“Good leadership means doing the right thing when no-one’s watching. Values governing the boardroom should be no different from the values guiding the shop floor,” Carly Fiorina, CEO Hewlett Packard

I begin with two definitions:
1) Business Ethics is the application of ethical values to business behaviour and
2) Corporate Responsibility is the external manifestation of a company’s behaviour in how it does its business.

The term Corporate Responsibility is favoured over Corporate Social Responsibility because of its wider implications in encompassing a company’s responsibilities in the social and environmental areas. It is a company’s responsibility to society that it will undertake its business in an appropriate and acceptable manner, whether defined by rules and regulations or not.

There is a logical process a company can follow to ensure that such responsible behaviour is enduring. The first steps are internally driven: setting values; drawing up a code of ethics/principles/conduct; and embedding these with all employees.
The objective is to create a consistent corporate cultural attitude of responsibility.

Not so long ago, companies felt that such attitudes were implicit in all they did. ‘Trust us’ – we know what we are doing was the mantra. That trust, by the public of business, has been shattered by questionable corporate behaviour such as Barings, Exxon, Shell, Nike, and Enron. The public now expects (demands?) companies to ‘show us that you are responsible’.

Where and how should companies begin this process? ‘Where’, is in the boardroom. Be the champion the chairman, CEO or an independent director, someone on the board needs to lead this process. The ‘how’ is through open discussion first in the boardroom then throughout the company.

Setting values: the language of values centres on words such as integrity, honesty, openness and transparency. The board of a company needs to understand how it will interpret such words as it relates to those with whom it does business. A good starting point is to review the issues the company has faced with its stakeholders (those to whom the company has a financial obligation/ responsibility – shareholders, employees, customers, suppliers and the wider community).

Once the value statements are agreed, these can be collated into a code of ethics/principles/conduct for the company to adopt. It is important to involve the employees. A code issued from the boardroom/ head office will not get the buy-in of the staff.

It needs to be tested for appropriateness and language throughout the company. Testing overseas is crucial. In many markets the cultural norms or legal environment may be different from those of the home base. If a code is widely discussed, and translated into local languages, the process of embedding its messages will be enhanced. The code also needs to be ‘a working document’, with examples of how employees should behave when confronted with situations – if it is to be effective, it should be the first reference point for an employee/ manager facing a dilemma. It should also state that ‘if in doubt, discuss and disclose the problem’.

At this stage the company has “shown” to its employees how it intends to undertake its business. This needs then to be monitored through staff conduct (with example from the top) and so built into the culture of the company as the expression of “this is how we do business round here”.

Should a company not meet its own standards then the whistle will get blown. The optional next stage, to develop corporate responsibility, is for the company to benchmark itself to an external standard, such as the UN Global Compact, or to verify its behaviour through AA1000 or GoodCorporation. But the arena of ethical behaviour is a subjective one and onesize solutions be they verification or reporting, will not fit all circumstances. A corporate responsible company is one that voluntarily follows best practice and is open and transparent in the way it conducts its business for all to see, understand and comment upon.

Director
Philippa Foster Back
Institute of Business Ethics
Tel: 44 (0) 20 7798 6040
E-mail: info@ibe.org.uk
Website: www.ibe.org.uk

The Institute of Business Ethics was established in 1986, to encourage high standards of corporate behaviour and sharing of best practice. It is a charity funded by corporate and individual subscribers, and undertakes research, issues publications, provides training courses and holds a number of discussion events throughout the year on the topics of the day.