Politics, Ethics and Social Responsibility of Business

Corporate Code of Ethics

Dr Usha Krishna

Chapter 14

‘We cannot wait for governments to do it all. Globalization operates on internet time.

Governments tend to be slow moving by nature, because they have to build political support

for every step. Therefore, industry has to undertake the leadership to formulate code of ethics

for all, in order to make the earth safer and business sustainable.’

Kof Annan

LEARNING OUTCOMES

This chapter is about operationalisation of ethics through a written code of ethics. There are many things to

learn over here.

• First, you would know the rationale for having ethical codes in business organisations.

• Second, you would be made aware of types of codes.

• Then, you shall develop an understanding of the processes in developing such codes.

• Finally, you would also come to know the steps for institutionalising codif ed behaviour.

14.1 INTRODUCTION

Codes of ethics are accepted standards of behaviour for individuals at corporate level. An automobile

manufacturer in South Africa enacted the f rst set of codes of conduct for its employees in the year 1977.

Many companies adopted these codes of conduct, commonly known as ‘Sullivan Principles’. Subsequently,

OECD made an attempt to collect the codes of conduct from 247 companies to f nd its scope. As per their

study, the companies issued codes of conduct in the areas of environment management, labour standards,

consumer rights, anti-corruption, bribery, human rights, science and technology etc.

Before proceeding further, let me f rst clarify the terms ethical codes’, ‘social codes’ and ‘codes of ethics

or conduct’ that have been used interchangeably in this chapter. Codes are stated principles of social norms

and are written as part of company policies. Codes of ethics help and guide managers/employees, not only

towards righteousness of action, commitment to ethics, adherence to procedural and moral actions, but also

towards minimising the chances of unfair practices, frauds and scandals.

The rationale behind developing codes is that the government takes a very long time to frame rules and

regulations for industry with respect to social and environmental codes. So, as mentioned by Kof Annan

(former UN Secretary General) businesses need to act on their own in this respect. Such codes are also used

as a shield to pre-empt imposition of penalties and f nes on industry for wrongful actions that is damaging

for the ‘triple bottom line’. Moreover, most importantly, ethics should not be driven by rules and legality. It

needs to be prompted, formalised and implemented through self-recognition and self-will.