For further information: Ron Berenbeim (212) 339-0352
The Conference Board
For Release Monday, August 2, 1999
COMPANIES WORLDWIDE DEVELOP A CONSENSUS ON GLOBAL ETHICS CODES GLOBALIZATION AND RISING IMPORTANCE OF CORPORATE CONDUCT CITED AS REASONS VIRTUALLY ALL CEOS NOW INVOLVED
Driven by growing participation in global markets, the contribution that common business conduct standards can make to improving Asian, African, and Latin American development prospects, and increased emphasis on corporate and individual conduct, companies in all regions are formulating, implementing and monitoring global business practice standards, according to a Conference Board study released today.
The report, Global Corporate Ethics Practices: A Developing Consensus, is based on discussions in meetings convened in New York, New Delhi, Mumbai, Rio de Janeiro, Buenos Aires and Paris by The Conference Board's Working Group on Global Business Ethics Principles and on a survey of 124 companies in 22 countries.
"There is a developing consensus among companies of all nationalities as to why codes are necessary and the subjects that ethics statements need to address," says Ronald Berenbeim, principal researcher and director of The Conference Board's Working Group on Global Business Ethics Principles. "Global business practice requires fixed reference points. As laws vary from one jurisdiction to the next, common principles are stated in the language of ethics."
Regional differences are blurring. Business leaders everywhere recognize that the need to avoid legislative or judicial intrusions occasionally requires companies to take actions that are not based on market or profit considerations. A major purpose of ethics codes is to equip employees with the ability to recognize ethical problems that threaten a company's independence from judicial or legislative intrusion and to resolve them in a manner that is morally consistent with principles that are at the core of corporate identity.
Berenbeim notes that the most serious challenge companies face is to establish an ethical decision-making "environment of trust" that is free from reprisals for employee decisions and actions taken in good faith. "Wherever we went, we found constraints that limit a company's ability to monitor its ethics practices. Each region has its own special problems. In much of Europe, there are strong social pressures against whistleblowing. In some parts of the world, reporting or questioning the boss's wrongdoing is unthinkable - either due to traditions of obedience to authority or for fear of retaliation. There are also practical considerations. For example, many Latin American employees do not have access to the telephone."
DRAMATIC INCREASE IN BOARD AND SENIOR MANAGEMENT ETHICS PROGRAMS
Regardless of culture, legal or political system, boards of directors, CEOs, and general counsels are playing important roles in all stages of the process. The level of board and senior management involvement in global ethics programs has increased dramatically since The Conference Board's largely North American and European focused corporate ethics practices survey in 1987. Seventy-eight percent of participating company boards of directors are now engaged in setting ethics standards, more than triple the 1987 figure of 21 percent. Virtually all CEOs (95 percent) are now involved in the process - in 1987, 80 percent of responding companies said that CEOs were active. The current level of general counsel participation is 92 percent - up from 41 percent in 1987.
GROWING CONSENSUS ON SUBJECT MATTER
There is also a growing consensus on subject matter. Bribery and improper payments, conflicts of interest, security of proprietary information, and receiving gifts are addressed in over 90 percent of the codes. Seven others issues such as environmental responsibility, sexual harassment, and workplace safety are covered in more than 70 percent of the statements.
Commenting on the consensus regarding certain subjects, Berenbeim says: "Agreement is virtually unanimous worldwide on fundamental contract ethics principles. Companies are determined to do what they can to minimize employee behavior that corrupts the purchasing process. The prevalence of statements on issues such as equal opportunity reflects an emerging global consensus on corporate conduct standards."
The report also says that in order to produce effective codes corporations are now conducting organizational analyses, making their codes more relevant and easy to read, and creating an awareness of the code through training.
HOW BUSINESS ETHICS PRACTICES HAVE CHANGED DURING THE LAST DECADE
* Codes are now public documents. The percentage of companies that provided The Conference Board with a copy of their code has increased fivefold. * Due to changes worldwide in the business curriculum, there is greater evidence of awareness and integration of basic ethical principles in the text of the documents. * Company codes are reviewed and revised frequently. Within the company, code formulation has become a more participatory and inclusive process.
PRINCIPLES USED IN FORMULATION OF CODES
The Conference Board Working Group lists the following reasons why companies now regard code formulation as essential:
* Role of business - Though profits are the first imperative, the dominant participant view is that public opinion and nonbusiness institutions will judge some business activity within the context of its social impact.
* Company autonomy - As deregulation continues, corporations must cease their reliance on governments to set standards and actively assume responsibility in their own business activities.
* Global business practice - Ethics provides a reference point for the reassessment of corporate behavior from a more global perspective.
* Ethical decision-making procedures are needed to encourage discussion regarding the consistency of individual decisions with the company's established broad, general principles of business conduct.
* Ethical decision-making environments of trust are essential in business practice. Developing and implementing them require skillful adaptation of procedures to the requirements of individual cultures, regions, and countries.
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Source: Global Corporate Ethics Practices: A Developing Consensus Report #1243-99-RR The Conference Board
Information on ordering this publication can be obtained by calling The Conference Board's Customer Service Department at 212-339-0345. Media, please call Frank Tortorici at 212-339-0231 [email protected].
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