the effectiveness of codes of conduct

Introduction

I n both public and private sectors therehas been a growth in the use of, firstly,

internally-generated and, secondly, externally-imposed codes and charters to direct anddefine organisational culture and perform-ance. In the public sector the former appear inthe form of mission or values statements andthe latter in terms of Citizens' Charters. In theprivate sector the former appear as codes ofconduct or ethical statements and the latter asCadbury-inspired codes of practices. Theirimpact, pervasiveness and measurement allreflect similar issues, particularly in terms ofthe increasing use of formal statements todefine conduct, culture and performance inthe public and private sectors. While there aredifferences in the genesis and purpose ofcodes in both sectors, they share similaritiesin language and focus and, although theprivate sector has a wider and longer involve-ment in their use, their use is increasing in thepublic sector.

The increasing focus on public manage-ment in the public sector has evolved through`̀ budget cuts, competitions, performancemeasurement and the imposition of manage-ment systems on previously autonomousinstitutions and professions'' (Flynn, 1997,p. 107) to focus the sector on `̀ receivednotions of high quality management derivedfrom transferable good practice in the privatesector'' (Ferlie et al, 1996, p. 14). In part thishas resulted in statements of values and

objectives as part of the business planningprocesses through which public sector organ-isations outline their roles, their perceptionsof their employees, and their commitment tothose to whom they provide functions andservices. In part, and often as a consequenceof the establishment of boards and theappointment of directors and non-executivedirectors across the public sector, there hasalso been support for importing other relatedprivate sector practices. Thus the possibleestablishment of audit committees, alreadyintroduced for National Health Service trusts,is part of the `ongoing debate about whetherthe procedures used in other sectors toexecute corporate governance apply fully tolocal government' (Audit Commission, 1996,p. 5).

The belief in the role of corporate govern-ance to resolve the issue of propriety in thepublic sector also includes a significantcommitment to the use of codes of conductby the 1995 Report from the Committee onStandards in Public Life, which saw themas one of the generic `common threads' tounderpin its principles of public life thatwould also avoid an over-reliance on `bureau-cracy and over burdensome rules' (Nolan,1995, paras 14 and 90). The enthusiasm forcodes of conduct in the public sector to defineexplicitly behaviour that has been assumed tobe, implicitly, an integral and continuing partof public life may, however, need to beinformed by concern over their usefulness inthe private sector for such a purpose, where

Volume 7 Number 3 July 1998# Blackwell Publishers Ltd. 1998. 108 Cowley Road, Oxford OX4 1JFand 350 Main St, Malden, MA 02148, USA.

The Effectiveness Of Codes Of Conduct

Alan Doig and John Wilson

Studies of the prevalence and contents of codes of conduct in the private sector show thattheir use to define an ethical environment or culture, and their effective implementation,must be as part of a learning process that requires inculcation, reinforcement and measure-ment. Consequently, the public sector must realise it cannot look solely to formal codes torevive and sustain public sector values. Alan Doig is Professor of Public ServicesManagement, and John Wilson is Principal Lecturer and Head of the Centre for PublicServices Management, at Liverpool Business School, Liverpool John Moores University.

BUSINESS ETHICS140

the `danger' with company codes is that theymay be `̀ useful and accurate descriptions ofthe organisational paradigm. But they arelikely to be at best only partially accurate,and at worst misleading, descriptions ofthe real organisational culture. This is not tosuggest that there is any organised decep-tion. It is simply that the statements of valuesand beliefs are often statements of aspir-ation or strategic intent of a particularstakeholder (such as the CEO) rather thanaccurate descriptions of the culture as itexists in the minds and hearts of peoplewithin and around the organisation'' (Johnsonand Scholes, 1997, p. 218). If there has been`̀ a departure from the standards of publicconduct which have mainly been estab-lished during the past 140 years'' (Com-mittee of Public Accounts, 1994, p. v), anuncritical reliance on codes which seek torepresent or recreate a culture and expec-tation that may no longer exist could do moreharm than good unless informed or temperedby an awareness of the issues concerning theuses and effectiveness of codes in the privatesector.

Business Codes of Conduct andCadbury Codes of Practice:The Pervasiveness and Purposeof Codes

British business has recognised, arguedWalter Manley, the need to `̀ offer productsand services of high standard and variety, tofashion them for consumers, and to competein a complex global market. These require-ments for success go far beyond the tra-ditional concept of a manufacturing concern. . . in addition, in the shift in Britain from amanufacturing to a service economy, soundpersonal relationships, and hence properconduct and high standards of ethical be-haviour, are critically important as neverbefore. . .'' (Manley, 1992, p. 1). Manley sug-gested that codes of conduct or ethical policystatements create a proper environment inwhich to help identify and reinforce withinthe firm those critical success factors whichimprove its capacity to compete in a rapidlychanging environment. They would also beintended to weave the firm's activities to thesocial fabric of the community in which thefirm operated, integrating it with the com-munity and thus profiting by the process,because it would promote customers' trustand confidence. Bromley has further arguedthat an organisation's `̀ clearest indication ofa collective conscience is . . . a corporate code

of conduct'' which is `̀ designed to protectan organisation's public image, and to alesser extent to enhance it, by declaring itsmoral standards to others'' (Bromley, 1993,pp. 196, 197).

How businesses view business ethics orcorporate social responsibility is neither clear-cut nor uniform. Johnson and Scholes notefour `ethical stance' business stereotypes:

(a) those companies who believe they areanswerable only to shareholders and thatthe law is the only determinant of ethicalconduct;

(b) those who move toward `̀ a recognition ofthe long-term benefit to the shareholder ofwell-managed relationships with otherstakeholders'';

(c) those who believe that `̀ stakeholder in-terests and expectations should be moreexplicitly incorporated in the organisation'spurposes'' to include being `̀ prepared tobear reductions in profitability for thesocial good''; and, finally,

(d) those committed to `̀ shaping society''where `̀ financial considerations are re-garded as of secondary importance ora constraint'' (Johnson and Scholes, 1997,p. 210).

With, however, a multiplicity of professional,industry, national, single-issue and inter-national codes in existence (Murray, 1997,pp. 101±3), but no single source for the role orcontent of corporate codes of conduct, nogeneric set of criteria for which companyshould have codes (or why, in terms of therelationship between the nature of the busi-ness and the need for, or purpose of, anethical stance) and no external framework toassess their effectiveness, there would notappear to be significant numbers of com-panies who have implemented codes, whichmight suggest that codes may not be asignificant feature of UK corporate culture.

The 1995 review by the Institute of BusinessEthics (Webley, 1995) of three surveys on theexistence of codes (by Ashridge College in1993, the Institute of Management in 1995,and the Institute of Internal Auditors in 1995)reported that each study noted a low re-sponse rate to its survey and an even lowerrate on the presence of codes (low rates ofreturn have been noted elsewhere in relationto similar surveys of UK companies [Kitsonand Campbell, 1996, p. 118] ):

. the Ashridge study reported a 23% re-sponse rate to its survey of the 500 largestUK companies; of those who respondedonly 43% of the respondents had codes;

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# Blackwell Publishers Ltd. 1998 Volume 7 Number 3 July 1998

. the Institute of Management had a 24%response to its survey of its 3000 members;47% of the respondents had codes;

. the Institute of Internal Auditors survey of500 UK firms revealed that, from a re-sponse rate of 22.6%, 70% had codes andmore than 50% had introduced them in theprevious five years.

The Institute of Business Ethics reported fromits own survey (Webley, 1995, pp. 8±10) of 100companies known to have codes (and fromwhom it had a 75% response rate) that over40% of respondent companies had developedtheir codes between 1990 and 1994 to ensureclear guidelines, but also because of `the fearof more severe regulatory regimes imposedby law'. Thus, the issue about codes, theirvalue and their pervasiveness is also affectedby a further dimension: their purpose or theirnecessity in an operational business context.What may take businesses beyond purelyeconomic activity based on the profit motiveis an acceptance of a corporate social respon-sibility to employees, customers, suppliersand other stakeholders that would involvedecisions or actions that are less concernedwith profit as an outcome than `̀ its exclusionas a motive'' (Chryssides and Kaler, 1995,p. 232).

What defines social responsibility, how-ever, is a decision of the individual companyand may be as much a reaction to increasinglyvocal and organised public concerns aboutpollution, health and animal welfare (McCor-mick, 1991; Kinnersley, 1994) as the conse-quence of a conscious effort to respond tostakeholder or environmental issues. `̀ Thecynic might then say that the businessmoralist who recommends virtue because itpays is not really recommending virtue at all:he has simply found a new and morepersuasive (indeed, more marketable) wayof profit-seeking'' (Barry, 1991, p. 90). At theother end of the spectrum from what maybe described as a business opportunity (ordecried as business opportunism) are thereactive pressures for a corporate stance onethics or codes deriving from the businessscandals of the late 1980s and early 1990s,either specifically or generally. British Air-ways' new chairman announced in 1993 thatthe airline was taking `̀ fair but effectiveaction'', in particular the issuing of a code ofconduct, to ensure there would be no repeti-tion of the `̀ regrettable conduct'' that char-acterised the airline's bruising battle withVirgin Atlantic (Gregory, 1994, p. 342). Moregenerally, major City scandals such as thoseinvolving Guinness, BCCI and Maxwell led tothe establishment of the Cadbury Committee

in financial reporting and accountability andcorporate governance. One of its two mainrecommendations, the other being the estab-lishment of audit committees, was a code ofbest practice which dealt with Board appoint-ments and financial reporting, and which wasintended, `within the limits set by theircompetitive position', to be based on com-panies' openness, integrity and accountabilityand to be the basis for `the confidence whichneeds to exist between business and all thosewho have a stake in its success' (Cadbury,1992).

Thus, codes may, while appearing to makethe organisation customer-focused and seento be working for the benefit of those who useits services or products, become a means tosell the firm to customers and employees. `Anethical code may be an opportunity for acompany to build moral capital and toimprove ethical behaviour in the companyand in its community, and also to get financialor economic benefits. But the company mayalso use the code to attain short-term profits,exploiting a reputation for morality that doesnot correspond with the truth. Therefore, theexistence of an ethical code is not necessarilya guarantee of moral attitudes. . .' (Argan-donÄ a, 1994, pp. 151±2). Furthermore, theappearance of a code, whether with thepurpose of developing or sustaining an`ethical dimension' to a company's activitiesas a consequence of circumstance ± the `quickreaction to a controversy (for example, theBritish Airways case)' (Kitson and Campbell,1996, p. 129), as well as the wider impact ofCadbury ± may well focus on the misconductof individuals but `̀ not be much concernedwith how moral problems arise in the firstplace'' (Munro, 1997, p. 103). Thus codes'`political' use as a indicator of a change incompany policy in response to negativepublic opinion may be problematical in termsof the likely impact on corporate culture.Ethical policy statements and ethical codes`̀ naturally suffer from some of the samedefects . . . policies cannot cover all possiblesituations; they are not prioritised, and theymay lead to conflicting and potentially in-compatible instructions. Formal policies mayalso be inconsistent with day-to-day practicesfor getting a job done. It has been found thatthe more decentralised the decision-makingfunction (and consequently the direct super-vision of managers), the greater the likelihoodof inadvertent non-compliance. It could alsobe suggested that if employees do notperceive senior managers to be complyingwith ethical policy, they may tend not tocomply themselves'' (McDonald and Zepp,1994, p. 205).

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The Contents of Codes: Prescriptionor Promise?

The issue of the uses and roles of codes mayalso be explored from a further perspective:the contents and focus of the codes them-selves. A number of multinational companiesbased or working in the United Kingdom andknown to have codes of conduct wereselected as a broad cross-section of businessactivity - including oil, airline, financial, andmanufacturing industries ± for a detailedanalysis of their codes.1 The results (Table 1)would suggest that codes do reflect the threelevels of ethical focus noted by Johnson andScholes: the macro level involving `̀ issuesabout the role of business in the national andinternational organisation of society''; thelevel of corporate social responsibility whichis concerned with `̀ the extent of which theorganisation should move beyond the mini-mum obligations'' placed on it by law orregulation; and the individual level which`̀ concerns the behaviour and actions ofindividuals within organisations'' (Johnsonand Scholes, 1997, p. 207).

On the other hand what codes reflect withinthose levels beyond the generalisations ofstatements of values has a significant empha-sis towards issues of legality and regulation.These dominate the detail rather than themore customer- and environment-orientedlanguage which is contained in their state-ments of values or principles and mayemphasise the increasingly instrumental legalcontext in which they operate. Thus, mattersof data protection, commercial confidential-ity, and the duties of employees are coreissues. Similarly, much attention is given tothe question of hospitality, conflict of interestsand bribery, both to employees and to those,such as politicians and public officials, withwhom many of the companies will deal in aninternational business context. The well-pub-licised background of contributions to poli-tical parties at home and overseas, as well asthe concerns expressed by US companiesabout the impact of the Foreign CorruptPractices Act on their competitiveness withnon-US companies and the fact that the Actapplies to all companies quoted on the NewYork Stock Exchange, would be expected toresult in explicit guidance in codes on briberyand corruption. Similarly, it is only to beexpected that the codes would also reflectUK-based business-focused legislation re-sponding to such controversial issues asinsider trading with a prominence not givento other legal issues such as discrimination orwider social issues such as substance abuse,

although the use of drugs has crept onto theagenda of companies during the 1990s,helped both by well-publicised cases on WallStreet and by the appearance of the police onthe London International Financial Futuresand Options Exchange in 1995 (Independent,1995), while alcohol abuse has increasinglybeen recognised for its negative impact on theperformance of personnel.

When presented by category, it is clearthat among the major headings included inTable 1, alongside the basic statement ofvalues (PSV: Principles and Statement ofValues) it is the question of legality andcompliance (CWL: compliance with the law)which dominates the contents of codes (seeTable 2). Grouped by frequency (see Table 3),it is also clear that the more discrete the issueor the more the issue has legal implications,the more likely it is to be addressed in thecode. The more general the issue, the lessattention, on the whole, it is given in thecodes. It is also noteworthy, in terms of bothspecificity and range of issues addressed, thatsimilar contents are reported in a wider 1990survey of the codes of US companies althoughthe rankings may well reflect the earliertiming of the US survey (see Note).

Equally interesting is the degree to whichcodes of conduct are disseminated andimplemented throughout companies as inte-gral working ethical frameworks. Of theselected companies, all referred in their codeto issues of implementation and adjudicationbut the predominant theme was one of pre-scription, drawing attention to the conse-quences of, and sanctions in relation to, non-compliance, both for the individual employeeand for the business reputation and workingeffectiveness of the company. Only onespecifically referred to the anonymous report-ing of allegations, while two proposed thatemployees formally confirm their adherenceto the contents of the company code. Thepresentation of the codes very much reflecteda top-down directive, albeit from the top ofthe company, and raises questions about howfar the code was `owned' by the employeesand developed out of the organisationalculture. More generally, the 1995 Institute ofBusiness Ethics review (Webley, 1995) foundthat one-third of employees in respondentcompanies to its survey were not given thecode and one-third of those companies hadno means for their employees to raise mattersof concern. Nearly 50% of firms did notinclude the code as part of an employee'scontract of employment, less than a third hadhad a disciplinary hearing involving the codeand over 60% did not require managers tocertify that the code was applied. A more

1 The authors wish toacknowledge their thanksto Eve Coles, formerly aresearcher in the Unit forthe Study of White CollarCrime, Liverpool BusinessSchool, and now ResearchAssociate, DurhamUniversity BusinessSchool, for collating andcategorising theinformation in the codes.



Table 1 Codes of practice^= entry in the code

COMPANIES

1 2 3 4 5 6 7 8 9 10

Principles and Statement of Values [PSV] ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

Sound Business Dealings [SBD]standards ^ ^ ^ ^ ^fairness ^ ^ ^ ^ înternal control ^ ^competitors ^ ^ ûse and receipt of gifts, inducements and hospitality ^ ^ ^ ^ ^ ^ ^ ^ ^political payments, dealing with politicians, public sector

and regulators^ ^ ^ ^ ^ ^

suppliers ^ ^ ^ ^ ^customers ^ ^ ^ ^ ^product\service quality ^ ^ ^dealing with agents and consultants ^ ^ ^ ^ ^

International Business (IB)dealing with host countries ^ ^ ^ ^ ^foreign currency dealingsinternational trade ^ ^discrimination and employment ^ ^

Executive Management Concerns [EMC]management style ^ ^ ^ ^ ^staffing ^ înternal organisation ^responsibility to shareholders ^ ^ ^markets ^performance ^research and development ^competitive ability ^ ^ ^

Relations between Employers and Employee [REE]commitment to employees ^ ^ ^rights and duties of the employee ^ ^ ^ ^ ^ ^ ^personal interests outside the firm ^ ^ ^ ^ ^ ^conflict of interest ^ ^ ^ ^ ^ ^ ^ ^salary and benefits ^dealings with media, lectures and publications ^trade unions and unfair dismissals ^travel and entertainment expenses ^ ûse of company property, resources and time ^ ^reimbursable expenses ^

Confidential and Propriety Information [CPI]personal data and computer security ^ ^ ^ ^ ^copyrights întellectual property, improvements and inventions ^ ^ ^proprietary information ^ ^ ^ ^

Communications Within & Without the Firm [CWWF]personal issues ânti discrimination policy ^ ^ ^ ^sex discrimination policy ^ ^ ^ êqual opportunity ^ ^ ^ ^sexual harassment ^ ^ âlcohol and drug abuse ^health and safety ^ ^product safety ^security and safety

Compliance with the Law [CWL] ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

Insider Trading & Share Dealing [IT] ^ ^ ^ ^ ^ ^ ^

Commitment to Society and Community [CSC] ^ ^ ^

Concern for the Environment [CE] ^

Implementation and Adjudication [IA} ^ ^ ^ ^ ^ ^ ^ ^

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recent Industrial Society report in 1996 notedthat there was a continuing significant gapbetween the rhetoric and practice of imple-menting codes of conduct. In responses from300 personnel managers, the report noted that80% acknowledged a gap `̀ between whattheir managers believed is right and whatthe organisations actually do; 40% had neverconsulted their employees on ethics and,while 71% thought that consulting staff aboutmajor decisions was `an essential part ofethical management', only 46% of organis-ations actually did so (Observer, 1996).

Conclusion: Counting on Codes forCorporate Cultures

There is little substantive evidence to confirmhow far an effective and operational code ofconduct either affects company performanceor excites external interest. Thus, while three-quarters of those surveyed by the Industrial

Society believed that `high ethical standardsboost financial performance', the 1995 CBI/Deloitte Touche survey on the implementa-tion of the Cadbury recommendations ±whose implementation attracted a degree (ifnot level of detail) of compulsion when theStock Exchange made admission of compli-ance with the code a listing obligation ± foundthat 90% of their respondents `̀ believed thatCadbury had had no positive effect on theirfinancial performance'' (CBI/Deloitte Touche,1995). There is also a noticeable shift from theviews of Sir Richard Greenbury, that prob-lems over the acceptance of both his andCadbury's recommendations might leave`any government' with `̀ no alternative but tointroduce legislation'' (Sunday Times, 1995),to those of Sir Ronald Hampel, chair of thelatest committee to review standards of busi-ness corporate governance, who made it plainthat his Committee `̀ stuck to the fundamentalprinciple that corporate prosperity comesbefore accountability'' (Observer, 1997).

Table 2: Frequency of categories (as listed in Table 1)



Nevertheless corporate accountabilitycannot be discounted, not least becauseinfluential institutions such as pension fundsare requiring companies in which they investto follow good practice in corporate govern-ance (Daily Telegraph, 1997a), and codes andpolicies on ethical behaviour do have a valuebeyond a legal framework: `̀ as an ethicsresource, then, law may have its uses, butit cannot claim to be an adequate reply tothe question of how do we know why someactions should count as ethical behaviour inbusiness and why others should be judged tobe unethical business conduct'' (Mahoney,1994, p. 33). Implementing a minimalist codebased on the Cadbury Report, for example, isno guarantee that `̀ the company is an ethicalorganisation. It may still produce shoddy ordangerous goods, pollute the environment,impose adverse condition on its workforceor tell lies in the advertising. However, thefollowing of a code such as that found in theCadbury report is more likely than not to lead

to a corporate governance regime with greateropenness of information, less likelihood ofdomination by one or a few people and fewerexcesses in the renumeration package ofsenior executives'' (Kitson and Campbell,1996, p. 115). Codes also have a purpose fordealing with externally-generated problems:`̀ middle managers, who tend most to be con-fronted with the pressure to bend and breakrules, can employ the code to set limits to abusiness relation. For example, they canrefuse profuse hospitality and gifts, and rejectclaims for bribes, by saying that their handsare tied by explicit corporate policy; possiblythis has the effect of not making the refusal orrejection personal and offensive, and notallowing the client to manipulate the businessinteraction by plying managers with excess-ive hospitality or gifts'' (Punch, 1996, p. 264).

Nevertheless, the use of codes to definean ethical environment or culture, and theireffective implementation, must be as part of alearning process that requires both incul-

HIGH MEDIUM LOW VERY LOW

. Principles andStatement ofValues

. Compliance WithLaw

. Conflict of Interest

. Personal Data andComputerSecurity

. Rights and Dutiesof Employees

. Implementationand Adjudication

. Insider Tradingand Share Dealing

. Personal InterestsOutside Firm

. Standards

. Fairness

. Political Dealings

. Management Style

. Dealings WithSuppliers

. Dealings WithCustomers

. Dealings WithAgents andConsultants

. Dealings WithHost Countries

. ProprietyInformation

. Anti-DiscriminationPolicy

. SexDiscriminationPolicy

. Equalopportunities

. Internal Controls

. Competitors

. Staffing

. Responsibility toShareholders

. CompetitiveAbility

. Commitment toEmployees

. SexualHarassment

. Health and Safety

. Commitment toSociety andCommunity

. InternationalTrade

. Discriminationand Employment

. Personal Issues

. Travel andExpenses

. Use of CopyrightProperty

. InternalOrganisation

. Markets

. Performance

. Research andDevelopment

. Salaries andBenefits

. Dealing With theMedia

. Trade Unions

. ReimbursableExpenses

. Copyrights

. Alcohol and DrugAbuse

. Product Safety

. Concern forEnvironment

Table 3. Codes: presence of issues

BUSINESS ETHICS146


cation, reinforcement and measurement.There are `̀ two different ways to warrantthe ethical results of a code. the first one isto `oblige' the company to behave alwaysaccording to the rules of the code: forexample, referring ethical affairs to a superiorbody in the company, or creating an internalauthority specialised in ethical affairs, orgiving full powers to an ombudsman orethical director, or submitting the companyto an ethical audit, etc., so that any opportu-nistic behaviour be penalised . . . The secondway to support a code is through thereputation of always being a moral corpor-ation or, at least, of having customary ethicalbehaviour . . . So, a company may have astrong ethical reputation, gained day by daythrough the efforts of its managers andemployees . . . In this case, the ethical codeis backed by the moral capital of the com-pany, i.e. by the attitudes of managers andemployees ethically trained, committed andmotivated'' (ArgandonÄa, 1994, pp. 151±152).

The latter way requires a substantial cor-porate investment; when `̀ a company doesproduce a code of ethics, it should ensure that

its drafting is participatory, and all employeesshould receive a copy and be able to discussits meaning and implementation. Perform-ance against the code should be monitored.Monitoring takes several forms ± requiring allmanagers to confirm that they have notdeviated from the code and following thisup with sample audits, asking non-executivedirectors to monitor compliance, establishingan ethics committee, giving responsibilityfor monitoring to a senior manager'' (Kitsonand Campbell, 1996, p. 129). Such proceduresdepend heavily on training, issue resolutionand continuing corporate support at seniorlevels ± building the `response route' (Table 4)± as the means to `̀ educate managers andemployees in how to behave when faced withbusiness conduct or ethical issues'' and thusprovide the link with measurement: `̀ withouta common basis for understanding a code ofconduct, compliance is nearly impossible''(Manley, 1992, p. 55). On the other hand,others would argue that, `̀ however com-mendable ethical codes are, and howeverlaudable the actions of whistleblowers,much of the material in this area highlights

Table 4

The Response Route

Perceptions

of conduct;of the acceptability or justification;of the status of those involved;of the possibility of retaliation.

Focusing the Response

common understanding of conduct;awareness of harmfulness;avoid subjectivity or individual perceptions of mitigating circumstances;discourage collusion or ignorance;promote common responsibility;provide safe, effective and quick reporting mechanisms;ensure organisational change.

Building The Decision Tree

the conduct in question is wrong;the conduct should be reported;the employee accepts that responsibility, knowing;

effective action will be taken;those actions will be appropriate;the benefit of taking action outweigh the cost of

reporting;the organisation is positive about both reportingand taking action.

Source: adapted from Gorta and Forell (1995) and Manley (1992).



the willingness of people to submerge theirwills, and shelve their consciences, in theinterests of the organisation'' (Punch, 1996,p. 266), and thus suggest attention shouldfocus on the former way of external compli-ance and control. Clarke (1995, p. 205), forexample, has argued that ethical consider-ations in the private sector `̀ will not featureeffectively on the business agenda unless theyare supported by regulation, institutions andcompliance procedures''. Nevertheless thetwo recent UK examples, in 1996 and 1997,of the abortive takeover of the CooperativeWholesale Society (CWS) and regulatoryreport by the Financial Services Authority(FSA) on the Prudential Assurance underlinethat neither way ± whether self-regulation orexternal measurement ± is a guarantee ofethical behaviour. The attempt to purchaseCWS with the help of confidential informa-tion from within the company was describedby the High Court as `̀ the clearest case ofa gross, wilful and disgraceful breach ofconfidence'' and CWS's chief executive com-mented that `̀ the City prides itself on itssystem of self-regulation and that systemdepends on high standards of probity andintegrity. Those standards must have beenput into question as a result of the actions ofcertain large reputable components of theCity establishment'' (Daily Telegraph, 1997b).In contrast, the report from the FSA on Pru-dential Assurance, the country's largest in-surance company and the possessor of a codethat èncapsulated a system of values and aculture that had developed over 140 years'(Manley, 1992, p. 22), alleged that the com-pany indicated: a `deep-seated and long-standing failure in management whichprevented Prudential from recognising itsown shortcomings'; à failure' to establishprocedures and controls to ensure compli-ance; and a `cultural disposition againstcompliance which filtered through Pruden-tial's branch offices, managers and advisers'(Daily Telegraph, 1997c).

It would thus appear that the use of codesalone in defining conduct, culture and per-formance in the private sector may be lesseffective than their proponents think, and ofless impact on managers and employees,customers and stakeholders than they wouldwish. Should the public sector look solely tocodes to revive and sustain public sectorvalues in the context of public management itwould do well to understand that the role andpurpose of corporate codes of conduct, whatthey are intended to achieve, how they areintended to achieve their purpose, and whoevaluates their effectiveness or ensure theircompliance, raise interesting questions about

their future use as frameworks for defining,determining and changing conduct, cultureand performance in either sector.

Note and references

Note

Kitson and Campbell (1996, p. 198) report the1990 findings of the US Ethics ResourceCentre on company codes which listed theethical issues in order of priority as: drug andalcohol abuse; employee theft; conflicts ofinterest; quality control; discrimination;misuse of propriety information; fiddling ofexpense accounts; plant closure and lay-offs;misuse of company assets; environmentalpollution; misuse of others' information;industrial espionage; inaccuracies in docu-ments and records; receiving excessive giftsand entertainment; false or misleading adver-tising; giving excessive gifts or entertainment;receiving `backhanders'; insider (information)trading; relations with local communities;antitrust issues (e.g. price-rings); bribery;political contributions and activities; im-proper relationships with local governmentpersonnel; improper relationships withnational government personnel; inaccuratecharging to government bodies; improperrelationships with foreign governmentpersonnel.

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the effectiveness of codes of conduct

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