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19/03/2018 11:01:12 AM

Ethical Conduct

I. Introduction

Business ethics has been considered as an elementary part of business environment where managers have to deal with ethical dilemmas related to their decision making process. (Robbins, 1994; Sternberg, 1994). According to Hosmer (1987), a decision can have uncertain consequences which result in different outcomes for stakeholders. If ethics in business is concerned as a well-developed set of questions rather than a neat list of answers (Hosmer 1987), the biggest challenge is how organization tackles these “questionable behaviors” which are becoming a normal part in the workplaces. De George (1993) offered manager some senses in terms of responding ethical challenges by suggesting ten strategies. On the other hand, Buller and Kohls (1994) focused on contextual factors referring to decision making process. Ethical issue is an abstract issue and it is not the same for all organizations as well as industries. There are a various factors which determine an employee’s behaviors when facing with ethical dilemmas. Therefore, the managers’ tasks are to create the ethical culture in behaviors of organizations through implementing an extensive regime as well as well-designed codes of conduct in their business. These codes of conduct should approach every particular aspect in business ethics both external and internal viewpoint. Furthermore, the effective codes of conduct are expected to present how to face with questionable actions of employees and management. This report will look into 10 different companies in 10 countries to address how those companies set up their codes of conduct as an ethical framework to help employees to overcome ethical dilemmas in workplaces.        

II. Background and Literature review

1. The business ethics definition

The concept of ethics can be seen as principles which help people to make a decision based on their perception about which is right or wrong. According to Yüksel (1994), ethical behaviors refer to individual actions in a right way and they are accepted by the society. In addition, there are some similar definitions proposed by other researchers: “business ethics is concerned as the set of rules related to how employers and employees should behave” (Yeh-Yun 1999); ethics management is a concept of a group judgement, an agreed based on set of standard or a collective set of principles (Burke 1999). Following definitions above, the fields of ethics are conceptually identified based on moral judgments related to what is right or wrong. As Kavali (1999) cited, the ethics business perspective is closely related to the social responsibility issue which is considered as the doing of societal good regardless to the business activity.

The theories of business ethics are manifold. De George (1989) proposed that the concentration of ethical issues has changed from religious and theological matters to social and ecological problem and recently moved to business ethics and social responsibility. From the viewpoint on the business ethics, managers who have decided power and authority follow these listed responsibilities (Yüksel 1999)

a. Individual ethics

Individual ethics consists of practices related to personal life and covers the appropriate behaviors based on individual beliefs. The ethical responsibilities and duties such as to keep the promise, not to tell lies or not to hurt or harm other people may different from individuals.

b. Institutional ethics

Institutional ethics refers democratic management. In addition, the main parts of institutional ethics include social and economic development, mutual assistance, equal treatment, justice and peace, solidarity and volunteering. If responsibilities are not shared, institution may raise unethical pressure on individuals. People including leaders and employees will work as a team or family when they share their expectations or mutual aims and values.

c. Social Ethics

Social ethics comes from the relations between institutions and society. The managers’ responsibilities are based on the institutions’ boundaries. Managers have relationships with unions, public offices, customers, suppliers or even their competitors. Managers must take responsibility for the quality of products, environment pollution related to conducting their activities and unequal competition.

Therefore, ethical problem in terms of individual, institutional or social ethics are various and abundant. In Kavali’s research (1999), managers try to address these listed ethical issues: corruption, bribes, gratuities, gifts, harassment and discrimination, unfair pricing, unequal competition, prejudice in hiring and so on. It is evident that organizations need to appreciate the importance of ethical codes of conduct to guide the employees’ practices to eliminate ethical issues at workplaces.

2. Ethical Decision Making Factors

Managers and employees must aware the ethical dimensions in their decision making process since they have to deal with many ethical dilemmas in business environment. According to De Cenzo (1996), these dilemmas refer to rules of conduct, moral standard and judgements related to what is right and what is wrong. Kavali (1999) stated that ethical conflicts appear to balance the disagreements between many parties such as customer, vendor, cooperate company, competitor and so on. It can be seen that the challenges in solving ethical problem is finding a balance point between profits and the social good (Barker 1999). Kavali (1999) suggested classifying factors which affect ethical decision making and behavior into four categories, those namely: personal factors, issue related factors, inter-organizational factors and extra-organizational factors. In some cases, ethical conflicts occur related to the debate of which is right and which is legal. For example, increasing prices in the competition absence is obvious legal, nonetheless, charging exorbitant prices may be considered as an unethical behavior.  

III. Methodology

In this research, ten companies from ten countries were chosen to investigate how those companies tackle “questionable behaviors” in their business. The companies illustrate different industries and the information which is demonstrated here is taken from the companies’ websites or their annual reports. The companies as well as their figures are listed in the table below (Table 1). Through observing the ethical codes of conduct in each company, it is important to find out I the company has dealt with the major ethical issues in their countries.

Table 1. The listed companies from 10 countries 

1. Nike

2. Ramboll UK Limited

3. Newcrest Mining Limited

4. Volkswagen

5. Singapore Airline

6. Banco Santander Brasil SA (BSBR)

7. Rosneft

8. Sanofi India Limited

9. China Telecom Corporation Limited

10. Telkom

This study concentrates on the ways that company implements their codes of conduct to address ethical issues and explores whether these codes of conduct are similar or different in companies. By comparing the data on BRIIC (Brazil, Russia, India, Indonesia and China) with data obtained in developed countries (the USA, UK, Australia, Germany and Singapore), it can be observed that developed countries have clear codes of ethics and procedures for reporting ethical violations than developing countries. Furthermore, each company has their different focus on codes of conduct to tackle particular issue based on their industries. For example, Banco Santander Brazil SA- the Brazil bank has regulations on prevention of money laundering and terrorism financing while manufacturing companies such as Ramboll UK Limited or Newcrest Mining Limited pay more attention on developing codes of conduct related to environment and social issues.   

IV. Analysis and Discussion

1. Corruption

Corruption is considered as one of the biggest barriers which affect to economic development, political stability, society and prosperity of each country. The most serious problem is that corruption has gradually perceived and accepted as a normal part of life. Corruption becomes commonly in doing business because it is concerned with sentiments such as “it is a sensitive issue” or “nothing can be done to address since many people are doing it”.  As a result, efforts to eliminate corruption are not only responsibility of NGOs but also organizations and society to prevent corruption. Due to corruption lies on the top of list of the most concerned business issues so all ten companies above implement codes of ethics to tackle this questionable behavior. Those companies including Nike, Ramboll UK Limited, Newcrest Mining Limited, Volkswagen, especially Singapore Airline are good at conducting ethical codes to combat corruption in their organizations. For example, Singapore Airline implemented a comprehensive and clear regulation called “Anti-corruption policy procedures”. Following this code of conduct, Company Employees must comply with applicable laws comprising anti-bribery and anti-corruption laws in the country which the Company (Singapore Airline) operates. Company Employees may be subject to criminal liability when they offer, pay or authorize payment which has anything of value such as improperly providing meals, gifts, entertainment, employment as well as direct cash payment in exchange for some inappropriate advantages for the company. In addition, “ignoring” or “turning a blind eye” with suspicious actions also be subject to criminal liability. “Red flags” is an example for the heightened corruption or bribery risk of third parties which are provided at Appendix 1. Furthermore, Singapore Airline offers a detailed guidance on meals, gifts, entertainment and travel with some basic rules in terms of reasonable giving or providing those courtesies. On the other hand, Rosneft, Sanofi India Limited, China Telecom Corporation Limited and Banco Santander Brasil SA do not focus on implementing ethical codes toward corruptions issues. Although Telkcom in Indonesia mentioned regulations to combat corruption in their organization they are still simple and general. Moreover, Telkom company tends to let their employees decide what is right or wrong on their own perception and judgment. It can be seen that there are differences referring to codes of conduct between developed countries (the US, UK, Australia, Germany and Singapore) and BRIIC countries (Brazil, Russia, India, Indonesia and China). This may be explained that developed and developing countries have the different ethical standards which are affected by cultural, political, social distance. Corruption occurs frequently in business practices and becomes a normal part of doing business in developing countries. Bribery can be masked in form of gift- an inevitable ritual in these countries. According to Hanson (2001) analysis about the bribery case in China, it could be unfavorable for MNEs not to accept gift-giving practices to secure business projects although they are improper with against corruption values in Western countries.

Another observation is that although it is obvious that ethical codes of conduct to combat corruption can be considered in the developed countries and not necessarily in developing countries this does not mean that company with simple ethical codes or no code of conduct will act unethically as well as company which carries out the well- designed codes of conduct will have no ethical issue. For instance, the accusations at Volkswagen (VW) reflected one difficult year for the Europe's biggest carmaker related to corruption allegations in the Czech Republic and India and sex-scandal from Germany to Brazil. (Lewin et al. 2006). The personnel director of VW, Peter Hartz, took responsibility for his alleged abuse of company’s fund in order to made payments for prostitutes and luxury foreign travels for VW’s employees on supervisory board. Consequently, VW implemented new anti-corruption guidelines which employees are not allowed to give or receive gifts with more than €50 of value and accept invitations to events without the company’s permission to tackle this issue. (The economist 2014)

2. Sexual harassment

According to ILO, sexual harassment referring to gender discrimination based on sex or coercion of a sexual nature, or a kind of unequal power relations between males and females. A good example of codes of conduct to address sexual harassment belongs to Telkom Company. In this company, employees who engage in sexual harassment behaviors will be subject to disciplinary action. In addition, management must take responsibility for secure that the working environment is free from sexual harassment. In contrast, Sanofi India Limited does not have an extensive regime and code of ethics for sexual harassment through a short sentence in their ethical codes which committed to harassment of any kind is prohibited. Even though Nike which has clear codes of conduct their actions are different. Nike, the leading manufacturer of sport shoes in the world, admitted that Indonesian workers suffered physical and verbal abuse at its factories. Following workers’ complaints, there were 30% people reported that they were sexually molested and bullied. Moreover, in Nike’s report, workers at the nine factories investigated were forced and bullied to work overtime under the poor condition and health care services. Additionally, some workers reported that they had to clean toilets or run around the factory’s ground as the penalty because of being late. They also informed that they had been forced into sex and fondled by manager with assembly-line workers. (BBC News 2001)      

3. Whistle-blowing policy

Whistle-blowing occurs when an employee reports suspected malpractice or wrong-doing at workplaces. Whistle-blowing policies can support employees to report to the supervisors if they have consistent and appropriate concerns about wrong-doing or malpractices. These companies from ten countries have whistle-blowing hotlines to encourage employees in terms of comfortable and confident making disclosure when they established the whistleblower system in organization. For instance, all reports made by the whistleblower system go to the CEO of Ramboll Group directly. Nevertheless, no organization can rely on codes of conduct only to tackle this questionable of behaviors. According to Schuler and Jackson (2007), the CEOs of Nike should ensure that their managers aware about whistle-blowing as a benefit, not a threat. Newcrest Mining Limited is the only one company has initiates to create a whistle-blowing culture through “Speak Out Service”, which is available 24 hours per day, 7 days a week and it is possible to communicate via email, website or free call. By offering this service, Newcrest is fostering a confident and comfortable environment to protect for employees who make a disclosure misconduct or suspected misconduct on an anonymous basis. On the other hand, nine rest companies also have their own whistle-blowing policies, however, those companies do not seem to pay their attention on developing their codes of conduct in deep and create a high standard and clear guideline to encourage employees to act as well as resolve the problem immediately. In fact, there are several barriers to implement a whistle-blowing program successfully such as a lack of trust, fear of retaliation, unwillingness of employees or fear of alienation for colleagues.

V. Conclusion and Recommendation

In conclusion, ethical code of conduct is an elementary part of organizations in order to address and tackle “questionable behaviors” at workplaces. Due to cultural, political and social difference, developed and developing countries have different presents in terms of their coded of ethics based on their own distinct moral standards which may raise conflicts in implementing those conducts. For example, the legislation referring to child labor is not much restricted in some countries like India, which children income becomes the main income source of the large families (Berg et al. 2001). Furthermore, developing countries are called as “golden mine” referring to cheap labor, various resources to gain competitive advantages, lax and weak regulations. When MNEs in developed countries operate their business in developing countries, they have to shape their strategy considering some of the most common ethical issues that are present in host countries. One of infamous case in term of moral standard conflict occurred in the 1990’s, when Nike was accused of using sweatshops in its factories in Viet Nam, Indonesia and other Asian countries. It was reported that Nike employed child labor with less than minimum wage, forced workers to do overtime under a subcontract in Viet Nam, China and Indonesia and provided a poor and squalid working condition with high level exposure to hazardous substances. According to Beder (2002) and Hill (2013), these scandals had a negative impact on Nike’s reputation that was reflected through a decrease on sale volumes because of consumer boycotts. Regarding to implement the best practices, companies should aware that there is some sort of method, technique, incentive, process or reward which is considered to be more effective than others (Jackson, Schuler 2007). In case of Nike, there are two recommended actions plans to the management: compensation and Training- Development strategy. Furthermore, using a PR campaign can help company to improve Nike’s image in terms of the sweatshop debate. It is necessary for management of Nike to appreciate the importance of ethical responsibility related to customer satisfaction, human rights, working conditions of the employees, governance and ethics and so on.

In developing countries, besides ethical codes of conduct related to corruption, environment, cases on tax evasion, sexual harassment, lobbying and discrimination there is also an increasing concern about corporate social responsibility (CSR). It has been a long way for developing countries to fully embrace the CSR value because of low level of economy as well as political instability. Nevertheless, following Cramer (2007), CSR issues will be addressed by new sense of business leaders in developing countries. Moreover, as Cauvusgil et al. (2013) stated, developing countries are expecting high quality CSR practices of Western companies and MNEs have become more and more environmentally and socially responsible. Adidas is a good example for implementing CSR policies successfully in developing countries. The company has released CSR reports for 11 consecutive years, which illustrated different measures to secure social and environmental welfare in developing countries. Adidas aimed to improve working conditions at its factories and decrease the impacts of its activities to the environment (Adidas 2007). Unlike the case of one of its biggest competitor, Nike, Adidas carried out an ethical strategy referring to improve and promote social welfare which brought the respect of institutions and public to Adidas.     

VI. Personal Reflection

I would like to demonstrate my reflection based on my own experiences to stress the personal dimensions related to making decision ethically. When I started to my first job, I always held strong values that I will stand up to any challenge and enable me to do the right thing when I took this job. Unfortunately, the problem is that the challenges do not often come in overt forms so it is difficult to face with ethical dilemma. In my case, I would like to share my story about one kind of ethical dilemmas that I had a chance to experience. When I worked as an auditor assistant, I had to work with a special senior auditor as well as our chief auditor. Once time we worked at a construction company, I was assigned to examine “Fixed asset Accounts” of the company. Because of the number of those assets is bigger than other companies, I could not apply a normal way to do. I spent two days for finding the best solution. Finally an initiate came to me with my extreme excitement in terms of creating one general formulation that enables to use for all assets. Nevertheless, my “Fixed asset Accounts” working-paper became my boss’s working-paper with his name typed clearly on this paper. Another experience is that although our group’s findings about a company’s frauds are obvious and time-consuming, the final result depends mostly on the relationship between the auditing company and its clients which against the regulation about the independence of auditing company.

To sum up, it is critical for organization to create a fair and comfortable environment with well-designed codes of ethics. More importantly, both manager and employee need to realize the importance of ethical practices in their business to eliminate ethical issues in the future.   

Nguyen Thi Hoang Nhi