EffectiveCorporateCodesofEthics:PerceptionsofCodeUsersMarkS.SchwartzABSTRACT.
The study examines employee, mana-gerial, and ethics ofcer
perceptions regarding theircompanies codes of ethics. The study
moves beyondexamining the mere existence of a code of ethics
toconsider the role that code content and code process(i.e.
creation, implementation, and administration)might playwithrespect
totheeffectiveness of codes ininuencing behavior. Fifty-seven
in-depth, semi-struc-tured interviews of employees, managers, and
ethicsofcers were conducted at four large Canadian com-panies. The
factors viewed by respondents to beimportant with respect to code
effectiveness include:provisions of examples; readability; tone;
relevance;realism; senior management support; training;
rein-forcement; living up to standards; reporting require-ment;
anonymous phone line; communicatingviolations; and enforcement. The
factors found to
bepotentiallyimportantinclude:justicationforprovisions;employeeinvolvement;
andsign-off requirements. Fac-tors found not tobe important
include: objectives forthe code; prior distribution; testing; and
relating onesperformancereviewtocompliancewiththecode.KEYWORDS:
behavior, codes, content, effectiveness,ethics,
processIntroductionCompanies are increasingly being pushed
towardsadopting a written document, typically referred to
asacodeofethics.Forexample,intheU.S.,underthe Federal Sentencing
Guidelines for Organizations(1991), companies can have their
sentences miti-gated if they can demonstrate that they had
aneffective compliance program in place prior to theoffence. Oneof
theelements of
aneffectivecom-plianceprogramarecompliancestandards,whicharereasonablycapableof
reducingtheprospectofcriminal activity (UnitedStates
SentencingCom-mission, 1991). Compliance standards
havebecomecommonlyunderstoodtorefertoacodeofethics. While referring
to the Federal SentencingGuidelines minimumrequirements for
aneffectivecomplianceprogram, Chancellor WilliamT. AllenoftheU.S.
CourtofChanceryof Delaware, inthecase Re: Caremark International
(1996), held thatmembers of boards of directors
couldbeheldper-sonally liable for failing to properly monitor the
legalandethicalbehavioroftheircompaniesemployees.The case implied
that directors should at a
minimumensurethattheircompaniespossessacodeofethicsas part of
aneffectivecomplianceprogram(Grun-feld,2002).In addition, recent
corporate scandals, such asEnron, WorldCom, Adelphia,
TycoInternational,and Qwest, have led to legislative
developmentssuch as the SarbanesOxley Act (2002),
whichrequirespubliclyheldcompaniestodisclose(e.g.inits annual
report) whether ornot thecompanyhasadoptedacodeof ethics for its
principal executiveofcer,nancialofcer,principalaccountingofceror
controller, or persons performing similar func-tions, and if not,
the reasons why not. Similarly,proposed listing requirements for
the NewYorkStock Exchange (2002) and the Nasdaq stock market(2002)
require companies toadopt anddisclose iftheypossess a codeof
ethics.
Basedontheabovedevelopments,astrongcasecanbemadethatcodesofethics,whilenotanexplicitlegalrequirementforall
companies, have virtually become legallyMarkS.SchwartzisAssistant
Professorof businessethicsandbusinesslawat
YorkUniversity(Toronto,Canada).Previ-ouslyhewas lecturer of
business ethics intheLegal StudiesDepartment at The WhartonSchool,
Universityof Penn-sylvania.HereceivedhisPh.D.fromtheSchulichSchool
ofBusiness, YorkUniversityin1999. His researchinterestsinclude
corporate ethics programs, corporate social
responsi-bility,andsocial investment.Journal of BusinessEthics 55:
323343, 2004.2004KluwerAcademicPublishers.
PrintedintheNetherlands.required, at least for U.S. public
companies(Grunfeld,2002).With all of the current activity promoting
theadoptionof codes of ethics, thereappears tobeanimplicit
assumptionamonglegislators, governmentregulators, and the boards of
the various stockexchangesthatcodesofethicsareapotential
meanstoinuence corporate andemployee behavior. Inother words,
companies should be required
toexpendresourcestodevelopandimplementacodeofethicsinordertoreducethechanceofimproperconductbytheiragents.Butisthisinfactthecase?Docodesreallymakeadifferencewhenitcomestobehavior?Ifso,
underwhatcircumstances?Thepropositionthat codesmight
makeadiffer-encewouldappear tomakeintuitivesense, partic-ularly in
light of the WorldCom scandal. At the timeof its scandal,
WorldComdidnot posess acodeofethics. AccordingtoWorldComs Boardof
Direc-tors Investigative Report, the only mention
ofethicswascontainedinasectioninWorldComsEmployee Handbook that
simply stated that fraudanddishonestywouldnot betolerated(WorldCom,
2003, p. 289). When a draft version ofa formal code of ethics was
presented to BernieEbbers (the former CEO) for his approval before
thefraud was discovered in 2001, his response wasreportedly that
the code of ethics was a colossalwaste of time (WorldCom, 2003, p.
289). Fol-lowingthescandal, andas part of thenewCEOsEthics Pledge
tomakeethics anintegral part ofhow WorldCom does business, the
companyadoptedaCodeof Business Ethics intheFall of2002 (WorldCom,
2003, p. 289). Although having
acodeofethicscertainlymaynothavepreventedthescandal, it is
hardtoimaginehowethics couldbemadeanintegral
partofacompanysbusinessprac-tices without at least adopting a code
of ethics,particularlyforacompanyaslargeasWorldCom.Before one can
begin examining whether codes ofethics really do make a difference
in inuencingbehavior, some claricationis required. Acertaindegreeof
confusionremains as towhat a codeofethics evenconsists of. Codes of
ethics have alsobeen referred to as codes of conduct, codes
ofpractice, corporate credos, mission statements,
orvaluesstatements(Berenbeim,1988;Murphy,1989,1995;EthicsResourceCenter,1990a;ClarksonandDeck,
1992; LEtang, 1992; Stevens, 1992, 1994;Driscoll et al., 1995).
Numerous denitions of acode of ethics have beenprovided (Harris,
1978;Berenbeim, 1988; Pitt and Groskaufmanis, 1990;Hosmer, 1991;
Townley, 1992; Robertson andSchlegelmich, 1993; Weaver, 1993;
Stevens, 1994;Brandl andMaguire, 2002; Ferrell et al., 2002).
Areviewoftheproposeddenitionsseemstosuggestthe following general
denition: A code of ethics is awritten, distinct, andformal
document whichcon-sists of moral standards used to guide employee
and/orcorporatebehavior.The denitionincludes three components.
Therst component, moral standards tobeapplied,
hasalsobeenreferredtoas avaluesystem, aspirationalideals,
guidelines, ethical principles, norms andbe-liefs, or groundrules.
Themoral standards provideguidance to employees to understand what
behaviorsare morally acceptable or improper. The secondcomponent,
towhatortowhomdoesthestandardapply, is generallyemployee behavior
or conduct,but alsoincludes theorganizations behavior. Onemight
considerthesetwotypes of behavioras rep-resenting behavior against
or on behalf of therm, as a corporation can only truly act through
itsagents. Thethirdcomponent is that thedocumentitself is written,
distinct (i.e. stand-alone), and formal(i.e.explicit).Several
theoristssuggestthatethical behaviorcanbeinuencedbyacodeof ethics,
inadditiontoanumber of other individual factors, suchas
gender,nationality/culture,age,religion,typeofeducation,type of
employment, years of employment, andpersonality, beliefs andvalues,
as well as situationalfactors, suchas peer groupinuence,
topmanage-ment inuence, rewards and sanctions, type
ofethicaldecision,organizationsize,andindustrytype(FordandRichardson,
1994). Interms of therolecodes of ethics might
playininuencingbehavior,Ferrell andGresham(1985) as part of their
con-tingencymodel suggest that: Ethics relatedcor-porate policy
will inuence ethical/unethicalbehavior Corporate policyandcodes of
ethicsthat areenforcedwill producethehighest level
ofcompliancetoestablishedethical standards (1985,p. 93).
Trevino(1986) introduces aperson-situa-tioninteractionist model of
ethical decision-mak-ing. She includes codes as part of the
corporateculture variable. She states that: Another
wayorganizations attempt to guide members ethical324
MarkS.Schwartzbehavior is by developing formal codes of
ethicalconduct (1986, p. 613). Brass et al. (1998) developa social
network model of unethical behavior.One of the organizations
factors inuencingbehaviorincludescodesofconduct,whichcansignicantly
decrease the prevalence of unethicalbehaviorinorganizational
contexts(1998,p. 15).Based on the theoretical models, a number
ofstudieshavebeenconductedinanattempttoverifyif codes are in fact a
variable which
inuencebehavior.Asopposedtobeingconclusivehowever,theresults of
thestudies areclearlymixed. Severalstudies (10/22) havefoundthat
codes areeffective(e.g. HegartyandSims, 1979;
LaczniakandInder-rieden,1987;FerrellandSkinner,1988;Richetal.,1990;
Singhapakdi andVitell, 1990; Kitson, 1996;McCabe et al., 1996;
Pierce and Henry, 1996;Adams et al., 2001; Somers, 2001). Other
studies (2/22) have foundthat the relationshipis weak(e.g.Murphy et
al., 1992; Weeks and Nantel, 1992),while numerous other studies
(10/22) have
foundthatthereisnosignicantrelationshipbetweenthetwovariables (e.g.
Fordet al., 1982; Hunt et al.,1984; Chonko and Hunt, 1985; Akaah
and Riordan,1989; Callan, 1992; AllenandDavis 1993;
Badar-accoandWebb,1995;Briefetal., 1996;ClarkandLeonard, 1998;
Farrell etal., 2002).Although the above studies examine the
po-tential effect of codes, they do not provide anexplicit denition
of code effectiveness beyondinuencing behavior. For the purposes of
thisstudy, code effectiveness is dened as includingthree
components: (1) corporate agents (e.g.employees andmanagers)
behaveinamanner thatis consideredby the company tobe legal
and/orethical innature (i.e. as denedinthe code); (2)any
non-compliant behavior is reported and/oraddressed by the company
to prevent its repeti-tion; and (3) the compliant behavior (or
thereportingof non-compliant behavior) is at least inpart due to
the existence of the code itself. Anineffective code of ethics is
one that has failedtoprevent illegal orunethical behavioronthepart
ofcorporate agents that was prohibitedinthe code.Code effectiveness
can exist to different degreesandcanbe measuredamong different
hierarchicallevels of anorganization(e.g. senior management,lower
level employees, etc.), within differentdivisions (e.g. sales,
manufacturing, etc.), or be-tween different locales (e.g. head
ofce, foreignofces/plants, etc.).Buildingontheimportant
contributions of pre-viouscoderesearch,
thisstudyseekstogaingreaterinsight intothevarious characteristics
of corporatecodes of ethics andhowsuchcharacteristics mightrelate
to code effectiveness. To accomplish thisobjective, thestudy: (i)
examines several aspects ofcode content and code process beyond the
mereexistenceofacode;and(ii)focusestheexaminationfrom the
perspective of the users of codes
themselves(i.e.employees,managers,andethicsofcers).(i)CodecontentandcodeprocessWhat
the empirical studies on code effectivenessmentioned above
essentially fail to take into accountisthat themereintroductionof
acodeisonlyonepotential factor in encouraging ethical
behavior(Nijhof et al., 2003). For example, a studybytheEthics
Resource Center found that when a code wasthesoleelement of
anethics program, therewas anegativeeffect onemployeeperceptions of
ethicalbehaviorasopposedtotheexistenceofethicstrain-ingandethicsofcesinadditiontoacode(1994,p.31).
The Ethics Resource Center study suggests
thatcodes,whilenecessary,areinsufcientasameansofencouraging ethical
behavior among employees.AccordingtoAdamsetal. (2001, p. 209):
Greaterunderstanding is needed on the process by whichcorporate
ethics codes inuence employee behav-iorresearchis
alsoneededontheeffects of
char-acteristicsofthecodeofethics(emphasisadded).This study begins
to address the concerns ofAdamset
al.(2001)byexaminingwhetherthereareseveral aspects of code
development itself that gobeyondthemereexistenceof thecodethat
shouldalsobetakenintoaccount as
potentiallyrelatingtocodeeffectiveness.Anumber of commentators of
codes of ethicshave made recommendations onhowtoimprovecode
effectiveness. These recommendations (dis-cussed in greater detail
below) include the following:(1) Code content (a) provision of
examples(Murphy, 1995; Gibbs, 2003); (b)positivetone(Austin, 1961;
Harris, 1978; Ethics ResourceCenter, 1990a); RaibornandPayne,
1990); (c)EffectiveCorporateCodesof Ethics
325appropriatelength(TrevinoandNelson,1995);(d) relevance (Pitt and
Groskaufmanis, 1990;Brandl and Maguire, 2002); and (e)
realism(Harris, 1978; Murphy, 1988; Ethics ResourceCenter,
1990a);(2) Code creation (a) acceptable objectives(Trevino et al.,
1999; Byrne, 2002); (b) em-ployee involvement (Molander, 1987;
Arndt,1990; Sweeney and Siers, 1990; Ethics ResourceCenter, 1990a;
Montoya and Richard, 1994;Messmer,2003);(3)
Codeimplementation(a)seniormanagementsupport(EthicsResourceCenter,
1990a; Mon-toyaandRichard, 1994; Jordan, 1995; TrevinoandNelson,
1995; Brandl andMaguire, 2002);(b) sign-off (Pitt and
Groskaufmanis, 1990; Lane,1991; Gibbs, 2003); (c)training(Benson,
1989;Gellerman, 1989; Pitt and Groskaufmanis,1990; Lane, 1991;
Gibbs, 2003; Messmer,
2003);(d)reinforcement(TrevinoandNelson,1995);(4)
Codeadministration(a)livinguptostandards(Trevino and Nelson, 1995;
Gibbs, 2003; Mess-mer, 2003) (b) reporting violations (Gibbs,
2003;Messmer, 2003); (c) anonymous phone lines(Gellerman, 1989);
(d) enforcement (Pitt
andGroskaufmanis,1990;SweeneyandSiers,1990;Gibbs, 2003; Messmer,
2003); (e) connecting thecode to performance reviews (Pitt and
Gros-kaufmanis, 1990; Raiborn and Payne,
1990).Theprimarydeciencyintherecommendationsthat have been made
however is that they do not
ap-peartobebasedonanyempiricalstudies.Suchrec-ommendationsappeartobesupportedmoreonthebasis
of personal intuition or experience as opposed toany quantitative
or qualitative research. According toAdams et al. (2001, p. 202):
organizations havehad to rely primarily on anecdotal evidence and
pre-scriptive recommendations for assessing the
effec-tivenessofthecodestheyhave.Thereappearstobelittle empirical
evidence to support or refute the oftenconicting recommendations
made in the literature.(ii)Perceptionsfromusersof
codesInadditiontofocusingoncodecontent andpro-cess, this study
seeks to investigate whether therecommendations that have been made
regardingcodeeffectivenessareinfactsupportedbytheusersof the codes
themselves. Several business
ethicsresearchersemphasizetheimportanceofidentifyingemployeeperceptionsinrelationtocodesofethics.Badaracco
and Webb (1995, p. 8) indicate theimportance of getting the
viewfromthe tren-ches (i.e. youngmanagers) as opposedtomerelyviews
fromthe generals headquarters with re-specttotheeffectivenessof
codesof ethics. Aspartof their assessment of ethics programs,
Trevinoetal. (1999, p. 145) suggest that employee percep-tions
matter and that: Employees can tell acompany a great deal about
whats going onWotruba et al. (2001, p. 62) suggest that webelieveit
is timetoshift attentionfromthecodesthemselves
tothepersonswhosebehavioristhefocus of these codes. Similar to
Badaracco andWebb(1995), Trevinoet al. (1999),
andWotrubaetal.(2001),thisstudyisbasedonthepremisethatcode users
perceptions are useful and should betaken into account when
assessing what mightmakecodes effective.
Theresearchquestiontobeexplored thenbecomes: according tothe
percep-tions of corporatemanagers, employees, andethicsofcers, what
aspects of code content and codeprocess might
relatetotheeffectiveness of corpo-ratecodes of ethics?
Figure1belowillustrates
therelationshipbetweenemployeeperceptionsoncodecontent andprocess
andcodeeffectiveness.What must be clear fromthe outset is that the
studydoesnotattempttodirectlymeasurecodeeffective-ness. Instead,
the study presumes that the views of theusers of codes should be
considered relevant inassessing the potential effectiveness of
codes of ethics,similar to therelevance of obtaining employee
feed-backonorganizational practices or receivingcon-sumer feedback
on a companys products or services.After discussing the methodology
used for thestudy, the paper will examine aspects of
codeCodeContentCodeProcessCode Effectiveness(Legal andEthical
Behavior)EmployeePerceptions of Code Figure1.
Employeeperceptionsandcodeeffectiveness.326 MarkS.Schwartzcontent
and code process to explore whether there isany support to their
being related to code effec-tiveness. Thepaperconcludes
withpractical impli-cations for corporations that currently possess
orintendtodevelopacodeofethics.MethodologyTo explore the research
question, the study consistedof fty-sevenin-depth,
semi-structuredinterviewsof employees, managers, andethics ofcers
at fourlarge Canadian companies. The selection ofrespondents was
randomfor three of four of thecompanies, while a snow ball
technique was used forthe fourth company. Of those contacted, 92%
agreedto be interviewed. A total of 58% of the respondentswere male
(33/57), while 42% were female (24/57).In terms of organizational
level, 60% of therespondents were managers (34/57), while
40%werenon-managers(23/57).Ofthemanagers,15%(5/34)labeledthemselvesseniormanagers.Sevenofthoseinterviewedwereethicsofcers,meaningthattheywereresponsiblefor
theadministrationof thecode. The types of positions of the
non-managementrespondents included: telephone operators,
salesrepresentatives, bank tellers, administrative
assistants,andassemblerson theproductionline. The rangeoftime
working for the company ranged from3months to33years,
withanaverageof 13.4yearsspent at thecompany. Theresearcher
individuallyinterviewedall of the participants, with51of
theinterviews being tapedandtranscribed. Upontherequest of several
respondents, sixinterviews werenot taped, althoughextensivenotes
weretakenoftheir responses. The average length of the interviewswas
65minutes. Respondents answers werecodedusing qualitative
researchsoftware (i.e. NUDIST)andthenanalyzedaccordingtothevarious
catego-riesofcodedevelopment.Thecompanies represent avarietyof
industries:telecommunications; banking; manufacturing;
hightechnology. They are among Canadas largestcompanies, each
earning billions in revenues andhaving tens of thousands of
employees. Three ofthe four companies conduct multi-national
activi-ties. Oneof thecompanies was thesubsidiaryof aU.S. parent
company. The companies fall withinthe upper echelon with respect to
having well-developed ethics programs in relation to otherCanadian
companies, each possessing an ethicsofcer as well as conducting
training on theircodes, whereas most Canadian companies do
notengageinethics training(only39%) nor posess anethics ofcer (only
42%) (KPMG, 2000). Theselectionof companies withextensive ethics
pro-grams was intentional, as it was presumed thatemployee
awareness of their companys code andthecodes potential impact
onbehavior wouldbemorelikelyincompanies withtrainingandethicsofcers
than in those without (Ethics ResourceCenter, 1994). Areviewof the
four companiescodes suggests that their orientation was
bothvalue-based and compliance-based (Paine,
1994,Trevinoetal.,1999).Eachcompanyscodeinitiallyidentieda set of
vesevencore values or prin-ciples, in addition to more detailed
provisions ofexpectedbehavior. Thelengthof thecodes
variedfrom21to65pages.Theinterview-basedmethodologywaschosentomovetheinvestigationof
codes beyondquestion-nairesintoanactual
corporatesettinginvolvingtheactual users of the code. Out of the 22
studiesaddressingthe effectiveness of codes of ethics (seeabove),
19 used a research method other thaninterviews. Atotal of 17studies
usedsurveyques-tionnaires, while two used an in-basket exercise,
andonealabexperiment.OtherthanstudiesconductedbyBadaraccoandWebb(1995),Kitson(1996),andAdams,
et al. (2001), no other study was identied
intheliteraturewhichusedin-personinterviews as
aresearchmethodologytoinvestigatecodes.As
anexploratorystudyandinorder toobtainpreliminary data on whether
content and processfactors affect code effectiveness, it has been
suggestedthat a qualitative research methodology based oninterviews
withthe actual users of codes is
moreappropriatethanquantitativemethods(Randall andGibson, 1990, p.
466; Liedtka, 1992, p. 163; Creswell1994, p. 146).
BadaraccoandWebbinterview30recent Harvard MBA graduates for their
views on theusefulness of corporateethics programs. Theystate(1995,
p. 25) webelievethat therearemanyimportant studies yet tobe done
that would be variantsof thisone.
Thesewouldrelyuponin-depthinter-views rather than questionnaires,
and they wouldexamine business ethics from the viewpoint of
peopleatlowerlevelsofanorganization.OurbeliefisthatEffectiveCorporateCodesof
Ethics 327these studies for understanding the role of
businessethics in organizations and for making it more effec-tive
could prove quite signicant. In addition,
thestudyalsoincludedforthersttimethosewhoareresponsible for the
administration of codes, the
ethicsofcers.FindingsanddiscussionCodecontentInterms of
codecontent, several aspects wereex-ploredtodeterminewhether
respondents hadanyconcerns, whichcouldultimatelyimpact
theeffec-tiveness of the code in inuencing behavior.Respondents
were asked questions regarding theimportanceof thefollowing: (a)
thejusticationforthe subject matter in their codes; (b) the
provision ofexamples; (c)thetoneof thecode(i.e. negativelan-guage
such as dont do x versus positive
oraspirationallanguagesuchasdoyortrytodoy);(d) the length of the
code; (e) the relevancy of thecode, and (f) the realismof the codes
expectedbehaviormatters.(a) Justication. Although several code
researchershaveexaminedwhichissues aremoreprevalent incodes
andwhichones are missing(Chatov, 1980;White and Montgomery, 1980;
Cressey and Moore,1983;SandersonandVarner,1984;Mathews,1987;Hite et
al. 1988; Ethics Resource Center,
1990b;LefebvreandSingh,1992;Berenbeim,1999;FarrellandCobbin, 2000;
Kapstein, 2004), what has notbeen sufciently examined is whether
employeesviews of theircodes content canaffect
theirdesiretocomplywiththecode. Just as thedesireof
citi-zenstoobeythelawmightbeaffectedbywhetheronebelieves thelaw
isjustied (Perry, 2002)or thata societal norm exists tosupport the
legislation(McAdams, 1997), the same may be the case forexpected
behavior as outlined in a corporationscodeof ethics.
Toexaminethispossibility, respon-dents were asked whether they
believed that thecontent (i.e. subject matter) of their codes
couldhave an impact on the codes effectiveness.Although the vast
majority of respondents
agreedwithorhadnoconcernswiththeircodescontent,and thus did not
believe that the content wouldimpact codeeffectiveness,
therewereafewprovi-sions that didcause some concern. Several
provi-sions were perceived by respondents to
beunjustiedonthebasisofbeingtoooverbearingorunfair,
implyingthattheseprovisionswouldhaveagreaterlikelihoodof
notbeingfollowed.Inventions. For example, provisions
dealingwithinventions, and the requirement of employees to
handoveranyinventions madetothecompany, evenifthey were developed
outside of normal workinghours, was perceived as being unduly
unfair:I might have a bit of a problem with the sectionthat talks
about patents and copyrights, if you come upwith an invention on
your personal time that
[thecompany]saysthatitwouldclaim,Idontagreewiththat.Ifitissomethingthatyoudoanditissomethingon
your own, it is not work related, but it turns out tobe an
invention I dont think [the company] shouldhave the right totake
the patent for that [emphasisadded].It appears that
suchaprovisionpotentiallyextendsthe codes reach or coverage beyond
what is deemedtobeacceptable, byenteringwhat might
becon-sideredtheprivateaffairsofanemployee.Sexual Harassment.
Despite the renewed
vigorwithwhichcompaniesarenowaddressingtheissueof sexual
harassment, several respondents felt
thattheircodeshadgonetoofar:sexuallyharassingpeople
Imean,ifyoucameuptomeandput your handonmyshoulder, I
mean,comeongivemeabreak,am[I]goingtosay,Dontdo that or You are
harassing me? Some
womenwould,itisstupid[emphasisadded].Environment. Several
respondents raised an issue interms of the fairness for being
disciplinedfor
notcomplyingwithenvironmentalresponsibilitiesassetoutintheircodes:All
I know is that its part of the code [and] I think itsa good
practice, but I dont know if it should be part
ofthecode.LikeareyoutellingmeifIdontrecycle,Iminbreachofthecode?[emphasisadded].Thefollowingrespondentfocusedontheappro-priateness
of certain punishment for a potentialcodeviolation: Should you lose
your job if you are
caughtthrowinggarbageontheroad?[emphasisadded].328
MarkS.SchwartzOther provisions that raised concerns for
therespondentsincludedopeningupasecondbusiness,requirements to
donate ones time to volunteeractivities, or
theinabilitytomakefacilitatingpay-ments.Onemightspeculatethatanemployeespotentialdisagreementwiththecodescontentduetoaper-ceivedlackof
justicationmight diminishthepo-tential that the employee
wouldcomplywiththecode. It alsoappears tobethe casethat for
thoseprovisions that arenot clearlyjustiable, sufcientjustication
would be required before employeeswould accept and comply with the
expected behavior.(b) Provisionof examples.
Accordingtorespondents,theprovisionof
exampleseitherinthecodedocu-ment itself or at least during the
training on the codewas a very important means by which to
facilitate anemployees understandingof the codes
provisionsandultimatelycodeeffectiveness. Thisndingsup-ports what
is discussed in the literature on theimportanceof providingexamples
(Murphy,
1995,p.731;Gibbs,2003,p.40).Considerthefollowingstatementsbyrespondents:I
think [the code] does a good job, because itactuallygives yousome
examples as tohowtheissue may relateto employees It makes it
extremelydifcult for an employee not to understand this.
Ithinkitisgreat.I thought actually the examples really
broughtthings home.I thought oneof the best things
theydidwastoputtheexamplesin.The respondents made it clear that a
code (ortraining based on the code) that lacks
relevantexampleswouldmostlikelyremainineffective.(c) Negativetone.
One of the most serious chargesagainst codes by code commentators
is that theyare often too negative in tone, a series of thoushalt
nots which does little to inspire employeestodotheright
thing(Austin, 1961; Harris, 1978,p. 315; Ethics Resource Center,
1990a, p. III-2;Raibornand Payne, 1990, p. 883). Inthis sense,the
code is used as more of a controlling, top-down instrument, and may
ultimately be lesseffective in inuencing behavior in a
positivefashion. Todate, theseviews arenot supportedbyanydata.
Toassess whether employees actuallyfeltthisway,
therespondentswereaskedwhethertheybelieved their codes to be too
negative in tone.Not only did most employees respond that
theircodes werenot toonegative, but that codes shouldbe negative in
tone. This nding appears to con-tradict what onetends
tondintheliteratureoncodes. Respondents expected their codes to
benegative inorder tobe effective, inother words,to have the
ability to clearly identify whatbehavior is expectedor
prohibited.One of the reasons suggested is that a code writtenin a
negative tone provides clearer expectations
thanonewritteninapositivefashion:No, I think it should be negative
Because its clearer tounderstand. Andthats what I
meanbytheblackandwhiteissue.Ifthereweregrayissues peoplewouldtake
that and misconstrue it and they could go back andsay, well it
doesnt really say yes or no, do it or dont. Ithinkyoudjust
beopeningupyourself for a lot ofmisinterpretation but if its clear
and concise, nega-tive or not, it doesnt matter, it needs to be
very clear No, I dont nd it offensive at all [emphasis
added].Aswell, several respondentsstatedthat thepurposeof a code is
not to inspire, and therefore need not bepositive in tone: Well, it
is not meant to be apump-me-upbookletOneof thereasons codes that
are writtenwithnegative language (e.g. dont do x) have
beencriticizedinthe literature is because it is believedthat
activities that are not expressly prohibited by thecode may be seen
by employees as being
permissible(Harris,1978,pp.314315;Murphy,1995,p.730).What the
studyfound, however, was that a codewritten in positive or
inspirational language (e.g. trytodox) might infact
provideemployees
withanevengreateropportunitytoengageininappropriateactivity.
Inother words, positive-tonedcodes maycreate even more loopholes
for employees thannegative-tonedcodes:No, because I thinkif
yousaytry or strive, thenpeoplethinktheyhaveabit of anoptionIt
gives themtoomanyoptionstoget out of thesituationandsay,Ohwell,
Itriedbut[emphasisadded].ifIdonttell yousomeof
thethingsyoucantdo,youwouldassumeyoucan[emphasisadded].EffectiveCorporateCodesof
Ethics 329Oneexampleinparticular helps todemonstratethepotential
for employees tomisinterpret a codethat does not explicitly
prohibit an activity in anegative fashion. One of the companys
codes beginsitsacceptanceof giftssectionby statingthatNotall gifts
are unacceptable. It also states that
thetimingandnatureofthegiftareimportantcircum-stancestoconsider,
andthatitisimportanttocon-sideranygift asapotential conictof
interest. Thecoderefers employees tothecompanys morede-tailedconict
of interest policy that uponexami-nation explicitly prohibits cash
gifts. Despite this,several respondents includinga
bankbranchman-ager believed that acceptance of cash gifts
atChristmas time from a wealthy customer wasacceptable according to
the code. This exampleappears tosuggest that a codewhichis
writteninpositiveoropen-endedlanguage(e.g. not all
giftsareunacceptable)versusclearandspecicnegativelanguage (e.g. do
not accept cash gifts), has agreater potential
tobemisinterpretedina mannerwhichpermitsaninappropriateactivity.(d)
Length. Another possible criticism of codes is thatwhenthedocuments
aretoolengthy, theyrequiretoo much time to be properly read, and on
that basisalone code effectiveness could be impacted (Trevinoand
Nelson, 1995; p. 246). The company codes
usedinthisstudydidvaryinlength, asfollows:CompanyOne: 55
PagesCompanyTwo: 21 PagesCompanyThree: 65 PagesCompanyFour: 25
PagesMost respondents felt that their codes
werenottoolengthy.Afewdidndthemtoolengthybasedon their current time
constraints. For those that weredissuaded fromreading their codes
due to theirlength,several stillbelieved that thecodes
couldnotbemadeanymoreconcise, duetotheneedtobeusedas a reference
document. This
positioncon-formswiththatfoundintheliterature:Codesmustconsist of
enoughdetail toprovidesufcient guid-anceon expected behavior(Pitt
andGroskaufmanis,1990, p. 1638; Laczniak and Murphy, 1991, p.
269).Afewrespondents didbelievetheir codes
weretoolengthywhichcoulddissuadeothersfromevenreadingthedocument:wedonthaveenoughtime.if
it was thicker, I wouldnt even sit down and
readit,Idonthavetimeforthat.Iwasbakingcookiesandittookmelikefourtraysofcookiestoreadthat
Anumber of other respondents noted that al-though their codes might
be considered lengthy, thepurposeof thedocument was toact as
areferenceandthereforetheentiredocumentneednotbereadatonetime:Well,
youdont just goandreadthe whole thing.I dont think it really could
be shorter because Ithinkwhat happens is that some people get
thisandtheyreadit andtheymust goquickly throughit, andtheyput it
away. Soit is thereas areferenceif
theyneedit.Eventhoserespondentswhobelievedtheircodestobe lengthy
felt that it would be impossible toshortenthem:No, Imean,
howcanyoushortenit?Yeah, maybe. Obviously I havent read the
wholething which may mean that its too lengthy. But on theother
handImnot suretheycanget awaywithanythingotherthanthat.There
thusappears to be a certain ideal length forcorporatecodes,
beyondwhichthecodebecomesoverlycumbersomeandless
likelytobereadandthereforecompliedwith.(e) Relevance. Another
concernis whether compa-nies areprovidingtheir employees withcodes
thataddress activities that aredeemedtoberelevant
totheemployeeinquestion(Pitt andGroskaufmanis,1990,p. 1639;Brandl
andMaguire, 2002). The vastmajority of respondents indicatedthat
their codeswere relevant to their activities. Respondents
didsuggest that only those provisions that are clearlyrelevant tend
to be read and remembered whichsuggestsapotential
impactoneffectiveness:I denitely did not pay a lot of attention to
itbecause I didnt really need it in my everyday life, rightnow. You
knowthere are some things that youoverlookbecauseit is not
pertainingtowhat evolvesaroundyounow.330 MarkS.SchwartzThey will
remember bits and pieces, whatever happenstoberelevanttothem.This
factormaybecomemoresignicant assev-eral U.S. companies may choose
tosimply adoptgenericcodes of ethics tocomplywiththeSarban-nesOxley
Act as opposed to developing a code that ismore directly related to
the nature of its business andtheactivitiesofitsemployees.(f)
Realistic. If companies are expecting theiremployeesto engage in
behavior which isperceivedby employees to be unrealistic or
unattainable, manysuggest that the code has the potential tolose
itslegitimacy(Harris, 1978, p. 312; Murphy, 1988,
p.909;EthicsResourceCenter,1990a,p.V-1).Alloftherespondents
believedthat their codes werenotplacing unrealistic demands or
expectations uponthem. This belief appears tobe
conrmedbytherespondentsstatingthatmostifnotall of
theircodesaresimplycommonsenseasindicatedabove:thereis
nothingintheretellingthemtodosome-thingthat theycant do.
Everythingis intheir clenches,theycandoit[emphasisadded].Interms of
code content, the studyfoundthatemployees: sometimes require
justication forcertain code provisions that do not make
initialsense; prefer examples that facilitate understandingof the
codes provisions; desire codes that arenegative intone
(inadditiontopositive) topro-videgreater clarityinterms of what is
appropriatebehavior; and favor codes that are of appropriatelength,
are relevant, andare
realistic.Codecreationprocess(a)Codeobjectives. One of the rst
issues in the crea-tionprocessiswhatemployeesthinkthereasonsarewhy
the company has a code, and whether such viewsinuence the potential
impact of the code
overbehavior.Byrne(2002)arguesthat:Codesofbusi-ness behavior,
however arrived at, function with-out up-front rational
justication. One study foundthat a key factor in the success or
failure of an ethics/compliance programis employees perceptions
ofmanagements motivation for the establishment of theprogramitself
(Trevino et al., 1999). This study,however, did not nd support for
such a position.When the respondents were asked why theythought
theircompanyhadacodeof ethics, sevendifferent objectives or reasons
emerged. The differentobjectives included: (1) protecting the
companysreputationorimage; (2)improvingthebottomlineforthecompany;
(3)establishingbehavioral expec-tations for employees; (4)
enhancing public
relations;(5)demonstratingcorporatecitizenship;(6)protect-ing
employees (e.g. allowing themtoknowtheirrights); (7)duetolegal
requirements. Afewobser-vations are noteworthy. Many respondents
noted theconnection between several of the above reasons andthe
ultimate improvement of the bottom line for thecompany.
Althoughseveral respondents mentionedpublicrelations as
anobjective,
theyalsoindicatedthattheircompaniesdonotwavethecodeintheair
tocustomers orthepublic. Instead, thepublicrelations impact is
based on the code leading toappropriateemployeebehavior that is
observedbycustomers orthepublic. As well, despiteCanadianlaw not
requiring companies to enact a code,
severalrespondentswereunderthatimpression.Respondents were then
asked whether theirperceptions of the companys objectives
inenact-ing a code might affect whether they or otherswould comply
with the code. None of therespondents raised any objections to the
entirerange of possible code objectives, suggesting thatthe
perceivedobjectives of employees donot ap-pear to be a factor that
might inuence theeffectiveness of codes.(b) Employee involvement.
It has alsobeensuggestedthat employees shouldbe
directlyinvolvedinthecodecreationprocess(Messmer, 2003, p. 14).
Oneof the reasons for this suggestionis basedonthepractical
consequenceof
enhancingtheemployeessenseofownershipoverthecode(Molander,1987,p.
628; Arndt, 1990; Sweeney and Siers, 1990, p.
34;EthicsResourceCenter, 1990a, p. II-3; Montoyaand Richard, 1994,
p. 714). The study examined thisissuebyaskingtherespondents whether
their par-ticipationortheparticipationofotheremployeesinthe
creation of the code was an issue for them in
anyrespect.EffectiveCorporateCodesof Ethics 331When asked whether
it is important to know
thatemployeeswereinvolvedinthecreationorrevisionof the code,
approximately two-thirds of respon-dentsindicated
thatitdidnotmatterto them,whileonly one-third felt that it was
important. Forexample, one respondent stated: No. As long as
itsapplicable tome, I meanI basicallydont carewhowritesit
[emphasisadded].Themajorityof respondents felt that their
par-ticipation in the creation of the code would
notnecessarilyincreasebuy-inforthecode.Whattheirparticipation would
do, however, is increase thechances that thecodes content
wouldberelevantandrealistic.Again,thisndingseemstocontradictthe
literature discussingthe necessity of
employeeinvolvementinthecodecreationprocessinrelationto enhancing
code buy-in, at least for the
majorityofrespondents.CodeimplementationprocessThestudyexploredrespondentsviewswithrespectto
several aspects of the code implementation processwhich might
inuence the codes effectiveness: (a) thetiming of the codes
distribution; (b) senior manage-ment support; (c) the sign-off
process; (d) training; (e)reinforcement; and (f) testing on the
code.(a) Distributingcode before employment commences. Al-though
not discussed in the literature on codes,respondents
wereaskedwhether thetimingof thedistribution of thecode (i.e.prior
to employment
asopposedtoafterbeinghired)wasofanyconcerntothem.Althoughitdidnotappeartobemuchofanissue,
respondents generally believed that it would
bemoreappropriatetodistributethecodepriortothecommencement of ones
employment, just
incasetherewassomethinginthecodewhichonewouldnotbeabletolivewith:Yeah,
I think so. Just to give a person an understandingyou know of the
corporations values. If theressomething in there I dont agree with,
then I guess
Iwouldnttakethejoborsomethinglikethat.Otheremployeesdidnot
believethat givingoutthe code prior to employment was an
importantissue due to the minimal chance an employee wouldobject
toits content: I dont seethat wouldbeamajor problem because there
is nothing in there
thatisreallydramatic;itisallprettybasic,humanrights,commonsense,ethical
stuff.(b) Senior management support. One of the
factorsaffectingcodeeffectiveness mentionedintheliter-ature is the
necessity of employees knowing thatsenior management supports their
companys code(Ethics ResourceCenter, 1990a, p. II-1;
MontoyaandRichard, 1994, p. 714; Jordan, 1995, p. 305;Trevino and
Nelson, 1995, p. 252; Brandl andMaguire, 2002). The respondents
conrmed theimportanceof perceivingsenior management sup-port.
Although several employees felt that their ownsenior management
supported the code, when
askedtoprovideevidence,manywereunablehowevertoidentify specic
examples. Some of the examplesemployees wereabletopoint
toincludedhearingmanagementspeakaboutthecode,seeingmanagerslead by
example, and discovering that managersknowand understand the code.
For example, allrespondents believed it was a good idea to see a
letterfromtheCEO:heisendorsingit.Heissayingthatyeah,Ibuyintothisconcept
Iamboundbythesamerulesyouare.(c)Sign-off process. Thereisgeneral
consensusintheliteraturethatinorderforcodestobeeffectivetheymust be
accompanied with a sign-off provisionwhereby employees acknowledge
that they haveread, understood, and/or compliedwiththe code(Pitt
and Groskaufmanis, 1990, p. 24; Lane, 1991, p.31; Gibbs, 2003, p.
41), althoughothers raisecon-cerns that possiblecynical views
amongemployeesmightdevelop(TrevinoandNelson,1995,p.247).Three of
the four companies state in their codes thatemployees are
requiredtoreviewthe code eitherannuallyorperiodically.There were a
number of respondents whopointedout someof theirconcernswithrespect
tothe sign-off procedure. The concerns include: (i)general
hesitation; (ii) therequest of unions not tosign; (iii) lackof
utility; (iv) reects lackof trust;and (v) suggests pushiness on the
part of theircompany.Oneconcernrelatedtoareectionof
alackoftrustorexcessivepaternalism:332 MarkS.Schwartzif my manager
wanted to read through it with me, Iwouldbesomewhat insulted,
becauseI wouldthinkcomeon,
havealittlebitmorefaithinme.Intermsofpushinessonerespondentindicated:Ifeel
handingout thebooklet isne. Idont feelthat
theyneedtohavepeoplesignacopythough. Imean,I thinkthatsbeinga
littlepushy.I thinkjustthefactthattheyhandout thebooklet
topeopleIthinkthats goodenough.
Theyshouldnotneedtosignsomethingtosaytheyvereadit[emphasisadded].Other
respondents suggested that requiringemployees tosign-off onthe code
is a goodideaprimarilybecause it wouldincrease awareness andprovide
anincentive toread the document. Sev-eral respondents indicated
that it was importantthat their managers appeared to take the
annualsign-off process seriouslyinorderforthemtotakeit seriously.
As one respondent noted however,having a manager take you through
the processdoes not necessarilyguaranteeemployeeinterest inthe
code:really, inall honesty, whenthemanager is sittinghere reading
all that stuff, you are probably thinking,
IwonderwhatIamgoingtobuyforsuppertonight?Althoughingeneralthesign-offprocessappearedto
be acceptable by the respondents, there were still
anumberofconcernsraisedregardingtheprocedure.The data indicates
that employees must perceive thatthe sign-off process is more about
enhancingawareness rather thanamechanismthat is foundedonalackof
trust betweenemployerandemployeein order for the sign-off process
to serve a con-structivepurpose.(d) Training. All code commentators
concur thatwithoutsufcienttraining, codesremainineffectivein
inuencing behavior (Benson, 1989, p. 318;Gellerman, 1989, p. 77;
Pitt and Groskaufmanis,1990,p.24;Lane,1991, p.131; Gibbs,2003,
p.40;Messmer, 2003, p. 13). The U.S. Federal SentencingGuidelines
includes effectively communicating thestandards toall employees
(e.g. training) as oneoftheelementsof
aneffectivecomplianceprogram(UnitedStatesSentencingCommission,1991).Thestudyfoundthat
althoughtrainingwasper-ceivedpositively by most of the respondents,
toomuchtrainingcouldbeperceivedbyemployees tobeawasteof
timeandmoney, whichmayreducethelegitimacyofthecode.Several
respondents
notedthevalueintraining.Essentially,trainingsessionsprovidetheexplanationrequired
for employees to become aware of thecodes usefulness, orat least
toindicatetheimpor-tancethecompanyattachedtothecode:[The training
sessions] are howyou make it real toeveryoneby showing thembacking
up a book.Anyonecancreateabook, bigdeal. Youbackit
upwiththesessionwhereyougiveexampleswhyweredoing it, why dowe have
integrity, why is this soimportant, howcan your actions impact a
[multi-milliondollar]company?[emphasisadded].like, theroomwas just
packedwithpeople. Youobviouslygot thesensethat it was veryimportant
Imean [its very rare] that we all get together like that soits
usually something quite important [emphasisadded].Other respondents
notedthat theremayalreadybe too much training, that training will
not have anyeffect onunethical individuals, that awrittendoc-ument
is sufcient, and that ethics training is
boring:Wehavegottrainingcomingoutofourears.If you have a person
thats unethical, you can put themintoaweekcourseandtheyll still
beunethical.Somecommentators suggest that
thedecisionofwhoshouldconductthetrainingmighthaveanim-pactonhowemployeesperceivethecode(TrevinoandWeaver,1995,pp.249,250).Whenaskedwhoshouldconduct
the training, approximately three-quarters of the respondents
believed that it should
beconductedin-house(i.e.bymanagersorethicsof-cers) versus
one-quarter whobelievedthat outsideconsultants were more
appropriate.There were several reasons proposed as to why
anoutsideconsultant as opposedtoamanager
shouldconducttraining.Somemanagersmaynothavetheabilitytoengageincodetraining:My
manager knows no more than I do. So I wouldrather that
apersonwhohas beentrainedandhas
acourseonthistotrainus.EffectiveCorporateCodesof Ethics 333Other
respondents were concerned whetheremployees would be open if their
manager con-ductedthetraining:Alotof
peopleareveryintimidatedbymanagement.SoI wouldhavetosay, if
youreallywantedtogetsome results, it would probably [be] better
tohavesomeone who was from the outside, just for the
overallhonestythat peoplewouldhave. Peoplearegoingtobe more honest
if it is someone who is not theirmanager becauseit couldaffect
their career or pro-motionorwhatever.Some respondents perceived
their managers aslacking the legitimacy necessary to conduct
thetraining:Isurewouldntwantmymanagerteachingethics.Idhavetogofor
theoutsideconsultant.
[Mymanager]probablycantsaytheword[ethics].Therewereseveral reasons
whythemajorityofrespondents believedthat training shouldbe
con-ductedin-house. Forexample,
managerswereper-ceivedasbetterunderstandingthecorporateculturethanconsultantsrenderingthembetterequippedtodothetraining:Whenyougettheoutsideconsultants,youalwaysgettheWhatdoyouknow?Youdontworkhere,
sortofthing.animmediatemanagercouldrespondtoaspecicquestion If it
was
anoutsideagencydeliveringit,basicallytheyarejustreadingthebook.Inaddition,
greater buy-in canbe demonstrated
andacquiredifthemanagerconductsthetraining:Management
[has]gottowalkthetalk.Ifyouasamanager cant explain it to your
employees, youre notinstillingagreatdeal of condencethatyoull
under-standitwhentheyhaveanissue.I think its more personal if its
conducted bymanagement and it also sends the message that
itssomething they believe in and theyre willing toabide by.The
respondents indicated that withrespect totraining, codes will be
more effective overall ifmanagers conduct the training as opposed
to outsideconsultants.(e) Reinforcement. Reinforcement
throughnewslet-ters, e-mails, or executivespeeches, has
beensug-gested as playing a role in code
effectiveness(TrevinoandNelson,1995,pp.248253).Thiswasconrmed by
the respondents whoindicated thatwithout constant reinforcement,
the code wouldtendtohaveonlya minimal impact onemployeebehavior.
Reinforcement appears
toallowemploy-eestoperceivetheseriousnessandimportancetheircompany
places on compliance with the code.Otherwise, the document becomes
less of a concern,andmoreeasilydisregarded:its just adocument.
Adocument doesnt
changetheculture,itdoesntchangevalues,itdoesntchangebehaviorwithout
everything else the document isjust adocument. Youneedtheconstant
education, re-education, awareness, examples and build that
examplebaseandpresentitonaregularbasis.Justputtinginadocument,no[emphasisadded].(f)
Testing. Although testing on the code has notbeenraisedinthe
literature as a factor that couldincreasecodeeffectiveness, it was
presentedtotherespondents for their perspective. Respondents
ap-pearedtohate tests ingeneral, andcertainly pre-ferred not to be
tested on their codes of ethics. Someof the issues
raisedregardingtestinginclude: howdoes onefail thetest; perceptions
of patronization;noguarantees that results of testing will relate
toonesactual
behavior;andthatthetestingprocessismerelyawasteoftime.CodeadministrationprocessTheliteratureoncodesraisesanumberofpotentialissues
with respect to code administration and itsimpact
oncodeeffectiveness. Theissues
examinedforthepurposesofthestudyincluded:(a)livinguptothecodes
standards; (b) reportingviolations ofthecode; (c) anonymous
phoneline; (d) commu-nicationof violations; (e)enforcement;
and(f)per-formancereviewsinrelationtothecode.(a) Living up
tostandards. As part of the code admin-istration process, it has
been suggested that companiesmust be seen to be acting with
integrity, that is, living334 MarkS.Schwartzup to their own
standards (Trevino and Nelson, 1995,p. 197; Gibbs, 2003, p. 41;
Messmer, 2003, p. 13).Without this general perception, the
administration ofthe code may become unattainable. Almost
everyemployee indicated that their companies appeared tobe living
up to the standards that had been set out inthe code. There were a
fewexamples, however,where this did not appear to take place in the
minds ofthe respondents and which appeared to
generatecynicism:Respect for Customers: All of a sudden, it is
notquality, it is quantity. After the old [phone] boardwent,
theygot thesemachines, its hurryup, get offthe phone, dont talk to
the customers, you donthave time It was like the customer did
notmatter anymore. That poor little guy, Mr. Smith,what time is it,
but we dont give out the time[the company] does not care about the
customeranymore money they do [care about] [thecompany] has
gottentoobig.Downsizing:Withthecodeofethics, andstuff,whatit
entailsinthere,is likeIwishtheydidnt havetocut[jobs]period.
Tomeitislikebusinessethics, likethecompanyis
sayingtoyouthesearetherules, I lovehaving you as my employee, this,
that...but the bottomline is when they have to do what they have to
do, thatisit.Discrimination and Harassment: harassment, thatswhat I
hadaproblemwithit says discriminationand harassment, race, national
or ethnic, colored,religion, age, sex, Icanttell youhowmanytimes
at[thecompany] Iwas condemnedforbeingaJew, bymanagersaswell.One
ethics ofcer discovered that the
com-panyspoliciesonexpensesforworkingoutduringbusiness trips and
drinking bottled water fromahotel mini-bar conictedwiththecodes
emphasisonhealth:Employee Health: Okaywetalkinthecodeofconduct
[about] beinghealthyandfamily, all thisstuff, andI was
inHongKonglast year andIpaidmyvedollarstogotoagymandworkoutandwhen
I got back I expensed it and it got kicked back tome expense wise
and they said, Im sorry we dont payfor gymcosts. Well thats crazy.
Ahugedisconnect onwhat wesayand[what wedo]Wealsosaidthat
wedontpayforanykindof [drinks]fromthemini-bar,well youknow, water
is abigdeal whenyougotoColombia
[emphasisadded].Accordingtotherespondents,
perceivedincon-sistencybetweenthecodeandhowthecompanyisactually
behaving appears to relate to the codespotential effectiveness.(b)
Reporting violations. Most commentators suggestthat
theabilitytoreport wrongdoingis extremelyimportant if codes are to
be effective (Gibbs, 2003, p.40;Messmer,2003,p.13).Several
researchershaveexploredtheindividual andsituational factors
thatmight inuence whether employees report
codeviolations(i.e.blowthewhistle).Someofthemoreprevalent
situational variables that have been consid-ered to affect the
decision to blowthe whistle include:theseriousness of the
violation, perceivedrespon-siveness, and the presence of others
(Miceli and Near,1988; Miceli et al., 1991; Sims and Keenan,
1998).Each of the four companies codes discussesemployees
obligations whenthey observe a codeviolation. The provisions
require employees toreport any andall code violations. The
provisionsalso indicate that failure to do so could result
indiscipline. Respondents were askedhowthey feltabout the
obligationtoreport all code violations.Despitemanyrespondents not
beingawareof thereporting obligations as stipulated by the
compa-nies codes, most respondents still believed thatemployees
should be obligated to report all vio-lations. Bynot
reportingtheviolation, onewas ineffect condoning the illicit
behavior: I thinkbynot reportingcertainthings,
thenyouarereallycondoningtheir behavior, youareanaccessorytothe
fact.Other respondents took a different positionbysuggesting that
companies may be creating
codeprovisionsthatareimpossibletoenforce:Ithinkthatitspointlesstosaywecanobligateyoutoreportwrongdoing
howare you goingtoforcemeto do it? People dont want to feel
compelled [todo]things.Theymightrebel iftheyfeel that Despite the
requirement to report code
violations,whatbecameabsolutelyclearwhenemployeeswereaskedwhether
theywouldreport violations of
thecodeisthatnotallviolationswouldimmediatelybereported. In other
words, the respondents are alreadyEffectiveCorporateCodesof Ethics
335preparednot toexplicitlycomplywiththeir codesandreport all
violations. Insomecases, evenethicsofcers indicated that they might
have difcultyreportingtheir supervisors. Instead, all
respondentsindicatedthatthedecisiontoreportviolationsde-pends.
Whenasked, What does it dependon?,several factors were revealed.
These factors included:(i)whethertheemployeehasbeenwarned;
(ii)thenature of the offence (e.g. stealing scotch tape versusa
companycomputer); (iii) whoviolatedthecode(e.g. manager, friend, or
star performer); (iv)
thecertaintyoftheoffensehavingbeencommitted;(v)the likelihoodof
actionbeingtaken; (vi) whetherother employees are aware and/or
condone the vio-lation; (vii) whether they must continue
workingalongside the violator (e.g. due to breakdown oftrust);
and(viii) whether retributionis feared(e.g.being
blacklisted).Figure2summarizes thefactors
whichinuencetherespondents decisionwhethertoreport
acodeviolation:(c) Anonymous phoneline. Thefact that
respondents(includingethicsofcers)will not automaticallyre-port
code non-compliance raises signicant issues forcompanies interms of
their codes potential effec-tiveness. One way to counter concerns
over possibleretributionis toimplement ananonymous phonelinefor
employees toreport concerns (Gellerman,1989, p. 78). TheU.S.
Federal SentencingGuide-lines includes the establishment of a
reportingchannel that protects against retribution as one of
theelements of an effective compliance program(UnitedStates
SentencingCommission, 1991). Al-most all of the respondents
believed that having sucha line served a purpose, for example:
sometimesyoudont feel
comfortabletalkingwiththepeoplearoundherewhoyougoingtoreport
[theviola-tionto] ifyou dontwant to talkto your manager?Many
respondents, however, raised concerns overabuseandactual
protectionof their anonymity. Atthesametime,
thereweresomerespondents whodidnot agreeat all withtheconcept of
ananony-mous phone line. Surprisingly, a number ofrespondents
fromeachof thefourcompanies werenot awarethat suchalineexisted.
Themajorcon-cerns were the perception of the line as a snitch
line,itspotential abuse,andthelackofactual
protectionovercondentiality.(d)Communicateviolations.
Whethercommunicatingcodeviolations toemployees
wouldimprovecodeeffectiveness is anissuethat
theliteratureoncodesdoesnotappeartohaveaddressed.Eachofthefourcompaniestendedtogotovariouslengthstocom-municate
employee code violations and the resultingdisciplinary action to
the offending employees.Overall, the respondents believed
communicatingviolations would increase the effectiveness of
thecode. A number of reasons were suggested as to howthe
publication of violations would be benecialincluding increasing
employees awareness of thecode and the fact that it is actually
being enforced bythe company. Other respondents, however,
raisedseveral concerns regarding the communication ofviolations
suchas limiting the communications toserious violations, rather
thanthosewhicharenotobviousviolations. Inaddition,
thecommunicationshouldnot disclose anynames. It mayalsoact
toprovide the opposite effect by giving employeesideas,
andmayinfact discourage employees
fromcomingforwardtoreportviolations.Otherrespon-dentsmentionedtheirconcernthatissuesoflackoftrust
areraisedwhenviolations arecommunicated.Manyrespondentsfelt that
therumormill wassuf-cienttocommunicateviolationsofthecode.Aware of
ViolationReportViolation(i) Warning was Given(ii) Serious
Violation(iii) Individual Not Friend/Star/Manager(iv) Certainty of
Offense(v) Likelihood of Action(vi) Others DontKnow/Condone(vii)
Must Continue Working With Person(viii) No Fear of
RetributionFACTORSFigure2. Factors inuencing decision to report
codeviolations.336 MarkS.Schwartz(e) Enforcement. Several
commentators have suggestedthat enforcement of thecodeis essential
toacodebeing effective (Pitt and Groskaufmanis, 1990, p.
25;SweeneyandSiers,1990,p.39,Gibbs,2003,p.40;Messmer, 2003, p. 14).
The U.S. Federal SentencingGuidelines (1991) includes consistent
enforcement asone of the elements of an effective
complianceprogram. It hasevenbeensuggestedthat theper-ception of
justice (e.g. code enforcement) can directlyinuencethemisconductof
theobserver(Trevino,1992, p. 647).
Mostrespondentsbelievedthattheircodes were in fact being
enforced:there[havebeen]thingsthat[went]on maybesomeone might get
their wrist slappedor whatever,but people were not dismissed. Now,
they aredismissing people and I think it is importantto set
thatsortof
example,youarenotgoingtogetawaywithitPeopledontgetawaywithitnow.Several
respondents stated, however, that
theydidnotbelievethecodewasbeingenforced:I mean executives also
should be following the samerules. Unfortunately, theycandowhatever
thehelltheywant,
butnooneistheretowatchthem.Idontthink[thecodes]beingenforcedatall.Management
is alsoseenbyonerespondent as
nottakingactionwithrespecttotheracistactivitiesofamanager:Thebossisracist,very.Ifyouare[thesamerace]yougetbreaks,
andifyourenot Actuallyitsbeenre-ported. Time andtime againtoupper
managementaboutthisguyandnothingsbeendone.Although the respondents
responses did
notindicatethatlackofenforcementwouldpreventthecodefromstill
havinganimpact, itclearlydoesin-creasethelevel ofcynicism:Ididnt
feel cynical, Ijust thought [thecode] was ajokecompared to what I
was seeing around me, what otheremployees were doing to get a sale
or the way they weretalking or behaving in the ofce [emphasis
added].Theyrecynical about what goes onaroundhere. Sothat means
thecodeIsuppose. Theyreverycynical.They have a big chip on their
shoulderaboutwhats happening withcertainemployees. Howcer-tain
employees are getting away with the things
Ivementionedtoyouandnothing is being done. Yes.Its causing morale
problems. And has for sometimepeoplenot
showingupandeverybodyinthedepartment knowingtheyhaveanother
jobandyouknowits beingreportedandstill nothingdoneandthat sort of
thing[emphasis added].Therespondents madeit clearthat without
consis-tent and unbiased enforcement, the code may not
betakenseriously.(f) Performance review.
Contrarytotheliteratureoncodeswhichtendstorecommendrewardingethicalbehavior
(Pitt andGroskaufmanis, 1990, p. 1645;Raiborn and Payne, 1990, p.
888), most
respondentsbelievedthatcomplianceordoingtherightthingisalreadypart
of your jobfor whichyouare beingcompensated, andthereforeneednot
beexplicitlyrewardedinanysense:No. Becausegoodethical
behaviorispart of ourjobYoushouldnt berewardedfor
doingsomethingthat is expectedof you.
Youshouldberewardedforgoingoverandabovethecall ofduty.Its the right
thing to do. Why should we be rewardedfordoingtherightthing?Other
respondents pointed out the difculty inmeasuringethical behavior:I
dont think theres really any way you can measure
apersonontheircompliance. Ithinkyoucanmeasurethemif theyre not
incompliance of the code, but I dontthink it can be the other way
around.Themajorityofrespondentssuggestedthatonesperformancereviewshouldnot
berelatedtocodecompliance, but rather onlywithones
non-com-pliancewiththecode.Interms of codecontent andcodeprocess
(i.e.creation, implementation, and administration), anumber of
concerns or potential concerns were raised,or insomecases
werefoundtobenon-issues foremployees. Table I represents a summary
of theconcerns orlackof concernforeachstageof codedevelopment.
Those aspects that were mentioned by amajority of the respondents
(i.e. more than half) weredeemedtobeimportant interms of
codeeffec-tiveness. Those aspects that were mentionedby aminority
of respondents (i.e. less than half) weredeemed potentially
important, while those notEffectiveCorporateCodesof Ethics
337mentionedbyanyrespondents
weredeemednotimportant.LimitationsandconclusionInterms of thestudy,
theviews of actual users ofcodes of ethics help to shed light on
which elementsof code content, creation, implementation,
andadministrationaredeemedimportant inrelationtopotential
codeeffectiveness.Therewereseverallimitationstothestudyhow-ever.
The research was qualitative in nature, and wasbased on
self-reported data. Research on directbehavioral evidence related
to the code should also beTABLEI.Codedevelopmental
stagesandeffectivenessCodedevelopmentstageRelationshiptocodeeffectivenessConcernsofrespondentsContentJustication
Potentiallyimportant
JustifyprovisionsifnotclearotherwiselessacceptanceExamples
Important Examplescritical toensureunderstandingofcodeTone
Important NegativetonenecessarytoensureexpectationsareclearLength
Important LengthydocumentcandissuadeattemptstoreaditRelevance
Important Must be relevant otherwise employees may not read
and/orrememberprovisionsRealistic Important
ExpectedbehaviormustbeachievableCreationObjectives Notimportant
AllobjectivesacceptableincludingbottomlineorpublicrelationsEmployeeinvolvement
Potentiallyimportant Involvement not necessarily required but could
lead to morerelevantcodeImplementationPriordistribution
Notimportant Priordistributionofminimal
concernbutcouldnthurt;employ-eeswill
mostlikelynotobjecttocodecontentSeniormanagementsupportImportant
Sufcient support frommanagement must beobservedor codewill
notbetakenseriouslySign-off PotentiallyImportant
Sign-offcangenerateincreasedawarenessbutpotentialindicationoflackoftrustTraining
Important Training must be sufcient or potential lack of awareness
of codesusefulnesswill resultReinforcement Important
Reinforcementmustbesufcientorcodewill
beconsideredjustanotheravorofmonthTesting Notimportant
Testingineffective;
potentiallypatronizingAdministrationLivinguptostandards Important
CodemustbeabidedbycompanyotherwisecynicismgeneratedReportingviolations
Important Necessarytoobligatereportingof code violations but
concernsoverpossibleretributionAnonymousphonelines Important Useful
to provide anonymous phone line but concerns
overprotectionofanonymityCommunicateviolations Important
Communicating violations benecial as a deterrent to
otheremployeesundercertainlimitationsEnforcement Important
EnforcementmustbeconsistentorcynicismgeneratedPerformancereview
Notimportant Performance review should not be based on code;
ethical behaviorisalreadypartofonesjobrequirements338
MarkS.Schwartzconducted (e.g. Farrell, et al., 2002), along with
spe-cic case studies involving code compliance and non-compliance.
Whether anemployees
perceptionoftheimportanceofacodeaspectactuallyleadstotheemployee
abiding by the code can also be questioned.For example, employees
might have felt that the
sign-offprocedurewaspushyoruntrustworthy,yetrequiring a sign-off
might remain important in termsof that particular employee or other
employees abid-ing by the code. Social desirability bias might also
havetaken place. In terms of the sample, only large
Cana-diancompanieswereincludedinthesample,asop-posed to smaller
rms. In addition, the study did notattempt to empirically measure
and assess therespondentss views regarding code content and
pro-cess, other than indicating whether a majority, aminority, or
none of the respondents deemed certaincode aspects to be important.
This was primarily duetothelimitednumbersof
respondentsinterviewed,andthefact that thestudywas intendedas a
pre-liminaryinvestigationof theimportanceof
severalcodecontentandprocessvariablesaccordingtotheusers of the
code. Further empirical research should
beconductedtohelpverifywhether theinitial assess-ment is
accurate.Interms of future research, other
codecontent(e.g.prioritizationofvalues)orcodeprocessaspects(e.g.
respondents views of therms ethics ofce)might be considered as
well. Additional researchquestions might alsobeexaminedsuchas
whetherthere might be linkages among the various codeaspects. For
example, would distribution of the codeprior to employment act as a
signal indicating strongmanagement support? Howdo all of the
variouscodeaspects relatetoanethical corporateculture?Whichfactors
are more important relative totheothers?(e.g.
seeingtheirmanagersleadbyexamplerather than merely hearing their
managers speakaboutthecode,etc.).Basedonthe study, if the views of
the studysrespondents are to be taken into account,additional
research should also be conducted tohelpverifythe
following:CodecontentCompanies should provide examples in the
codedocumentorduringcodetraining, aswell
asmain-tainanegativetoneforcertainactivitiessuchasgiftgivingandreceiving.
Provisionsthat maynotseemapparent should include a rationale to
help justify theexpectedbehavior.CodecreationEmployees
shouldbeinvolvedintheprocess, notnecessarilyin orderto
gaintheirbuy-inor senseofownership, but to help ensure a relevant
and
realisticdocumentisproduced.CodeimplementationSeniormanagersmustbeseentosupport
thecode,the sign-off process must be seen to be for thepurposes of
enhancing awareness, training effortsmust provide employees with
examples and anopportunity to ask questions, training should
beconductedbymanagers, andreinforcement of
thecodeneedstotakeplace.CodeadministrationCompanies must live up to
their codes standards, andaddress the potential retribution
concerns ofemployees.Anonymousphonelinesshouldbepro-vided.
Enforcement must be consistent and impartial.Othersomewhat
counter-intuitivendings fromthestudyincludethefollowing:
themajorityof respondents believethat codesshouldbenegativeintone,
ratherthanpositive(and that positive/inspirational language in
acodecancontributetoinappropriateactivity); most employees will not
immediately reportcodeviolations, whichmight raiseissues
aboutcodeefcacy; the majorityof employees are unaware of
theexistence of an anomymous phone line forreportingviolations;
most respondents believe that performance
re-viewsshouldnotberelatedtocodecompliance,butratherwithcodenon-compliance.This
study attempts to address a deciency inthe current research on
codes of ethics byEffectiveCorporateCodesof Ethics 339engaging in
qualitative in-depth research, and byspeaking with the actual users
of codes, to gaingreater insight into whether what has
beenclaimedbycodecommentators is infact thecase.Suchexploratory
researchis necessary before rec-ommendations are made by
consultants, or legis-lation identifying elements of an
effectivecomplianceprogramis enacted. Inaddition, ratherthan simply
posing the code variable, additionalfactors (i.e. codecontent
andprocess) that supportor hinder thecodes
inuenceshouldbeidentiedinthe literature oncode theory, whichis
still inits infancy.Inadditiontoenhancedlegislative enforcementand
additional emphasis on ethics education atbusiness schools as
recommended by U.S. Presi-dent George Bush (CNN, 2002), the
emergenceof corporate codes of ethics represents one ofmany ways to
address corporate misconduct.Unfortunately, the phenomenon of
corporatecodes, despitegrowingtremendouslyinpopularityover recent
years, still faces resistance, skepticism,and cynicism from many
within the corporate(e.g. former WorldComCEOBernie Ebbers,
seeabove) and academic communities. According toPitt
andGroskaufmanis (1990, p. 1630): Corpo-rate codes of conduct boast
as many critics asproponents. Many continue to argue that
codescanbecomealegal pitfall (Pitt andGroskaufmanis,1990), are
unnecessary due to the existence ofgood internal auditing and legal
constraints (Ber-enbeim, 1988, p. 91), andtendtobeusedmerelyas
windowdressing (Benson, 1991, p. 18). Partof the reason for these
views might be the con-tinued lack of attention placed by academics
andsenior managers at corporations on the variousaspects of
codecontent andcodeprocess. Infact,it may be the case that code
content and codeprocess are the keys to explaining why
somecompanies such as Enron, despite possessing acode of ethics,
have faced major scandals, whileothers have been able to avoid them
(such asthrough internal reporting of misconduct byemployees with
resultant action taken). Unfortu-nately one doesnt hear very much
regarding thecompanies that managedtoavoidscandals due totheir
codes of ethics.The study found employees, managers, and
ethicsofcers do not necessarily support certain codecontent
andcodeprocess variables currentlyinuseandrecommendedbyothers.
Whether this
lackofcodeusersupporttranslatesintoalesseffectivecodeof ethicsisnot
clear, andthusshouldbesubject
togreaterempiricalresearch.Whatthisstudyindicateshowever is that
code content and process bestpractices shouldbesubjectedtogreater
empiricalscrutinybeforetheyareadvisedor evenmandatedbygovernments.
Thestudysupports theclaimthatthe mere existence of a code alone
will unlikelyinuence employee behavior, and companies
merelypossessinga code might legitimatelybe subject toallegations
of window-dressing. Further researchoncodecontent andprocess is
clearlynecessarytofurther developour understandingof whether
andhowcodesinuenceemployeebehavior.AcknowledgementTheauthor
gratefullyacknowledges WesleyCraggandLinda Trevinoas well as the
anonymous re-viewers for their helpful comments towards
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