Tài liệu Business ethics: the new bottom line pdf

15 The benefits of being ethical 20 Putting business ethics into practice 23 Values, openness and probity 31 The American experience 36 Policy priorities for the UK 48 Government's ro

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Contents

Foreword by Sir Adrian Cadbury 7

Introduction 11

What is business ethics? 15

The benefits of being ethical 20

Putting business ethics into practice 23

Values, openness and probity 31

The American experience 36

Policy priorities for the UK 48

Government's role 55

Notes 59

Appendix: the European experience 61

Acknowledgments

Demos and the author would like to thank the sponsors whose generosity made this paper possible They are

British Telecom, C&A, Coopers & Lybrand, National

‘Westminster Bank and MSF The author also gratefully recognises the assistance she received from Celia Wells of Cardiff Law School, from her colleagues on the executive

of the European Business Ethics Network (EBEN), and from the following people in the United States, who gave

so freely of their time and ideas: Dr W Michael Hoffman,

of Bentley College, Gary Edwards of the Ethics Resource Center, William T Redgate, Vice President ~ Business

Practices, The Dun and Bradstreet Corporation, Harvey

Pitt of Frank, Field, Harris, Shriver & Jacobson, Win

Swenson of the Federal Sentencing Commission, Richard Ferlauto of the Center for Policy Alternatives, Walter

Jackson, former Director of the Office of Government Ethics, Marilyn L Glynn of the Office of Government Ethics, John Buckley and Vie Pompa of Digital, Graydon Wood of Nynex, and Pat Rodgers of Hughes

DEMGS

‘Open access Some rights reserved

Aste publisher of this work, Demos has an open access policy which enables anyone to access

‘ourcontent electronieally without charge

‘We want to encourage the circulation of our work as widely as possible without affecting the

ership ofthe copyright, which remains with the copyright holder

Users are welcome to download, save, perform or distribute this work electronically or in any

‘other form including in foreign language translation without written permission subject to the conditions set out in the Demos open access lence which you can read here,

Please read and consider the fll icence, ‘The following are some ofthe conditions imposed by the licence

‘© Demos and the author(s) are credited:

+ The Demos website address (sew cemos.ca.uh is published together with a copy ofthis policy statement in a prominent postion,

‘+ The text isnot altered and is usd in fll (the use of extracts under existing fai usage rights

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1+ The workis not resold;

‘© copy of the work ar lnk tits use online is sent to the address belo’ for our archive

8 downloading publications, you are confirming that you have read and accepted the terms of the Demos open acces licence

‘attributionjno devivatives/non-commercial version ofthe Creative Commons licence,

To find out more shout Creative Commons licences go to wos creativesommons.otg

Contents

Foreword by Sir Adrian Cadbury 7

Introduction 11

What is business ethics? 15

The benefits of being ethical 20

Putting business ethics into practice 23

Values, openness and probity 31

The American experience 36

Policy priorities for the UK 48

Government's role 55

Notes 59

Appendix: the European experience 61

Acknowledgments

Demos and the author would like to thank the sponsors whose generosity made this paper possible They are

British Telecom, C&A, Coopers & Lybrand, National

‘Westminster Bank and MSF The author also gratefully recognises the assistance she received from Celia Wells of Cardiff Law School, from her colleagues on the executive

of the European Business Ethics Network (EBEN), and from the following people in the United States, who gave

so freely of their time and ideas: Dr W Michael Hoffman,

of Bentley College, Gary Edwards of the Ethics Resource Center, William T Redgate, Vice President ~ Business

Practices, The Dun and Bradstreet Corporation, Harvey

Pitt of Frank, Field, Harris, Shriver & Jacobson, Win

Swenson of the Federal Sentencing Commission, Richard Ferlauto of the Center for Policy Alternatives, Walter

Jackson, former Director of the Office of Government Ethics, Marilyn L Glynn of the Office of Government Ethics, John Buckley and Vie Pompa of Digital, Graydon Wood of Nynex, and Pat Rodgers of Hughes

Foreword

This is a timely paper It not only makes the case for the

drawing up of codes of conduct but also provides

practical guidance on how to make them even more

effective

The Committee which I chaired solely concerned the financial aspects of corporate governance and not

corporate governance as a whole Yet even within that

more limited context, we wrote in our report ~ “We regard

it as good practice for boards of directors to draw up codes

of ethics or statements of business practice and to publish them both internally and externally.” Most people want to know what is expected of them at work and equally wish

to be associated with enterprises whose standards meet their own,

Why, however, should it be seen as necessary to put in writing what was once - rightly or wrongly ~ taken for

granted? As Sheena Carmichael points out, business

conduct in the past was to a great extent governed on a club basis In the financial services sector in particular, firms were expected to know the club rules and to ensure that they were enforced Transgression of the rules was

likely to involve expulsion from the club and the loss of business that went with it

Foreword

The club approach was effective in setting limits to

acceptable behaviour, but its drawback was that the club drew up its rules primarily with the interests of its

members in mind It used, for example, to be considered

acceptable to rig the market for the new issues to give

newly-floated enterprises a flying start Club members never paid the artificially high price for these stocks, that fell on innocent outsiders The argument of the insiders ~

and they were that in every sense - was that cheating a

handful of unwary outsiders was an acceptable trade-off

for an easily tapped capital market They also used that

still familiar justification, “everyone does it.”

Something of the club approach lingers on in the

reluctance, referred to by Sheena Carmichael, to accept that theft is theft, whether it is stealing from a poor box

or picking the pockets of uninformed investors The

meaningless phrase “victimless crime” to describe insider

trading is an example of the attempt to draw a distinction

between one form of theft and another

Whatever their limitations, club rules provided a

degree of assurance and the sanction of expulsion was swifter and more certain than the slow arm of the law For a club to function as a setter of standards, however, its

members have to know their fellow members and they

have to share or accept common values

‘The fundamental changes which broke the club approach were that firms grew rapidly in size, so that the personal influence of those leading them was weakened,

competition became more severe with pay increasingly

tied to performance and the business framework became international, so that there was no longer a single,

generally accepted source of moral authority Firms had

to find their way in what the author describes as a

“culturally fluid environment.”

‘The consequence of these changes, to which must be added continuing technological change and changing business structures, has been that the unwritten rules ~

“the way we do things here” - no longer hold They were

passed on by those with longer service to new entrants,

compilation, They will only be effective if those at the top are seen to abide by them and if they are reinforced

by the company’s reward system

Wide consultation and debate is important in drawing

up codes, not only to ensure ownership but also to ensure agreement as to what they mean in practice, especially

across national boundaries It will be normal for codes,

for example, to debar the offering or receiving of bribes

But when does a gift become a bribe? Within my former company, I suggested two “culture free” rules of thumb in answer to that question, one which had been regularly raised in my discussions round the world on standards of behaviour

First, all payments must be on the face of the invoice;

in other words they must go through the books, however unusual they may appear to head office or the auditors

Second, gifts can be given and accepted, provided that

their being written up in the company newspaper would cause embarrassment neither to the giver nor the

should not be set in stone One of the planks on which

our Committee's Code of Best Practice was based was the need for a proper degree of disclosure

In governance terms, disclosure ensures that those with rights and responsibilities towards companies have the information which they need to exercise them and I would argue that openness is the basis of public

9

Foreword

confidence in the corporate system In addition, Sheena Carmichael argues persuasively that openness within a company is the surest insurance against unforeseen ~ by those at the top ~ disasters

There is a final reason why I believe codes of good

business conduct have an importance today which they did not have in the steadier state, more hierarchical

company of the past It is now widely accepted that

business organisations need to be freer in form, with the individuals and teams having the authority to get on with their tasks without reference back At the same time,

companies are buying in services which they once

controlled in-house and are forming alliances with

partners overseas from different backgrounds

‘Trust, therefore, has to take over from control Trust

in turn has to be based on a shared understanding of the basis of business conduct This shared understanding is as necessary for employees on the same site, if they are to use their initiative and drive to the full, as it is for good working relationships between partners in different

countries In an internationally competitive world that understanding can only be reached if we make the

considerable effort to set down in writing ~ and review

regularly - the rules by which we, and all those with

whom we work, do business

Sir Adrian Cadbury

Chairman of the Cadbury Committee on the Financial Aspects of

Corporate Governance

10

Introduction

Ethics used to be a rare word in British public life But

recent years have brought a rising tide of concern about

standards in public life and business; concerns which are, above all, about ethics This report aims to contribute to

the debate by showing how formal ethical processes can

be brought into organisations to replace the unwritten contracts and assumptions that may have worked in the

past, but which no longer hold good

It suggests alternatives to the still prevalent view that the personal integrity of business leaders (or ministers) is sufficient to guarantee ethically justifiable decisions

Instead, it sets out concrete steps which can be taken to

introduce processes which encourage ethical behaviour in

organisations, drawing in particular on the experience of the USA, where both private and public sector use formal ethical processes as part of their everyday operations

Why should an organisation try to be ethical? For

some, intrinsic reasons are sufficient Doing the right thing needs no justification But many in the business world look for harder-nosed arguments as to why they should change the ways in which they operate For such

sceptics there are no unambiguous assessments of the

direct benefits of ethical behaviour, in terms of hard cash

"

Introduction

But there are many examples of how ethical behaviour can feed through to the bottom line, improving relation- ships with customers, employees, shareholders and

suppliers Moreover there is no shortage of evidence of the costs that follow from serious failures of ethical con- trols In business, costly problems, ranging from share- holder opposition to executive pay to environmental

disasters, are judged by customers and others in ethical terms, just as in politics the success of a government is judged not only in relation to its performance but also in relation to its integrity More generally business suffers when its legitimacy is in question At present in the UK, only 15% of the public broadly trusts multinational busi-

ness to be honest and fair (compared to 27% who trust

their daily newspapers, 39% who trust accountants and

83% who trust their GP)." According to MORI, 67% disagree with the proposition that ‘business generally tries to

strike a balance between profits and the public interest’

So how should firms regain trust? Many of the necessary steps are set out during the course of this

report But the core argument is that openness is now the most important ethical value A lack of openness has

caused the downfall of many companies In all but a very few instances, it is necessary to put a formal ethical

process in place in order to ensure openness within an organisation Unless staff feel free to raise concerns

without fear of reprisal, there is a high probability that warnings from frontline staff about potential disaster will not reach those in a position to act In this sense, the collapse of Barings Bank is a classic example of the failure

of ethical controls, not just of managerial or financial ones It is invariably the case that before a major disaster

~ be it the Space Shuttle Challenger, BCCI or Barings ~ there are people within the organisation who are warning

of the problem Disasters of this magnitude strike rarely, but when they do they can destroy a company Indeed, even apart from its other benefits, the cost of an ethical process can be seen as disaster insurance, as a crucial part

of risk management

12

For Britain these may be particularly difficult lessons to learn Most British institutions are relatively closed The

UK has neither a written constitution nor a Freedom of Information Act Much of our law is case law, shaped by

the judiciary rather than the legislature Well under half

of UK companies have a written code of business conduct The civil service, until very recently, has had few formal guidelines for its behaviour Such regulatory and self

regulatory processes as there are, whether in the City of

London, the House of Commons or in business

generally,are rarely enforced with vigour

What lies behind these arrangements is the tradition that British society runs on an unarticulated consensus

about proper behaviour Before the twentieth century, the

consensus did not need to stretch to the whole

population, as both financial and political power were concentrated in the hands of the few Today, with a far

wider source of recruitment, and a more open and

meritocratic society, it is no longer possible to assume - if

it ever was ~ that everyone has the same view of good and

bad, of right and wrong It is even less possible to assume that everyone will take the same approach to decision- making in the ethical grey areas

In the USA and other countries it is assumed that with

a diverse population it is necessary to spell out standards

of behaviour and put in place mechanisms for ensuring that standards are met Of course such approaches always meet with resistance: when the Federal Sentencing

Guidelines which have done so much to affect the ethical

behaviour of US corporations were first brought in, over

200 judges threw them out of court as unconstitutional before the Supreme Court ruled in their favour

But the importance of US experience is that the

Americans have already worked their way through the different stages of this debate They have tried the option

of simple codification of the rules ~ but have found that

by itself, a code of conduct is not enough Instead, in both

the private and the public sectors, people now talk in terms of ethical programmes or processes Based on

13

things which in the past have been informal It entails

devoting management time to issues which may appear peripheral to the core business But if the intention is to align and internalise ethical behaviour so that each

individual, objectively, is playing to the same rules, a

period of discomfort may be necessary

No ethical process can guarantee correct behaviour, just as no judicial process can guarantee an absence of murder or of armed robbery But it can improve the

odds.The report therefore starts by clarifying the different

issues, such as compliance, corporate governance and

codes of conduct which form part of business ethics It goes on to examine values, as the basis of organisational ethics, and discusses the benefits of being ethical The American experience is then described as a useful model

‘An outline is given of the UK legal and regulatory

framework, prior to a series of recommendations for the key actors who can achieve change: businesses

themselves, shareholders and, finally, government

The central argument is that ethics is part of the new

bottom line for businesses They will ignore it at their peril Businesses which are seen to be unethical will lose customers, deter potential employees and encourage

governments to make life difficult for them Worse,

businesses that cannot be open internally, will inevitably face unforeseen problems

This book shows how they can pre-empt such problems

~ gaining not only an individual competitive advantage,

but also restoring the trust of the public on whom they

ultimately depend

4

What is

business

ethics?

It is only recently that business ethics has become visible

In the past it was assumed to be part of the shared culture

and understandings of those running business, and

therefore did not need to be made more explicit or

studied Today however it is treated as a separate branch

of ethics, with professors, PhD students, courses and

institutes

Yet there is still considerable confusion about the

nature and scope of business ethics The widest,

definitions bring in issues such as the relationship

between business and society, business and the political process, and subject the purpose of business to moral

questioning; for example over the legitimacy of

promoting cigarettes to the third world where consumers may be less educated about the risks

At the other end of the spectrum critics such as Elaine

Sternberg? building on the arguments of Milton

Friedman, prefer a very narrow definition of business ethics If the only purpose of business is to maximise long- term owner value, then, for example, corporate

community involvement becomes not only wrong, but

ultimately criminal ~ Sternberg goes as far as to define it

as theft

15

answered theoretically, or in a timeless way

In practice businesses have no choice but to operate in

a more complex ethical environment - an environment

which is not only continually changing, but also beyond their control Only rarely can businesses wholly insulate themselves from the values of their existing and potential

employees and shareholders,consumers and potential

regulators, particularly if their business involves direct

contact with the public, the provision of essential services

or activity in regulated parts of the economy Moreover when, according to MORI, only 15% of the public believe

that companies, only responsibility is to operate

competitively, such narrow accounts of ethics can easily

mislead business leaders

‘The fact that business cannot insulate itself from

public ethics, any more than it can insulate itself from

the pressures of the market, renders unhelpful an over- narrow theoretical definition But it also means that the

traditionalist view of business ethics is unsustainable

When the values of consumers and employees change, and when a shared consensual culture is replaced by a

more heterogeneous one, it is no longer possible to rely

on implicit or ‘common sense’ understandings

In what follows I do not try to impose a single view of how business ought to behave There is an extensive

literature on right conduct which has tried to do just

that Six years ago Derry and Green’ had already

identified as many as nine approaches to the use of

ethical theory in business ethical texts: there are probably half a dozen more today Nor do I take on the full scope of

ethics proposed by authors such as Powers and Vogel‘ who

write that ‘in essence, ethics is concerned with clarifying what constitutes human welfare and the kind of conduct necessary to promote it’, a definition which is almost

limitless in its implications Nor does it address the

interesting debates over the extent to which individuals

or firms should be attributed moral responsibility or

blameworthiness, as in Goodpaster’s classic article, ‘Is a corporation a moral agent?”

Instead, the argument is narrower It is primarily about the tools firms can use to think ethically, and about how

they can apply the same rigour to ethics that they apply

to such things as product development and marketing It argues that unless there is a broad fit between business ethics and wider perceptions, problems are bound to

arise; second that in a more culturally fluid environment itis essential to formalise and operationalise ethics, just

as it is any other important parameter of business

decisions A significant part of this entails clarification = defining ethical issues more precisely and specifying with greater rigour the trade-offs between ethics and other

business interests

‘These tools need to be sophisticated and also flexible For the the scope of business ethics is not only wide, it is also dynamic The following table, for example, based on a

1987 survey* of 200 Chief Executive Officers and 100

senior executives worldwide, gives the views of business people as to what constitutes an ethical issue

Issue Percent

Inappropriate gifts to corporate personnel 91%

Employee health screening 79%

Conflicts between company’s ethics

and foreign business practice 77%

Security of company records 76%

Government contract issues 59%

Financial and cash management procedures 55%

Plant/facility closures and downsizing 55%

Political action committees 55%

omparable worth 439

Executive salaries 37

In practice the relative weighting of issues reflects public

opinion Executive pay would probably come much

higher today The other major change has been in the

significance of environmental ethics which has become

probably the most highly developed branch of business ethics, largely in response to a perceived change in public

attitudes and consistent evidence that people use

environmental criteria to judge whether a business is ethical Today, many companies commission

environmental audits and print the results in their

annual report

In themselves such policies ~ and indeed any policies to operationalise ethics ~ do not solve business dilemmas, so much as clarify them Animal testing is a good example

the developing arguments over whether companies

should refuse to sell products which have ever been tested

on animals or which contain some ingredients which

have been tested on animals, has yet to be resolved The

same is true of questions of workplace discrimination

which can at times gain a high public profile if

companies fail to control racial and sexual harassment or informal discrimination Many forward-looking

companies already have a structure in place to deal with

these issues ~ a policy on harassment, an equal

opportunities officer, channels of complaint, as well as

mentoring and support groups - situations in which it is possible for staff to talk informally about discrimination and develop skills to take them through the unseen

barriers But these too are not conclusive solutions, since

they themselves generate new debates about the

legitimacy of the new rules The point, however, is that the process of arguing about ethics is not only

unavoidable but also healthy It brings dilemmas into the open and ensures that they are managed internally

19

The benefits of

being ethical

Why should businesses bother with ethics? There are two

schools of thought about the benefits of being ethical in business The first, the deontological, focuses on the

intrinsic benefits of doing right The second, the

consequentialist, is pragmatic, and focuses on the payoffs

in business terms of avoiding risk and improving

reputation

Many of the roots of business ethics lie in theology

From the day the money lenders were thrown out of the

‘Temple, some business people have sought to integrate their personal beliefs with their business practice But it

is not necessary to have a belief in God, Jehovah, or Allah,

for one to wish to live one's life according to the

transcendental values of probity, fairness, or respect for one’s fellow human beings For those who hold such

timeless beliefs the most important benefit of

encouraging ethical business, is simply that it is right If

in addition it enables both workers and management to feel good about themselves, then so much the better

According to this view high principles, high morale and high productivity go hand-in-hand

But in a context of fierce global competition businesses need practical as well as moral reasons to invest in their

20

ethics One is risk avoidance A good ethics process,

operationalised so that all decision-making procedures and structures support it on a day-to-day basis, will give

an organisation the best chance possible of finding out

about potential problems early so that they can be dealt

with before they become a disaster

There are also market advantages to be gained from an ethical reputation The reputation of a company like

Marks & Spencer for quality and value has not been

achieved overnight This reputation has been developed over decades by their consistently ethical treatment of customers, staff and suppliers It takes many years to

develop a good reputation, and to acquire the trust of

consumers One single incident of unethical behaviour ~

or even an accident, unethically handled - can destroy

that reputation overnight High ethical standards,

regularly reviewed, will enable companies to hear

employee and customer concerns at an early stage: a

company alert to its changing environment will benefit

from the opportunity to recreate itself ahead of the

demands of the market and of its stakeholders

Finally, effective ethical processes can improve the quality ofa firm's relationships with its key stakeholders: not

only shareholders but also government (which may

otherwise impose regulatory restrictions), employees and the communities in which the business operates

terest in the ethics of

behaviours - lying, fraud, deception and theft -

sometimes lead to greater profits than their opposites What is at issue is how far government can or should go

in seeking to align business decisions and what are

perceived to be moral virtues and the public good,

Here there is a continuum of perceptions At different times societies may change their views as to the extent of

21

Second, predictable levels of ethical behaviour reduce costs of transactions, hedging and insurance

Third, many types of unethical behaviour impose costs

on government and taxpayers, as in the case of Maxwell

‘This common interest becomes apparent at times when public perceptions of business turn hostile Bad behaviour

by a few impacts on all businesses, and can create a

climate for intrusive and damaging political interference

In some cases well-defined laws and regulations can minimise these kinds of problem But just as it is more efficient for a society as a whole to rest on self-discipline rather than external policing, so in relation to business it

is far more efficient to find ways to internalise ethical principles In what follows I show how this can be done, and the distinct roles of government and business itself

22

Putting

business ethics

into practice

Despite the legacy of the club mentality, a code of ethics

is already present, and in some respects formalised, in

modern businesses It takes many different forms, most of

which have grown up ad hoc, with few guiding principles

These are some of the main ones

Compliance

Many financial services companies employ ‘Compliance

Officers’ to ensure that the company does not breach the law in any of the many countries where it may be trading, and that it complies with the many regulations and

directives imposed by the Bank of England, the European

Commission, or other statutory bodies Some companies

may point to their compliance officer as evidence that they behave ethically, but all the existence of this person demonstrates is that they are obeying the written rules of

their profession This is, in other words, a necessary but

far from sufficient condition for internalising ethical

principles

Moreover, even this issue is more complex than it at first seems In recent years, a number of companies which

would consider themselves ethical (such as B&Q, who

have a strong environmental policy and a good track

23

consequently waited until the law had been changed

before opening their stores on Sundays Clearly, ‘partial’ ethics here provided a temporary competitive advantage, but the long-term benefit to Marks and Spencer may be greater

Codes of conduct

The second main area of existing action is around codes

of conduct Research shows that between one third and

one half of major British companies have an ethical code

An Institute of Business Ethics survey of 164 leading

companies in 1993 found that one-third have, or are

developing, codes of conduct? The same year, a study by

Ashridge Management College showed that 43% of

respondents (directors of the top 500 companies) had a

code of ethics*

‘The way in which these codes are drawn up, however, varies widely They may be developed, tested and

modified over many years, or they may be put together in

a few days by a public relations department engaged in a

damage limitation exercise The vast majority come from

a ‘top down’ approach Very few say anything about the ways in which the codes are implemented, monitored and enforced ~ probably because, in most companies, the act

of drawing up the code is seen as an end in itself Osmosis

is expected to take care of the rest When asked, ‘Who is responsible for implementing the code?’ one in three British companies claims ‘everybody’ in other words,

nobody?

Writing down values and standards is an essential step

on an organisation's path to integrating ethical behaviour The number of organisations whose value system is so strong that they can be totally confident that unwritten

standards are being adhered to can probably be counted

on the fingers of one hand Recent events have made it

24

clear that the standards of the House of Commons do not fall into this category

Buta code alone does not make an organisation

ethical To assess their merit, further questions must be asked about their origins and about monitoring and

enforcement procedures If the latter are lacking, such a code can even be counter-productive, as a 1994 survey of

over 4,000 employees demonstrates.”

Ethics and corporate governance

Questions of ethics have become bound up with issues of corporate governance ~ how companies are governed, the system by which they are directed and controlled Indeed

it is arguable that many of the UK’s problems with

business ethics can be traced to the roots of the dominant

structures of corporate governance in the governance of the country: Jonathan Charkham’s excellent analysis of

the effects of the aristocratic settlement, dating back to

William I, on the value system which for generations has rated ‘trade’ as an inferior occupation, points out that the consequences of these attitudes are still pervasive

Corporate governance is currently being scrutinised more closely than ever before The Cadbury committee's

recommendations on such things as the existence of an

independent audit committee, numbers and

responsibilities of non-executive directors, and the

separation of responsibilities between chief executive and chairman, are now institutionalised through the Stock Exchange requirement that companies issue a statement about their compliance with Cadbury ~ and their reasons for any failure to comply = as a condition of listing on the Stock Exchange

As yet, however, these measures have not restored a

public perception of business integrity Too many audit committees of non-executives appear to be socially

homogeneous and insensitive to perceptions of

remuneration both outside and inside the company

All of these initiatives are steps in the right direction, and as such are to be welcomed The line that they follow,

25

however, is that of regulation, rather than ethical

imperatives As such, they will require policing as, failing other measures to support them, their aims will not be embedded in the culture Moreover, until they address

more fundamental questions, such as the

unrepresentative nature of non-executive directors and the almost complete absence of basic modern personnel principles (such as equal opportunities) in the way these

are selected, they will remain a peripheral, rather than a

core part of ethical behaviour

Ethics and corporate social responsibility

The fourth area of change has been around the

relationship between business and the communities

within which it operates Corporate social responsibility,

now more commonly termed corporate community

involvement, is a high profile activity engaged in by most

of Britain's leading companies Business in the

Community and The Prince's Trust, with the active

support of the Prince of Wales, encourage companies to

give a proportion of their profits to support education, youth work, crime prevention, the arts, medical research and a host of other activities Their motto is that the

wealth of the high street depends on the health of the

back street; many millions of pounds are given to charity

by companies In some cases this is clearly distinct from suich more narrowly commercial activities as the

sponsorship of arts or sporting events But in other cases

it is overtly used as a tool for diverting bad coverage

Moreover even where the very best community

involvement programmes are in place, involving large numbers of employees and business units, these may still

leave untouched business ethics in core activities

Ethics and whistleblowing

Recent years have brought a flurry of activity around the role of whistleblowers Public Concern at Work, the

charity set up to provide help and advice to potential

whistleblowers, makes the distinction between ‘raising a

26

concern’ ~ when an employee is worried about an issue and discusses it with other people within the

organisation ~ and ‘whistleblowing’ - when the employee goes outside the organisation to seek help or publicity

The existence of a whistleblower implies a breach of

ethical behaviour, whether on the part of the

organisation which has done something unethical or, in rare cases, on the part of the whistleblower, who may

have improper reasons for publicising some action

Sometimes the issue is straightforward - over half of the cases referred to Public Concern at Work relate to

alleged fraud; sometimes the organisation's behaviour may put the public at risk; sometimes the whistleblower

is in breach of his own contract, as when someone breaks the Official Secrets Act to leak documents to the press

But there is invariably a secondary ethical issue, namely, how the organisation deals with the person who has a

concern Raising a concern can be extremely difficult for

an employee A recent study for the Audit Commission”

found that one person in three in the National Health

Service would fear for their job if they were to report a suspicion of fraud

It has been estimated that, before the Challenger

Shuttle disaster, as many as 1200 members of staff at

NASA were aware that the ‘O’ rings were likely to blow under certain circumstances Yet a closed and hierarchical organisational structure can make it impossible for those

at the top to hear messages which do not fit with what

they expected to hear In a recent UK case where a

subsidiary of a public company behaved in a way which the main board would have condemned, the messages flagging up the improper behaviour were simply not

heard ~ because they did not fit with what the main

board expected to hear And the collapse of Barings Bank was clearly foreshadowed by auditors almost one year before the final, sudden plunge into bankruptcy

The sad reality is that almost all whistleblowers end up

losing their job, however good their motives and however praiseworthy their cause In the United States,

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employment legislation now provides for punitive

damages against companies who sack those who have blown the whistle in the public interest In the UK,

damages paid by Employment Appeal Tribunals can be

derisory, and there is little encouragement for staff with

serious public concerns to do the right thing An ethical organisation will ensure that its internal processes

encourage staff to raise concerns ~ safely and internally,

and with support if necessary from someone such as a

union official They will not be penalised ~ indeed, an

intelligent organisation will welcome the opportunity to

hear staff's concerns The information paradox is that power within an organisation often resides with those

who lack information, and information resides with those

who lack power An ethical process can bring the two

Professional ethics

Lawyers, accountants and doctors have long had their own codes of professional ethics These codes invariably mention integrity, and put duty to the patient or client above everything else (including, some would argue,

other virtues such as fairness) But they do not solve all ethical problems For example, when a nursing sister

recently administered pain-killing drugs to a patient,

following the promise of a doctor that he would authorise this soon after, it was she who lost her job The doctor who forgot to sign the authorisation suffered no such penalty If a lawyer does not obtain the best deal for a client, because he has been careless rather than negligent

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with the case, the client will normally be advised that the cost of suing the lawyer will far outweigh the additional settlement they can get Neither is obviously ethical

Codes can provide protection for professionals who wish to blow the whistle ~ nurses, for example, often feel that their code will support them in speaking out about patient care, But there is often a feeling that, as these professionals are judged by their peers, the interests of their patients and clients lose out Doctors who are struck off the register, for example, are often permitted to

practice again within a timeframe which surprises those who make comparisons with a criminal penalty for a

similar offense

The secrecy with which their enforcement is shrouded

lessens the moral validity of professional ethics codes So

does the fact that their customers ~ their clients and

patients ~ are excluded from the process There are many lessons which can be drawn from them, and their long history; but if they are to be accepted as truly ethical,

they need to open those closed doors to share their

benefits with the rest of the world, and allow their

customers to influence the development and enforcement

of the codes

Public sector ethics

Everything that has been said so far about companies can equally apply to the public sector

Government departments, local authorities, hospitals and schools are increasingly similar in form to busines: even though their primary goals are different The

importation of a business culture has in many cases

exacerbated confusion about how to behave Civil

servants ~ many of whom knew few business people and

little about how business operates - were suddenly told to behave like business people, with little support and

training as to what that meant Some assumed that

business was less ethical than the public sector, and that they were being freed to behave less ethically than before

In one major privatised industry, there was a significant

S,

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jump in small thefts and frauds in the first couple of years after privatisation

Accountability has also taken centre stage in public discussions of public sector ethics The rise of a new

generation of appointed quangos, particularly in health,

has raised important questions about precisely how those sitting on boards should behave