What can companies do to improve ethics in their organization?
11/29/2023
6 min
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Research shows that many companies have programs, guidelines, or written codes in place to promote ethical behavior and prevent misconduct. But this hasn’t necessarily prevented unethical conduct or some of the corporate scandals that have made the headlines over the last decades, notes Simone DE COLLE, professor of business ethics & strategy at IÉSEG. In this interview, the expert in stakeholder theory, speaks about the development and design of corporate ethics programs and how they can be implemented effectively to improve ethics within organizations.
What are the main functions of a corporate ethics programs?
Within a company or organization, a corporate ethics program is essentially the main way to help managers embed ethics in their decision-making process. These programs also help organizations in terms of their decision-making and relations with different stakeholders externally. They create transparency for potential customers, suppliers, or investors who can see the commitments that corporations have made.
Can you please describe the different elements of a corporate ethics program?
A written code of ethics is probably the central element of any ethics program, but alone it’s simply not enough. Several different elements need to be put in place to provide more comprehensive guidance for decision making.
One of the main references in our field is the Institute of Business Ethics (IBE), which is based in London, and it is doing research and surveys around corporate ethics programs. Using their definition, there are four building blocks of ethics programs: the first is a written code for ethical business conduct; the second is to have internal means for reporting where employees can report misconduct in a confidential manner. The third block relates to internal training for communicating and creating awareness around the standards of ethical conduct. The final block is a helpline or similar mechanism for employees to get advice when they have a doubt or question.
A second important international reference comes from the US Federal Sentencing Commission Organizational guidelines. These have existed for nearly 30 years and add three more elements to those already highlighted by the IBE. They underline the importance of being clear in terms of identification of responsibility within the organization, for example in terms of an ethics committee or ethics/compliance officer. Another element is to have effective internal monitoring and auditing activities, and here we sometimes see a natural extension of the internal audit function while sometimes companies create a special position. The last one relates to enforcement. If an organization has a code or rules, and an ethics committee, it is likely there will be an internal investigation if a violation is reported. If wrongdoing has been proven, then there must be some sanction but also a mechanism for reviewing and correcting the whole ethics program, in the perspective of its continuous improvement.
What is the state of play in terms of implementing ethics programs in Europe and further afield?
Indeed, the IBE publishes research on this topic every two years via a survey called Ethics at Work, in which they question around 10,000 employees not only in Europe but also in the US and Australia on ethics at work. We can see in the last survey (2021) that overall, more than two thirds (67%) of respondents said their organization had a written code of ethics, while the figure was slightly lower for the other blocks of the corporate ethics program, namely a means of reporting misconduct confidentially (57%) training (52%) and advice or an information helpline (46%).
However, there are some interesting differences between countries for example between US and France. In the US, 82% said their company had a written code of ethics compared to 55% in France.
It’s important to note that this survey gauges the perceptions of employees rather than the actual number of companies with such programs, but it provides a very interesting source of information. IÉSEG has been participating in the French part of the survey (as National Partner) and we have seen there has been interesting progress made in France in terms of ethics programs.
You highlight that many employees are aware of different ethics’ activities. But what can companies do to ensure their corporate ethics programs or activities are effective?
This is a crucial question. We all know that even having a code of ethics and all the different elements of a comprehensive ethics program in place doesn’t ensure that there will be no problems in terms of unethical behavior or misconduct.
It’s well known that that companies such as Enron and Arthur Andersen had a code of ethics but the scandals involving these companies actually led to the creation of the Sarbanes Oxley Act in the US in 2002 (which incorporated a number of changes to improve financial reporting and prevent corporate misconduct).
What I can say from my research and experience in working with corporations is that I think we can focus on two aspects of ethics programs: the design and the implementation.
In terms of design, it is important to avoid reducing these activities to a merely compliance-based approach. While of course we need to have rules and procedures, corporations need to provide their employees and managers with as much guidance as possible on how to behave in different situations. We cannot reduce ethics to a compliance problem or simply the prevention of illegal or unethical behavior. Ethics programs need to help managers to be proactive and to find new solutions to new problems.
There is a quote by Wittgenstein that I really like to use when discussing the problem of compliance-based ethics. He said “When I obey a rule, I do not think. I obey blindly”. This is the problem of compliance.
So, while I believe we need rules, we also need a values-based approach when we design an ethics program. This means ethics-related activities are based on a set of values or principles for decision making. These need to be interpreted, applied, and agreed by a group of people: not only comprising the management team but also more widely within an organization. These should therefore act as a mechanism for solving problems and working together.
As outlined in Stakeholder theory we can see corporations as a system of cooperation among different stakeholders. Using this perspective, ethics can be a resource for better decision making and not a constraint that limits the decision making of managers.
With a values-based approach the role of training and the implementation of programs are both extremely important. I think it’s important not to rely on a top-down approach.
It shouldn’t simply be about communicating and sharing the values, policies, or rules that employees should adhere to. We also want managers and employees to agree on the problems they face or new ways of doing things. The idea, therefore, is to have a values conversation during ethics training rather than simply focusing on communication about complying with rules. Ethics training is an opportunity to discuss and ask questions such as what do we stand for? What kind of company do we want to be?
And when companies are faced with issues that are more strategic or new, this kind of approach I think is more helpful for managers to find solutions that make their ethics program more effective than just via a compliance-based approach. They can discuss which is the best way to act whilst adhering to their values. It’s not just a question of let’s find the rule we have to follow.
Issues such as AI and big data are creating lots of challenges in terms of ethics. Are there any learnings from stakeholder theory that we can draw on?
One of the key ideas of stakeholder theory is that we need to engage with our stakeholders. Obviously, managers as decision makers have to face new issues and challenges emerging in society such as artificial intelligence, climate change, etc. All these new challenges require this kind of work-they require managers to engage with their different stakeholders, and to maintain this internal values-based conversation.
The idea of stakeholder theory is really to find a balance between a compliance-based approach and a values-based leadership, a balance between profit and purpose, and a balance between business and ethics-we need to see both. If we think about stakeholders, we think about human beings, and we know that human beings care about fairness and not just about money. So, if we embrace stakeholder theory we actually can find more reasonable solutions to new problems and that’s the approach we try to foster when we develop ethics training for executives and how we teach business ethics at the School.
Professor DE COLLE is a co-author with Ed Freeman of “Stakeholder Theory: The State of the Art” (Freeman et al., 2010, Cambridge University Press), a reference publication in stakeholder theory.
His co-authored article “Moral Motivation Across Ethical Theories: What Can We Learn for Designing Corporate Ethics Programs?” can also be viewed here.
