Ethical Practices in Organisations

Developing the list of ethical practices and checking for their
relevance and its practice in organisations

Abstract

The research paper is related to the creation of a questionnaire for listing the ethical practices in organisations. The aim is to find out what are the various practices laid down by the company with regards to ethics. There is no comprehensive list of ethical practices currently available.

Creation of the questionnaire is based on literature review. Based on the Literature review the list of practices will be identified. The ethical practices will be classified under various heads.

The pilot study checks for the relevance of the ethical practices so as to modify the list of practices.  The pilot study of the questionnaire is administered on around 10 employees each of the 4 companies from the list of Economic Times top 500 companies. It aims to find out whether the particular ethical practice is practiced in their organisation and also rank the practices they found relevant in order of importance. This will help in future research in the area of Business Ethics in organisations. It will help create a list of ethical practices that organisations can put in place in their organisation if they want to practice and create an ethical culture.

Key words

Business Ethics, Ethical Practices, Ethics, ET 500

1. Introduction  

The research paper is related to the creation of a questionnaire for listing the ethical practices in organisations. The aim is to find out what are the various practices laid down by the company with regards to ethics. There is no comprehensive list of ethical practices currently available.

Thus while most companies have basic policies on employee integrity, confidentiality and sexual harassment, relatively few have established policies regarding bribery exploitive child labour, human rights violations and other issues they may encounter in the global market place [1].

Attempting to understand ethics, ethics is beyond compliance .To find out what is the list of policies and practices put in place by organisations to establish an ethical culture.

The establishment of a code of conduct needs to be seen by the organisation only as an initial step in the development of an ethics programme because without modifying the internal values to emphasise ethical conduct, there is no guarantee that future transgression will not occur

Also, though organisations have created codes of ethics, however they are country specific and do not cater to international policy. As business entities are becoming global, they need to be modified and a universal code needs to be established [1]. So a cut paste action of ethics code is not enough.

However, it was found that while the existence of a code was not associated with the frequency of violations, its use was associated with reduced ambiguity of standards and a contingent reward system [2].

Environics Millenium Poll on CSR which polled over 25000 citizens in 23 countries. It is found that 20 percent of consumers reported having either rewarded or punished companies based on their perceived social performance. Further the majority of respondents said they wanted companies to place greater emphasis on social and environment goals [3].

This leads us on to the importance of Triple bottom-line accounting. What is distinctive about the 3BL approach is that it primarily calls on firms and senior managers to focus on things besides the traditional bottom line: it has never been possible to do well by the bottom line without paying attention elsewhere, especially to key stakeholder groups like employees, customers, suppliers and governments.(4) So this emphasises focusing  on aspects other than the financial bottom-line.

According to KPMG’s International Survey of Corporate Sustainability Reporting 2002 45% of the Fortune global top 250 companies are now issuing environmental, social or sustainability reports in addition to their financial reports [4].

This is further emphasised through the report of Environics 2001 CSR monitor which reported that corporate reputation is now based more on social responsibility than brand image, particularly in wealthy countries. The majority of respondents ranked environmental impacts, labour practices, business ethics and social contributions as the most important factors for forming an impression of the company. Hence it reemphasises the fact that ethical practices needs to be focussed on.

Also, when asked what CSR means many gave meanings which were relevant to charitable giving.  Many could not differentiate between CSR and charitable giving. Charitable giving fluctuates with a company’s revenues; CSR requires a fairly constant investment especially while a company is working to establish credibility with its stakeholders [3]. So we take CSR commitment to be a more relevant aspect of ethical practice.

Finally the FSG (Federal Sentencing guideline) has motivated almost all large companies to adopt a code of ethics.   It has suggested to make ethics a priority, set a good example of ethical conduct, keep commitments, provide information about culture and compliance, consider ethics in decision making and talk about ethics in the work place, what are the policies, compliance programmes and practices. With regards to environment it looks at positive programmes in place such as pollution reduction, recycling and energy saving measures as well as negative measures such as level of pollutants EPA citation fines law suits and other measures.

Not only Community relations, Employee relations, Diversity, Customer relations [5]. Business practices, diversity- women representation in the workforces are also to be taken into account [6].

Through both training and the selection process of new functionaries, the organisation can influence the degree to which the decision maker has the necessary skills to act in a responsible way. Delaney and Sockell (1992) studied the potential effectiveness of firms’ ethics training programmes. The results suggested that such training can have a positive effect, but relatively few firms provided such programmes [7].

In practice many organisations try to influence norms and values by formulation and communication ethical codes. In addition to the formal norms and values, informal norms should also be considered especially the support in the organisations for responsible behaviour through the informal ‘reward system’ (Jackal 1988, scott-Morgan 1994) [7]. This together with professional training will not only improve the standards adopted generally by companies but also introduce the necessary level of support from the boardroom to ensure effective implementation in areas which to date is causing many companies some difficulty.[8]

The Best practice framework is based on 7 pillars of an ethical programme - values, codes, feedback, responsibility, training, reward and external assessment [8]. The establishment of the GRI-Global Reporting Initiative gives the minimum standards that companies should meet [8]. Thus this will help companies know if they are on track.

Ultimately its measurement- that’s what companies are increasingly looking with regards to their ethics and compliance programmes partly to determine whether the programmes are working but also to tweak and fine tune business systems and processes in the hope of recouping some return on the vast sums being spent on post Enron compliance [8].

So it is important that the organisations first put in place the various ethical practices and ultimately measure it.

It is important that ethics programmes are predominantly internally motivated and have not been introduced in response to external pressure [7]. External pressure being for example such factors as the revised provisions in the Sentencing Guidelines in the USA and the Cadbury Report and its recommendations in the UK (in India the Mangalam report) [7].

2. Background of the research

The questionnaire was created based on the literature review. Based on the Literature review the list of practices is identified. The ethical practices are classified under various heads.

This study checks for the relevance of the ethical practices so as to modify the list of practices.

It aims to find out whether the particular ethical practice is relevant, also if it is practiced in their organisation and then to rank the practices they found relevant in order of importance.

This will help in future research in the area of Business Ethics in organisations. It will help create a list of ethical practices that organisations can put in place in their organisation if they want to practice and create an ethical culture.

3. Findings

The ethical practices questionnaire is given as Appendix I

The 7 sections were

  • CSR
  • Diversity
  • General Framework
  • Employees
  • Government (SEBI)
  • Environment
  • Customer

The questionnaire was administered to a total of 40 employees . They were from 4 public listed organisations. The respondents were from the middle and senior level.

The list of ethical practices was generated from the literature review.

The respondents were to tick the items based on whether they found it relevant i.e. yes, no.

The second response they had to make was whether it was practiced in their organisation, yes, no or not aware.

In the third column they had to rank in order of importance the practices that they had marked as relevant, 1 being most important going down to 2 next most important and so on.

Only the yes and no responses were taken for calculating percentages. The option of not aware was not taken into account for the calculation.

The information thus collated can be used to understand the practices found to be most relevant. To understand the practices found to be highly relevant but not practiced. Also to understand those practices with the largest gaps under each of the 7 heads.

Overall the findings were:

Table 1: Ethical Practices – relevance, it being practiced and gaps

Ethical Practice Framework

Percentage finding it relevant

Percentage saying its being practiced

Gap between relevance and practice

1. CSR

77

68

9

 2.Diversity,

64

57

7

 3.General Framework

81

65

16

 4.Employees,

100

95

5

5.Government (SEBI) etc,

87

82

5

6.Environment,

88

63

25

7.Customer

99

99

0

The above table shows the relative percentages and the gap.

Overall the percentage for all aspects of ethical practices being practiced in the organisation was less then how relevant it was found. Only for the section of customers (the percentage was equal)

The findings indicate  that all the practices listed were found to be relevant ie  each received a percentage weithtage above 50%

The section for Diversity received the lowest response in terms of relevance and also for it being practiced.

For customers the percentage for it being relevant and practiced it was the same.

The biggest gap i.e. between relevance and being practiced of 25% was found in the section for Environment followed by the General framework wherein the gap is 16%.

Among the 7 sections the highest weightage in terms of relevance was given to Employees and then customers.

Some individual items which received the highest relevance were :

  • Fair opportunities in training and promotion
  • Good/safe working conditions
  • Timely payment of salaries
  • Payment of organisation taxes
  • Following guidelines listed by SEBI
  • Actions to prevent global warming and carbon footprints
  • Providing complete information to the client and keeping client information confidential
  • The Organisation spends a certain percentage of the profit on CSR activities.
  • Volunteering employee hours
  • Women representation
  • Ethics code
  • Code of punishment for sexual harassment

4. Conclusion

Though this study was conducted in 4 organisations with a sample of 40 individuals, the findings are consistent.

Organisation can understand what the relevant ethical practices are. They can incorporate those which they are currently not practicing if they would like to move towards an ethical culture.

Overall the message is that though many of these ethical practices are considered relevant more organisations need to practice it.

References

  1. Nader Asgary, Mark C. Mitschow, Toward a Model for International Business Ethics. Journal of Business ethics. 2002, 36: 239-246.
  1. Farrel B.J., Cobbin D., Farrell H. Can Codes of ethics really produce consistent behaviours? Journal of Managerial Psychology. 2002, 17/6: 468-490.
  1. The ethics of Corporate Social Responsibility Management trend of the New Millennium? Economist 1 No V 17 2001, 13-33
  1. Norman W., MacDonald C. Getting to the Bottom of Triple Bottom-line. Business Ethics Quarterly. 2003, 14/2: 243-262.
  1. Dr. Curtis C. Corporate Performance is closely linked to a Strong Ethical Commitment. Business and Society Review. 1999, 104/4: 407-415.
  1. Paine L. S. Value Shift 1st ed. Tata McGraw Hill, New York, USA. 2003, 11-136
  1. McDonald G., Nijhof A. Beyond Codes of Ethics: An integrated framework for stimulating morally responsible behaviour in organisations. Leadership & Organisation Development Journal. 1999, 20/3: 133-146.
  1. Summerfield D. Corporate Governance: the stakeholder debate. In: Business Ethics: Facing up to the issues 1st ed. Economist Publication, London.2004, 98.

Appendix 1

ETHICAL PRACTICES

Do you find this relevant

Do you practice this in your organisation

Rank all those that you find relevant in order of importance

What are the various practices, policies laid down by the company with regards to ethics.

List of ethical practices:

1

CSR

 

 

 

 

The organisation spend a certain percentage of the profit on CSR activities

 

 

 

 

The amount spent changes every year, not based on any rule

 

 

 

 

It is not only cheque book philanthropy(donations) or strategic ie based on benefit to the organisation but based on the urgent needs of the communities

 

 

 

 

Volunteering employee hours towards social projects

 

 

 

2

Diversity

 

 

 

 

Minority representation

 

 

 

 

Women representation

 

 

 

 

Independent directors -% as per law

 

 

 

 

Independent directors not  exceeding tenure of 5 years

 

 

 

3

General framework

 

 

 

 

Code of conduct

 

 

 

 

Ethics code

 

 

 

 

Ethics training

 

 

 

 

Ethics officer

 

 

 

 

Ethics hotline

 

 

 

 

Code of conduct for outsourced companies

 

 

 

 

Code for punishment of sexual harassment

 

 

 

 

Joined any association even though not mandatory for eg. global compact, transparency international

 

 

 

4

Employees

 

 

 

 

Fair opportunities in training and promotion

 

 

 

 

Good /safe working conditions

 

 

 

 

Timely payment of salaries

 

 

 

5

Government/SEBI /accounts

 

 

 

 

Payment of taxes etc

 

 

 

 

Following the guidelines listed by SEBI

 

 

 

 

No fines levied by the govt

 

 

 

 

Few clauses in the audit report

 

 

 

6

Environment

 

 

 

 

Actions to prevent global warming

 

 

 

 

Actions to reduce carbon footprints

 

 

 

 

Triple bottom line accounting

 

 

 

7

Customer

 

 

 

 

Providing information to the customer

 

 

 

 

Keeping customer information confidential

 

 

 

8

Additional practices