Ethical Codes

John Bateman
Lecture 8
By way of introduction:
We are dedicated to conducting business
according to all applicable local and
international laws and regulations.and
with the highest professional and ethical
standards.
Extract from a companys Code of Ethics,
July 2000
Lecture content
Definition
Types of Codes
Focus 1: Company Codes
- Rationale
- Prevalence
- Examples
- Evaluation
Focus 2: Professional Codes
- Professions?
- Role of Code
- Example Accountancy profession
- Justification
- Problems/Issues
Focus 3: Principles of Public Life
And finally..

Definition
Crane & Matten define ethical codes as
..voluntary statements that commit
organizations, industries or professions to
specific beliefs, values and actions and/or
that set out appropriate ethical behaviour
for employees (p191)
Types of code
Corporate/organisational codes
Professional codes
Industry/sector codes (for example as developed
by trade associations for their members)
International codes (Ethical Trading Initiative,
Caux Roundtable) (see lecture on Globalisation)
Others - principles for public service, codes for
3
rd
sector volunteers, ethical research code for
Sussex students
Prevalence/popularity
A must-have for big business?
Crane & Matten estimate that two-thirds of
UK businesses and that virtually all US
large firms have one
Uptake for SMEs is lower
So what goes into a company
code?
General statements of principles and values
(what we stand for)
Practical guidance on what to do (resolving
ethical dilemmas?)
Might address particularly sensitive issues such
as
- bribery/corruption (eg for MNCs);
- environmental issues (e for oil companies)
- labour exploitation (for clothing industry)



Some typical buzzwords
1 .Example 1: Hewlett Packards code:
- Honesty
- Excellence
- Compassion
- Citizenship
- Respect
- Fairness
- Excellence
- Responsibility
continued
2. Example 2 Boeings code:
- Avoidance of conflicts of interest
- No personal gain through inappropriate use of
information
- Confidentiality
- Fair dealing
- Compliance
- Reporting others who breach the code
NB also see the BAe Systems Code on the Study Direct
site
An ethical culture: key elements
Ethical code
Committed leadership
Ethical training
Advice on ethical dilemmas
Reporting, investigating and disciplining misconduct
Build in to appraisals (rewards)
Stay ahead of regulation
Accountability from the top: do as I do not just do as I
say

Evaluation: the positives
Reputational advantages: a good
company to do business with/trusted
brand
Improve risk/crisis management
Create cohesive & ethical corporate
culture
Avoidance of fines/sanctions/boycotts
Helps to achieve kite-marks
Sends out right signals to stakeholders
Evaluation: the negatives
Raises stakeholder expectations
Can be vague and open to interpretation
If not policed (followed-through) then
wont work
Limited buy-in within organisation
Not perceived as meaningful
Could be overly bureaucratic/time-
consuming
Focus 2 Professional Codes
Firstly: what is a profession?
Teacher?
Social Worker?
Counsellor?
Architect?
Estate agent?
Management Consultant?
Professional footballer?
Racehorse?

It all depends on.
.what we mean by profession
Pay?
Status?
Expertise?
Autonomy?
Exclusive right to practice?
Self regulation?
Professional qualification?
Professional body?
Code of ethics?
Duties of a doctor
Make the care of your patient your first concern.
Protect and promote the health of patients and
the public.
Provide a good standard of practice and care.
Treat patients as individuals and respect their
dignity.
Work in partnership with patients.
Be honest and open and act with integrity.

FUNDAMENTAL PRINCIPLES IN CODES OF CONDUCT
FOR PROFESSIONAL ACCOUNTANTS
Members should:
at all times maintain the good reputation of the profession and its ability
to serve the public interest,
perform with:
integrity
due care
professional competence
independence
objectivity
confidentiality, and
not be associated with any misleading information or misrepresentation.
MOTIVES INFLUENCING PEOPLE AT
KOHLBERGS SIX STAGES OF MORAL REASONING
STAGE DESCRIPTION MOTIVE FOR DOING RIGHT
Preconventional Self-interest
1. Obedience Fear of punishment and authorities
2. Egotisminstrumental
and social exchange
Self-gratification, concern only for oneself
Lets make a deal
Conventional Conformity
3. Interpersonal concordance Role expectation or approval from others
4. Law and duty (social order) Adherence to moral codes,
or to codes of law and order
Post-conventional,
Autonomous or Principled Interests of Others
5. General individual rights
and standards agreed
upon by society
Concern for others, and broader
social welfare
6. Self-chosen principles Concern for moral or ethical principle
Professional Codes: positives
- Protecting and serving the public (eg Civil
Engineering!)
- Guidance for professionals (from professionals)
- Aspiration and inspiration (high standards of
practice)
- Common & consistent standards
- Professional credibility and back-up
- Deterrence and discipline (sanctions being
struck-off)
- Pre-empts state regulation (keeping your own
house in order)


And problems/issues
A smokescreen behind which professionals can get
away with things?
Keeps a profession exclusive and inward looking?
Self-serving ie professional collusion reduces
competition?
Flawed in wording/interpretation/implementation
Maintain professional autonomy at the expense of good
management (eg professionals might be blind to
costings?)


Focus 3: Ten principles of public
life for politicians
Selflessness
Honesty and integrity
Objectivity
Accountability
Openness
Personal judgement
Respect for others
Duty to uphold the law
Stewardship
Leadership
And finally.
1.Boeing
- 2005 CEO forced to resign following an affair
with an employee
- 2005 Chief Financial Officer convicted
2. H-P
- 2010 CEO resigns after admitting a close
personal relationship with a contractor who
received improper payments
3. BAe Systems
- 2010 fined by both the US and UK governments
for false statements/false accounting


And our public servants?
- 2009 onwards a series of revelations
about MPs claiming false expenses
several MPs and Lords imprisoned for
false accounting
- Remember the companys Code of Ethics
we quoted at the start? The company
was..?
A great code of conduct doesnt (always)
make for great conduct!

Reading
Crane & Matten, Chapter 5 especially
pp191-201