CODES OF ETHICS - DEFINITION AND ROLE INSIDE
ORGANIZATION
Diana Corina Gligor
West University of Timişoara, Faculty of Economics and Business Administration
Timişoara, Romania
diana.gligor@feaa.uvt.ro
Valentin Partenie Munteanu
West University of Timişoara, Faculty of Economics and Business Administration
Timişoara, Romania
valentin.munteanu@feaa.uvt.ro
Abstract
The interest given to ethics and business ethics in particular, has significantly increased
in the past years due to recent financial scandals and to the fact that the present financial and
economical crisis, viewed by a significant body of opinion as a consequence, among others, of
the lack or failure of the system of ethical values, with great impact on business activities.
There is also a growing trend in this field of normalization, concretized in the elaboration and
use of different codes.
In order to stimulate, obtain and maintain an ethical climate inside an organization,
codes of ethics and codes of conduct are developed. Both types of codes trend to reflect the
standard of behavior that organizations wish their employees to adopt, but a distinction can
be made between this two [2]. This distinction is important because we can find organizations
that have codes of ethics that are rather codes of practice. So, a code of conduct trends to be
more instructive, or to set rules concerning the behavior. As a result, codes of practice are
prescriptive or proscriptive concerning particular aspects of the behavior of the members of
organizations. By comparison, a code of ethics trends to be more general, encouraging
members of the organization to display particular characteristics such as loyalty, honesty or
integrity. Codes of ethics don’t normally address
specific type of actions rather they
encourage the application of “virtues” viewed as personal qualities that provide the basis for
the individual to lead a “good, noble or happy life” [3]. Besides this important distinction
between codes of ethics and codes of practice, other dimensions of classification can be used
and models of classifications can be proposed starting from theme.
Regarding the roles that ethical codes play inside an organization, some see them as
legitimate and necessary tools for the management to develop and maintain an expected
behavior for employees, while others perceive the codes of ethics as being manipulative
control devices. As Stevens [4] has noted: “some ethical codes are little more than legal
barriers and self-defense mechanisms; others are intended to influence and shape employee
behavior”.
Keywords
codes of ethics, codes of conduct, classification of codes, perception of codes and use of
codes.
1.
INTRODUCTION – THE ACTUALITY OF THE THEME
IN DISCUSSION
We can state that the attention given to business ethics in recent years has
intensified. If the use of ethics in business has followed the same trend, it can be
debatable. And it will be very interesting to study by the scholars in the field the
new role that business ethics will have in the new international context created by
changes due to the economic crisis. Will business ethics be in the hart on the new
economic environment, as a guaranty than mistakes done in the past won’t happen
again, or it will be something defined already as “savage capitalism”, when
everybody runs for it’s self and rules no longer apply. We, business people and
business organizations as entities face a decision, we are at a crossroad, and maybe
we are facing a new ethical dilemma with profound implication for the future of how
business in done.
Another aspect that we should also take in consideration is the fact that ethics is not
important for a business organization just to avoid a scandal. Like many other things
in life “looks seemed to be very important” and the interest given by companies to
business ethics issues is closely related to their image, rather than their core values
and activities. And when you do something only to look god in the eyes of the media
or even local communities, but without a real commitment, you lack a long term
perspective. So we feel the need to underline that business ethics is not just a matter
of public relations.
2. FEATURES OF THE CODES OF ETHICS
One of the way in which business ethics is put in use inside business organizations is
trough different codes, called codes of ethics, codes of practice, codes of conduct,
etc. or just “our credo”(i.e. Johnson&Johnson, Tylenol study case).
Codes can be designed for a specific company or for a specific
industrial/commercial sector. This type of codes are designed either as a internal
voluntary action either as a response to direct or indirect exterior pressure, coming
from various categories of stakeholders, primary or secondary for the activity of the
business organization, like clients, different business partners, employees,
governments, local communities, NGO’s. In the specialty literature it is mentioned
the fact that ILO – International Labor Organization – argues that the interest for
corporate codes was initially awaken in the 1980s as a response to the scandals in
US defense industry and the overt greed displayed on Wall Street. C. Fisher and A.
Lovell [3] state that ILO sees business ethics as a way for companies to promote
self-regulation, thereby deterring government intervention and possible regulatory
actions.
Related to this, we can bring also in discussion the legal system in use in USA that
with the 1984 Sentencing Reform Act and the 1991 Federal Guidelines for
Sentencing Organizations allows for a fine to be reduced up to 95% if an
organization can prove that it has implemented effective programs to prevent and
detect violations of the law. Corporate codes can be one part of this kind of
programs, and in this way they have an increased importance for organizations.
It can be stated, however, that codes of ethics have existed even prior to 1980, in
different forms and with different names. It is rather difficult to pinpoint the original
date when the first ethical code was written. Brytting [1] cited the Zeiss organization
as having a recognizable code of conduct for its employees as early as 1896.
It is essential to recognize the potential that codes of ethics have of reducing the
corporate exposure to punitive damages in claims of negligence [6]. This, of course
raises another debate, about whether the designing and the implementation of codes
of ethics should be a matter of defending the company and protecting its financial
state, or a matter of giving a specific form to the values and principles shared inside
an organization. In the authors opinion it is a crucial to be a matter of both, meaning
that you can not effectively implement a code in which nobody inside the
organization believes in (we could call a certain kind of code a “drawer code”written and then forgotten in a drawer) because it’s not respected the main
condition, that of proving to be an effective measure, but at the same time we should
take in consideration the advantages offered by such a type of legislative frame, that
of promoting a more ethical environment inside business organization and
emphasizing on the preventive rather than the punitive measures.
Another aspect of this debate regarding the source that codes of ethics should have
could be stated in the form of a recommendation for any business organization that
wants to promote an ethical environment to take a proactive, rather that a reactive
attitude and to take measures before the external pressure is exercised.
Codes of ethics can be a part of a more complex program of implementing business
ethics in an organization, along with other measure of institutionalization of business
ethics, like ethics officers and ethics training. Codes of ethics can be viewed as part
of the ethical climate of an organization, tightly related to the cultural environment
of the organization.
3. CODES OF ETHICS, CODES OF CONDUCT
One important distinction must be done between codes of ethics and codes of
conduct, and is important to study their differences in order to achieve a better
understanding of the different roles that they could play inside organizations.
In practice, we notice that a lot of organizations don’t know or don’t take into
consideration these differences between a code of ethics and a code of conduct. The
main feature of distinction between the two types of codes is represented by the
level of prescription. Research studies [7] undertaken in this direction have shown a
much higher level of prescription in the case of codes of practice, that in the case of
codes of ethics.
A code of conduct is represented by a set of instructions or rules concerning the
behavior of the members of the organization. Regarding the content of a code of
conduct there is another aspect, another distinction that we should take in
consideration: how much the code is prescriptive or proscriptive.
The prescriptive character of a code indicates that the majority of the instructions
or rules are requiring the adherence of the members of the organization, meanwhile
the proscriptive character of a code indicates that the majority of the instructions
or rules indicate the behavior to be avoided.
Recommendations
of use
The challenges
The Character
We have elaborated a table to identify and systemize the main criteria of distinction
between a code of ethics and a code of conduct, presented as it follows:
Table 1. The main differences between a code of conduct and a code of ethics
CODE OF CONDUCT
CODE OF ETHICS
- Address specific actions or the - Have rather a general character
behavior of employees
- Have a prescriptive or proscriptive
character
- Encourage employees to adhere to
certain “values” or “values”
- The extend of action addressed by
the code can be problematic
- The “virtues” promoted might vary
over time
- if the code fails to address a
specific situation of ethical behavior,
the employee might perceive that the
organization is morally indifferent
toward that situation
- It is difficult to define “values” with
consistence and acceptance for the
majority of the employees
- It’s use is recommended where there
can be a certain degree of
predictability of the types of ethical
dilemmas that employees might face
in their activity
- It’s use is recommended where the
degree of predictability for the ethical
dilemmas that employees might face
in their working activity is rather low
- It’s use is recommended where there
is lather a low degree of trust and
responsibility for the employees
- It’s use is recommended where there
is lather a high degree of trust and
responsibility for the employees
4. CLASSIFICATION METHODS
The interest for ethical codes has increased both in the business communities and in
the academic community. If the interest for ethical codes for the business
communities can be expressed by the increasing number of business organization
that elaborate and promote a code, in the academic community there the is an effort
to develop means of study for the codes.
Researchers have tried to find means of analysis and comparison between different
codes, as a way that leads to a better understanding and use of codes. We can find
several descriptive/exploratory studies that approach the subject of codes of ethics
classifications, and we can cite (apud Gaumnitz and Lere, 2002, [4]): Jamal and
Bowie, 1995 [5]; Kaye, 1992 [6]; Langlois and Schlegelmilch, 1990 [7]; Levebvre
and Singh, 1992 [8]; Montoya and Richard, 1994 [9]; Oz, 1993 [10]; Preble and
Hoffman, 1999 [11]; Wiley, 2000 [14].
One of the methods proposed [4] is a classification scheme containing six important
features that codes have:
- Length;
- Focus;
- Level of detail;
- Shape;
- Thematic content;
- Tone.
The length of a code is expressed by the number of different statements or ideas that
it presents. The authors of this classification scheme present an example for offering
a general name for codes using this feature of the codes. For instance, that say, if a
code contains nine different statements or ideas, that code could be called “a ninestatement code”, and this way we can state that we already have a starting point for
the comparison of different codes. The authors make an observation obvious for all
of us, that this dimension solely offers a very narrow perspective of comparison for
different codes, and that the length of a code does not offer any specification for its
content.
The focus of a code is expressed by the number of themes of topics presented in the
content of a code. Using this feature, a code can be categorized as being “focused” if
it approaches a reduced number of themes or topics or “breadth” if it approaches
more themes or topics. To offer an example of the use that this classifications
dimension might have, presented also by the authors of this classification scheme,
we can say that a code that has nine different themes or topics could be called “a
nine-theme code”. The main weak point of this classification dimension is that it
does not offer any clue about the level of detail that characterizes the codes. A code
could be a nine-theme code with one statement for each theme or it can have several
statements for each theme.
The level of detail represents a combination of the two classification criteria
presented above, and it is expressed by the average number of statements per theme.
This, in the opinion of the authors of this classification scheme, sounds like “a
measure of central tendency” and it represents a measure for the level of detail of a
code. For instance, they say, a code with a mean of five statements for a theme can
be viewed a more detailed code than a code with a mean with two statements for a
theme. This feature of classification, although it already offers a more compressive
approach for the classification of codes, it has its own limitation. If we say that a
code it has a mean of four statements for a theme, with no other clues, we can not
determine that it is a code with two themes and eight statements, or a code with four
themes and sixteen stamen, or any other possible combination of the number of
themes and statements. And still we have no information about the content of
various themes and statements.
The shape of a code it can be very well illustrated by the fallowing figure, presented
by the previous cited authors [4]:
Figure1. Sample of code structures
CODEA Theme 1
Statement
Statement
Statement
CODEB Theme 1
`
Statement
Statement
Statement
Statement
Statement
CODEC Theme 1
Statement
Statement
Statement
Statement
Statement
Statement
Statement
Theme 2
Statement
Statement
Statement
Theme 2
Statement
Statement
Theme 3
Statement
Statement
Statement
Theme 3
Statement
Statement
Theme 2
Statement
Theme 3
Statement
If we analyze the previous figure we can state that CODE A, CODE B and CODE C
are all “nine-statements” and “three-theme” codes with a level of detail of three.
They save the same length, the same focus and the same level of detail, but we can
easily notice that they are not the same as shape.
The shape of a code can be expressed as the thematic emphasis of a code, defined a
multi-variate concept that addresses the relative concentration of statements across
themes [4]. Starting from this classification feature, we can define the shape of a
code as being “horizontal” if it stresses theme coverage or “vertical” if it stresses a
particular theme, entirely or almost entirely to the exclusion of other themes. The
extreme example of a horizontal code would be that of a code that has nine
statements covering nine different themes and of a vertical code would be that of
code that has all its statements for the same theme.
Numbers can be used to capture shape [4]. Referring to the two previous extreme
examples, we could say that a nine statement code that is a “perfect horizontal” code
can be codes as being a “1 1 1 1 1 1 1 1 1” code and a code that is “perfect vertical”
can be coded as a “9” code.
In the example cited in the previous figure, we can notice that CODE A can be
coded as having a “3 3 3” shape, CODE B as having a “5 2 2” shape and CODE C
as having a “7 1 1” shape.
This method of coding codes shape has the great advantage of offering the
information about the shape of a code in a very compact way. If we are given the
codification of the shape of a code we can determine its length, its focus and its level
of detail, meaning all the classification criteria mentioned before shape.
The thematic content of a code fallows the underling of some of the content
characteristics of a code, due to the fact that all the previous cited criteria of
classification failed to address this issue. The thematic content underlines the theme
that has the greatest number of statements in a code. For instance, a code that has a
shape coded as being “5 2 2” can be added the attributes “3 2 1 1 honesty, integrity”
and we already obtain the information that it is a code mainly approaching the theme
of honesty and integrity.
The tone of a code is another classification item that refers to the content of the
code, addressing the subject of the character of a code as being directing (or
prescriptive) or proscriptive. A possible metric to use could be the count of
prescriptive statements, called positive statements, and proscriptive statements [4].
Starting from here, we can define a “inspirational, aspirational or positive” tone or a
“legalistic, regulatory or negative” tone of a code.
In our opinion, this classification system represents an important step in researcher’s
efforts to analyze, systemize and compare different codes, but it is only a first step
because future development and future research is possible for more detailed and
more complex systems.
5. HOW A CODE OF ETHICS COULD BE IMPLEMENTED
Usually codes of ethics represent a “top-down” initiative, with little no involvement
from non-senior managerial staff and they state how employees are required to
behave by the senior management of the organization.
But they are a few important aspects that these senior managers should take into
consideration. First of all, in order to be effective, a code of ethics needs the
adhesion of the members of the organization. This involves a series of concrete
measure of obtaining the adhesion like for instance promoting the decision of
elaborating a code of ethics before the action effectively begins, making a survey
among employees with the matters that a code of ethics should address in their
opinion or having discussions with them prior to the elaboration of the code. All
these measures are designed to ensure that employees perceive the code as having
their own input, rather than a restrictive order coming from the management of the
organization that should be fallowed in order to avoid punitive measures.
Other measures can range from “ethics hotlines” where employees with ethical
concerns could express their opinion, or meetings with employees in the system of
“quality circles” in the field of ethics to periodical external ethical reviews or ethics
audits.
Organizations can also use in practice other methods for promoting certain corporate
values among employees, like:
 Trainings;
 Story telling;
 Reward systems;
 Monitoring systems;
 Communication channels;
 Job specifications;
 Ethics officers;
 Information systems;
 Recruitment and selection policies and processes, and
 Organizational strategies.
6. THE ROLES THAT CODES OF ETHICS AND CODES OF
CONDUCT MIGHT HAVE INSIDE ORGANIZATIONS
One general presentation of the roles that a code or ethics or a code of conduct could
have inside an organization includes the following:
1. Codes can limit the risks to witch the organization is exposed;
2. Codes can offer guidance for employees;
3. Codes can be a form of regulation;
4. Codes can be a form of discipline inside organizations;
5. Codes can offer information to different categories of stakeholders, both
inside and outside organization;
6. Codes can be a form of proclamation;
7. Codes can be an instrument of negotiation.
Beside these roles, we could also bring into discussion how codes are really
perceived and used inside an organization. Codes can be perceived and used both by
managers and other employees as a mean of guidance, of help or as mean o
manipulation.
Taking in considerations these two important aspects, how codes are perceived and
used, by both managers and employees we can propose the next frame of analysis:
Table2. Analysis of the perception and use of codes inside an organization
Perception
Mean of help
Managers
Mean of help
Employees
Managers
Mean of help
Employees
Managers
Employees
Managers
Mean of help
Mean of
manipulation
Mean of help
Mean of help
Mean of help
Mean of help
Employees
Managers
Employees
Managers
Employees
Managers
Employees
Managers
Employees
Mean o help
Mean of help
Mean of
manipulation
Employees
Managers
Employees
Managers
Mean o help
Mean of
manipulation
Mean of help
Employees
Managers
Mean of help
Mean of help
Mean of help
Employees
Managers
Use
Mean of help
Mean of
manipulation
Mean of help
Mean of
manipulation
Mean of manipulation
Mean of help
Mean of manipulation
Mean of help
Mean of manipulation
Mean of
manipulation
Mean of manipulation
Mean of
manipulation
Mean of help
Mean of
manipulation
Mean of manipulation
Mean of help
Mean of manipulation
Mean of
manipulation
Mean of manipulation
Mean of help
Mean of manipulation
Mean of
manipulation
Mean of help
Mean of help
Mean o help
Mean of
manipulation
Mean o help
Mean of help
Mean of help
Mean of
manipulation
From Table 2 presented above, we can state that there could be a difference between
the managers or the employees perceive and effectively use codes inside
organization, but also the fact that there could be differences between the perception
and use of codes for the two categories mentioned.
Further research will try to analyze each of these situations, and further mode to
determine witch have the most potential harm for an organization, and thus is vital
to identify the existing gap between them.
7. CONCLUSIONS
A code of ethics or a code of conducts represents a statement made by an
organization for its outside and insides stakeholders that it is ready to embrace the
values of business ethics. It can be just a first step, or a part of a more complex
strategy. A company designs a code of ethics to fallow a trend, to look god in the
eyes of the media or to express core values of its management of its entire body of
employees. Whatever the motivation could be, those designing the code must be
aware of the important features and particularities that different codes have and to
chose the more appropriate shape and content.
In recent years, significant efforts have been done in order to assure a better
understanding, use, and classification of codes, but challenges concerning ethical
codes remain both for the business environment and the academic environment.
References
[1] Brytting T., “Moral supports structures in private industry –The Swedish case”,
Journal of Business Ethics, 16, 1997
[2] Farell B.J., Cobbin D.M., “A content analysis of the codes of ethics in Australian
enterprises”, Journal of Managerial Psychology, 11(1), 37-55, 1996
[3] Fisher C., Lovell A., “Business Ethics and Values”, Ed. Prentice Hall, 2003
[4] Gaumitz B.R., Lere J.C., “A classification Scheme for Codes of Business
Ethics”, Journal of Business Ethics, 49, 329-335, 2004
[5] Jamal K., Bowie N.E., ‘Theoretical Considerations for a Meaningful Code of
Professional Ethics’, Journal of Business Ethics 14(9), 703–714, 1995
[6] Kaye B. N., ”Codes of Ethics in Australian Business Corporations”, Journal of
Business Ethics 11(11), 857–862, 1992
[7] Langlois C. C., Schlegelmilch B. B, „Do Corporate Codes of Ethics Reflect
National Character? Evidence from Europe and the United States’, Journal of
International Business Studies 21(4), 519–539, 1990
[8] Lefebvre M., Singh J. B., „The Content and Focus of Canadian Corporate Codes
of Ethics”, Journal of Business Ethics 11(3), 799–808, 1992
[9] Montoya I. D., Richard A.J., „A Comparative Study of Codes of Ethics in Health
Care Facilities and Energy Companies’, Journal of Business Ethics 13(9), 713–718,
1994
[10] Oz E., „Ethical Standards for Computer Professionals: A Comparative Analysis
of Four Major Codes”, Journal of Business Ethics 12(9), 709–726, 1993
[11] Preble J. F., Hoffman R.C., ”The Nature of Ethics Codes in Franchise
Associations Around the Globe’, Journal of Business Ethics 18(3), 239–253, 1995
[12] Stevens B., “An analysis of corporate ethical studies; Where from here?”,
Journal of Business Ethics, 13, 63-96, 1994
[13] Warren R., “Codes of Ethics: Bricks without Straw”, Business Ethics: A
European Review, 2, 1993
[14] Wiley C., „Ethical Standards for Human Resource Management Professionals:
A Comparative Analysis of Five Major Codes’, Journal of Business Ethics 25(2),
93–114, 2000