Business Ethics:
A New Style of Management
and Investment
Professor David M. Chen
Graduate Institute of Finance
Fu Jen Catholic University
Spring 2007
Purposes
To appreciate the essential of Business
Ethics through five main faucets
1. Recognizing socially acceptable business
conduct from the global perspectives
2. Embedding good business in treating people
nice and fair
3. Reengineering corporate image
4. Enhancing professional ethics
5. Investing in sustainable and socially
responsible corporations
Various global initiatives in areas related to
corporate social responsibility (CSR) and their
respective implementation guidance form the core of
course materials.
The course will be held in English
Students are expected to communicate and
present case studies or research reports in
English.
English proficiency is emphasized as another main
product of the course.
Content
1. Business Ethics as a Field of Study
 Code of Ethics (Guardsmark-ethics06)
 Code of Conduct (PwC-conduct05)
2. Caux Round Table Principles for Business
 Nissan’s Approach to CSR (Nissan’sApproachCSR)
3. Ethics Resource Center
 National Business Ethics Survey 2005 (NBES-05)
 Critical Elements of Organization Ethical Culture 2006
(ERC-OrgEthicalCuture06)
4. Environmental Management Systems
 ISO 14000
 RoHS
5. Working environment
 SA8000
 The Switcher-Prem Group Experience in India
(SwitcherPremIndia-02)
 SA8000: Tool to Improve Quality of Life
(ToolImporveQualityLife-02)
6. Business Principles for Countering Bribery
 Transparency International
(CorruptionPerceptionsIndex-06,
GlobalCorruptionBarometer-06, BribePayersIndex-06)
 (ICC-CombatBribery)
7. NYSE/NASD IPO Advisory Committee
 NYSE Hearing (StockRatingResearchConflict,
GuaranteedRepurchase, PriceInfluencing)
 Enron
 SEC report (SEC-Enron-02)
 TIAA CREF testimony (TIAA-CREF-Enron-02)
8. Policy for Managing Conflicts of Interest
in Relation to Investment Research
 Morgan Stanley
 Investment research report disclosure
requirements (GoldmanSach-Huandian)
9. Dow Jones Sustainable Index
 (NewInvestmentStyle)
 World Resources Institute (ChangingDrivers,
Oil&Gas)
Business Ethics as a Field
Case
A newly hired salesman on training
His trainer is used to making up the
differences in restaurant and golf bills for
procurement agents (common courtesy?).
• Being asked to add the extra expenses to cost of
other items since no line on the form for this (yet
the numbers don’t add up)*.
• Learned the differences between working
directly with the federal government
procurement agents and the companies with
which his firm subcontracted (relay information).
Regulation
The Procurement Integrity Section of the
Office of Federal Procurement Policy Act
and the Federal Acquisition Regulation
• Section 27(a)(2) forbidding agents to “offer, give,
or promise to offer or give, directly or indirectly,
any money, gratuity, or other thing of value to
any procurement officials of such agency; or (3)
solicit or obtain, directly or indirectly, from any
officer or employee of such agency, prior to the
award of a contract any proprietary or source
selection information regarding such
procurement.”*
Certificate of Procurement Integrity signed
by procurement agents
Recognize & deal with complex issues
Public outrage about deception and fraud
Enron, WorldCom, Arthur Andersen, Tyco
• A crisis of confidence and trust: accounting
fraud, insider trading, falsifying documents,
deceptive advertising, defective products,
bribery, & employee theft.
• Integrate business ethics and corporate
responsibility into all business decisions.
Business ethics
Deals with questions about whether specific
business practices are acceptable.
• Should a salesperson omit facts about a
product’s poor safety record?
• Should an accountant report inaccuracy
discovered in an audit?
By its nature, the field of business ethics is
controversial and there is no universally
accepted approach for resolving its issues.
• The goal is to help one understand and use one’s
current values and convictions when making
business decisions so that you think about the
effects of those decisions on business and
society.*
• Neither to moralize by telling you what is right
or wrong on specific situation, nor to prescribe
any one philosophy or process as best or most
ethical.
• Focus on how organizational ethical decisions
are made and on ways companies can improve
their ethical conduct.
Definition
Ethics
Tayor
• An inquiry into nature and grounds of morality
where the term morality is taken to mean moral
judgments, standards and rules of conduct.*
The American Heritage Dictionary
• The study of the general nature of morals and of
specific moral choices; moral philosophy; and
the rules or standards governing the conduct of
the members of a profession.
Distinction from ordinary decisions
• Alderson: Lies in “the point where the accepted
rules no longer serve, and the decision maker is
faced with the responsibility for weighing values
and reaching a judgment in a situation which is
not quite the same as before.”
• The amount of emphasis decision makers place
on their own values relative to accepted
practices within their company.
Business ethics
Comprises the principles and standards that
guide behavior in the world of business.
• Profit not realized through misconduct.
• Balance the desires for profits against the needs
and desired of society.
• Right or wrong, ethical or unethical, is often
determined by investors, employees, customers,
interest groups, the legal system, and the
community (they are not necessarily “right”, but
their judgments influence society’s acceptance).
• Hence, it is important to understand business
ethics and recognize ethical issues.
Reasons for studying
Business ethics is not merely an extension of
an individual’s own personal ethics.
• An individual’s personal values and moral
philosophies are only one factor in the ethical
decision-making process.
• Normally a business does not establish rules or
policies on personal ethical issues such as sex
and the use of alcohol outside the workplace
(may even be illegal).
• Only when a person’s preferences or values
influence job performance do an individual’s
ethics play a major role.
• A high level of personal moral development may
not prevent an individual from violating the law
in a complicated organizational context.*
• E.g., there is considerable debate over what
constitute antitrust, deceptive advertising, and
violation of Foreign Corrupt Practices Act, even
experienced lawyers debate the exact meaning.*
• Because organizations are culturally diverse and
personal values must be respected, ensuring
collective agreement on organizational ethics is
as vital as any other effort.
• Many business ethics decisions are close calls.
• Studying business ethics will help to identify
ethical issues when they arise and recognize the
approaches available for resolving them.
• Learn more about the ethical decision-making
process and about ways to promote ethical
behavior within the organization.
• Begin to understand how to cope with conflicts
between personal values and those of the
organization.
Development
 Before 1960
The 1920s
• The Progressive Movement attempted to provide
citizens with a “living wage,” defined as income
sufficient for education, recreation, health, and
retirement.*
• Businesses were asked to check unwarranted
price increases and any other practices that
would hurt a family’s “living wage.”
The 1930s
• Came the New Deal which specifically blamed
business for the country’s economic woes.
• Business was asked to work more closely with
the government to raise family income.
The 1950s
• The New Deal had evolved into the Fair Deal by
Harry S. Truman.
• This program defined such matters as civil rights
and environmental responsibility as ethical
issues that businesses had to address.
Overall
• Ethical issues related to business were often
discussed within the domain of theology or
philosophy.
• Religious leaders raised questions about fair
wages, labor practices, and the morality of
capitalism.
• Catholic colleges and universities began to offer
courses in social ethics.
• Each religion applied its moral concepts not only
to business but also to government, politics, the
family, personal life, and all other aspects of life.
The 1960s
American society turned to causes.
• An antibusiness attitude developed as many
critics attacked the so called military-industrial
complex.
• The decay of inner cities and the growth of
ecological problems such as pollution and the
disposal of toxic and nuclear wastes.
• The rise of consumerism (Consumers’ Bill of
Rights): John F. Kennedy delivered a “Special
Message on Protecting the Consumer Interest,”
which outlined four basic consumer rights:
safety, informed, choose, and to be heard.
• Ralph Nader’s Unsafe at Any Speed, 1965,
which criticized the auto industry as a whole,
and GM in particular, for putting profit and style
ahead of lives and safety.
• Consumer activist also helped secure the passage
of several consumer protection laws, such as the
Wholesome Meat Act of 1967, the Radiation
Control for Health and Safety Act of 1968, the
Clean Water Act of 1972,* and the Toxic
Substance Act of 1976.
• Lyndon B. Johnson and the Great Society
(national capitalism): the U.S. government’s
responsibility was to provide the citizen with
some degree of economic stability, equality, and
social justice. Activities that could destabilize
the economy or discriminate against any class of
citizens began to be viewed as unethical and
unlawful.
The 1970s
Business ethics began to develop as a field
of study.
• Business professors began to teach and write
about corporate social responsibility:
organization’s obligation to maximize its
positive impact on stakeholders and to minimize
its negative impact.
• Philosophers applied ethical theory and
philosophical analysis to structure the discipline
of business ethics.
• Companies became more concerned with their
public images.
• The Nixon administration’s Watergate scandal
focused public interest on the importance of
ethics in government.
• The Foreign Corrupt Practices Act was passed
during Jimmy Carter’s administration: illegal for
U.S. businesses to bribe government officials of
other countries.*
• A number of major ethical issues had emerged,
such as bribery, deceptive advertising, price
collusion, product safety, and the environment.
The 1980s
Business ethics acknowledged as a field of
study.
• Business ethics organizations grew to include
thousands of members.
• Many of leading companies established ethics
and social policy committees.
• The Defense Industry Initiative on Business
Ethics and Conduct (DII) was developed to
guide corporate support for ethical conduct (18
defense contractors drafted principles in 1986).
Six principles
1. DII supports codes of conduct and their
widespread distribution. Must be
understandable and provide details on more
substantive areas.
2. Member companies (50) are expected to
provide ethics training for their employees
as well as continuous support between
training periods.
3. Defense contractors must create an open
atmosphere in which employees feel
comfortable reporting violations without
fear of retribution.
4. Companies need to perform extensive
internal audits and develop effective internal
reporting and voluntary disclosure plans.
5. DII insists that member companies preserve
the integrity of the defense industry.
6. Member companies must adopt a
philosophy of public accountability.
 Reagan/Bush eras
• Self-regulation, rather than regulation by
government, was in the public’s interest.
• Many tariffs and trade barriers were lifted,
and business merged and divested within an
increasingly global atmosphere.
• Corporations that once were nationally
based began operating internationally and
found themselves mired in value structures
where accepted rules of business behavior
no longer applied.
The 1990s
Bill Clinton continued to support selfregulation and free trade.
• Unprecedented government action to deal
with health-related social issues such as
teenage smoking (restricting cigarette
advertising, banning vending machine sales,
and ending the use of cigarette logos in
connection with sports events).
• SEC Chairman Arthur Levitt unsuccessfully
pushed for many reforms that could have
prevented the accounting ethics scandals.
Federal Sentencing Guidelines for
Organizations
• FSGO approved by Congress in Nov. 91.
• Based on the six principles of the DII.
• Codifying into law incentives to reward
organizations for taking action to prevent
misconduct, such as developing effective
internal legal and ethical compliance
programs.
• Mitigate penalties for businesses that strive
to root out misconduct and establish high
ethical and legal standards.
• If a company lacks an effective ethical
compliance program and its employees
violate the law, it can incur severe penalties
(carrot-and-stick).
• Focus on firms taking action to prevent and
detect business misconduct in cooperation
with government regulation.
• A mechanical approach using legislative
logic will not suffice to avert serious
penalties. Must develop corporate value,
enforces its code of ethics, and strive to
prevent misconduct.
The twenty-first century
Falsifying financial reports and reaping
questionable benefits had become part of the
culture of many companies.
• Dennis Kozlowski, former CEO of Tyco, was
indicted on 38 counts of misappropriating
$170m of Tyco funds and netting $430m from
improper sales of stock.
– Allegedly used the funds to purchase many
personal luxuries, including a $15m vintage
yacht and a $3.9m Renoir painting and to
throw a $2m party for his wife’s birthday.
• Arthur Andersen was convicted of obstructing
justice after shredding documents related to its
role as Enron’s auditor.
– Also faced questions surrounding its audits
of other companies that were charged with
employing questionable accounting practices,
including Halliburton, WorldCom, Global
Crossing, Dynegy, Qwest, and Sunbeam.
Congress passed the Sarbanes-Oxley Act
• in 2002, the most far-reaching change in
organizational control and accounting
regulations since the Securities and Exchange
Act of 1934.
• Made securities fraud a criminal offense and
stiffened penalties for corporate fraud.
• Created an accounting oversight board that
requires corporations to establish codes of ethics
for financial reporting and to develop greater
transparency in financial reports to investors and
other interested parties.
• Requires top executives to sign off on financial
reports (risk fines and long jail sentences if
misrepresented).
• Requires executives to disclose stock sales
immediately and prohibits companies from
giving loans to top managers.
Current trend
• From legally based ethical initiatives to cultural
or integrity-based initiatives that make ethics a
part of core organizational values.
• NYSE requires all member companies to have
code of ethics.
• Many firms now have ethics officers, and some
firms, including UPS, Raytheon, and Baxter
International, take ethics seriously enough to
have their ethic officers report directly to senior
management or boards of directors.
• The growth of the Ethic Officer Association
(EOA) to 850 members, representing 420
companies, highlights the increasing importance
of this position (considering launching an ethics
certification program).
Global development
• Businesses are working more closely together to
establish standards of acceptable behavior.
• Some companies will not do business with
organizations that do not support and abide by
these standards.
• The Caux Round Table is a group businesses,
political leaders, and concerned interest groups
that desire responsible behavior in the global
community.
Benefits
Building an ethical reputation among
employees, customers, and the general
public pays off.
Increased efficiency in daily operation,
greater employee commitment, increased
investor willingness to entrust funds,
improved customer trust and satisfaction,
and better financial performance.*
• Many believe a particular course of action is
simply the right thing to do as a responsible
member of society (feeling good is also a good
business).
Employee commitment
• Comes from employees who believe their future
is tied to that of the organization and their
willingness to make personal sacrifices for it.
• Safe work environment, competitive salaries,
and the fulfillment of all contractual obligations
toward employees.
• Work-family programs and stock ownership
plans to community service.*
• Productivity and teamwork: share a common
vision of trust within and between departments;
make individuals more willing to rely and act on
the decisions and actions of their coworkers.
• Trusting relationships (honesty and respect)
contribute to greater decision-making
efficiencies.
Investor loyalty
• Social responsible mutual funds and asset
management firms.
• Investors recognize that an ethical climate
provides a foundation for efficiency, productivity,
and profits. Negative publicity, lawsuits, and
fines can lower stock prices, diminish customer
loyalty, and threaten a company’s long-term
viability.*
Customer satisfaction
• Almost 60% of people focus on social
responsibility ahead of brand reputation or
financial factors when forming impressions of
companies (boycott the company).
• May avoid the products of companies that are
perceived as treating their employees unfairly
(sweatshop and abuses in subcontracting, SA
8000 industry code of conduct).
• When an organization has a strong ethical
environment, it usually focuses on the core value
of placing customers’ interest first.
• Companies convicted of misconduct (failure to
act responsibly toward various stakeholders)
experience a significantly lower return on assets
and on sales.
Ethics Resource Center, ERC (reading)
www.ethics.org
National Business Ethics Survey, NBES
• "Ethics and compliance programs can and do
make a difference. However, their impact is
related to the culture in which they are situated."
2005 NBES Summary
Misconduct: any behavior that violates the
law or organizational ethics standards.
• 21% observed abusive or intimidating behavior
towards employees.
• 19% observed lying to employees, customers,
vendors, or the public.
• 18% observed a situation that places employee
interests over organizational interests.
• 16% observed violations of safety regulations.
• 16% observed misreporting of actual time
worked.
• 12% observed discrimination on the basis of
race, color, gender, age or similar categories.
• 11% observed stealing or theft.
• 9% observed sexual harassment.
The six elements of a formal ethics and
compliance program are based upon
suggestion by the FSGO
1.Written standards of conduct
2.Training on ethics
3.Mechanisms to seek ethics advice or information
4.Means to report misconduct anonymously
5.Discipline of employees who violate ethical
standards
6.Evaluation of employees performance based on
ethical conduct
 The NBES defines risk factors as:
1. Employee's exposure to circumstances that
invite misconduct.
2. Employee's recognition of those situations as
misconduct.
3. Pressure to compromise the standards of the
organization.
4. Preparedness of employees to respond to these
situations.
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www.workingvalues.com
www.complianceweek.com
www.ama-assn.org
www.aacsb.edu
Every Guardsmark crest (reading)
is emblazoned with our company core
values: Truth, Courage, & Judgment.
Our business success and ethical
commitment are indivisible.
• Guardsmark was founded on the pillars of
quality, excellence, diversity, opportunity, and
doing the right thing; from day one, we wanted
to work with individuals who had intellect, work
ethic, and honesty.
• Every single member of our organization—from
the security officer to the corporate executive—
is committed to demonstrating our values and
principles at all times.
• Through our Code of Ethics, the people of
Guardsmark pledge to work always “to
strengthen our weaknesses and build on our
strengths” and to “lead by example.”
The Guardsmark Code of Ethics
• All Guardsmark employees subscribe to our
comprehensive Code of Ethics, which is a
product of top-down commitment and bottom-up
involvement. First developed in 1980, this living
document is revised annually by the entire
workforce.
• The Code sets impeccable standards of behavior
for employee conduct across:
» Employee relations
» Our commitment to excellence
» Professionalism in the industry
» Employee wellness
» Vendor relations
» Community and government relations
» Industry commitment
» Information technology
Ensuring understanding by employees,
visitors and vendors
• Our code appears in our employment application,
where it must be signed by every applicant. It is
always available to our employees as a standalone document and promoted in:
» Our orientation handbook
» Periodic educational publications
» Employee manuals
» Placards in all offices
• To make the principles of this important
document accessible to each Guardsmark team
member, Guardsmark maintains an ethics
committee and a dedicated ethics officer who
can be reached through a toll-free number. We
take every ethics concern or issue seriously and
provide assistance about applying principles to
any given situation.
Understand our ethical foundation
• A true understanding of Guardsmark's
commitment can only come from reviewing our
Code of Ethics in its entirety.
• Guardsmark exceeds the requirements of the
Sarbanes-Oxley Act of 2002 that mandates the
disclosure by public companies of whether they
have adopted written codes of ethics to deter
wrongdoing and to promote honest and ethical
conduct.
• Although a private company such as
Guardsmark is not subject to the requirements of
this bill, the organization publicly releases its
Code of Ethics, which was established in 1980
and is rewritten annually with input from its
employees and applies to all team members,
without exception.
• www.guardsmark.com
PricewaterhouseCoopers (reading)
is one of the world’s pre-eminent
professional services organisations.
As professional advisers we help our clients
solve complex business problems and aim to
enhance their ability to build value, manage
risk and improve performance.
• As business advisors we play a significant role
in the operation of the world’s capital markets.
• We take pride in the fact that our services add
value by helping to improve transparency, trust
and consistency of business processes.
• In order to succeed, we must grow and develop,
both as individuals and as a business.
• Our core values of Excellence, Teamwork and
Leadership help us to achieve this growth.
• As a result, we also have a Code of Conduct for
all PwC people and firms.
• This Code is based on our values and it takes
them to the next level - demonstrating our values
in action.
• The Code also provides a frame of reference for
PwC firms to establish more specific
supplements to address territorial issues.
• www.pwc.com
Ethics Statements
One of BellSouth's greatest assets is
our reputation.
One of the key factors that contributes to
our reputation and good name is our
long-standing tradition of ethics -- a
tradition which has built solid trust
between us and our customers, our
employees, our shareholders, and our
communities.
As we work to maximize shareholder value,
we will not waver in maintaining our
tradition of ethics.
• BellSouth's ethical culture is rooted in our
values. It is these values that guide our actions
and relationships with each other, with our
customers, and with our investors.
• While our values describe who we are and what
we are about, it is our actions that make these
values meaningful. Every action we take shapes
the ethical character of BellSouth. That character
is at the heart of our reputation and ultimately
sets us apart in the marketplace.
• We understand each individual employee's
actions contribute to the trust we have
earned. We offer our employees a variety of
resources to help them make ethical decisions
and maintain the highest level of integrity.
• BellSouth's Office of Ethics & Compliance is
available to answer questions concerning ethics,
or take reports of possible ethical violations.
• **Customers, please click here and go directly
to a special customer link
• Employees and other concerned individuals can
contact Ethics by completing this online form or
by calling the Ethicsline at 1-800-664-4231.
• Both these methods are available 24 hours a day,
7 days a week You may remain anonymous if
you prefer, but this sometimes limits the
investigation due to insufficient information.
• www.ethics.bellsouth.com
Texas Instruments
employees placed their personal imprint
on the ethics of the company, more than
60 years ago.
They chose to conduct themselves to the
highest standards of personal integrity, and
they demanded the same of others.
• Today, those principles and values still permeate
all of TI's actions and decisions.
• As TI grew, management recognized a need to
formalize and communicate company standards.
• In 1961, TI published its first written code of
ethics, a booklet titled "Ethics in the Business of
TI."
• Though it has been revised several times to
reflect changes in the business environment, the
basic message contained in that first booklet has
never changed, nor has TI's emphasis on
maintaining a track record of ethics and integrity.
• About 20 years ago, an increasing number of
difficult issues, challenges and close calls in
modern business were recognized, but clear
choices of action did not always exist.
• Employees and their business associates needed
to better understand TI's expectations and where
they could go for help if they had a question or a
concern.
• TI believes maintaining the highest ethical
standards requires a partnership between
employees and employers.
• The employer proactively supports employees
by communicating values and giving individual
guidance, while empowered employees
participate actively in problem-solving.
• In 1987, TI decided to actively support
employees by establishing a TI Ethics Office and
appointing a TI Ethics Director.
• The TI Ethics Office has three primary functions:
» Ensure that business policies and practices
continue to be aligned with ethical principles;
» Clearly communicate ethical expectations; &
» Provide multiple channels for feedback
through which people can ask questions,
voice concerns and seek resolution to ethical
issues.
• A reputation and track record for ethics and
integrity is vital for establishing the trust that is
the basis for all successful business relationships.
All people associated with TI—employees,
customers, suppliers, governments and
communities—need to understand and
appreciate the importance of these principles.
• TI has strong documented requirements for
ethical business practices:
» TI Standard Policies and Procedures
» The TI Commitment
» "The Values and Ethics of TI" booklet
» The direction is clear, and the message is
firmly and credibly supported by our highest
levels of management and by our Board of
Directors.
• www.ti.com
HCA announced the development
of the Ethics, Compliance and Corporate
Responsibility Department in Oct. 1997.
Alan Yuspeh was named Senior Vice
President for Ethics, Compliance and
Corporate Responsibility.
• The department oversees the development and
implementation of a comprehensive corporate
Ethics and Compliance Program.
1.Articulating standards of compliance and
ethical conduct through a Code of Conduct and a
series of company Policies and Procedures.
2.Creating awareness of these standards among
everyone in the company through high quality
ethics training, compliance training, and other
ongoing communication efforts.
3. Providing a means to report exceptions (i.e.,
possible misconduct). We maintain an Ethics
Line (1-800-455-1996) to receive reports from
anyone who is aware of a violation of our Code
of Conduct or Policies and Procedures. This
line is answered at all times.
4. Monitoring and auditing performance in
areas of compliance risk to ensure that
established policies and procedures are being
followed and are effective.
5. Establishing organizational supports, including
necessary committees, responsible executives
and facility ethics and compliance officers, for
this entire effort.
6. Overseeing implementation of and adherence
to a Corporate Integrity Agreement.
7. And undertaking other efforts, such as clinical
ethics and pastoral care services.
hcahealthcare.com
Starbucks: It’s the way we do business
Contributing positively to our
communities and environment is so
important
that it’s a guiding principle of our mission
statement.
• We jointly fulfill this commitment with partners
(employees), at all levels of the company, by
getting involved together to help build stronger
communities and conserve natural resources.
In our communities Starbucks has many
community building programs
• that help us be good neighbors and contribute
positively to the communities where our partners
(employees) and customers live, work and play.
• We encourage and reward volunteerism and
participation in organizations that are important
to our partners, including local schools, literacy
programs, walk-a-thons and Earth Day activities.
Environmental Affairs
• Starbucks integrates policies and programs
throughout all aspects of operations to minimize
our environmental impact.
• From promoting conservation in coffee growing
countries to recycling, Starbucks is committed to
contributing positively to the environment.
Supplier Diversity
• By working with qualified diverse suppliers,
Starbucks has regularly met and exceeded its
goals for purchases with women and minorityowned suppliers. Embracing diversity is our
foundation for providing a world-class supplier
program that supports our Mission Statement.
Mission Statement
Establish Starbucks as the premier purveyor
of the finest coffee in the world while
maintaining our uncompromising principles
while we grow. Six guiding principles:
1.Provide a great work environment and treat each
other with respect and dignity.
2.Embrace diversity as an essential component in
the way we do business.
3.Apply the highest standards of excellence to the
purchasing, roasting and fresh delivery of our
coffee.
4.Develop enthusiastically satisfied customers all
of the time.
5.Contribute positively to our communities and
our environment.
6.Recognize that profitability is essential to our
future success.
Committed to a role of environmental
leadership in all facets of our business.
1.Understanding of environmental issues and
sharing information with our partners.
2.Developing innovative and flexible solutions to
bring about change.
3.Striving to buy, sell and use environmentally
friendly products.
4.Recognizing that fiscal responsibility is essential
to our environmental future.
5.Instilling environmental responsibility as a
corporate value.
6.Measuring and monitoring our progress for each
project.
7.Encouraging all partners to share in our mission.
www.starbucks.com
The Caux Round Table Business
Principles of Ethics
Introduction
CRT principles are rooted in two basic
ethical ideals: kyosei and human dignity.
The Japanese concept of kyosei means
• living & working together for the common good
enabling cooperation and mutual prosperity to
coexist with healthy and fair competition.
• “Human dignity” refers to the sacredness or
value of each person as an end, not simply as a
mean to the fulfillment of others' purposes or
even majority prescription.
• The document owes a substantial debt to The
Minnesota Principles, a statement of business
behavior developed by the Minnesota Center for
Corporate Responsibility. The Center hosted and
chaired the drafting committee, which included
Japanese, European, and United States
representatives.
• CRT principles offer a foundation for dialogue
and action for business leaders worldwide and
affirm the necessity for moral values in business
decision-making. Without moral values, stable
business relationships and a sustainable world
community are impossible.
Competitors
Suppliers
Responsibilities
Communities
Economic &
social impact
Owner/investors
Employees
CRT Business
Principles of Ethics
Business behavior
Respect for rules
Customers
Avoidance of
illicit operations
Respect for the
environment
Support for
multilateral trade
Principle 1. The responsibilities
Beyond shareholders toward stakeholders
• The value of a business to society is the wealth and
employment it creates and the marketable products
and services it provides to consumers at a reasonable
price commensurate with quality.
• To create such value, a business must maintain its
own economic health and viability, but survival is
not a sufficient goal.
• Businesses have a role to play in improving the lives
of all their customers, employees, and shareholders
by sharing with them the wealth they have created.
• Suppliers and competitors as well should expect
businesses to honor their obligations in a spirit of
honesty and fairness.
• As responsible citizens of local, national, regional,
and global communities in which they operate,
businesses share a part in shaping the future of those
communities.
Principle 2. The economic and social impact
Toward innovation, justice, and world
community
• Businesses established in foreign countries to
develop, produce, or sell should also contribute to
the social advancement of those countries by
creating productive employment and helping to raise
the purchasing power of their citizen.
• Businesses also should contribute to human rights,
education, welfare, and vitalization of the countries
in which they operate.
• Businesses should contribute to economic and social
development not only in the countries in which they
operate, but also in the world community at large,
through effective and prudent use of resources, free
and fair competition, and emphasis upon innovation
in technology, production methods, marketing, and
communications.
Principle 3. Business behavior
Beyond the letter of law toward a spirit of trust
• Accepting the legitimacy of trade secrets, businesses
should recognize that sincerity, candor, truthfulness,
the keeping of promises, and transparency
contribute not only to their own credibility and
stability but also to the smoothness and efficiency of
business transactions, particularly on the
international level.
Principle 4. Respect for rules
To avoid trade friction
• and to promote free trade, equal conditions for
competition, and fair and equitable treatment for all
participants, business should respect international
and domestic rules.
• In addition, they should recognize that some
behavior, although legal, may still have adverse
consequences.
Principle 5. Support for multilateral trade
Should support the multilateral trade systems
• of the GATT/World Trade Organization and similar
international agreements.
• They should cooperate in efforts to promote the
progressive and judicious liberalization of trade, and
to relax those domestic measures that unreasonably
hinder global commerce, while giving due respect to
national policy objectives.
Principle 6. Respect for the environment
Should protect and, where possible,
• improve the environment, promote sustainable
development, and prevent the wasteful use of natural
resources.
Principle 7. Avoidance of illicit operations
Should not participate in or condone bribery,
• money laundering, or other corrupt practices; indeed,
should seek cooperation with others to eliminate them.
• Should not trade in arms or other materials used for
terrorist activities, drug traffic, or other organized
crime.
Principle 8. Customers
We believe in treating all customers with dignity
• irrespective of whether they purchase our products
and services directly from us or otherwise acquire
them in the market.
We therefore have a responsibility to
• provide our customers with the highest quality
products and services consistent with their
requirements;
• treat our customers fairly in all aspects of our
business transactions, including a high level of
service and remedies for their dissatisfaction;
• make every effort to ensure that the health and
safety of our customers, as well as the quality of
their environment, will be sustained or enhanced by
our products and services;
• assure respect for human dignity in products offered,
marketing, and advertising; and
• respect the dignity of the culture of our customers.
Principle 9. Employees
We believe in the dignity of every employee
• and in taking employee interest seriously.
We therefore have a responsibility to
• provide jobs and compensation that improve
workers’ living conditions;
• provide working conditions that respect each
employee’s health and dignity;
• be honest in communications with employees and
open in sharing information, limited only by legal
and competitive restrains;
• listen to and, where possible, act on employee
suggestions, ideas, requests, and complains;
• engage in good faith negotiations when conflict
arises;
• avoid discriminatory practices and guarantee equal
treatment and opportunity in areas such as gender,
age, race, and religion;
• promote in the business itself the employment of
differently abled people in places of work where
they can be genuinely useful;
• protect employees from avoidable injury and illness
in the workplace;
• encourage and assist employees in developing
relevant and transferable skills and knowledge; and
• be sensitive to serious unemployment problems
frequently associated with business decisions, and
work with governments, employee groups, other
agencies and each other in addressing these
dislocations.
Principle 10. Owners/investors
We believe in honoring the trust
• our investors place in us.
We therefore have a responsibility to
• apply professional and diligent management in order
to secure a fair and competitive return on our
owners’ investment;
• conserve, protect, and increase the owners/investors’
assets;
• disclose relevant information to owners/investors
subject only to legal requirements and competitive
constrains; and
• respect owners/investors’ requests, suggestions,
complains, and formal resolutions.
Principle 11. Suppliers
Our relationship with suppliers
• and subcontractors must be based on mutual respect.
We therefore have a responsibility to
• seek fairness and truthfulness in all of our activities,
including pricing, licensing, and rights to sell;
• ensure that our business activities are free from
coercion and unnecessary litigation;
• foster long-term stability in the supplier relationship
in return for value, quality, competitiveness, and
reliability;
• share information with suppliers and integrate them
into our planning processes;
• pay suppliers on time and in accordance with agreed
terms of trade; and
• seek, encourage, and prefer suppliers and
subcontractors whose employment practices respect
human dignity.
Principle 12. Competitors
We believe that fair economic competition
• is one of the basic requirement for increasing the
wealth of nations and, ultimately, for making
possible the just distribution of goods and services.
We therefore have a responsibility to
• foster open markets for trade and investments;
• promote competitive behavior and demonstrates
mutual respect among competitors;
• refrain from either seeking or participating in
questionable payments of favors to secure
competitive advantages;
• respect both tangible and intellectual property rights;
and
• refuse to acquire commercial information by
dishonest or unethical means, such as industrial
espionage.
Principle 13. Communities
We believe that as global corporate
citizens,
• we can contribute to such forces of reform and
human rights as are at work in the communities in
which we operate.
We therefore have a responsibility to
• respect human rights and democratic institutions,
and promote them wherever practicable;
• recognize government’s legitimate obligation to the
society at large and support public policies and
practices that promote human development through
harmonious relations between business and other
segments of society;
• collaborate with those forces in the community
dedicated to raising standards of health, education,
workplace safety, and economic well-being;
• promote and stimulate sustainable development and
play a leading role in preserving and enhancing the
physical environment and conserving the earth’s
resources;
• support peace, security, diversity, and social
integration;
• respect the integrity of local culture; and
• be a good corporate citizen through charitable
donations, educational and cultural contributions,
and employee participation in community and civic
affairs.
ISO 14000
What is it?
International Organization for
Standardization (ISO)
ISO 9000 series
• International standards dealing with quality
management systems.
ISO 14000 series
• Environmental management systems.
• Finalized in September 1996.
• The key to a successful ISO 14001 EMS is
having documented procedures that are
implemented, maintained, monitored, reviewed,
and corrected.
• Specifies requirements for establishing an
environmental policy, determining
environmental aspects & impacts of
products/activities/services, planning
environmental objectives & measurable targets,
implementation & operation of programs to meet
objectives & targets, checking & corrective
action, and management review.
Why is the concern?
May become a contractual requirement of
customers in both the U.S. and the EC.
• It is a continuation of the ISO-9000, may
eventually become a requirement for obtaining
ISO-9001 recertification.
• It is a logical next step because it is very similar
to ISO-9001 and the principles of TQM.
• The U.S. EPA may provide incentives under its
Common Sense Initiative (CSI) programs to
benefit companies certified.
What is the benefit?
Help remain competitive
• Competitors, customers and suppliers are
seeking registration.
• Identify areas for reduction in energy and other
resource consumption, reduce environmental
liability & risk, help to maintain consistent
compliance with legislative & regulatory
requirements, benefit from regulatory incentives,
prevent pollution & reduce waste, response to
pressure from customers & shareholders,
improve community goodwill, profit in the
market for green products, response to insurance
company pressure, and demonstrate commitment
to high quality.
EPA Guidance
In Enforcement Settlements
EMS as injunctive relief
to return violators to compliance
• and minimize or eliminate the potential for
repeat violations by addressing the root causes
of noncompliance.
• Where EPA determines that the root cause of a
defendant’s or respondent’s violations is the
absence of a systematic approach to identifying,
understanding, and managing the regulated
entity’s compliance with applicable
environmental requirements.
• Where specific elements or requirements
common to EMSs are independently required
by law or regulation, such elements/
requirements should be sought as injunctive
relief whether or not a compliance-focused
EMS, per se, is sought.
 Regulatory requirements
• Clean Water Act, Clean Air Act, Resource
Conservation and Recovery Act.
• 12 Elements of Compliance-Focused
Environmental Management System (CFEMS):
1. An environmental policy with an express
statement of management’s intent to provide
adequate EMS personnel and resources.
2. Processes and monitoring to ensure sustained
compliance.
3. Written targets, objectives, and action plans,
for each organizational subunit, to achieve and
maintain compliance with all environmental
requirements.
4. A mandatory pollution prevention program.
5. A program for ongoing community education
and involvement in the environmental aspects
of the defendants’ operations.
6. Procedures for investigating and promptly
correcting violations and their root causes.
7. Ongoing evaluation of facility compliance,
including periodic compliance audits by
independent 3rd party auditors.
 EMSs as Supplemental Environmental
Projects (SEPs)
 for small businesses and state and local
governments
• EMSs that meet the SEP Policy criteria are
eligible for penalty mitigation credit as “Other
Types of Projects” without advance approval.
• The SEP Policy, and federal law, require SEPs
to be “supplemental” projects that the violators
are “not otherwise legally required to perform.”
• The SEP Policy’s “environmentally beneficial
projects” and “public benefits” SEP criteria can
generally be satisfied when the terms of
settlement require the violators to implement
their EMSs for at least one full EMS cycle,
identify and report performance results on two
or more EMS targets and objectives promoting
beyond-compliance results with public benefits,
ensure that issues and priorities of concern to the
communities in which the facilities are located
are identified and considered, and submit to EPA
SEP Completion Reports describing what the
violators have done to develop, implement, and
act on their EMSs.
• SEP credit should be extended only to EMS
expenditures that produce significant benefits
accruing primarily to the public.
• EPA personnel have the discretion to calculate a
settlement penalty that reflects relevant actions
by violators. With respect to EMSs, the range of
possible scenarios where a violator’s actions may
be considered in adjusting a penalty downward
from the preliminary penalty amount include
where a company discovers a violation through
an existing EMS and corrects the violation prior
to EPA’s discovery or the company lacks a
preexisting EMS but puts one into place before
concluding settlement negotiations.
• It may also be appropriate to consider whether
and to what extent a violator has implemented an
EMS in assessing the degree of willfulness
and/or negligence.
RoHS
European Directive
The Restrictions of the use of certain
Hazardous Substances in electrical and
electronic equipment
ban the putting on the EU market
• of new Electrical and Electronic Equipment
(EEE) containing more than the permitted levels
(maximum concentration values) of lead,
cadmium, mercury, hexavalent chromium and
both polybrominated biphenyl (PBB,多溴化聯
苯 ) and polybrominated diphenyl ether (PBDE,
多溴聯苯醚 ) flame retardants from 1 July 2006.
• There are a number of exempted applications for
these substances (and an exemption for spare
parts for the repair of equipment put on the
market before 1 July 2006; the regulations do
not apply to the re-use (capacity expansion or
update) of equipment that was put on the market
before the same date.).
• Producers must be able to demonstrate
compliance by submitting technical
documentation or other information to the
enforcement authority on request and retain such
documentation for a period of four years after
the EEE is placed on the market.
• Responsibility for the enforcement will lay with
the Secretary of State for Trade & Industry, who
has appointed the National Weights and
Measures Laboratory (NWML), an executive
agency of the Department of Trade and Industry,
to act on his behalf.
Definition
Maximum concentration value
• A maximum concentration value of up to 0.1%
by weight in homogeneous materials for lead,
mercury, hexavalent chromium, PBB and PBDE
and of up to 0.01% by weight in homogenous
materials for cadmium will be permitted in the
manufacture of new EEE. These values were
established through the adoption of a
Commission Decision on 18 August 2005.
Homogeneous material
• A material that cannot be mechanically
disjointed into different materials.
Scope
Categories of EEE covered
1. Large household appliances
2. Small household appliances
3. IT and telecommunication equipment
4. Consumer equipment
5. Lighting equipment
6. Electric and electronic tools
7. Toys, leisure and sports equipment
8. Automatic dispensers (自動販賣)
• Reflect eight of the ten categories in Annex 1 of
the Waste Electrical and Electronic Equipment
(WEEE) Directive.
• Apply both to electric light bulbs and to
household luminaries.
• The two categories of the WEEE Directive not
included are Medical Devices and Monitoring &
Control Instruments. Article 6 of the RoHS
Directive places an obligation on the European
Commission to present proposals for including
EEE falling within those two categories within
the scope of the RoHS Directive, once scientific
and technical evidence has demonstrated that
such proposals are feasible.
• The criteria for assessing “grey area” products
(those whose inclusion is in doubt) have been
discussed in the Technical Adaptation
Committee (TAC) of Member States and is
reflected in the Commission’s non-legally
binding Frequently Asked Questions document
on the WEEE and RoHS Directives
Outside the scope
• Intended for a specific national security and/or
military purpose. This exemption would not
apply to any equipment that is not designed
exclusively for these purposes.
• Products where electricity is not the main power
source: Many products contain electrical and
electronic components, either for additional
functionality or as peripheral parts, e.g., a
combustion engine with an electronic ignition.
• Products where the electrical or electronic
components are not needed to fulfil the primary
function: particularly toys and novelty items
contain an electrical or electronic element that
gives added value to the product. Often there are
similar products on the market fulfilling the
same function, but without these components.
• Electrical and electronic equipment that is part
of another type of equipment: Examples of such
equipment would be lighting or entertainment
equipment for use in vehicles, trains or aircraft.
The elements of a system that are not discernible
EEE products in their own right or that do not
have a direct function away from the installation
are excluded from the scope of the Regulations.
• Batteries: includes batteries that are permanently
fixed into the product, as well as disposable
batteries. The text of the draft Directive on
Batteries and Accumulators & Waste Batteries
and Accumulators is currently being finalised,
with an expectation that it will be adopted
shortly and come into effect in 2008.
Exemptions
• Large scale stationary industrial tools
1.Mercury in compact fluorescent lamps not
exceeding 5 mg per lamp.
2. Mercury in straight fluorescent lamps for
general purposes not exceeding:
– 10 mg in halophosphate lamps
– 5 mg in triphosphate lamps with a normal
lifetime
– 8 mg in triphosphate lamps with a long
lifetime.
3. Mercury in straight fluorescent lamps for
special purposes.
4. Mercury in other lamps (high intensity
discharge HID) not specifically mentioned here.
5. Lead in glass of cathode ray tubes, electronic
components and fluorescent tubes (viable
alternatives for these applications have not yet
been identified).
6. Lead as an alloying element in steel containing
up to 0.35% lead by weight, aluminum
containing up to 0.4% lead and as a copper
alloy containing up to 4% lead.
7. Lead in high melting temperature type solders
(i.e. lead based alloys containing 85% by
weight or more lead). Viable lead-free
alternatives have not yet been identified.
– ‘Solder’ is defined as “alloys used to create
metallurgical bonds between two or more
metal surfaces to achieve an electrical
and/or physical connection”. In this context,
the term ‘solder’ also includes all materials
that become part of the final solder joint,
including solder finishes on components or
printed circuit boards.
8. Lead in solders for servers, storage and storage
array systems, network infrastructure
equipment for switching, signaling,
transmission as well as network management
for telecommunication.
– For professional, high reliability
applications.
9. Lead in electronic ceramic parts (e.g.
piezoelectronic devices)
10. Cadmium and its compounds in electrical
contacts and cadmium plating except for
applications banned under Directive
91/338/EEC relating to restrictions on the
marketing and use of certain dangerous
substances and preparations (products
manufactured in the household goods and
central heating and air conditioning plant
sectors).
– ‘Cadmium plating’ means any deposit or
coating of metallic cadmium on a metallic
surface.”
11.Hexavalent chromium as an anti-corrosion of
the carbon steel cooling system in absorption
refrigerators.
– Absorption fridges are often used in
recreational vehicles (e.g. motor homes and
caravans) or remote places where electricity
is not available. Another typical application
is for minibars in hotel rooms as these
fridges are virtually noiseless.
– The applied heat and use of a waterammonia mixture results in a corrosive
environment that warrants the use of
hexavalent chromium. This exemption has
been introduced, since viable alternatives
for this specific application have so far not
been identified.
12.Deca BDE in polymeric applications.
13.Lead in lead-bronze bearing shells and bushes.
– Used, amongst others, in compressors for
stationary refrigeration and air conditioning
equipment.
– Need excellent self-lubrication properties to
meet the high durability and reliability
requirements.
– So far no suitable alternative has been
identified, although other materials have
been extensively tested.
14.Lead used in compliant pin connector systems.
– Used to attach connectors or components to
a double-sided printed circuit board.
– Avoids the need for soldering during
manufacturing, thereby avoiding the
overheating of components and damaging
the integrity of the connectors and board
material and allows separation for repair.
– Suitable alternatives to the tin-lead alloy
have not yet been identified.
15.Lead as a coating material for the thermal
conduction module c-ring.
– Such modules are the key components of a
mainframe central processing unit and
typically contain multiple chips. The c-ring
functions as a hermetical seal, continuously
dissipating heat and preventing oxidation of
solder joints.
– No feasible alternative has so far been
identified.
16.Lead and cadmium in optical and filter glass.
– To obtain specific properties and meet
quality standards, for a wide variety of
applications including in the photo industry
(e.g. camera lenses), in projectors, scanners,
printers and copiers.
– Suitable alternatives for many of these
applications have not yet been identified.
17.Lead in solders consisting of more than two
elements for the connection between the pins
and the package of microprocessors with a lead
content of more than 80% and less than 85% by
weight.
– Microprocessors are mounted onto boards
or substrates by way of a socket. Such
sockets require that a large number of pins
(up to 950) are mounted onto the
microprocessor for completing the
necessary electrical connections.
– This exemption has been introduced to
allow for the development of alternative
designs without generating excessive
amounts of waste.
18.Lead in solders to complete a viable electrical
connection between semiconductor die and
carrier within integrated circuit Flip Chip
packages.
– The external solder connections between
packages and PCB known as level 2 are
excluded from this exemption as viable
alternatives have been developed.
19.Lead in linear incandescent lamps (using a
glowing filament) with silicate coated tubes.
20.Lead halide as radiant agent in High Intensity
Discharge lamps for professional reprography
applications.
– HID lamps produce light by striking an
electrical arc across tungsten electrodes
housed inside a specially designed inner
fused quartz or fused alumina tube. This
tube is filled with both gas and metals. The
gas aids in the starting of the lamps and the
metals produce the light once they are
heated to a point of evaporation. Certain
HID lamp types contain lead-iodide (PbI2)
as a component in the filling.
– These lamps are used in professional U.V.
applications: the curing, reprography and
label printing industries. The lead is used
for creating the correct lamp emission
spectrum and lamp effectiveness.
21.Lead as activator in the fluorescent powder
(1% lead by weight or less) of discharge lamps
when used as sun tanning lamps containing
phosphors such as BSP (BaSi2O5:Pb) as well
as when used as specialty lamps for diazoprinting reprography, lithography, insect traps,
photochemical and curing processes containing
phosphors such as SMS ((Sr,Ba)2MgSi2O7:Pb).
22.Lead with PbBiSn-Hg and PbInSn-Hg in
specific compositions as main amalgam and
with PbSn-Hg as auxiliary amalgam in very
compact Energy Saving Lamps.
23.Lead oxide in glass used for bonding front and
rear substrates of flat fluorescent lamps used for
Liquid Crystal Displays.
– Lead is currently used in the glass panel of
Liquid Crystal Display (LCD) screens. Two
glass substrates are bonded with high
precision by inserting glass spacers in
between, to keep the same gap. Lead is used
there to prevent overheating of the glass,
which would result in image distortion and
malfunction.
– It is found in the form of a solder with a
concentration of 70% lead by weight, used to
create a safe electrical contact on the plane
glass surface. Lead containing glass solder is
also used to assemble the flat-panel glass
envelope.
Social Accountability International
Founded in 1997
Mission: promote human rights for
workers around the world.
About SAI, www.sa-intl.org
• A non-governmental, international, multistakeholder organization.
• Convenes key stakeholders to develop
consensus-based voluntary standards, conducts
cost-benefit research, accredits auditors,
provides training and technical assistance, and
assists corporations in improving social
compliance in their supply chains.
Social Accountability 8000
• A comprehensive and flexible system for
managing ethical workplace conditions
throughout global supply chains.
• Provide both practical and visionary solutions
for ethical supply chain management.
• Based on the principles of thirteen international
human rights conventions.
• The first auditable social standard and creates a
process that is truly independent.
• The benefits of adopting SA8000 are significant
and may include improved staff morale, more
reliable business partnerships, enhanced
competitiveness, less staff turnover and better
worker-manager communication.
SA8000® Certification
• Available only through SAI-accredited,
independent organizations, known as a
Certification Body.
 Bases
 International Labor Organization
1. ILO Conventions 29 and 105 (Forced &
Bonded Labour)
2. ILO Convention 87 (Freedom of
Association)
3. ILO Convention 98 (Right to Collective
Bargaining)
4. ILO Conventions 100 and 111 (Equal
remuneration for male and female workers
for work of equal value; Discrimination)
5. ILO Convention 135 (Workers’
Representatives Convention)
6. ILO Convention 138 & Recommendation
146 (Minimum Age and Recommendation)
7. ILO Convention 155 & Recommendation
164 (Occupational Safety & Health)
8. ILO Convention 159 (Vocational
Rehabilitation & Employment/Disabled
Persons)
9. ILO Convention 177 (Home Work)
10.ILO Convention 182 (Worst Forms of
Child Labour)
 United Nations
11.Universal Declaration of Human Rights
12.The United Nations Convention on the
Rights of the Child
13.The United Nations Convention to
Eliminate All Forms of Discrimination
Against Women
SA 8000
 Purpose and scope
 This standard specifies requirements for
social accountability to enable a
company to:
a) develop, maintain, and enforce policies and
procedures in order to manage those issues
which it can control or influence;
b) demonstrate to interested parties that
policies, procedures and practices are in
conformity with the requirements of this
standard.
Definition
Child
Any person less than 15 years of age,
• unless local minimum age law stipulates a
higher age for work or mandatory schooling, in
which case the higher age would apply.
• If, however, local minimum age law is set at 14
years of age in accordance with developingcountry exceptions* under ILO Convention 138,
the lower age will apply.
Young worker
Any worker over the age of a child and
under the age of 18. (old workers?)
Child labor
Any work by a child younger than the age(s)
specified except as provided for by ILO
Recommendation 146.**
Remediation of children
All necessary support and actions to ensure
the safety, health, education, and
development of children
• who have been subjected to child labour, as
defined above, and are dismissed.
Forced labor
All work or service that is extracted from
any person under the menace of any penalty
for which said person has not offered
him/herself voluntarily
• or for which such work or service is demanded
as a means of repayment of debt.
Working
hours
Disciplinary
practices
Discrimination
Remuneration
Child
labor
Social accountability
requirements
Forced
labor
Freedom of
association
Health
& safety
Social accountability requirements
Child labor
Shall not engage in or support the use of
child labour.
Shall establish, document, maintain, and
effectively communicate to personnel and
other interested parties policies & procedures
• for remediation of children found to be working
and shall provide adequate support to enable
such children to attend and remain in school
until no longer a child as defined above.
• for promotion of education for children covered
under ILO Recommendation 146 and young
workers who are subject to local compulsory
education laws or are attending school,
– including means to ensure that no such child
or young worker is employed during school
hours and that combined hours of daily
transportation (to and from work and school),
school, and work time do not exceed 10
hours a day.
Shall not expose children or young workers
to situations in or outside of the workplace
that are hazardous, unsafe, or unhealthy.
Forced labor
Shall not engage in or support the use of
forced labour,
• nor shall personnel be required to lodge ‘deposits’
or identity papers upon commencing
employment with the company.
Health and safety
Bearing in mind the prevailing knowledge of
the industry and of any specific hazards,
• shall provide a safe and healthy working
environment and shall take adequate steps to
prevent accidents and injury to health arising out
of, associated with or occurring in the course of
work, by minimizing, so far as is reasonably
practicable, the causes of hazards inherent in the
working environment.
• Shall appoint a senior management
representative responsible for the health and
safety of all personnel, and accountable for the
implementation of the Health and Safety
elements of this standard.
• Shall ensure that all personnel receive regular
and recorded health and safety training, and that
such training is repeated for new and reassigned
personnel.
• Shall establish systems to detect, avoid or
respond to potential threats to the health and
safety of all personnel.
• Shall provide, for use by all personnel, clean
bathrooms, access to potable water, and, if
appropriate, sanitary facilities for food storage.
• Shall ensure that, if provided for personnel,
dormitory facilities are clean, safe, and meet the
basic needs of the personnel.
Freedom of association
& right to collective bargaining
• Shall respect the right of all personnel to form
and join trade unions of their choice and to
bargain collectively.
• Shall, in those situations in which the right to
freedom of association and collective bargaining
are restricted under law, facilitate parallel means
of independent and free association and
bargaining for all such personnel.
• Shall ensure that representatives of such
personnel are not the subject of discrimination
and that such representatives have access to their
members in the workplace.
Discrimination
Shall not engage in or support
discrimination
• in hiring, remuneration, access to training,
promotion, termination or retirement based on
race, caste, national origin, religion, disability,
gender, sexual orientation, union membership,
political affiliation, or age.
• Shall not interfere with the exercise of the rights
of personnel to observe tenets or practices, or to
meet needs relating to race, caste, national origin,
religion, disability, gender, sexual orientation,
union membership, or political affiliation.
• Shall not allow behaviour, including gestures,
language and physical contact, that is sexually
coercive, threatening, abusive or exploitative.
Disciplinary practices
Shall not engage in or support the use of
• corporal punishment, mental or physical
coercion, and verbal abuse.
Working hours
Shall comply with applicable laws and
industry standards on working hours.
• The normal workweek shall be as defined by law
but shall not on a regular basis exceed 48 hours.
• Personnel shall be provided with at least one day
off in every seven-day period.
• All overtime work shall be reimbursed at a
premium rate and under no circumstances shall
exceed 12 hours per employee per week.
Where the company is party to a collective
bargaining agreement freely negotiated with
worker organizations (see ILO) representing
a significant portion of its workforce,
• it may require overtime work in accordance with
such agreement to meet short-term business
demand. Any such agreement must comply with
the above requirements
Other than as permitted above,
• overtime work shall be voluntary.
Remuneration
Shall ensure that wages paid for a standard
working week shall always meet at least
legal or industry minimum standards
• and shall be sufficient to meet basic needs of
personnel and to provide some discretionary
income.
• Shall ensure that deductions from wages are not
made for disciplinary purposes,* and shall
ensure that wage and benefits composition are
detailed clearly and regularly for workers.
• Shall also ensure that wages and benefits are
rendered in full compliance with all applicable
laws and that remuneration is rendered either in
cash or check form, in a manner convenient to
workers.**
• shall ensure that labour-only contracting
arrangements and false apprenticeship schemes
are not undertaken in an effort to avoid fulfilling
its obligations to personnel under applicable
laws pertaining to labour and social security
legislation and regulations.
Access for
verification
Policy
Records
Management
review
Outside
communication
Addressing
concerns &
taking
corrective
action
Management
systems
Control of
suppliers/
subcontractors
& sub-suppliers
Company
representatives
Planning &
implementation
Management systems
Policy
Top management shall define the company’s
policy for social accountability and labour
conditions to ensure that it:
a)includes a commitment to conform to all
requirements of this standard;
b)includes a commitment to comply with national
and other applicable law, other requirements to
which the company subscribes and to respect the
international instruments and their interpretation;
c)includes a commitment to continual
improvement;
d) is effectively documented, implemented,
maintained, communicated and is accessible in
a comprehensible form to all personnel,
including, directors, executives, management,
supervisors, and staff, whether directly
employed, contracted or otherwise representing
the company;
e) is publicly available.
 Management review
 Top management shall periodically review
• the adequacy, suitability, and continuing
effectiveness of the company’s policy,
procedures and performance results vis-a-vis
the requirements of this standard and other
requirements to which the company subscribes.
• System amendments and improvements shall
be implemented where appropriate.
Company representatives
Shall appoint a senior management
representative who,
• irrespective of other responsibilities, shall
ensure that the requirements of this standard are
met.
• Shall provide for non-management personnel to
choose a representative from their own group to
facilitate communication with senior
management on matters related to this standard.
Planning and implementation
Shall ensure that the requirements of this
standard are understood and implemented at
all levels of the organisation; methods shall
include, but are not limited to:
a) clear definition of roles, responsibilities, and
authority;
b) training of new and/or temporary employees
upon hiring;
c) periodic training and awareness programs for
existing employees;
d) continuous monitoring of activities and results
to demonstrate the effectiveness of systems
implemented to meet the company’s policy and
the requirements of this standard.
 Control of suppliers/subcontractors and
sub-suppliers
 Shall establish and maintain appropriate
procedures
• to evaluate and select suppliers/subcontractors
(and, where appropriate, sub-suppliers) based
on their ability to meet the requirements of this
standard.
Shall maintain appropriate records of
suppliers/subcontractors’ (and, where
appropriate, sub-suppliers’) commitments to
social accountability, including, but not
limited to, the written commitment of those
organizations to:
a) conform to all requirements of this standard
(including this clause*);
b) participate in the company’s monitoring
activities as requested;
c) promptly implement remedial and corrective
action to address any nonconformance
identified against the requirements of this
standard;
d) promptly and completely inform the company
of any and all relevant business relationship(s)
with other suppliers/subcontractors and subsuppliers.
• Shall maintain reasonable evidence that the
requirements of this standard are being met by
suppliers and subcontractors.
• Where the company receives, handles or
promotes goods and/or services from
suppliers/subcontractors or sub-suppliers who
are classified as homeworkers, the company
shall take special steps to ensure that such
homeworkers are afforded a similar level of
protection as would be afforded to directly
employed personnel under the requirements of
this standard. Such special steps shall include
but not be limited to:
a) establishing legally binding, written purchasing
contracts requiring conformance to minimum
criteria (in accordance with the requirements of
this standard);
b) ensuring that the requirements of the written
purchasing contract are understood and
implemented by homeworkers and all other
parties involved in the purchasing contract;
c) maintaining, on the company premises,
comprehensive records detailing the identities
of homeworkers; the quantities of goods
produced/services provided and/or hours
worked by each homeworker;
d) frequent announced and unannounced
monitoring activities to verify compliance with
the terms of the written purchasing contract.
 Addressing concerns and taking
corrective action
 Shall investigate, address, and respond
• to the concerns of employees and other
interested parties with regard to conformance/
nonconformance with the company’s policy
and/or the requirements of this standard;
• the company shall refrain from disciplining,
dismissing or otherwise discriminating against
any employee for providing information
concerning observance of the standard.
• Shall implement remedial and corrective action
and allocate adequate resources appropriate to
the nature and severity of any nonconformance
identified against the company’s policy and/or
the requirements of the standard.
Outside communication
Shall establish and maintain procedures to
communicate regularly
• to all interested parties data and other
information regarding performance against the
requirements of this document, including, but
not limited to, the results of management
reviews and monitoring activities.
Access for verification
Where required by contract, shall provide
reasonable information and access
• to interested parties seeking to verify
conformance to the requirements of this standard;
where further required by contract, similar
information and access shall also be afforded by
the company's suppliers and subcontractors
through the incorporation of such a requirement
in the company's purchasing contracts.
Records
Shall maintain appropriate records
• to demonstrate conformance to the requirements
of this standard.
Business Principles for
Countering Bribery
An initiative of Transparency International
and Social Accountability International
December 2002
Foreword
Development
In a partnership project undertaken with a
Steering Committee drawn from companies,
academia, trade unions and other nongovernmental bodies.
• Growing corporate awareness of the risks posed
by bribery, particularly in the light of recent
scandals, and the public is expecting greater
accountability and probity from the corporate
sector. (Bribery: An offer or receipt of any gift,
loan, fee, reward or other advantage to or from
any person as an inducement to do something
which is dishonest, illegal or a breach of trust, in
the conduct of the enterprise’s business.)*
• A practical tool to which companies can look for
a comprehensive reference to good practice (as
opposed to best) to counter bribery.
Give practical effect to recent initiatives
• The OECD Convention on Combating Bribery
of Foreign Public Officials in International
Business Transactions
• The ICC Rules of Conduct to Combat Extortion
and Bribery
• The anti-bribery provisions of the revised OECD
Guidelines for Multinationals.
Purpose
• Provide practical guidance for countering
bribery, creating a level playing field and
providing a long-term business advantage.
• Apply to bribery of public officials and to
private-to-private transactions.
Implementation
requirements:
1. Organization &
responsibilities
2. Business
relationships
3. Human
resources
4. Training
5. Raising concerns
& seeking guidance
6. Communication
7. Internal controls
& audit
8. Monitoring
& review
Business
principles
Countering Bribery
Scope
Aims
Program
development
Countering Bribery
Business principles
Shall prohibit bribery in any form whether
direct or indirect.
Shall commit to implementation of a
Programme to counter bribery
• based on a commitment to fundamental values
of integrity, transparency and accountability.
• Shall aim to create and maintain a trust-based
and inclusive internal culture in which bribery is
not tolerated.
• The Programme is the entirety of an enterprise’s
anti-bribery efforts including values, policies,
processes, training and guidance.
 Aims
 Provide a framework for good business
practices and risk management strategies
for countering bribery.
 Assist enterprises to
a) eliminate bribery
b) demonstrate their commitment to countering
bribery
c) make a positive contribution to improving
business standards of integrity, transparency
and accountability wherever they operate.
Program development
Reflecting the size, business sector, potential
risks and locations of operation,
• which should, clearly and in reasonable detail,
articulate values, policies and procedures to be
used to prevent bribery from occurring in all
activities under effective control.
Should be consistent with all laws relevant
to countering bribery in all the jurisdictions
• in which the enterprise operates, particularly
laws that are directly relevant to specific
business practices.
In consultation with employees, trade unions
or other employee representative bodies.
• Ensure that the enterprise is informed of all
matters material to the effective development of
the Programme by communicating with relevant
interested parties.
 Scope
 Should analyse which specific areas pose
the greatest risks from bribery.
 Should address the most prevalent forms of
bribery relevant to the enterprise but at a
minimum should cover the following areas
1. Bribes
• Should prohibit the offer, gift, or acceptance of
a bribe in any form, including kickbacks, on
any portion of a contract payment, or the use of
other routes or channels to provide improper
benefits to customers, agents, contractors,
suppliers or employees of any such party or
government officials.
• Should prohibit an employee from arranging or
accepting a bribe or kickback from customers,
agents, contractors, suppliers, or employees of
any such party or from government officials, for
the employee’s benefit or that of the employee’s
family, friends, associates or acquaintances.
2. Political contributions
• The enterprise, its employees or agents should
not make direct or indirect contributions to
political parties, organisations or individuals
engaged in politics, as a way of obtaining
advantage in business transactions.
• Should publicly disclose all its political
contributions.
3. Charitable contributions and sponsorships
• Should ensure that charitable contributions and
sponsorships are not being used as a subterfuge
for bribery.
• Should publicly disclose all its charitable
contributions or sponsorships.
4. Facilitation payments
• Also called “facilitating”, “speed” or “grease”
payments, these are small payments made to
secure or expedite the performance of a routine
or necessary action to which the payer of the
facilitation payment has legal or other
entitlement.
• Recognising that facilitation payments are a
form of bribery, should identify, minimise and
preferably eliminate them.
5. Gifts, hospitality and expenses
• Should prohibit the offer or receipt of gifts,
hospitality or expenses whenever such
arrangements could affect the outcome of
business transactions and are not reasonable
and bona fide expenditures.
 Implementation requirements
 Should meet, at a minimum
1. Organization and responsibilities
• The Board of Directors or equivalent body
should base their policy on the Business
Principles and provide leadership, resources
and active support for management’s
implementation of the Programme.
• The Chief Executive Officer is responsible for
ensuring that the Programme is carried out
consistently with clear lines of authority.
• The Board of Directors, Chief Executive
Officer and senior management should
demonstrate visible and active commitment to
the implementation of the Business Principles.
2. Business relationships
• Should apply its Programme in its dealings
with subsidiaries, joint venture partners, agents,
contractors and other third parties with whom it
has business relationships.
• Subsidiaries and joint ventures
– Should conduct due diligence before
entering into a joint venture.
– Should ensure that subsidiaries and joint
ventures over which it maintains effective
control adopt its Programme.
– Where an enterprise does not have effective
control it should make known its
Programme and use its best efforts to
monitor that the conduct of such
subsidiaries and joint ventures is consistent
with the Business Principles.
• Agents
– Should not channel improper payments
through an agent.*
– Should undertake due diligence before
appointing an agent.
– Compensation paid to agents should be
appropriate and justifiable remuneration for
legitimate services rendered.
– The relationship should be documented.
– The agent should contractually agree to
comply with the enterprise’s Programme.
– Should monitor the conduct of its agents and
should have a right of termination in the
event that they pay bribes.
• Contractors and suppliers
– Should conduct its procurement practices in
a fair and transparent manner.
– Should undertake due diligence in
evaluating major prospective contractors
and suppliers to ensure that they have
effective anti-bribery policies.
– Should make known its anti-bribery
policies to contractors and suppliers. It
should monitor the conduct of major
contractors and suppliers and should have a
right of termination in the event that they
pay bribes.
– Should avoid dealing with prospective
contractors and suppliers known to be
paying bribes.
3. Human resources
• Recruitment, promotion, training, performance
evaluation and recognition should reflect the
enterprise’s commitment to the Programme.
• The human resources policies and practices
relevant to the Programme should be developed
and undertaken in consultation with employees,
trade unions or other employee representative
bodies as appropriate.
• Should make it clear that no employee will
suffer demotion, penalty, or other adverse
consequences for refusing to pay bribes even if
it may result in the enterprise losing business.
• Should apply appropriate sanctions for
violations of its Programme.
4. Training
• Managers, employees and agents should
receive specific training on the Programme.
• Where appropriate, contractors and suppliers
should receive training on the Programme.
5. Raising concerns and seeking guidance
• To be effective, the Programme should rely on
employees and others to raise concerns and
violations as early as possible. To this end,
should provide secure and accessible channels
through which employees and others should
feel able to raise concerns and report violations
(“whistle blowing”) in confidence and without
risk of reprisal.
• These channels should also be available for
employees and others to seek advice or suggest
improvements to the Programme. To support
this process, should provide guidance to
employees and others with respect to the
interpretation of the Programme in individual
cases.
6. Communications
• Should establish effective internal and external
communication of the Programme.
• Should, on request, publicly disclose the
management systems it employs in countering
bribery.
• Should be open to receiving communications
from relevant interested parties with respect to
the Programme.
7. Internal controls and audit
• Should maintain accurate books and records,
available for inspection, which properly and
fairly document all financial transactions.
Should not maintain off-the-books accounts.
• Should establish feedback mechanisms and
other internal processes supporting the
continuous improvement of the Programme.
• Should subject the internal control systems, in
particular the accounting and record keeping
practices, to regular audits to provide assurance
that they are effective in countering bribery.
8. Monitoring and review
• Senior management should monitor the
Programme and periodically review the
Programme’s suitability, adequacy and
effectiveness and implement improvements as
appropriate.
• Should periodically report to the Audit
Committee or the Board the results of the
Programme review.
• The Audit Committee or the Board should
make an independent assessment of the
adequacy of the Programme and disclose its
findings in the Annual Report to shareholders.
Transparency International
Founded in 1993.
The leading international organisation devoted
to curbing bribery.
With the mission to build coalitions of civil society,
governments and the private sector to join in the
fight against corruption.
• TI’s work is based on the belief that corruption is
a major threat to human rights, development and
international trade, and that containing
corruption to manageable levels calls for the
creation of a broad coalition. Engagement with
the private sector is key to its mission.
References (reading)
TI, Corruption Perceptions Index, Nov. 6, 2006
 A strong correlation between corruption and poverty,
with a concentration of impoverished states at the
bottom of the ranking.
 Chair Huguette Labelle. “Despite a decade of progress
in establishing anti-corruption laws and regulations,
today’s results indicate that much remains to be done
before we see meaningful improvements in the lives of
the world’s poorest citizens.”
 Scores countries on a scale from zero to ten, with zero
indicating high levels of perceived corruption. Almost
three-quarters of the countries in the CPI score below
five (including all low-income countries and all but two
African states).
 The facilitators of corruption continue to assist political
elites to launder, store and otherwise profit from
unjustly acquired wealth, which often includes looted
state assets.
 TI advocates strong measures to curb bribery’s supply
side, including the criminalisation of overseas bribery
under the OECD Anti-Bribery Convention, as well as
its demand side, including disclosure of assets for
public officials and adoption of codes of conduct.
 But the transaction is often enabled by professionals
from many fields. Corrupt intermediaries link givers
and takers, creating an atmosphere of mutual trust and
reciprocity; they attempt to provide a legal appearance
to corrupt transactions, producing legally enforceable
contracts; and they help to ensure that scapegoats are
blamed in case of detection.
TI, Global Corruption Barometer,* Dec.7, 2006
 The police are the sector most affected by bribery, with
17 percent of those who have had contact paying a
bribe. Police are most commonly bribed in Africa and
Latin America.
 Bribery for access to services is most common in Africa.
The most commonly bribed sectors in Africa are the
police, tax revenue and utilities.
 People around the world tend to be very negative about
their government’s attempt to fight corruption. Only
one in five surveyed worldwide think that their
government is effective to some degree in fighting
corruption; nearly two in five say the government is
‘not effective’ in its anti-corruption work.
 One in six surveyed globally thinks that their
government actually encourages corruption rather than
fighting it.
 Despite relatively good scores on the Corruption
Perceptions Index 2006, nearly one in five respondents
in the United States and the United Kingdom thinks that
their government encourages corruption rather than
fighting it.
 The public views political parties as the most corrupt
institution, followed by parliament/legislature.
 Police are considered to be the sector most affected by
corruption in both Africa and the Newly Independent
States.
 The Taiwanese public reports an increase in levels of
corruption in most of the institutions and sectors
covered by the Barometer 2006 during the last two
years. The public in Hong Kong and Croatia also view
corruption as worse in a number of sectors, while, in
contrast, in India there have been some perceived
improvements.
 Political life is viewed as being most affected by
corruption, followed closely by the business
environment.*
 Corruption is reported as affecting family life very little
in EU+ countries and the Newly Independent States,
but a great deal in Africa and South East Europe.
 Perceived corruption in political life in the United
States has increased in the last two years; perceived
corruption in Iceland’s business environment and
family life has increased; perceived corruption has
increased in Spain and Japan’s political life and
business environment.