are corporations institutionalizing ethics

Are Corporations Institutionalizing Ethics?Author(s): Center for Business EthicsSource: Journal of Business Ethics, Vol. 5, No. 2 (Apr., 1986), pp. 85-91Published by: SpringerStable URL: http://www.jstor.org/stable/25071559 .Accessed: 23/04/2013 08:26

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Center for Are Corporations Institutionalizing Ethics? Business Ethics

ABSTRACT. Very little has been done to find out what corporations have done to build ethical values into

their organizations. In this report on a survey of 1984

Fortune 1000 industrial and service companies the Center for Business Ethics reveals some facts

regarding codes of ethics, ethics committees, social audits, ethics

training programs, boards of directors, and other areas

where corporations might institutionalize ethics. Based

on the survey, the Center for Business Ethics is convinced

that corporations are beginning to take steps to institu

tionalize ethics, while recognizing that in most cases

more specific mechanisms and strategies need to be

implemented to make their ethics efforts truly effective.

It is a well-known fact that the past decade has seen a tremendous rise in interest and

activity in business ethics, especially in academic and research circles. So many books and articles have been published on business ethics that there are now book length bibliographies on the

Established in 1976, The Center for Business Ethics at

Bentley College is dedicated to providing a non

partisan forum for the exchange of ideas on business

ethics in an industrial society. Special emphasis is

placed on these ideas as they relate to the activities

of corporations, labor, government, special interest

groups, and the professions. The Center sponsors National Conferences on Business Ethics, publishes

their proceedings, works with academic institutions

and corporations to set up business ethics courses

and programs, and generally serves as a clearing house

for ideas and materials on business ethics.

The report and survey were prepared by the

following people from the Center for Business Ethics: W. Michael Hoffman, Director; Ann Lange, Research Associate; Jennifer Mills Moore, Research Asso

ciate; Karen Donovan, Graduate Assistant; Paulette

Mungillo, Aileene McDonagh, Paula Vanetti, Linda Ledoux, Staff Assistants.

field. Ethics centers on the subject continue to

grow, and it is now possible to attend a con ference or

workshop on business ethics almost

monthly. A 1980 survey by the Center for Business Ethics at Bentley College indicated that there had been a 500% increase in business ethics courses in

colleges and universities since 1973 - a trend that seems to be continuing even today. But have corporations been taking any steps to incorporate ethical values and concerns into their daily operations?

The Center for Business Ethics has been asked this question so often and by so many people and groups that the Center decided to

make it a lead question in a lengthy question naire on

''Instilling Ethical Values in the Cor

poration" sent to the 1984 Fortune 500 list of industrial and the Fortune 500 list of service

companies. Of the 279 responding companies (a 28% survey response) 223 (almost 80%) indicated that they were taking steps to in

corporate ethics (see Table I). This finding is encouraging since it gives

some indication that, contrary to public opinion, some of America's

major corporations are show ing interest in responding to the need

? and

increasing public demand ? for greater social

responsibility and accountability. In fact, most of the corporations listed the goal of being social

ly responsible as their primary reason for in

corporating ethics into their organizations rather than

simply complying with state and federal requirements (see Table II).

Our survey was then designed around seven

specific areas relating to possible steps companies might have taken to incorporate ethics: (1) codes;

(2) ethics committees; (3) judiciary boards; (4) ombudsmen; (5) ethics training, (6) social

Journal of Business Ethics 5 (1986) 85-91. ? 1986 by D. Reidel Publishing Company.


86 Center for Business Ethics

TABLE I

No Yes No resp. Total # of # % # % # % responses

Has your company been taking

steps to incorporate ethical

values and concerns into the

daily operations of your organi zation? 56 20.1% 223 79.9% 0 0% 279 100%

TABLE II

Some specific goals

a company may want to achieve through its efforts to incorporate ethical values in the corporate

environment are Usted below. Rank the top 3 in order of importance to your company.

Reasonsa Most important 2nd most 3rd most Choice not in

important important top 3

_# %_# %_# %_# %

To improve management 35 15.7% 34 15.2% 26 11.7% 128 57.4% To provide guidelines for

employees'behavior 62 27.8% 58 26.0% 39 17.5% 64 28.7% To establish better corporate

culture 34 15.2% 30 13.5% 29 13.0% 130 58.3% To

comply with local, state or

federal guidelines 35 15.7% 25 11.2% 36 16.1% 127 57.0% To reduce white collar crime 6 2.7% 6 2.7% 11 4.9% 200 89.7% To improve public image 6 2.7% 7 3.1% 17 7.6% 193 86.6% To be a socially responsible

corporation 76 34.1% 39 17.5% 45 20.2% 63 28.3% Other 8 3.6% 3 1.3% 2 0.9% 210 94.2%

a For each possible reason 223 companies responded. Some respondents chose to give multiple answers for a given

ranking.

audits; and (7) changes in corporate structure. Table III reveals the general findings of cor

porate activity in these areas.

Ethics codes

Of those companies taking steps to institutional ize ethics, 93% have written codes of ethics in

place, representing about a 5 to 10% rise over a

1979 study by the Ethics Resource Center and almost a 40% rise over a study for the Conference Board twenty years ago. Almost all the com

panies communicate their ethics codes to their

employees through printed materials, but only 40% do so through advice from a superior and 34% through an entrance interview. Only 21% use

workshops or seminars to communicate their codes, and only 11% post them in the

workplace. Codes of ethics, therefore, are in

creasing, but it seems clear that the communica tion of them to

employees is not sufficient in most

companies ? a lack which

surely diminishes their effectiveness, if not also their fairness.

Over 80% of the companies having codes use dismissal as a sanction for enforcement. Also, a

significant number of companies use formal

reprimands and demotion. Only 19% record


Are Corporations Institutionalizing Ethics ? 87

TABLE III

Some ways that ethical values can be incorporated into

the corporate environment are listed below: Which of

these does your company use?

Yes No Total # # % # % responses

Code of conduct 208 93.3% 15 6.7% 223 100%

Ethics com

mittee 40 17.9% 183 82.1% 223 100%

Judiciary board 3 1.3% 220 98.7% 223 100%

Ombudsman 17 7.6% 206 92.4% 223 100%

Employee training in ethics 99 44.4% 124 55.6% 223 100%

Social audit

ing and

reporting 98 43.9% 125 56.1% 223 100%

Changes in

corporate structure 46 20.6% 177 79.4% 223 100%

None of the above 2 0.9% 221 99.1% 223 100%

TABLE IV

What is the function of the ethics committee ?

Yes No Total # % # % # %

To oversee ethics

activities in the

corporation 27 67.5% 13 32.5% 40 100% To review code

of conduct 26 65.0% 14 35.0% 40 100% To handle infrac

tions of the code ofeonduct 16 40.0% 24 60.0% 40 100%

To respond to

employee com

plaints 9 22.5% 31 77.5% 40 100% To answer ques

tions on cor

porate ethics

policies 21 52.5% 19 47.5% 40 100% To develop cor

porate policy on ethics 27 67.5% 13 32.5% 40 100%

Other 7 17.5% 33 82.5% 40 100%

violations in status reports and a few levy fines. Ten

responding companies having codes use no

formal sanctions at all.

Ethics committees, ombudsmen, judiciary boards

It is difficult to understand, however, how codes could be overseen and enforced adequately and

consistently when only 18% of those companies incorporating ethics have ethics committees,

only 8% have an ethical ombudsman, and only 3

responding companies indicated they have a

judiciary board. And in most companies that do have an ethics committee, their functions seem

more policy making oriented rather than dealing with specific violations and complaints (see Table IV). Only 40% of them handle infractions and 23% respond to employee complaints.

This characterization of the functions of most

ethics committees seems consistent with the

make-up of their membership: 60% draw ethics committee members from executive officers, 45% from the board of directors, and 23% from

managers. On the other hand, only 8% have

representatives from outside the corporation as

members and only 8% have employees as

members below the managerial rank, of which

less than 3% are hourly employees. Further

more, the members of 88% of the companies with ethics committees are appointed; only 8% have any members that are voted in. A similar pattern holds for those few companies having an ombudsman: 94% are appointed and 94% come from inside, rather than outside, the

company. This profile of the relatively few ethics

committees and ombudsmen suggests that their thrust is very much upper-management directed,

designed without much input or representation from lower level

employees or from people outside the company. It would seem that more

representation in these mechanisms is important to their overall effectiveness. And since most

ethics committees do not handle specific code violations or employee complaints, it would also seem that this would make the need for judiciary boards that much more necessary.



Ethics training

Another step being taken by those companies incorporating ethics is employee training in ethics. The Center has received many calls,

especially in the last few years, from corpora tions interested in setting up employee training in ethics, but we were pleasantly surprised that over 44% of those taking ethical steps have such

training, with 53% stating that they use a

workshop or seminar as one method (see Table V). This ethics training is mostly addressed to managers (86%), but a large percent also include executive officers, management trainees, and administrative staff, with hourly workers being included the least (35%). This ethics training is a

requirement in 69% of the companies having it, and most list, in order, the following two reasons for establishing such training: (1) developing employee awareness of ethics in

business; and (2) drawing attention to ethical issues to which an employee may be exposed.

TABLE V

What method or methods are used for training employees in the area of ethics?


Workshop or

seminar 52 52.5% 47 47.5% 99 100% Internal course 33 33.3% 66 66.7% 99 100%

Course conducted

by person from outside the

company 6 6.1% 93 93.9% 99 100% Course conducted

by institution other than

company 2 2.0% 97 98.0% 99 100% Personal interview 24 24.2% 75 75.8% 99 100% Orientation ses

sion 60 60.6% 39 39.4% 99 100% Other 15 15.2% 84 84.8% 99 100%

Social audits

Another encouraging sign revealed in the survey is that 43% of those companies incorporating ethics perform a social autdit or report which

analyzes the firm's activities in a number of ethical and socially sensitive areas (see Table

VI). Unfortunately, this information in most cases is disclosed through internal memoranda and circulated only at the highest levels within the company (see Table VII). Only 22% disclose their social audit or report to the general public and

only 21% do so to their shareholders.

Assuming corporations are performing respon sible activities in the areas listed in Table VI, it

would seem they ought to disclose that to the

public and their shareholders if they want to

improve their public image. It could also be

argued that the public has a right to know.

Nevertheless, over 70% do not list "informing

TABLE VI

Some areas of corporate social performance that could

be included in a social audit or report are listed below. Which ones does your company include ?


Community in

volvement 66 67.3% 32 32.7% 98 100% Equal opportu

nity employ ment 87 88.8% 11 11.2% 98 100%

Compliance with laws and regu lations 79 80.6% 19 19.4% 98 100%

Safety in the

workplace 64 65.3% 34 34.7% 98 100% Protection of

the environment 54 55.1% 44 44.9% 98 100%

Quality of prod ucts and services 56 57.1% 42 42.9% 98 100%

Safety of prod ucts and services 43 43.9% 55 56.1% 98 100%

Conduct in multi

national opera tions 50 51.0% 48 49.0% 98 100%

Other 11 11.2% 87 88.8% 98 100%


Are Corporations Institutionalizing Ethics? 89

TABLE VII

To whom is audit information disclosed ?


All em

ployees 28 28.6% 70 71.4% 98 100% Shareholders 21 21.4% 77 78.6% 98 100% Board of

directors 66 67.3% 32 32.7% 98 100% Executive

officers 70 71.4% 28 28.6% 98 100%

Managers 48 49.0% 50 51.0% 98 100%

Hourly em

ployees 13 13.3% 85 86.7% 98 100% General

public 22 22.4% 76 77.6% 98 100% Other 18 18.4% 80 81.6% 98 100%

the public of impacts of corporate activities on

society" as one of their top three reasons for

performing a social audit (see Table VIII).

Changes in corporate structure

One of the most disappointing findings of the survey is the fact that almost 80% of the com

panies incorporating ethics have made no changes in corporate structure to accommodate their efforts. Most people working in the field of busi ness ethics feel

strongly that corporate institu tionalization of ethics and the development of a successful corporate ethical culture demands

important structural changes in the organiza tion. Table IX reveals some of these changes being made by about 20% of the companies taking ethical steps. The most changes have occurred in the role or

membership of the board of directors, but an active decision

making role for workers remains very low. And a bill of rights for employees is almost nonexistent (3 responding companies).

TABLE VIII

Possible reasons for performing a social audit or report are listed below. Please rank the top three in order of importance to your company.

Reasons a Most important

# %

2nd most

important # %

3rd most

important

Choice not in

top 3 # %

For public relations To shape company policy To provide information for

management decisions

To increase accountability To inform management of im

pacts of corporate activities

on society

To inform management of costs

to the corporation

To inform the public of impacts of corporate activities on

society Other

4 24

25 35

10

4

15 4

4.1% 24.5%

25.5% 35.7%

10.2%

4.1%

15.3% 4.1%

3 22

20 14

17

4

4 2

3.1% 22.4%

20.4% 14.3%

17.3%

4.1%

4.1% 2.0%

12 16

14 15

11

6

12.2% 16.3%

14.3% 15.3%

11.2%

6.1%

9.2% 1.0%

79 36

39 34

60

84

70 91

80.6% 36.8%

39.8% 34.7%

61.2%

85.7%

71.4% 92.9%

a For each possible reason 98 companies responded. Some respondents chose to give multiple answers for a given

ranking.



TABLE IX

Possible changes in corporate structure are listed below. Which changes has your company made?


Changes in the role of the board of directors 18 39.1% 28 60.9% 46 100%

Changes in the role of board of director's members 17 37.0% 29 63.0% 46 100% Inclusion of outside directors as board members 19 41.3% 27 58.7% 46 100%

Representation on the board of an ethics officer 1 2.2% 45 97.8% 46 100% Worker participation in decision-making 11 23.9% 35 76.1% 46 100% Introduction of an employee bill of rights 3 6.5% 43 93.5% 46 100%

Other 13 28.3% 33 71.7% 46 100%

Highlights and summary

The Center for Business Ethics is pleased to discover that :

? 80% of the largest industrial and service

corporations responding to this survey have taken steps to incorporate ethical values in their organizations.

We also find it encouraging that:

? 93% of the above companies have written codes of ethics.

? 44% have ethics training for employees and

nearly 70% require it. ? 44% have social audits, most of which cover such areas as equal opportunity, safe

ty, community involvement, environ

mental protection, and multinational conduct.

However, this data must be tempered by the sur

vey's findings that specific implementation of stated ethical goals is badly lagging. For example:

? Only 18% have ethics committees; only 8% have ethical ombudsmen; only 1% have

judiciary boards. ? Of those having ethical committees, only 40% handle infractions of the code and

only 23% handle employee complaints. ? Almost none of the ethics committees include hourly or salaried employees other than managers and very few include rep

resentatives from outside the company. ? Of the companies having ethics training,

only 35% provide any for hourly employees. ? Only a little over 20% of the companies having social audits disclose them to the

public and to shareholders. ? Almost 80% have made no changes in

corporate structure to accommodate their ethics efforts. And of those which have

made such changes, only 24% have adopted

worker participation in decision making and only 7% have an employee bill of rights.

One would hope that in the future corporations will strengthen their ethics efforts with more

specific mechanisms and strategies for ethical

implementation. Perhaps this will come in time. We at the Center believe that it will, for much

progress has already been made. But it should be pointed out that:

- Of those companies which stated that they have taken ethical steps 74% also state that

they are not planning to expand their efforts to incorporate ethical values into the corporate environment.

Based on this survey, the Center for Business Ethics is convinced that corporations are much more concerned with ethics than in the past and have taken many positive steps to incorporate ethics into their activities. We must continue, however, to press for more progress toward


Are Corporations Institutionalizing Ethics? 91

institutionalizing ethics within corporations. This would include more ethics committees,

judiciary boards, and ombudsmen to oversee and enforce corporate ethics, more ethics training for all corporate employees, more social report

ing with more disclosure to the general public, more diverse representation on all committees ?

including the board ?

relating to ethical

concerns and impacts, and more changes in

corporate structure which could provide more

responsiveness to ethical concerns inside the

organization, especially those of employees. Only when such important details of implemen tation are more universally established will

ethics truly be woven into corporate life.

Note

1 It might be argued that our survey is suspect because

we received only a 28% response. We agree that this is a

reason to be cautious about generalizing from our data.

It is possible that the companies who did not respond are not taking any steps to institutionalize ethics. How

ever, not all the companies who responded are institu

tionalizing ethics; note that 56 responding companies said that they are taking no such steps. We suspect that

most of the companies who did not respond decided not to because of other reasons, perhaps primarily because

of the questionnaire's length (67 questions, taking probably an hour to fill out). In fact, everyone we spoke to before and after the survey was surprised that our

return was so high, especially since 70% of the returns

were completed by people of vice-presidential rank or above. Furthermore, we found out after the data were

in that several corporations who did not respond to the

survey had taken steps to institutionalize ethics, but the

questionnaire simply did not reach an appropriate person in the corporation and, as

a result, was not

completed.

Center for Business Ethics,

Bentley College, Waltham, MA 02254, U.S.A.

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Article Contentsp. [85]p. 86p. 87p. 88p. 89p. 90p. 91

Issue Table of ContentsJournal of Business Ethics, Vol. 5, No. 2 (Apr., 1986), pp. 85-172Front MatterAre Corporations Institutionalizing Ethics? [pp. 85-91]Responsibility and Moral Reasoning: A Study in Business Ethics [pp. 93-117]ReviewReview: untitled [pp. 118, 136, 150, 170-171]

Whose "Loyal Agent"? Towards an Ethic of Accounting [pp. 119-128]The Workers' Right to Know, Participate and Refuse Hazardous Work: A Manifesto Right [pp. 129-136]Corporate Strategy and Ethics [pp. 137-150]Collective Responsibility and Professional Roles [pp. 151-154]Accountability and the Restraint of Freedom: A Deontological Case for the Stricter Standard of Corporate Disclosure [pp. 155-164]A Kantian Evaluation of Taylorism in the Workplace [pp. 165-169]Back Matter

are corporations institutionalizing ethics

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