various countries make infrequent mention
EMILY F. CARASCO AND JANG B. SINGH 85

TABLE 2e Content Analysis Results: References to Laws Cited

(percentages in brackets)

Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

22. Competition 20 (63%) 1 (3%) 2 (6%) 9 (28%)

Act/Anti-trust
23. Securities 28 (88%) 0 2 (6%) 2 (6%)
24. Environment 26 (81%) 0 2 (6%) 4 (13%)
25. Food and drug 32 (100%) 0 0 0
26. Product safety 28 (88%) 0 3 (9%) 1 (3%)
and quality
27. Worker health 26 (81%) 1 (3%) 4 (13%) 1 (3%)
and safety
28. Bribes or payments 24 (75%) 0 6 (19%) 2 (6%)
to government officials
29. False advertising 32 (100%) 0 0 0
30. Other laws 17 (53%) 2 (9%) 4 (13%) 8 (25%)

of specific laws and governmental agencies. Laws relating to com-

petition/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 Inter-
national 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,
86 BUSINESS AND SOCIETY REVIEW

TABLE 2f Content Analysis Results: Commissions Referred to

Government Agencies (percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

31. Competition tribunal 32 (100%) 0 0 0

32. Other agencies 26 (81%) 0 3 (9%) 3 (9%)

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 proce-
dures 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 understand-
ing affidavits, and other oversight procedures are the most fre-
quently 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 fre-
quently 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
EMILY F. CARASCO AND JANG B. SINGH 87

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 juris-

dictions 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
88 BUSINESS AND SOCIETY REVIEW

TABLE 2g Content Analysis Results: Types of Compliance

Enforcement Procedures (percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

Internal Oversight
33. Supervisor 23 (72%) 1 (3%) 6 (19%) 2 (6%)
surveillance
34. Internal watchdog 27 (84%) 2 (6%) 3 (9%) 0
committee
35. Internal audits 23 (72%) 3 (9%) 1 (3%) 5 (16%)
36. Read and 23 (72%) 1 (3%) 5 (16%) 3 (9%)
understand affidavit
37. Routine financial 30 (84%) 0 2 (6%) 0
budgetary review
38. Legal dept review 25 (78%) 3 (9%) 3 (9%) 1 (3%)
39. Other oversight 23 (72%) 3 (9%) 5 (16%) 1 (3%)
procedures
Internal-Personal Integrity for questions re policy or reporting
misconduct of self or others to:
40. Supervisor 21 (66%) 2 (6%) 6 (19%) 3 (9%)
41. Internal watchdog 29 (91%) 2 (6%) 1 (3%) 0
committee
42. Corporation’s legal 23 (72%) 3 (9%) 5 (16%) 1 (3%)
counsel
43. Other (in firm) 23 (72%) 4 (13%) 3 (9%) 2 (6%)
44. Compliance 29 (91%) 0 2 (6%) 1 (3%)
affidavits
45. Employee integrity 27 (84%) 3 (9%) 1 (3%) 1 (3%)
46. Senior 23 (72%) 3 (9%) 4 (13%) 2 (6%)
management role
models
External
47. Independent 31 (97%) 1 (3%) 0 0
auditors
48. Law enforcement 28 (88%) 3 (9%) 1 (3%) 0
49. Other external 32 (100%) 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
EMILY F. CARASCO AND JANG B. SINGH 89

TABLE 2h Content Analysis Results: Codes Mentioning

Enforcement or Compliance Procedures (percentages
in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Category (ND) (D) (DD) (E)

50. Codes mentioning 8 (25%) 2 (6%) 11 (34%) 11 (34%)

enforcement or
compliance procedures
(a composite measure
of items 33–49)

TABLE 2i Content Analysis Results: Penalties for Illegal Behavior

(percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

51. Internal reprimand 28 (88%) 2 (6%) 2 (6%) 0

52. Fine 29 (91%) 2 (6%) 1 (3%) 0
53. Demotion 28 (88%) 2 (6%) 2 (6%) 0
54. Dismissal/Firing 23 (72%) 5 (16%) 3 (9%) 1 (3%)
55. Other internal penalty 29 (91%) 3 (9%) 0 0
External
56. Legal prosecution 28 (88%) 3 (9%) 1 (3%) 0
57. Other external penalty 31 (97%) 1 (3%) 0 0

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 cat-
egory 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
90 BUSINESS AND SOCIETY REVIEW

TABLE 2j Content Analysis Results: General Information

(percentages in brackets)
Not Discussed
Discussed Discussed In Detail Emphasized
Categories (ND) (D) (DD) (E)

58. Need to maintain 7 (22%) 4 (13%) 9 (28%) 12 (38%)

corporation’s good
reputation
NO YES
59. Letter/Introductory 14 (44%) 18 (56%)
remarks—President/CEO/
Chair of the Board
60. Code specific to which WORLD:
country (Canada, USA, 30 (94%)
World/General) 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 reputa-
tion 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 con-
tracts, worker’s rulebook and standards of conduct. Protect-
ing 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.
EMILY F. CARASCO AND JANG B. SINGH 91

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 intro-

ductory remarks from the CEO/president, or chair of the board re-
commending 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 manage-
ment: 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 adher-
ing 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 dif-
ficulty 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

CONCLUSION

Berenbeim observes that commentators of divergent views agree

that the development of global markets for capital, goods, and ser-
vices 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
92 BUSINESS AND SOCIETY REVIEW

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 trans-
national corporate codes of ethics. It was found that the corpora-
tions, 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 indus-
try. 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 investig-
ated for possible links between them and effectiveness in shaping
behavior.

NOTES

1. C. C. Langlois and B. B. Schlegelmilch, “Do Corporate Codes of

Ethics Reflect National Character? Evidence from Europe and the United
States,” Journal of International Business Studies (4th quarter) (1990), 519–
536, 522.
2. C. Forcese, Commerce with Conscience? Human Rights and Business
Codes of Conduct (Montreal: International Centre for Human Rights and
Democratic Development, 1977), 14.
3. R. Berenbeim, “Global Ethics,” Executive Excellence 17(5) (2000), 7.
EMILY F. CARASCO AND JANG B. SINGH 93

4. The Global Business Responsibility Resource Centre, Ethics Codes,

1–11. Retrieved July 16, 2001 from the World Wide Web: http://
www.bsr.org /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.
94 BUSINESS AND SOCIETY REVIEW

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 Cor-
porate 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 Com-
pany, 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.