Codes of conduct: Good ethics is good business

It protects the reputation of the company. British Airways is a classic example, where large amounts of marketing investment in image were undermined by the public's perception of its actions.

Ethical policies can be a powerful marketing tool; an example is The Body Shop with its anti-animal testing and environmental policies.

It helps ensure the company complies with existing law and is able to anticipate future changes in it.

It sets the tone for the organisation, improves professional standards and makes sure that it is in tune with the community.

By voluntarily complying with higher standards, companies can avoid laws being imposed. The tobacco industry has followed a voluntary code of advertising, but in the knowledge that stricter rules would be imposed should it choose to ignore the code.

Accepted standards of behaviour may change from industry to industry, from company to company, and from country to country. Thus an acceptable standard of ethics for a local corner shop is not likely to be acceptable from ICI or Shell.

Company standards will differ from those of individuals. For example, companies tend to be much more scrupulous in observing copyright law than individuals.

Ethical values may conflict. Keeping the workforce employed and the company in business may mean trading with a country whose views and policies are abhorrent.

Training. A training programme can give specific guidance on what is ethical and feed back on ethical dilemmas to senior management.

The bigger and more international the organisation, the more effort needs to be put into a train-ing programme. For example, Unilever is recognised as having created a common corporate culture by an informal, trans-national network involving training and exchange programmes. As its co-Chairman and Chief Executive Officer put it: "Maintaining ... standards depends as much on everyone in the organisation understanding and accepting them as on formal instruction manuals" ("Inside Unilever: the evolving trans-national company", Harvard Business Review, Sept-ember-October, 1992).

Ensuring the corporate body language is right. The actions of management have to be consistent with those of the code.

Tailoring the code to the company.

The more that it is possible to involve the whole company in creating and implementing the code, the greater the sense of common commitment and the more accurately it will reflect the needs of the company.

Greater care has to be exercised in certain situations. A company that markets itself as being squeaky clean has further to fall if it fails to meet this standard, so its structures must match its boasts. For example, the Co-op Bank has faced criticism on the grounds that its investment decisions do not match the ethical investment policy that was the centrepiece of its marketing policy.

Similarly, the internal structure of the company may make unethical behaviour more likely. There may be a policy of creating fierce intra-company rivalry between competing divisions or employees involved in long-term joint ventures may face conflicts of loyalty between the project and the company. In these situations, controls may need to be more stringent so that ethical issues are given prominence.

Implementing self-standing guidelines for parts of the code. Competition and environmental issues raise complex ethical and legal questions that are usually dealt with under self-standing compliance policies (see and IV(2), 15).

PLC, 1993, IV(1), 39Having a suitable body such as a committee of non-executive directors to oversee the code and audit compliance. They should be prepared to act on complaints from the public or employees. In particular, employees often feel deeply about ethical issues that confront them in the workplace; providing a means by which they can bypass the usual reporting structure and speak directly to a senior member of the company may prevent them from reporting the matter to the press or a regulatory authority.

Monitoring new concerns. Ethics change and the company changes.

Monitoring requires a systematic approach. Grand Metropolitan is reported to have a public policy issues monitoring database in the US that watches a wide range of issues that are likely to become of concern to consumers. The process is expensive but it gives managers warning of potential consumer concerns; it allowed its subsidiary, Green Giant, to phase out the use of CFC's in the freezing of vegetables ahead of consumer action and the imposition of tax disincentives. Having a monitoring system does not mean that the company should follow public opinion slavishly; a company could carry out a campaign to re-educate the public if it does not consider the public's concern to be legitimate.