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Business Ethics

Managing business ethics:

Code of ethics
Course Instructor: Shd
What is business ethics
Business ethics management is the direct
attempt to formally or informally manage
ethical issues or problems through specific
policies, practices and programmes
Typical components of business
ethics management
Mission or values statements
Codes of ethics
Reporting/advice channels
Ethics managers, officers and committees
Ethics consultants
Ethics education and training
Stakeholder consultation, dialogue and
partnership programmes
Auditing, accounting and reporting
Evolution of business ethics
management (BEM)
Take-up of different components
Change in emphasis concerning the
purpose of business ethics management
Previously primarily focused on managing
employee behaviour
Increasing attention to management of
broader social responsibilities

Designing and implementing

codes of ethics
Codes of ethics
Codes of ethics are voluntary statements that
commit organizations, industries, or professions
to specific beliefs, values, and actions and/or set
out appropriate ethical behaviour for employees
Four main types of ethical codes
Organisational or corporate codes of ethics
Professional codes of ethics
Industry codes of ethics
Programme or group codes of ethics
Prevalence of codes and ethics
Increasingly prevalent
Substantial rise in usage during 1990s
2/3 of large UK firms have some kind of
formal ethical code whilst almost all large
US firms have a code of ethics
Less prevalent in Europe
Content of codes and ethics
Codes of ethics typically attempt to do one or
both of the following:
Define principles or standards that the organization,
profession or industry believes in or wants to uphold;
Generalized codes -----
Set out practical guidelines for employee behaviour,
either generally or in specific situations (such as
accepting gifts, treating customers etc.)
Specific codes -------
Content of codes and ethics
Generalized code of Unilever
All Unilever employees are expected to avoid
personal activities and financial interests which
could conflict with their responsibilities.
Specific codes of Unilever
To define financial interest they have specific
codes for bribery, gift etc.
Transparency International have specific codes
only whereas bureaucratic organizations have
general codes.
Difference between general and
specific codes
General codes Specific codes
Flexible and applicable to Not flexible and so
multiple situations cannot be applied in
different situation
General statements lack a Specific codes have
framework of meaning and clarity of expression
purpose and clarity
General statements Specific codes creates
sometimes create loopholes as it may not
ambiguous situation be possible to cover
every aspect.
Critical views on ethical codes
Generalised statements of obligation
(Hosmer 1987)
Suppress individual moral instincts and
emotions in order to ensure bureaucratic
conformity and consistency
Type of Content
Highly guided Low guided

Rule-based Cell: 1 Cell: 2

externally driven Specific codes Generalised codes
Or both generalised and specific Or both generalised and
codes specific codes
High guidance of management and Low guidance of management
strict monitoring and less or no monitoring
internally driven
Cell: 3 Cell: 4
Generalised codes Generalised codes
Managers try to develop employees Not enough guidance and
ethical values through different initiative to create values
programs like, ethical training Depends mainly on individual
employees ethical values

Figure: Type of content of code of

Effectiveness of codes of ethics
Not what a code says but how it is
developed, implemented and followed up
Suggestions for successful implementation
Maximise participation of organisation
members in development stage to encourage
commitment and buy in (Newton, 1992)
Discipline employees found in breach
(Webley 2001)
Global codes of ethics
Can organizations devise one set of principles for all
countries in which they operate?
Cross-cultural issues most commonly addressed are:
Gifts (hospitality and bribes)
Conflicts of interest
Insider dealing
Equal opportunities and discrimination
Protection of the environment
MNEs should be guided by 3 principles (
Respect of core human values
Respect for local traditions
Belief that context matters when deciding right and wrong
Importance of code of ethics
Specific guideline for particular situation or
Demonstrate organization's concern
internally and externally
Generate economic efficiency
Codes can complement other ethical
management activities
Factors to be considered for
developing COE
Type of content
Compliance with relevant Law
Provisions regarding exposing wrongdoing
Provisions regarding the problem to be solved,
e.g. procurement policy
Encompass accountability mechanism
Specific provision for punishment
Cross-cultural issues
Highlight relationship with the particular
stakeholder involved