Articles & Write Ups


    by  Kamakshi S. Mehlwal, Arbitrator and AOR Supreme Court of India

    Being 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.
    The 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.”
    Business 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 

    A 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 operational ideals.

    Relevance of a Code of Conduct

    Codes 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.
    The 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.
    The 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.

    Inherent values used to define the ethical standards for Boards are:

    •           Integrity
    •           Loyalty
    •           Consideration for work/external environment
    •           Confidentiality of information
    •           Disclosure of interest
    •           Excellence
    •           Fairness
    •           Honesty
    •           Courage
    •           Independence
    •           Accountability
    •           Leadership
    •           Quality
    •           Responsibility
    •           Respect
    •           Social responsibility/community
    •           Sustainable development (a recent addition)

    Some 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?

    A 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.

    Creating a Code

    Ethical 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.
    Codes 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.

    Typical 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 executive
    •           Serving as a court of appeals to senior management
    •           Self-assessment of the Board and its members regarding its effectiveness
    •           Creating the structures and systems to ensure the above

    Typically 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.

    Corporate Governance in relation to the need for distinctive and unique Code for each Organisation:

    The 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:

    An 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.
    The 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. 

    This can be done by:
    1.         By surveys
    2.         By interviews
    3.         By factor analysis of decisions and discussions captured in Board minutes
    4.         By a combination of these and other techniques

    The 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.
    Corporate 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 the Board;
    •           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.
    While 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.

    According 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.
    The 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 success.
    Former 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.
    Ms. 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 now.”
    As 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.
    Ivey 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. 
    Their 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.
    Living Our Values is organized according to five core values: integrity, respect, customer driven, excellence and socially responsible.
    We behave with integrity
    • 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 governments.
    We respect each other
    • 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 are customer driven
    • We listen to customers, understand their needs, offer the best solutions and deliver on our promises.
    • We make it easy for customers to deal with us.
    • We go beyond expectations and always deliver an outstanding experience.
    We strive for excellence
    • 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 improve.
    • We value and reward high performance and success.
    • We provide high value to our shareholders.
     We are socially responsible
    • We respect the environment and its finite resources.
    • 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
    The 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 multi-stop-shopping philosophy.

    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.
    Audit and implementation of corporate values
    Corporate 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.
    With the Corporate Values Index project we developed a range of services and tools dedicated to support companies communication through corporate values:

    1. Internal communication audit including examination of what values employees are guided by.
    2. External communications diagnosis with company’s business surroundings in context of corporate values.
    3. Developing an internal communication strategy based on corporate values.
    4. Values & Strategic Session for representatives of the Board and managers.
    5. Development and implementation of social programs building the company's image in the context of societal values.

    3) National Bank of Kuwait
    Winner 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:  

    •           Code of Conduct
    •           Related parties transactions
    •           Conflict of interest
    •           Confidentiality
    •           Whistle Blowing

    Code of conduct

    The 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.

    Related Parties Transactions

    The 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.

    Conflict of Interest

    The 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.


    The 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.

    Whistle Blowing

    The 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
    Board 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.
    The 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 shareholders.
    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.
    The 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 shareholders.
    The 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.
    Board Committees The Company has an Audit Committee, Corporate Governance Committee, and Compensation Committee.

    5) FLUOR
    This 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.

    Fluor Governance
    Fluor’s 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.

    Board Committee Membership
    Members of Fluor's Board of Directors participate in four standing Board committees: Audit, Executive, Governance, and Organization and Compensation.
    Board Independence
    Twelve of Fluor’s 13 Board members are independent. Board committees (other than the Executive Committee) are comprised solely of independent directors.
    Corporate Governance Documents
    Corporate 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.

    6) Johnson & Johnson 
    It 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 reputations.
    Johnson & Johnson: Code Of Business Conduct & Ethics For Members Of The Board Of Directors And Executive Officers
    Responsibilities of Directors and Executive Officers
    The 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.
    1. Conflicts of Interest
    Every 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.
    2. Conduct of Business and Fair Dealing
    No 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 capacity;
    •           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; or
    •           take unfair advantage of any customer, supplier, competitor or other person through manipulation, concealment, misrepresentation of material facts or other unfair-dealing practice.
    3. Gifts
    No 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.
    4. Compliance with Laws and Regulations
    Consistent 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.
    5. Use of Non-Public Information and Disclosure
    A Director or Executive Officer who knows important information about the Company that has not been disclosed to the public must keep such information confidential.
    Directors 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.
    6. Use of Company Funds, Assets and Information
    Each 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.
    No Company funds, assets or information shall be used for any unlawful purpose.
    No undisclosed or unrecorded fund or asset shall be established for any purpose.
    No 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.
    Each 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   
    Incorporates best-in-class business standards as a key pillar of its business practices.
    Business Standards and Ethics Training
    Compliance 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 Conduct.
    Hiring Practices
    It 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.
    Human Resources
    The 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. 
    Harassment Prevention and Discrimination Policies
    The 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 Limited
    Code 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 conduct.
    Every Director must –
    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.
    Directors must comply with all applicable laws, rules and regulations. These would include securities laws, insider trading laws and the Company’s insider trading compliance policies.
    Directors must avoid conflicts of interest.
    Directors shall not –
    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 Limited
     1.   Contribute to society and human well-being:
    Protect fundamental human rights and respect the diversity of all cultures.
    Avoid harmful effects to health and safe social environment.
    Legal and moral responsibility for the safety and protection of human life and environment.
     Integrity and honesty.
     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
     Company's stakeholders.

    2.  Specific Professional Responsibilities:
     Live the Company’s Vision, Mission and Values of STC- each day

    3.   Values:
     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

    4.   Acquire and maintain professional competence:
    Compliance with Laws

    10) Kouton Retail India Ltd.

    Code of Conduct:
    • 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.

    11) Bata India Limited

    Code 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 with integrity.
    • 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:
    In 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 and auditors.
    Corporate Ethical Standards
    To 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.
    IBM 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 powerful.

    Ethics Codes
    The 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.
    Organizations evaluate integrity performance through a number of qualitative and quantitative measures, including:
    • Conducting cultural and ethical surveys and evaluating employee responses
    • Reviewing reports to the ethics hotline, whistleblower reports, and trend analyses
    • 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). 

    Nicole 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.
    Dando 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.”
    But 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.
    Dando 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 business.”
    So 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 beat.
    The right choices
    Questions 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.
    Boards take decisions which have far-reaching consequences and directly affect the lives of their employees and other stakeholders, a recent example being tax avoidance.
    But 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.
    It should go without saying that members of Boards should have personal integrity, as well as being champions of the company’s values. 

    Principles and terminology
    The 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 states.
    Although 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.
    Communication 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?

    Well turned-out corporate practices
    Avant-garde 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.
    But 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.

    The 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.
    If 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.

    Below 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 business?
    •  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?
    It 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.
    An organisation that sacrifices its ethical values can do incalculable harm to its corporate reputation and to its stake holders.

    The Institute of Business Ethics, London
    Frank Navran December 31, 2002
    Nicole Dando, head of projects at the Institute of Business Ethics, London
    A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU is available as a free download.
    Blog posted by Steven Mintz, aka Ethics Sage, on December 18, 2012
    Carol Stephenson, O.C.  in  “A BOARD’S ROLE IN FOSTERING VISION, VALUES AND INTEGRITY”  Former Dean, Ivey Business School from 2003-2013
    Warren G. Bennis, the distinguished management teacher and author
    A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU

    The Companies Act, 2013