Prsentation

1. MBA Management Perspectives
Unit 2: Ethics, Governance and CSR
Session 4
Dr. Andrea Werner
a.werner@mdx.ac.uk

2. Session overview
 Last three sessions:
 Stakeholder approach, CSR and related concepts
 Corporate Governance
 Ethical Theory
 Today: Managing individual and corporate
values - Business Ethics Management
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3. Business Ethics Management
“Business ethics management is the direct
attempt [of companies] to formally or
informally manage ethical issues or
problems through specific policies,
practices and programmes.” (Crane and
Matten 2010:185)
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4. Why business ethics management?
 Corporate scandals
 Concern about reputation
 Part of risk management
 Compliance with regulation (especially US)
 Part of good corporate governance
 “It is important that all employees should know what standards of
conduct are expected of them. We regard it as good practice for
boards of directors to draw up codes of ethics or statements of
business practice and to publish them both internally and
externally.” (Cadbury Report, 1992)
 (mimetic behaviour)
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5. Components of business ethics
management
 Value and mission statement
 Code of ethics
 Reporting/Advice channels
 Ethics awareness raising and training
 Ethics managers / officers /board committees
 Risk management systems
 Stakeholder consultation, dialogue and partnership
programmes
 Auditing, accounting, reporting
 Ethical culture
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6. Examples of corporate mission and
value statements
“The mission of Merck is to provide society with superior products and
services by developing innovations and solutions that improve the
quality of life and satisfy customer needs, and to provide
employees with meaningful work and advancement opportunities,
and investors with a superior rate of return.
Our values:
 Our business is preserving and improving human life.
 We are committed to the highest standards of ethics and
integrity.
 We are dedicated to the highest level of scientific excellence and
commit our research to improving human and animal health and
the quality of life.
 We expect profits, but only from work that satisfies customer
needs and benefits humanity. We recognize that the ability to
excel -- to most competitively meet society's and customers'
needs -- depends on the integrity, knowledge, imagination, skill,
diversity and teamwork of our employees, and we value these
qualities most highly.”

7. Examples of corporate mission and
value statements
BP
“We help the world meet its growing need
for heat, light and mobility. We strive to do
that by producing energy that is
affordable, secure and doesn’t damage
the environment.
BP is progressive, responsible, innovative
and performance driven.”
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8. Types of ethics codes
“Codes of ethics are voluntary statements that commit organisations,
industries, or professions to specific beliefs, values and actions and/
or that set out appropriate ethical behaviour for employees” (Crane
and Matten 2010:191)
 Organisational or corporate codes of ethics
 Professional codes of ethics
 Institute of Chartered Accountants Code of Ethics
 National Association of Estate Agents Code of Practice
 Industry codes of ethics
 Responsible Care (chemical industry)
 Programme or group codes of ethics / standards
 UN Global Compact
http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html
 PACI Principles for Countering Bribery (World Economic Forum)
 SA 8000 (labour standard)
 ISO 26000 (social responsibility)
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9. Code of conduct vs code of ethics – two
‘extreme’ views (Fisher & Lovell 2009:392)
 Code of conduct
 Focus on compliance with law and with company’s
own rules and policies
 Goal: prevent criminal conduct and protect company
from self-interested action
 rules to prescribe and proscribe certain behaviour
 Example issues: conflicts of interest, insider dealing,
personal use of assets
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10. Code of conduct vs code of ethics – two
‘extreme’ views (Fisher & Lovell 2009:392)
 Code of ethics
 focus on commitments of company
 links to values and visions of the company
 seeks to build relations of trust with all stakeholder
groups
 encourages employees to display behaviour based on
virtues such as integrity and honesty
 sets out general principles
 Example issues: equal opportunities for employees,
value for money products and services, respecting
human rights, respecting the community, the
environment
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11. Look at the examples you brought:
 Do you think this is a code of conduct (regulating
employee behaviour) or a code of ethics (setting out
organisational commitments to stakeholders) or both?
Why?
 Do you think the code addresses sufficiently the
ethical/CSR issues that the company is facing? Why?
Why not?
 What do you like about this code, what do you dislike
about this code?
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12. What makes a code / ethics programme work?
 Clearly based on values (linked to values and mission statement)
 Balance between principles and prescriptions
 Stakeholder orientation
 Employees (and other groups) are involved in drawing up the code
 ‘User friendly’ style of code (e.g. provision of examples, reasonable
length)
 Support structures (implementation and communication, training,
speak up mechanisms etc)
 Support from top-level management
 Follow-through (e.g. consistent policies and actions, violations are
taken seriously)
 Embedded in an ethical culture
 Reference to ‘higher level’ codes (industry, global codes etc.)
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13. Corporate Scandals and
whistleblowing HBOS and the
banking crisis
Whistleblower:
Paul Moore
Worldcom, Enron and
accounting fraud BP Oil Spill
Whistleblower: Adam Dillon
Whistleblowers:
Cynthia Cooper, Sherron Watkins
Maxwell
pension scandal
Whistleblower:
Harry Templeton

14. What is a whistleblower?
 An employee (or ex-employee) of an
organisation
 Is in possession of privileged information
about what s/he perceives to be illegal and/or
unethical conduct in the organisation
 Decides to (voluntarily) bring this information
to the attention of those who might be able to
rectify this malpractice
 Internal/external whistleblowing

15. A recent whistleblowing case
 Paul Moore and HBOS
http://www.youtube.com/watch?v=_GsyJ9V136E&feature=related
http://edition.cnn.com/video/#/video/business/2009/02/18/finighan.uk.whistleb
 Why did he decide to speak up?
 To what extent would his personality have played a role?
 What consequences did he have to suffer for his actions?
 What do you make of his motives?
 Why did not more people raise concerns as he did?
 What would have happened if senior management had responded
to his concerns?

16. What is at stake in whistleblowing cases?
 the need for employees to feel able to exercise moral
agency (i.e. follow their conscience and/or their
professional ethos)
 public interest in information that affects societal welfare
(avoidance of harm)
VS
 the contractual requirement of employees to display
loyalty to the organisation and respect confidentiality of
information (potential damage to organisation)
 Likely negative consequences of whistleblowing (career-
related, financial, emotional, health-related)
 protection from malicious and ill-founded accusations
from disgruntled employees

17. How should companies respond?
 Formal ‘whistleblowing’ policies
 What do your corporate codes of ethics examples say
about internal whistleblowing (e.g. raising concerns,
reporting violations, speaking up)
 Organisational culture

18. Good practice for a formal internal
whistleblowing policy
Commitment to internal whistleblowing policy (part of
corporate responsibility policy)
Gives employees the option to raise a whistleblowing
concern outside of line management
(internal/external contacts)
Offers employees a right to confidentiality when raising
their concern
A guarantee against retaliation and victimisation of the
bona fide whistleblower and a provision of
disciplinary action against those who maliciously make
a false allegation
Organisation provides well-trained personnel to investigate
reports
Provides feedback to employees about outcome of
investigation

19. But ...
 “Employees are encouraged to report actual or potential
infringements of the BG Group Principles. ... BG Group
employees who have concerns or queries are encouraged
to speak to their manager. If this is not possible, employees
can call the independent service TalkDirect for guidance
and advice in confidence.” (BG Group)
 “As a duty of your employment, you are required to raise
concerns about possible violations of the law, a regulation
or the Code... Report your concerns to your manager or, if
necessary, a senior manager, or any member of the
compliance, legal, responsible business or human
resources functions at IMI Group or local level... When you
encounter a particular sensitive situation and you are not
comfortable using the regular reporting channels, you can19
report a concern via the IMI Hotline.” (IMI Group)

20. Potential Downsides of Corporate
Whistleblowing Policies
 possible consequences if reporting illegal and unethical
conduct is made compulsory in organisations (Tsahuridu
and Vandekerckhove 2008)
 can turn moral responsibility of employees into liability, holding
them responsible for failing to blow the whistle
 instead of encouraging moral autonomy may increase control of
people by organisations
 shifts responsibility for ethical behaviour from organisation to
individual members
 cultural differences (Hassink et al. 2007)
 CNIL in France and anonymous whistleblowing hotline

21.  How can employees raise concerns
(more) effectively?
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22. Enablers for ‘Voicing Values’ (Gentile 2010)
- Tips for Employees
 Enlist allies
 Select and sequence your audience
 Gain greater confidence in your viewpoint as a result of
securing more information
 Work through incremental steps
 Change the frame of the problem: position it as opportunity
seeking rather than risk management, for example, or as a
‘learning dialogue’ rather than a reproach
 Find win-win solutions
 Appeal to shared purpose, values (appeal to alignment)
 Normalise (managing this kind of conflict is just part of doing
the job)
 Play to your strengths (how can you best influence?)
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23. Organisational culture and ethics
Paul Moore:
“The sales culture had got markedly out of balance
with the ability to control this sales culture.”
“I witnessed and resisted a reckless lending
culture that ultimately led to the bank’s collapse.”
“It was a kind of culture that celebrated bullying.”

24. Ethical organisational culture – beyond a code
of ethics and ‘speak up’ mechanisms
 Organisational ‘lived’ ethos
 Schein’s levels of culture:
 artefacts, espoused values, basic assumptions
(1992, cited in Fisher & Lovell 2009:411)
 Role of senior managers
 commitment, communication, example
 Encouragement of dialogue and debate
 encourage employees to voice concerns
 no stifling of dissenting voices
 Fostering of autonomy and ‘moral imagination’ (see
Gentile’s [2010] Giving Voice to Values approach)

25. Ethical organisational culture – beyond a code
of ethics and ‘speak up’ mechanisms
 Appropriate reward and incentive systems
(Trevino et al 1999)
 reward for ethical behaviour
 punishment for unethical behaviour
 performance targets and ethical behaviour
 incentives vs motivations
 Commitment to organisational learning
e.g. after incidents

26. Readings
 Crane & Matten (2010). Business Ethics. Chapter 5
 Griseri & Seppala (2010). Business and Corporate
Social Responsibility. Chapter 11
 Fisher, C., Lovell, A. (2009) Business Ethics and Values.
Harlow: Pearson Education, Prentice Hall. Chapters 7
and 10.
 Boatright, J. (2009) Ethics and the Conduct of Business.
Upper Saddle River: Pearson Education, Prentice Hall.
4th edition. Chapter 4
 Schwartz, M. (2004) ‘Effective corporate codes of ethics:
perception of code users’, Journal of Business Ethics
55(4), 323–343.
 Trevino, L., Weaver, G., Gibson, D. and Toffler, B.
(1999) ‘Managing ethics and legal compliance: what
works and what hurts’, California Management Review 26
41(2), 131–151.

27. Coursework
 Choose company
 Choose issue
 Suggested structure:
 Company background
 Explanation of issue
 Application of CSR/business ethics theories to explain
why company should care about the issue
 Analysis of existing business ethics management
tools/policies
 Recommendations to improve practice
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