a good corporate citizen involves acting in an ethical manner. Just as ethical
values are necessary for a company, these values and ethics are the moral
backbone of its Board of Directors also.
Institute of Business Ethics, London defines business ethics as –
“Business ethics is the application of
ethical values to business behavior. It applies to any and all aspects of business
conduct, from Boardroom strategies and how companies treat their employees and
suppliers to sales techniques and accounting practices. Ethics goes beyond the
legal requirements for a company and is, therefore, about discretionary
decisions and behavior guided by values. Business ethics is relevant both to
the conduct of individuals and to the conduct of the organization as a whole.”
ethics is a Code of moral conduct for the business, which specifies that the
business should achieve growth and profits in a socially and legally
responsible manner and is accountable for its decisions to the internal and
external stakeholders and the public at large.
Developing Codes of
Conduct for a Corporate Board of Directors
Code of conduct is different from by-laws or a statement of roles and
responsibilities. A Code of conduct outlines a set of fundamental principles,
whether or not they are the basis for certain operational or legal requirements
or prohibitions. These principles help Boards understand why the by-laws
mandate behavior in certain ways, why the laws require or prohibit certain
actions and what is to be done when the by-laws and legal strictures are
ambiguous or subject to interpretation. A Code addresses the values of an
organization and how they reflect the values of the larger society. It helps
the Board define what is right, fair, just and good in those cases where it may
be less than obvious which path constitutes the high road. It defines
Relevance of a Code
of conduct for corporate Boards of directors may be viewed as a modern
phenomenon. Conventionally Boards have been governed exclusively by a set of
by-laws, or technical/operational practices. Traditionally the by-laws have
been complemented by a document describing functions, responsibilities, perhaps
even putting the intonation on certain legal issues or compulsions.
Code describes the organization’s fundamental principles and values so that a
director can better understand and meet the expectations and requirements of
the organization, even in cases not articulated in any document. It facilitates
dialogue about ethical issues and goes a long way towards guaranteeing that
well-intentioned people will not erroneously prefer the incorrect path when
confronting situations not adequately addressed in policy, procedure, law,
regulation or by-laws.
ethics and values given in a Code are very realistic and are demonstrated or
simulated with numerous operational examples of the very types of predicaments
and elusiveness that an individual director or the Board collectively might
encounter in the course of exercising their responsibilities. The Code creates
a common vocabulary, and a sense of the ethical requirements for serving on a
Board. A Code would typically detail how fairness plays out on Boards - issues
of independence, conflicts of interest, and the need to separate personal needs
from those of the organization.
values used to define the ethical standards for Boards are:
• Consideration for work/external
• Confidentiality of information
• Social responsibility/community
• Sustainable development (a recent
of these principles are portrayed as “ethical values” (e.g. honesty and
fairness) while others are more aptly described as “organizational values”
(e.g. excellence and sustainable development). Ethical Board Principles
typically include both.
Why does a Company
need a Code?
Code moves the Board forward towards numerous objectives.
• It is an ethical document defining
what an organization means when its holds its directors to the highest ethical
standards - its details the fundamental maxim - do the right thing, by defining
right and wrong in some detail.
• It has legal standing, in that the
standards articulated become concrete evidence of the organization's
expectations and intentions, with respect to the behavior of its directors.
• It serves the organization in times
of change and uncertainty, where the law and policy may be vague, or an issue
is so new that law has not yet spoken.
• It brings society at large to the
Boardroom by reminding the Board that they represent more than the
shareholders. In addition to the stakeholders who depend on the Board to do the
right thing, society (and all of the interests it represents) also has a vested
interest in the actions of the Board.
Codes are the standards for expressing how the inherent values/principles of
the company will function at the Board level. There is no perfect set of
values, nor is there an exceptional numeral for values. Several organizations
believe that too many values result in weakening their importance while some
believe that every germane value deserves consideration and importance.
of conduct for Boards cannot replace by-laws and do not define values in
general for a society. They do not exist in a vacuum. Codes begin with an
understanding of roles and responsibilities - they address the purpose of the
Board and how that Board is to function. Those roles, responsibilities and
functional criteria are typically found in the by-laws. While it may become the
norm at some point that Boards first create their Codes, and then their
by-laws, today the reverse is more typical. Neither are Codes substitutes for
statements of roles and responsibilities. The organization decides what the
Board will do, how the Board will serve and which decisions will remain the
responsibility of the Board.
of the responsibilities of Boards are:
• Representing the interests of the
investors/shareholders to the organization
• Directing the leadership regarding mission,
vision and values
• Directing the leadership regarding
strategy and strategic goals
• Overseeing the financial well-being
of the organization
• Overseeing the operational
effectiveness of the organization
• Selecting and overseeing the chief
• Serving as a court of appeals to
• Self-assessment of the Board and its
members regarding its effectiveness
• Creating the structures and systems
to ensure the above
Codes list no more than seven to ten core values, choosing to
"subordinate" others under the broader umbrellas. For example, the
value of providing a harassment-free workplace, prominent in today's legal and
social environment, may be highlighted because of society's concern for this
issue. Or, it may be under the umbrella of "respect" — the broader
core value. How it is listed is a matter of the Board's preference.
Governance in relation to the need for distinctive and unique Code for each
Codes are considered as the vital medium for articulating how the core
values/principles of an organization are to function at the Board level. There
is no perfect set or an ideal number of values for an organization. Some
believe that more than a handful of values dilute their significance. Others
believe that every applicable value deserves attention.
Each Board is
unique and Each Board Code needs to be inimitable:
illustration in India is HDFC Bank which recognizes the importance of good
corporate governance, which is generally accepted as a key factor in attaining
fairness for all stakeholders and achieving organizational efficiency. This
Policy is implemented by the Board of Directors through a Code, to provide a
direction and framework for managing and monitoring the bank in accordance with
the principles of Good Corporate Governance.
Code has to keep pace with the changing requirements - so the diligent Board
should regularly review the Code and develop systems and processes for
determining the degree to which the Code is "integrated" into the
formal and informal processes of the Board and its members.
3. By factor analysis of decisions and
discussions captured in Board minutes
4. By a combination of these and other
Board must hold itself accountable to the Code and must hold the Code to a
standard of relevance and utility to ensure that the agreed upon core doctrines
and values are not distorted.
Governance lays down the road map to be condensed by the Board of Directors to
a checklist of uncomplicated steps:
• Create a list of the guiding values
and principles most important for the organization;
• Create behavioral standards to
illustrate the application of those values to the roles and responsibilities of
• Review the existing Board by-laws and
policies for guidance and direction of how those values and standards are
typically applied; and
• Create the systems and processes to
ensure that the Code is implemented and effective.
a Code may detail what one should do in the capacity of Board member, we are
all proficient enough to seek and discover ways to pervert the Codes
intentions. The process of perversion may be as delicate as subliminal
validation or as manifest as fraud or other criminal demeanor. We need to
remember that the Code is not a substitute for good and honorable people doing
a difficult task to the best of their ability for the benefit of those who have
entrusted them with this responsibility. The Code is not a guarantee.
to Carol Stephenson, O.C. in
“A Board’s Role in Fostering Vision, Values and Integrity” the leadership team serves as a compass for
the organization’s future direction, as an anchor for its vision and values,
and as a magnet for potential investors and employee talent.
best Boards understand the importance of clear values, honest communications
and social vision in building a company that will be consistently successful
year after year. Above all, they recognize their critical role in fostering this
Dean, Ivey Business School from 2003 - 2013 Ms. Stephenson spent many years in
the Canadian telecom industry before joining Ivey. As a widely respected CEO,
she brought more than 30 years of progressive experience in marketing, operations,
strategic planning, technology development, and financial management to
Canada's premier business school.
Stephenson writes, “Lately, however, in the wake of recent high-profile
corporate scandals, much of the discussion around corporate Board tables has
shifted to governance reform, new rules and legal compliance. Reassuring
investors that their interests are protected is not a bad thing, but I believe
that more Boards should remember that it’s not the only thing. Time and time
again, research has shown that an effective Board of directors is not simply a
matter of putting in place independent directors, audit committees and ethical
guidelines. However, I believe that investors, employees and other stakeholders
have come to expect much more from their corporate leadership teams, especially
Warren G. Bennis, the distinguished
management teacher and author, said, “Leaders keep their eyes on the horizon,
not just on the bottom line.” “These values establish a framework for what is
considered to be acceptable within an organization.” These values must be lived
by every employee, especially Board members and executives. Every employee
looks to the corporate leadership team to show the way.
Business School’s research also shows, leaders must encourage open and honest
communications across all levels, but especially with top management. Authentic
leaders listen with intent and invite feedback. And they act on what they
learn. This honesty and openness engenders trust, reinforces relationships and
secures the loyalty of employees, customers and investors. It is vital in a
business environment marked by uncertainty and change.
SOME EXAMPLES OF
CODES OF COMPANIES (as available in public domain):
1) Intact Financial Corporation, Toronto
based Canadian Insurance Co.
Code of Conduct titled, “Living our values” approved by the Board of Directors
in November 2009 sets out commitment to acting with integrity and with the
highest of ethical standards.
Our Values is organized according to five core values: integrity, respect,
customer driven, excellence and socially responsible.
• We demonstrate the highest ethical
standards of personal conduct.
• We behave with honesty, integrity,
openness and fairness when dealing with each other, customers, partners and
• We value the diversity of our people
and their dreams.
• We foster an environment conducive to
personal growth and development and to new opportunities.
• We recognize and value the
contribution each of us and our teams are making to our success.
• We listen to customers, understand
their needs, offer the best solutions and deliver on our promises.
• We make it easy for customers to deal
• We go beyond expectations and always
deliver an outstanding experience.
• We are disciplined in our approaches
and our actions, which is why we excel in all of our businesses.
• We embrace change and the
opportunities it creates, encourage innovative thinking and always seek to
• We value and reward high performance
• We provide high value to our
are socially responsible
• We respect the environment and its
• We believe in making the communities
where we live and work safer, healthier and happier.
• We encourage the involvement and
citizenship of all our employees.
2) On Board Capital Group, Europe
On Board Group is an investor in companies within the sphere of business
communications. On Board Group’s mission is to create a leading communications
group in Central and Eastern Europe. The Group is to generate growth by
combining unique competences in the following areas: communications,
advertising and promotion, as well as interactive communications based on the
On Board Group invests in entities with high market competencies. The companies
constituting part of the Group win awards in national and international public
relations, advertising and interactive communications competitions.
and implementation of corporate values
Values play similar role as brand values - should be a signpost for all actions
taken, and their manifestation should be correlated with the company’s
activities. On Board PR Ecco Network consultants have experience in research
methodology and implementation processes of corporate values.
the Corporate Values Index project we developed a range of services and tools
dedicated to support companies communication through corporate values:
Internal communication audit including examination of what values employees are
External communications diagnosis with company’s business surroundings in
context of corporate values.
Developing an internal communication strategy based on corporate values.
Values & Strategic Session for representatives of the Board and managers.
Development and implementation of social programs building the company's image
in the context of societal values.
3) National Bank of Kuwait
of Best Bank in The Middle East Award: The Group is achieving high standards of
corporate values. These are followed and embedded through a number of
well-established pillars. These pillars are formulized through a robust set of
policies and procedures covering:
• Related parties transactions
Board takes the lead in setting professional standards and corporate values
which promote integrity for the entire body, Executive Management and other
employees. The Group Code of Conduct outlines the ethical standards expected of
various stakeholders in the conduct of its business. This specifically covers
the Board, Group employees and other stakeholders.
Group Related-Party Transactions Policy outlines the guiding principles on
dealing with and managing transactions with relevant parties, whether between
the Group and its Board Members, their companies or their related parties,
Executive Management, and employees including syndicated financing and trading
activities. The policy is in compliance with regulatory and IFRS standards.
Board monitors and manages the potential conflict of interest of the Group
including the abuse of the Group’s resources and any misuse of powers. The
Conflict of Interest Policy provides guidelines for the identification,
reporting, disclosure, prevention, and strict limitation of potential conflict of
interest, including rules concerning connected party transactions and potential
conflicts of interest.
Board, Executive Management and employees are committed to preserve the
confidentiality of information and data on the Group’s customers, as per the
rules of the laws and instructions issued by the regulatory bodies in this
respect. This has been well governed by confidentiality and
information-security rules adopted and implemented within the Group.
Group promotes a transparent and collaborative working environment for all
employees. The Whistle Blowing practices determine the guiding principles and
procedures which enable the Group’s employees to escalate to the Chairman any
significant disputes, their concerns regarding any potential violations,
malpractice, and “reportable” conduct, and to allow independent investigation
and monitoring of these concerns.
4) Columbian Mines EL Dorado
Mandate: The Directors of Colombian Mines Corporation are required to manage
the Company's business and affairs, and in doing so to act honestly and in good
faith with a view to the best interests of the Company. In addition, each
director must exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
Board of Directors is responsible for supervising the conduct of the Company's
affairs and the management of its business in the best interest of the
obligation of the Board must be performed continuously, and not merely from
time to time, and in times of crisis or emergency the Board may have to assume
a more direct role in managing the affairs of the Company.
Board has instructed management to maintain procedures to monitor and promptly
address shareholder concerns and has directed and will continue to direct
management to apprise the Board of any major concerns expressed by
Board is responsible for overseeing the Company's public disclosure practices
in accordance with applicable securities legislation and the rules and policies
of stock exchanges and markets on which the Company's securities are listed or
traded. In so doing, the Board is free to seek the advice of the Company's
outside legal counsel.
Committees The Company has an Audit Committee, Corporate Governance Committee,
and Compensation Committee.
is a FORTUNE 500 company that delivers engineering, procurement, construction,
maintenance (EPCM), and project management to governments and clients in diverse
industries around the world. For over a century, clients have selected Fluor as
their company of choice to complete challenging projects in remote parts of the
world.Founded as a construction company in 1912, Fluor quickly built a
reputation for applying innovative methods and performing precise engineering
and construction work within the emerging petroleum industry. Today, Fluor
continues to develop and implement innovative solutions for complex project
issues in diverse industries, including chemicals and petrochemicals,
commercial and institutional (C&I), government services, life sciences,
manufacturing, mining, oil and gas, power, renewable energy,
telecommunications, and transportation infrastructure.
objective is to create value for all of its stakeholders, including
shareholders, clients, employees, and the communities where Fluor employees
live and work. Good corporate governance standards that promote the principles
of integrity, transparency, and accountability will protect and likely enhance
Fluor's stakeholder value.
of Fluor's Board of Directors participate in four standing Board committees:
Audit, Executive, Governance, and Organization and Compensation.
of Fluor’s 13 Board members are independent. Board committees (other than the
Executive Committee) are comprised solely of independent directors.
Governance Documents include Fluor's Certificate of Incorporation, Bylaws,
Board Committee Charters, Corporate Governance Guidelines, and the Code of
Conduct for the Board of Directors. Corporate Governance Guidelines are
regularly reviewed and updated, in response to changing regulations and
stakeholder concerns and committee charters clearly establish each committee's
roles and responsibilities.
has one of the most famous ethics Codes; it consistently receives high rankings
for community and social responsibility in Fortune’s annual survey of corporate
& Johnson: Code Of Business Conduct & Ethics For Members Of The Board
Of Directors And Executive Officers
of Directors and Executive Officers
Board of Directors of Johnson & Johnson has adopted this Code of Business
Conduct & Ethics for the members of the Board of Directors and the
Executive Officers (as defined under the regulations of the Securities and
Exchange Commission) of the Company.
Director and Executive Officer has a duty to avoid business, financial or other
direct or indirect interests or relationships which conflict with the interests
of the Company or which divide his or her loyalty to the Company. A conflict or
the appearance of a conflict of interest may arise in many ways. Each Director
and Executive Officer must deal at arm's length with the Company and should
disclose to the Chairman, Vice Chairman or Lead Director any conflict or any
appearance of a conflict of interest on his or her part. Any activity which
even appears to present such a conflict must be avoided or terminated unless,
after such disclosure to the Board, it is determined that the activity is not
harmful to the Company or otherwise improper. The end result of the process of
disclosure, discussion and consultation may well be approval of certain
relationships or transactions on the ground that, despite appearances, they are
not harmful to the Company.
Conduct of Business and Fair Dealing
Director or Executive Officer shall:
• compete with the Company by providing
service to a competitor as an employee, officer or director or in a similar
• profit, or assist others to profit,
from confidential information or business opportunities that are available
because of service to the Company;
• improperly influence or attempt to
influence any business transaction between the Company and another entity in
which a Director or Executive Officer has a direct or indirect financial
interest or acts as an employee, officer or director or in a similar capacity;
• take unfair advantage of any
customer, supplier, competitor or other person through manipulation,
concealment, misrepresentation of material facts or other unfair-dealing
Director or Executive Officer shall solicit or accept gifts, payments, loans,
services or any form of compensation from suppliers, customers, competitors or
others seeking to do business with the Company.
Compliance with Laws and Regulations
with our Credo and business philosophy, it is the policy of Johnson &
Johnson to comply with the laws of each country in which our companies do
business. Each Director and Executive Officer shall comply with all applicable
laws, rules and regulations, and shall use all reasonable efforts to oversee
compliance by employees, other Directors and other Executive Officers with all
applicable laws, rules and regulations.
Use of Non-Public Information and Disclosure
Director or Executive Officer who knows important information about the Company
that has not been disclosed to the public must keep such information
and Executive Officers shall maintain the confidentiality of any non-public
information learned in the performance of their duties on behalf of the
Company, except when disclosure is authorized or legally mandated.
Use of Company Funds, Assets and Information
Director and Executive Officer shall protect the Company's funds, assets and
information and shall not use the Company funds, assets or information to
pursue personal opportunities or gain.
Company funds, assets or information shall be used for any unlawful purpose.
undisclosed or unrecorded fund or asset shall be established for any purpose.
false or artificial entries shall be made in the books and records of the
Company for any reason, and no Director or Executive Officer shall engage in
any arrangement that results in such prohibited act.
year each Executive Officer and Director must sign the Certificate of
Compliance With the Johnson & Johnson Code of Business Conduct & Ethics
For Members of the Board of Directors And Executive Officers
7) The Walt Disney Company
best-in-class business standards as a key pillar of its business practices.
Standards and Ethics Training
training, including training regarding the Company's Standards of Business
Conduct and ethics, is provided to employees and Cast Members worldwide through
the Company's learning management system known as Disney Development Connection.
It is the Company's intent, through its compliance training, to ensure that all
of its employees and Cast Members have the knowledge and training to act
ethically and legally, in compliance with the Company's Standards of Business
is the policy of The Walt Disney Company to provide equal opportunity for all
employees and applicants for employment without regard to race, religion,
color, sex, sexual orientation, national origin, age, marital status, covered
veteran status, mental or physical disability, pregnancy, or any other basis
prohibited by state or federal law.
Walt Disney Company's employees and cast members are essential to fulfilling
our business goals. Our mission is to drive the people dimension of our
business, consistent with Disney's culture and values.
Prevention and Discrimination Policies
Walt Disney Company’s policy prohibits employees from harassing any other
employee, guest or other person in the course of the company's business for any
reason prohibited by law, including, but not limited to, race, religion, color,
sex, sexual orientation, gender identity, national origin, age, marital status,
covered veteran status, mental or physical disability, pregnancy, or any other basis
prohibited by state or federal law.
8) Mahindra Holidays & Resorts India
of Conduct for Directors
Mahindra Holidays & Resorts India Limited
is committed to conducting its business in accordance with applicable laws,
rules and regulations and the highest standards of business ethics and ethical
i. represent the interests of the shareholders
of the Company;
ii. exhibit high standards of integrity,
commitment and independence of thought and judgement;
iii. dedicate adequate time, energy and attention
to ensure the diligent performance of his/her duties including making all
reasonable efforts to attend Board or Committee Meetings; and
iv. comply with every provision of this Code.
must comply with all applicable laws, rules and regulations. These would
include securities laws, insider trading laws and the Company’s insider trading
must avoid conflicts of interest.
a. compete with the Company; or
b. take for themselves personally any business
opportunities that belong to the Company or are discovered through the use of
corporate property, information or position; or
c. use corporate property, information or
position for personal gain.
9) The State Trading Corporation of India
FROM CODE OF BUSINESS CONDUCT AND ETHICS
Contribute to society and human well-being:
fundamental human rights and respect the diversity of all cultures.
harmful effects to health and safe social environment.
and moral responsibility for the safety and protection of human life and
Be fair and take action not to discriminate.
Honour confidentiality in business and affairs.
Work unstintingly for eradication of
corruption in all spheres of life.
Bring pride to the organization and provide
value-based services to
Specific Professional Responsibilities:
Live the Company’s Vision, Mission and Values
of STC- each day
• Zeal to excel and zest for change
• Integrity and fairness in all matters
• Respect for dignity and potential of individuals
• Strict adherence to commitments
• Ensure speed of response
• Foster learning, creativity and teamwork
• Loyalty and pride in the Company
Acquire and maintain professional competence:
10) Kouton Retail India Ltd.
act honestly, fairly, ethically and with integrity;
conduct in a professional, courteous and respectful manner and not take
improper advantage of their position;
use their prudent judgement to avoid all situations, decisions or relationships
which give or could give rise to conflict of interest or appear to conflict
with their responsibilities within the Company;
not exploit for his/her own personal gain, opportunities that are discovered
through use of corporate property, information or position;
avoid conducting business on behalf of the Company except with the prior
approval of the Board; with (a) a relative (b) a Private Limited Company in
which he or his relative is a Member or a Director (c) a Public Limited Company
in which he or his relative holds 2% or more shares or voting right and (d) with
a firm in which the relative is a partner;
disclose and avoid having any personal and/or financial interest in any
business dealings concerning the Company;
avoid any dealings with a Contractor or Supplier that compromises the ability
to transact business on a professional, impartial and competitive basis or
influence decision to be made by the Company;
not hold any positions or jobs or engage in outside businesses or other
interests that are prejudicial to the interests of the Company; and
inform the Board, at the earliest opportunity, any existing or potential
conflict of interest situation.
of Conduct posted on the Company's Website:
• Act in the best interests of, and
fulfill their fiduciary obligations to the Company’s shareholders.
• Act honestly, fairly, ethically and
• Conduct themselves in a professional,
courteous and respectful manner;
• Comply with all applicable laws,
rules and regulations;
• Act in good faith, responsibly, with
due care, competence and diligence, without allowing their independent
judgement to be subordinated ;
• Act in a manner to enhance and
maintain the reputation of the Company;
• Disclose potential conflicts of
interest and abstain from discussion and voting on any matter in which the
Director has or may have a conflict of interest;
• Make available to and share with
fellow Directors and Senior Management information as may be appropriate to
ensure proper conduct and sound operation of the Company;
• Respect the confidentiality of
information relating to the affairs of the Company; and
• Not use confidential information
acquired in the course of their service as Directors their personal advantage.
Earlier overseas legislations that can be referred to for guidance:
the U.S. just in the last ten years, two game-changing pieces of legislation
have altered the landscape for corporations. The Sarbanes-Oxley Act that was passed in 2002 established new
obligations for Board members and oversight responsibilities were irreversibly
ratcheted up several steps, along with the possibility of more lawsuits against
Board members for failing to carry out their fiduciary obligations. The Dodd-Frank Financial Reforms Act that
was passed in 2010 created a myriad of new regulations that Board members need
to know about, as well as whistle-blowing obligations of internal accountants
create a culture that encourages ethical behavior, managers must lead others to
behave ethically. At General Electric,
chief executive Jeffrey Immelt demonstrates his concern for ethical leadership
by beginning and ending each annual meeting with a statement of the company’s
integrity principles, emphasizing that “GE’s business success is built on our
reputation with all stakeholders for lawful and ethical behavior.” These words
are backed up with a reward system in which managers are evaluated for how well
they meet ethics-related standards such as the use of audits, minimal customer
complaints and lawsuits, avoidance of compliance actions by government
regulators, and high ratings on employee surveys.
uses a guideline for business conduct that asks employees to determine whether
under the full glare of examination by associates, friends, and family, they
would remain comfortable with their decisions. One suggestion is to imagine how
you would feel if you saw your decision and its consequences on the front page
of the newspaper. This “light of day” or “sunshine” ethical framework can be
Sarbanes-Oxley Act requires that public companies periodically disclose whether
they have adopted a Code of ethics for senior financial officers—and if not,
why not. Often, the statements are just for show, but when implemented well
they can change a company’s ethical climate for the better and truly encourage
ethical behavior. Executives say they pay most attention to their company’s
Code of ethics when they feel that stakeholders (customers, investors, lenders,
and suppliers) try to influence them to do so, and their reasons for paying
attention to the Code are that doing so will help create a strong ethical culture
and promote a positive image.
evaluate integrity performance through a number of qualitative and quantitative
Conducting cultural and ethical surveys and evaluating employee responses
Reviewing reports to the ethics hotline, whistleblower reports, and trend
Benchmarking against peer, industry, country, and corruption indexes
Conducting quality surveys and evaluating employee responses
Monitoring and evaluating public scrutiny from the media, shareholders,
customers, and external watchdog agencies
Selecting and overseeing the activities of the auditors
Understanding and approving waivers to the Code of conduct (which should
generally be rare and should be supported by a compelling business case).
TONE HAS TO BE SET FROM THE TOP
Dando in “Corporate governance: Why the Board must lead on Ethics” 2013 has
written that Business ethics are good for company performance, but the tone has to
be set from the top. Nicole Dando is head of projects at the Institute
of Business Ethics, London.
says “Much is written about the role, indeed duty, of the Board in setting the
ethical values of the organisation. A Board is responsible for determining,
articulating and communicating the values and standards of the business, and
for ensuring that the policies, procedures and controls in place act to embed,
rather than hinder, ethical values throughout the business.”
can Boards demonstrate that they are committed to ethical standards and their
application to the way they govern and conduct themselves?The case for business
ethics has been well demonstrated through the costs and impacts of the repeated
high profile cases of corporate greed and misconduct. Often those integrity failures
are a result of senior individuals crossing ethical boundaries as well as
ignoring or circumventing the rules set out in law.
further says that in today’s environment, stakeholders have high expectations
that companies should be run in accordance with good corporate governance
practices – it is the directors who bear ultimate responsibility for the
if corporate governance lies at the very heart of the way businesses are run,
it is imperative that ethical values should be part of what makes those hearts
of ethics, or the “right way to run a business”, are inherent in all aspects of
corporate governance and in every Board decision and action. These include the
discretionary decisions a Board takes to deliver on its duties as set down in
law, and demanded by shareholders and other stakeholders.
take decisions which have far-reaching consequences and directly affect the
lives of their employees and other stakeholders, a recent example being tax avoidance.
business ethics also includes the way the Board conducts itself and the way
Board members choose to behave in carrying out their role. The culture of an
organisation will be strongly influenced by the nature as well as the quality
of the leadership shown by the Board.
should go without saying that members of Boards should have personal integrity,
as well as being champions of the company’s values.
imperative for ethical behaviours and practices within the Boardroom has
arguably never been more important. But new research from the Institute for
Business Ethics – A Review of the Ethical Aspects of Corporate Governance
Regulation and Guidance in the EU – has found that explicit reference to
ethical principles and terminology has generally been absent from corporate
governance guidance and regulation both at the EU level and within most member
the research found similarities in general corporate governance principles and
requirements, a comparison of explicit ethics drivers was not actually possible
as they were not evident. This lack of explicit engagement and encouragement,
if not requirement, for ethical standards would seem to undermine the
imperative for integrity, honesty and accountability in the Boardroom.
is not just about words: “walking the talk” is important too. It means applying
the Code of ethics to directors’ behaviour, as well as staff conduct. How does
the Board handle conflicts of interests? Is there diversity in the Board? Is
remuneration and recruitment fair and transparent?
companies recognise business ethics, sustainability and social responsibility
as portraying the right way to run a business as well as being crucial for long
term success. But Boards are still lagging behind when it comes to examining
their own ethics. The apparent lack of explicit engagement with ethical
principles in corporate governance guidance means there is inadequate
requirement for Boards to operate with high ethical standards.
for a company to be truly ethical, Board members must also ensure that the
Board itself is governed with ethics in its mindset and at its heart.
advantage of implementing a Code of Conduct is that it enhances the corporate
governance efforts of the organization by establishing a uniform set of core
values and behavior for the Board and all the staff. The staff know what is the
right course of action, whom to approach in a dilemma and what will be the
risks of adopting unethical behavior pattern. Due to this, the reputation and
legal risks of the organization are also reduced since it is mandatory for
employees to follow the law.
high-quality workers can be trained; then first-class Board members can be also
be trained. It doesn’t matter what is their race, nationality or gender. If
they possess the dexterity needed for the job, experience should not be a
barrier to enter. If they are leadership material; experience should not be a barricade.
If they can create a culture of compliance and ethics; experience should not be
an obstacle. Some may say you gain these abilities through experience. Yes,
experience helps, but what helps more is the sensitivity to reporting
obligations and establishing an ethical tone at the top that creates an
ethnicity of compliance and ethical behavior that attracts capable individuals
to the organization.
are ethical health-check questions for Boards and directors to consider:
• Does the organization have a
comprehensible and well defined ethics policy, approved and reviewed at
appropriate intervals by the Board?
• Has the Board considered, understood
and consented to the process by which its values are entrenched in the
• Do ethical values inform and
strengthen the Board's strategic decision-making?
• Has the policy been delineated in
unambiguous terms and communicated throughout the organisation?
• Does the company have an effective
whistle-blowing policy and a modus operandi that protects the whistle-blower?
• Does the Board have adequate
appraisal apparatus in place to monitor observance of these values?
is pertinent for the Board to recognize the importance of business ethics in
corporate governance and the significance of operating in a transparent and
accountable manner by demonstrating the highest professional standards. By
doing so, an organisation can generate goodwill amongst its stakeholders and
safeguard and protect its corporate reputation.
organisation that sacrifices its ethical values can do incalculable harm to its
corporate reputation and to its stake holders.
Institute of Business Ethics, London
Navran December 31, 2002
Dando, head of projects at the Institute of Business Ethics, London
Review of the Ethical Aspects of Corporate Governance Regulation and Guidance
in the EU is available as a free download.
posted by Steven Mintz, aka Ethics Sage, on December 18, 2012
Stephenson, O.C. in “A BOARD’S ROLE IN FOSTERING VISION, VALUES
AND INTEGRITY” Former Dean, Ivey
Business School from 2003-2013
G. Bennis, the distinguished management teacher and author
Review of the Ethical Aspects of Corporate Governance Regulation and Guidance
in the EU