Why People / Organizations Act Ethically?

Check this very interesting discussion in the Ethics and Responsibility forum of 12manage: Why are people and/or organizations acting in an ethical way? Tons of  interesting views...

Interview with Professor Gardner on the Ethical Mind

The Harvard Business Review of March 2007 contains an interview worth reading with Harvard Graduate School Professor of Cognition and Education Howard Gardner.
Gardner became well known by his 1983 book Frames of Mind, in which he argued that people don't have one, but multiple intelligences: linguistic, logical-mathematical, spatial, bodily-kinesthetic, musical, interpersonal and intrapersonal intelligence.

Likewise, Gardner now proposes to distinguish between Five Types of Cognitive Minds:

1. The Disciplined Mind - What we gain through applying ourselves in a disciplined way in school.
2. The Synthesizing Mind - Surveys a wide range of sources, decides what is important and is worth paying attention to.
3. The Creating Mind - Looks for new ideas and practices, innovates, takes chances, dicovers.
4. The Respectful Mind - The kind of open mind that tries to understand and form relationshipss with other human beings.
5. The Ethical Mind - Broadens the respect for others (see 4) into something more abstract. Asks: "What kind of a person, worker, and citizen do I want to be?"

The Ethical Mind grows at home and in the surrounding community. Bad behavior of others can undermine it. Gardner mentions cheating MBA students as an example of this undermining, and thinks that it is more difficult for businesspeople to adhere to an ethical mind than it is for other professionals, because business is strictly not a profession, has no guild-structure, no professional model, no standards and no penalties for bad behavior. The only requirement is to make money and not run afoul of the law.

In order to stay on the right track, Gardner advises business leaders to:

1. Believe doing so is essential for the good of the organization, especially during difficult times.
2. Take the time to step back and reflect about the nature of their work.
3. Undergo "positive periodic inoculations", being forced to rethink what you're doing.
4. Use consultants, which should include a trusted advisor within the organization, the councel of someone completely outside the organization (an old friend), a genuine independent board.

See also the related website The Good Work Project, an "effort to identify individuals and institutions that exemplify good work—work that is excellent in quality, socially responsible, and meaningfulto its practitioners—and to determine how best to increase the incidence of good work in our society".

Create and evaluate a Code of Conduct

A corporate Code of Conduct, sometimes also refered to as Code of Ethics, helps a company to show to all involved parties, internal and external, the standards that govern its conduct, thereby conveying its commitment to responsible practice wherever it operates.

As you know, there have been many recent legal and paralegal initiatives to promote or require good conduct by corporations. Because there are now so many of these guidelines, it is not simple to get an overview, so that you're able to quickly assess if your firm's Code of Conduct is 'worldclass'. A useful article in the HBR of Dec 2005 by Professors Lynn Paine, Rohit Deshpandé, Joshua D. Margolis, and Kim Eric Bettcher may help: it provides a useful overview of all (?) things that should be considered in any Corporate Code of Conduct.

The authors suggest 8 governing ethical principles which taken together they call: The Global Business Standards Codex (GBS Codex). These 8 principles to create or evaluate a Code of Conduct and their most important aspects are:

1. The Fiduciary Principle (Diligence, Loyalty).
2. The Property Principle (Protection, Theft).
3. The Reliability Principle (Contracts Premises, Commitments).
4. The Transparency Principle (Thruthfulness, Deception, Disclosure, Candor, Objectivity).
5. The Dignity Principle (Respect for the Individual, Health and Safety, Privacy and Confidentiality, Use of Force, Associatiation & Expression, Learning & Development, Employment Security).
6. The Fairness Principle (Fair Dealing, Fair Treatment, Fair Competition, Fair Process).
7. The Citizenship Principle (Law & Regulation, Public Goods, Cooperation with Authorities, Political Noninvolvement, Civic Contribution, .
8. The Responsiveness Principle (Addressing Concerns, Public Involvement).

The article itself is already a summary of regulations and best practices. So if you want to assess or create a Corporate Code of Conduct, you are advised to read the article completely.

Interview with Stuart Hart on the Bottom of the Pyramid

Here are a few interesting quotes I found in a short interview with Professor Stuart Hart on the latest developments around the Bottom of the Pyramid concept in an interview in Business Ethics Magazine.

"Western capitalists need to enlist the entire human community in the capitalist dream, which is about pulling yourself up. Unless we can do that for everyone — in a way that respects local culture and doesn’t destroy underlying ecosystems — global capitalism is in trouble".

"When C.K. Prahalad and I started working on this in 1998, people thought we were nuts. Nobody would publish it. It became an underground paper on the Internet, getting a fair amount of corporate visibility. The inflection point was Sept. 11. After that, it was published almost immediately, coming out in Strategy and Business in January 2002. Suddenly people could see how this way of thinking had implications for security, because it deals with the roots of terrorism".

"We’re also looking at creating a worldwide network of collaborating BOP labs at other business schools".

If you have thoughts or experiences to share around this intriguing BOP concept, please enter your Comments.

The Value of Corporate Values

An outstanding in-depth article on the Value of Corporate Values can be found in an article by Reggie Van Lee, Lisa Fabish, and Nancy McGaw in this month's S+B.

Based on a survey at 365 companies in 30 countries, the authors claim "increasingly, companies around the world have adopted formal statements of corporate values, and senior executives now routinely identify ethical behavior, honesty, integrity, and social concerns as top issues on their companies’ agendas".

The highlights of the survey and article are:

1. A large number of companies are making their values explicit. That’s a change — quite a significant change — from corporate practices 10 years ago. The ramifications of this shift are just beginning to be understood.
2. Ethical behavior is a core component of company activities.
3. Most companies believe values influence two important strategic areas — relationships and reputation — but do not see the direct link to growth.
4. Most companies are not measuring their “ROV.”
5. Top performers consciously connect values and operations.
6. Values practices vary significantly by (continental) region.
7. The CEO’s tone really matters.

The article provides quantitative data about these 7 findings and concludes with "A commitment to corporate values may be in vogue, but the public will remain suspicious until corporations both understand and can demonstrate that they are committed to using values to create value".

Top banker enters "business ethics" fray

The head of Switzerland’s largest bank has outlined his vision of how companies can regain public trust, in the context of a growing debate about "business ethics".

Peter Wuffli, group CEO of banking giant UBS, condemned what he called the "almost cyclical abuse of power by business leaders" that led to a series of high-profile corporate collapses in recent years.

However, he told the 35th annual ISC conference at St Gallen University that society now ran the risk of "going too far" and "crushing" business with arbitrary new regulations.
Wuffli said the time had come to "give corporations the chance to earn back the trust of society", and argued that businesses – like individual human beings – "need freedom".

"For a large, global listed corporation, there is simply no alternative to maximising the profit potential relative to relevant competitors."

However, he said this did not mean only "cold-blooded short-term profit maximisers [would be] rewarded by the financial markets".

He said companies could only be successful if they "balanced the interests of various stakeholder groups" – particularly customers and employees.

"Responsible corporate leadership means delivering on a profit-oriented mandate in a way that is fully transparent and in line with its stated values, vision and strategies," he said.

However, he concluded: "It is only individuals who can act responsibly. A company is as ethical as its people – every single one of them." Article in Swiss Info

Firms are nervous about ethics and fast to fire

Two senior investment bankers at Bank of America were summoned to a meeting where their boss, visibly uncomfortable and flanked by bank lawyers, read them a statement. They were both dismissed and asked to leave the building immediately. The decision was final.

Stunned, the bankers asked if they had broken any regulations. No, they were told. Nor had they traded on any inside information. Within the hour, they had turned in their BlackBerrys and laptops and were on their way home to the suburbs.

This example illustrates one effect of heightened regulatory scrutiny in the United States after the collapse of Enron and other companies. Corporations and their boards are adopting zero-tolerance policies and increasingly holding their employees to lofty standards of business and personal behavior.

The result is a wave of abrupt firings as corporations move to stop perceived breaches of ethics by their employees that could result in law enforcement action, or public relations disasters.

In the ruthlessly competitive world of investment banking, the two investment bankers at Bank of America had been doing what presumably was their job. Acting on a tip from a rival banker, they had called a company preparing to merge with another and asked to get in on the deal.

In a different era, such a ploy might well have been seen as an example of what hungry bankers do to secure an inside edge with a client and maybe even a better bonus - not an inappropriate use of confidential information and cause for termination.

'We are in a regulatory frenzy,' said Ira Lee Sorkin, a senior white-collar-crime lawyer at Carter Ledyard & Milburn in Manhattan. Read on.

Supposed unethical behavior by MBAs applicants punished severely

"I know everyone is getting more and more anxious to check status" of applications, read the message posted to a BusinessWeek.com discussion group by someone using the screen name "brookbond."
"So I looked around their site and found a way."
Over the next nine hours, about 150 prospective MBA students pasted a URL address into a Web browser and typed in a passcode in an attempt to learn their fates.
The consequences were severe. Harvard Business School, the MIT Sloan School of Management and Carnegie Mellon University's Tepper School of Business have pledged to reject any applicants who tried to get an early peek at their acceptance or rejection letter.
Read the rest of this story.
I'd say that's a pretty hypocrite action of those colleges, who in the past have largely neglected ethics in their courses.

Bestselling Business Ethics Books

Waivers of codes of conduct and E.

In an interesting article in Ethikos of September 2004, Rebecca S. Walker discusses Waivers of codes of conduct and E.

Section 406 of Sarbanes-Oxley requires companies to disclose whether or not they have adopted a code of E. for senior financial officers, and if not, why not.

The SEC regulations implementing section 406 ("SEC Implementing Regulations") define a code of E. to mean written standards that are reasonably designed to deter wrongdoing and to promote:
(i) honest and ethical conduct, including the ethical handling of actual and apparent conflicts of interest;
(ii) full, fair, accurate, timely and understandable disclosure in reports and documents filed with or submitted to the SEC and in other public communications;
(iii) compliance with applicable laws, rules and regulations;
(iv) prompt internal reporting of code violations to an appropriate person; and
(v) accountability for adherence to the code.

Companies must immediately disclose any amendments of the code in a public filing with the SEC on a Form 8-K or on the company's Internet site.

On November 4, 2003, the SEC approved NYSE Rule 303A.10, including a requirement that NYSE-listed companies adopt and disclose a code of B. conduct and E. applicable to all directors, officers and employees. Any waivers of the code for directors and executive officers may be made only by the board of directors or a board committee and must be promptly disclosed to shareholders.

But, what is a waiver? The SEC Implementing Regulations defines a waiver as "the approval by the registrant of a material departure from a provision of the code of E."
The NYSE and the Nasdaq have not articulated any definition of a waiver.

According to Walker, "Given the SEC's definition of a waiver as a material departure from a provision of the code, it would seem possible to draft a code so as to avoid the need to grant a waiver under most circumstances", since "Most of the requirements for contents of codes are broad enough that language could be drafted to minimize the need to authorize a departure".