“mainstreaming”_ethics

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Mainstreaming ethics inAustralian enterprises

Brian J. Far rell and Deirdre M. CobbinU ni ver sity of T echnology, Sydney, A ustral ia

IntroductionIn 1992, the Ethics Research Group within th e School of Accounting a t th eUniversity of Technology, Sydn ey, comm enced a p rogr amm e of broad-based

research into the e thica l cul tures and codes wi thin larger Aust ra l ianenterpr ises. T he investigations focused on three area s of study. T he first w as anexamination of the extent to which codes of ethics ha d b een adopted b y th eenterp rises. T he predictors of code adop tion were investigat ed in relation tovariables of organization type, size, revenues and the pa rticular sector of majoractivity. These investigations have been comp leted an d th e finding s rep orted inFar rell and Cobbin[1].

In the second st udy th e natur e of the content of the various codes used byAustra lian enterp rises was exa mined to determine the areas of focus of thecodes and the level of their ethical content a nd g uidan ce. Repor ts of otherresearchers were used for compar at ive purp oses to al low finding s on theAustralian experience to be matched against the focus of content and the level

of ethical guidan ce of US and UK codes rep orted by Robin et al.[2], Pelfrey an dPeacock[3] and Schlegelmilch an d Houst on[4]. The s econd Austr alian stu dy h asalso been completed, and our finding s rep orted[1].

The third and present study consisted of an investigation into the responsesof enterprises to a postal su rvey. The su rvey instrum ent was forwarded to allenterprises identified in the first stud y as having at th e time a code of ethicscurrently in operation or a code in prep aration. The aim of this study w as toascer ta in the level of comprehens iveness in the s t ra tegies , processes ,procedures and stru ctures which each enterprise put in place to support th eeffectiveness of its code of ethics and generate a cohesive and comprehensiveethical culture within the organization. We have elsewhere[5] provided ourdetailed views on the mainstreaming approach to ethics w hereby an ethicalculture is able to be developed and maintained within an enterprise so that,without such an approach, the cul ture is not sust ainable. Th is strategy toethical culture we have described as mainstreaming. This article reports onthe extent of mains tream ing in Australian enterpr ises through the introductionof integrated strategies and processes.

As t his is the third stu dy in a s eries of three, and in the repor ting of the firsttwo the pivotal issu e of the mean ing of the term ethics was exam ined, an ext ractis given from the earlier rep ort:

While there are many definitions [of ethics] in the literature[5,6] the common thread is thate th ics i s abou t r igh t and wrong , good and bad ac t ions , and t ha t e th ics inc ludes the

Journal of ManagementDevelopment, Vol. 15 No. 1, 1996,

pp. 37-50. MCB University Press ,0262-1711


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philosophical reasons for morality stipulated by society. It goes beyond the area of the law,and provides guidance for resolving moral dilemmas with a fair, correct and right solution.Th e contents of codes as restatements of the law, prescriptions on behaviour, directions onmana gement s tyle and other non-ethical issues and the pr esence of values and ethicalguidelines were a m ajor issue in th e research[1].

In this article the characteristics of the research subjects were investigated inrelation to their ownership an d indus try -sector typ e, and size, as an indicator ofthe i r representa t ive nature of Aust ra l ian enterpr i ses . In addi t ion, thechar acteristics of the codes were exam ined in relation to p redictor variables oftheir place of origin and the nature of their authorships, the frequency of codemodification and processes of code review.

As indica tors of mains t reaming, f ive character i s t ics of codes wereinvest igated as well as ethics educat ion str ategies, the presence of ethicscommit tees and the ap pointment and opera t ion of e thics off icers . Otherindicators s tudied were the natu re and extent of the distribution of codes andthe deg ree of their accessibility by s tak eholders, the avenu es employed topromote codes to the sta ff and p ublic, the presence of form al procedures in th eresolution of ethical dilemm as, and the us e mad e of codes to impose pena lties.Finally the resp ondents persp ectives on th e pu rp ose and effectiveness of theircodes were also investigated as ind icators of mainstrea ming. The just ificationfor the selection of the elements chosen as constituting valid indicators isexplained prog ressively for each element in the results a nd d iscussion section.In Farrell and Cobbin[7], mains tream ing wa s arg ued to occur only when a

sub stan tial number of the elements are present in th e one enterpr ise, includinga commitment by top mana gement.T he investigation resulted in finding s on th e level of mainstream ing of codes

in Austr alian enterprises. These reflect the commitm ent and energy ap plied bythose at the head of enterprises and their managers to th e development a ndperceived import ance of ethical culture in their dealings with an d am ong th estak eholders of the enterpr ises. T he investiga tion also provided an insigh t intothe und erstan ding of what ethics and a n ethical culture are by those positionedto implement change in the ethical behaviour of business in th e Austra lianenvironment. Th e activities of the Aus tra lian Competition and Consum ersCommission, other agencies of govern ment an d indu stry group s to come togr ips with ever-increasing amoun ts of blacklet ter law by way of codes of conduct presupp ose an establ ished environment in which b usiness p eopleunderstand the man ner, and app reciate the advantages, of operating and doingbu siness in an ethical world with ethical markets.

MethodologySelection of subjectsT he subjects chosen for the postal questionnaire came from th e Austra lianenterprises wh ich provided their codes of ethics in respons e to requests forthem. T he original selection is deta iled in the rep ort on the first two stu dies. Inbrief, the subjects selected for the earlier studies were drawn from a database


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created from the All Ordinaries Index of the Australian Stock Exchan ge and t hefirst 500 entries on t he Bu siness Review W eeklysTop 1,000, both as cu rrent atOctober 1991. When the lists w ere combined, duplicate listings were eliminated,as w ell as 61 New Zealand enterp rises, and the result wa s a da tabas e of 537Australian enterprises.

Commencing in April 1992, the enterp rises on th e datab ase were forward edrequests for informa tion as to whether th ey had a code of ethics, and if they did,it was further requested that it be made available to the researchers. When anenterpr ise provided a code for the stu dies, or indicated they h ad a code or thatthey had a code in active prepara tion, the survey instrum ent was sent to themwith a requ es t for i t s complet ion an d re tur n. Because an u nder tak ing of confidentiality wa s given in th e earlier stu dies (as a consequence of a pilot st udywhich concluded tha t only a low p art icipa tion rate would result from not givingsuch a ssur ance), this as pect of the programm e was continued in the third st udy.

W hile in general th e questionnaire findings s uffered the us ual qu alificationsin the lack of opportu nity to v erify th e responses provided, a select ion of respons es was able to be subjected to testing ag ainst informa tion on the pub licrecord. T he testing in th e areas of organizational type, the main a ctivity sectorand the revenue size, for examp le, showed a cor relation betw een the respons esand the pub lic record. The verifications are repor ted at ap propriate places in thediscussion an d findings s ection of this article. T his asp ect provided confidencein the reliability of the sta tistical inform ation on wh ich the finding s were ba sed.

As to the survey instr ument, this was a document of eight pa ges and its

length migh t have caused a low response ra te. However, the respons e was high,being a return of 102 usable returns from a mail-out of 123. The unexpectedlyh igh r e tu rn i s exp l a ined by t he f act t ha t t he ma i l ou t was on ly t o t hoseenterprises which had responded to the first request, and either had or wereclose to having a code of ethics.

Prof ile of sur veyed enterpr isesT he respondents w ere analysed from the m aterial in the questionnaire as tothei r ownership typ e , the i r main ac t ivi ty sec tor an d s ize . T he la t ter wasascertained from an nual revenue and employee numb ers. T he inform ation onthe char acteristics of the enterprises wa s ava ilable from th e first four qu estionsof the questionnaire.

Profile of the codesT he profile elements investiga ted were used as indicators of the mainst reamingof ethical cultures in Australian enterprises. The matters examined by way ofsu rvey involved the p lace of or igin of the codes and two i ssues on codeauthorship. One was the extent of consultancy of those to whom the code wasto be addressed. The other wa s f rom the perspect ive of the t ra ining a ndback gr ound of the auth ors. Finally, the extent of modification an d review ofcodes were also investigated as criteria of mainstream ing.


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M ainstreamin gT he selection of indicators of mains tream ing the ethical culture an d codesextended b eyond the profile elements st ated above. They a lso included th enatu re and ex tent of the education of those to whom th e codes app lied, theestablishment of ethics committees, the ap pointm ent of ethics officers, thedistribution and access of codes, and their use and application circumstances.T he last item included the d iscipline of staff, the res olution of conflict withsupp liers and customers, and the use of codes as a m arketing technique.

Resear ch subj ects perspectives on t he value of eth ical cultu resIn extending an opportunity to respondents to p rovide their perspectives on themerits of having a code of ethics and the advantage or otherwise of an ethicalculture in an enterprise, an indicator of the level of commitment to achievingsuch goals was obtained.

Res ults and discuss ionProfile of the research subjectsT he prof ile was inves t iga ted to ensu re tha t the su rveyed subjec ts wererepresenta tive of the enterpr ise typ es and other attr ibutes of the datab ase. Onlythe largest of Austr alian enterprises were listed on the databa se. T his focus hadbeen established in the first tw o studies of the research p rogr amm e to allowcomparative studies with reported findings from the USA and UK, which hadalso used th e largest comp anies in their count ries for ana lysis.

T he profile provided by the investigation covered orga nizational type, sectoractivity an d size. T he analysis showed th at, in th ese aspects, the respondentswere a representative samp le of the datab ase.

Organ iza t iona l type . T he dat abase for a l l three s tudies in the projectcontained 537 enterp rises. T he previous ar ticle in the series reported t hat half ofthe enterprises on the database were publicly listed on the Australian StockExchange. Government and foreign-owned enterprises each comprised similarpercentages of the da tabas e (17 and 19 per cent respect ively). Al l otherclassifications accounted for ab out 14 per cent of the sub jects.

Reliability testing of the responses ag ainst indep endent information on thepub lic record sh owed a high correlation, with r = 0.63 (p< 0.01).

T he responses to the questionnaire were draw n only from those who report ed

tha t they h ad a code or tha t a code was close to implementation. T he earlierfindings were that government own ership was a source more likely both t orespond (68 per cent) and to have a code of ethics (49 per cent). Austra lian StockExchange-listed enterprises had a much lower response rate (38 per cent) andlower frequency of codes (20 per cent), while private ent erprises h ad the lowestrespons e rate (17 per cent) and the lowest p ercenta ge of codes (9 per cent). Th erespons e rate to the surv ey in this study for the different typ es of enterprisereflect the rat es for having a code. With t he qu est ionnaire, 40 per cent of respond ents were l i s ted comp anies an d 28 per cent were pu bl ic-sec tor


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(government) enterprises; 17 per cent were foreign owned and only 5 per centprivately owned.

A ct i v i ty type . Respond ents could indicate the dom inan t activity of theirenterpr ise amon g 24 classif icat ion types. The respons es showed a broaddiversification with th e only strong concentr ation being in finance/investment(17 per cent). Otherwise, for the other activity types the range was from zero(both constr uction an d clothing/textile man ufactu ring) to nine (chemicals/coal).

Tests of reliability of the resp onses on a ctivity ty pe a gainst independentinformat ion on the public record showed a cor relation, r = 0.20 (p< 0.05).

Size. T he size of an enterpr ise was indicated by t wo variables, gross revenuesand employee num bers (where an enterprise consisted of a g roup, the indicatorswere of the group and not an individua l member):

(1) Revenue: 33 per cent of the respondent s ha d imm ediately p reviousannual revenues falling in the A$251,000,000-500,000,000 band. Therange o f r evenues r epor t ed by r e sponden t s was f rom l e s s t hanA$50,000,000 to an am ount exceeding A$5,000,000,000. T he median w asin the band A$501,000,000-1,000,000,000.

T here was a very high correlation, r = 0.81 (p< 0.01), between th eresponses given on th e s ize of revenue for the enterpr i ses and theinforma tion on the pub lic record. The accura cy of the responses in th eareas ava ilable for testing wa s a pleasing asp ect of the sur vey work.

(2) Employee numbers: 16 per cent of enterprises h ad m ore than 10,000

employees. T he mean num ber of employees for respondents was 6,649with a r ang e of 0-77,000. In th e collection of da ta on emp loyees, thepra ctical view was p referred t o the strictly lega l position. Th us t wo caseswere included where a ma nagement comp any w as th e employer of therespond ents workforce.

Codes profileSix items were included in the q uestionnaire on th e chara cteristics of the codesused b y th e respondents. Five items related directly to ma instream ing, wh ile theother item, the date of implementation of the codes, provided informa tion on thetime span enterprises had had to establish an ethical culture if mainstreamingstrategies had b een put in place.

1. Place of or igin . A local origin mean s an oppor tun ity for a code to reflect thevalues of its host comm unity a nd of those bound b y it, and for the latter to havea proprietary interest in what is, to the greater extent, their code. Whether theoppor tuni ty was taken i s repor ted under the headings of authorship andconsultan cies. T he imp osition of a foreign code without m odification denu desthe code and its culture of these impor tan t asp ects.

T he enterpr ise codes were overwhelmingly Aust ralian in origin (81 codes or79 per cent). Nineteen per cent were written elsewhere. Fur therm ore, while 36per cent of all codes involved a s ubs tant ial adapta tion of another code, the


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ada pta tion in 25 per cent of all codes was b ased on a code which originated inAustralia. The responses included codes in preparation.

2. Date of im plem entat ion. A significant feature of the enterprise codes wastheir recent date of commencement (see Figure 1). This is clearly evident in tha tthe median year wa s 1990 and the mode 1992. T he earliest code was 1928.Seventeen codes ha d been a dopted u p to 1980. T he pub lication dates, whereshown on the codes themselves and used in th e f irst s tudy, confirmed th eaccura cy of the respons es in the questionnaire.

3. Authorship. T here were two notable features of author ship:

(1) There was a disparity between who the author types were and the typescovered by t he codes. Of the categories of aut hor ty pes, man agers w erethe most frequ ent g roup d irectly enga ged in the wr iting of the codes (60per cent ). On th e other ha nd other em ployees were only direct lyinvolved in 23 per cen t of cases, an d d irectors in 34 p er cent. Yet, while 95per cent of the codes app lied to ma nag ers, 89 per cent ap plied to otheremployees , and 73 per cent to di rec tors . So a l l the g roups weresub stan tially un der-represented in the direct writing of the codes.

(2) The other feature of direct authorship was th at lawyers were the mostfrequently represented profession, with 32 per cent, while accountantsrated 23 per cent . This contrast s with th e experts in ethics, ethicalphilosophers, who were involved in only 8 p er cent of codes. Others wh ohad an eth ical training w ere used for 8 per cent of codes as w riters also.The other category in the list was used for 28 per cent of author type(see F igure 2).

4. Consul ta ncies. In l ine wi th auth or typ e there was an imba lance in therepresenta tion of consultant typ es for those covered by th e codes. All consu ltanttyp es occur red with less frequency than auth or types. T hus m anagers wereconsulted a t th e t ime the codes were wri t ten in 24 per cent of enterprises,

Figure 1 .Year in w hich code wasimplemented

Before1932

1933-1942

1943-19521953-1962

1963-1972

1973-1982

1983-1992

0 20 40 60 80 100

Percentage of respondents


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directors 21 per cent and other em ployees 12 per cent. Governm ent a genciesand professional associations were consulted with similar frequencies (10 percent and 7 per cent respectively).

The other important aspect in consultancies was the low frequency of inputfrom the ethics profession. For both ethical philosophers a nd others tra ined inethics, only 8 per cent of enterprises u sed th eir expertise in each case.

T he use of lawyers (27 per cent) and accountan ts (15 per cent) as consultantswas less pronounced th an t he frequency of their presence as direct author s. (SeeFigure 3.)

5. Review. Bygr ave[8] has observed th at:

Ethical issues are of a developing na ture an d any code will require regular assess ment of newchallenges wh ich may ar ise from accelerat ing change am ong customers , competi tors ,government regulation, the economy, etc. and necessary revision in order to maintain itsvalue[8].

Ethical cultures an d codes are par t of an evolutionar y process. T hey need tochange as the environment in which they exist alters for any numb er of reasons.It is a healthy s ign tha t codes and cultures are reviewed regularly an d chan gesmad e as a consequence. T he codes and their cultures would then be so much

more a l ive and thr iving as they cont inue to be adjus ted to match the i renvironm ent. Even thou gh , genera lly, the Aus tra lian codes w ere of recentorigin, their review as an ongoing activity had a very high frequency, with 69per cent of respond ents rep orting th at their codes were regularly reviewed. Thereview function was evenly spread among committees, directors, managers, adesignated off icer and others. T here was no combinat ion of the v ariousperson nel typ es reported by resp ondents a t a significant level.

Given th e recent da te of the codes, it wa s notewort hy to find th at 39 per centof the codes have been m odi fied s ince the i r incept ion. T he f requency of

Figure 2 .Author ship of code

Director

Manager

Other employee

Lawyer

Accountant

Philosopher

Ethics trainedOther

0 20 30 50 60 70


10 400 20 30 5010 40


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modification is relatively high and may indicate that constant reviews werebeing maintained.

MainstreamingIndicators of mainstr eaming included five of the element s in th e code profilesrepor ted ab ove. Yet mains tream ing involves more th an jus t these as pects. Itinvolves a full and comprehensive network of integ rated activities, proceduresand stra tegies. T hese other indicators investigated ar e described below.

Ethics trainingThe views of respondents on the need for e thica l t ra ining for var iousstak eholders of an enterpr ises ethical culture were examined a nd, then, by w ayof contra st, the level of actual training eng aged in by enterpr ises.

Views of respondents on the need for eth ics t ra in ing. T he respondentsexpress ed a str ong v iew th at emp loyees should receive training in eth ics (82 per

cent of respondents). The opinion of 72 per cent of respondents was that thereshould b e t raining conducted by the enterprise i tself. Thir ty -f ive per centbelieved that ethics training should be part of a formal business course and 48per cent d id not ag ree with th is. Seventy -five per cent took th e view that eth icstra ining should not be by oth er than t hese two mean s (see Figure 4). T here wasa high frequency (68 per cent) aga inst th e training of man agers on ly, and 74 percent considered all employees should be tr ained in ethics. On the tr aining ofdirectors 75 per cent believed they ough t to be tra ined, with only 9 per centagainst.

Figure 3 .Th ose consulted inwriting the code

Director

Manager

Other employee

Lawyer

Accountant

Philosopher

Ethics trained

Government

Association

Other

0 20 30 40 50


10


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Actual ethical training. In contrast with the strong views expressed on th e needfor ethics tra ining, only 46 per cent of respond ents ha d ma de arr ang ements forethics tra ining in relation to people within th e organ ization, while 35 per centhad not. T he num ber of people trained th rough each organ ization r anged fromone to 9,000, with a m edian of 550. Only 11 respondent enterpr ises had trainedin excess of 1,000 of their people.

T he most common training m ethod reported w as in-house induct ion of managers and employees. Seminar and courses conducted by others were usedby on ly 8 per cent of enterp rises. More enterprises tra ined man agers (42 per

cent) and other emp loyees (37 per cent) compar ed with directors tr ained (22per cent).

Ethics seminars. Given the indicators on eth ics training, the frequency ofenterpr ises condu cting seminars on ethics ma tters could be expected to be andwas low. Only 18 per cent of enterp rises conducted su ch semina rs.

Other training sessions on business ethics. In this area the frequency rep ortedby respondents was again low 25 per cent of enterprises had held trainingsessions other tha n by seminar.

Ethics incorporated into other training programmes. The level of activityrepor ted in this aspect of training sh owed a higher frequency th an others, with37 per cent of enterp rises hand ling ethics training in this ma nner.

Attendance at ethics seminars by other organizations. Twenty p er cent of

enterprises repor ted that oppor tunities were given for attend ance at ethicsseminars conducted by other organizations.

Ethics committeeAn eth ics committee may b e charged with a n um ber of functions, including th eoversight of the operational asp ects of the code. A m ajor function might b e fori t to consider , in the l ight of the code and ent erpr ise values, the types of commonly encountered ethical dilemm as in daily bus iness operations and tocommunicate its deliberations to all stakeholders within the enterprise. Thefrequency of ethics comm ittees amon g th e enterprises w as low (10 per cent) 65

Figure 4 .Preferred training

method

Corporation

Formal course

Other

0 20 60 100


40 80


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per cent of respond ents repor ted that n o ethics comm ittee had been establishedin their enterprise (see Figure 5).

Form al procedur es with in the ent er pr ise for staff f acing business ethi caldilemmasFormal procedures require a commitment by senior management in terms oftime, staffing an d funds t o ensu re quality supp ort an d confidential couns ellingfor those enterprise members who face ethical dilemmas in the conduct of theenterpr ises bu siness. T his function is an impor tan t asp ect of an ethical culturesup por t ing an ethics code. In only 19 per cent of enterp rises were form alprocedures in p lace to assist st aff in resolving ethical dilemma s th ey confront in

bu siness (see Figure 5).

A ppointm ent of a specific officer to deal with ethical matt er sEth ics officers are th ose who are:

Assigned the role and responsibility of devising, implementing and administering ethics

programs within their organisation[9].

T heir ethics work can cover counselling, education, qua lity as su ran ce andconfidential interna l investigations on eth ical mat ters. T hey are b oth a focalpoint in the d evelopment and maintenance of ethical cultures, and p art of thes t ra tegies tha t m ight be put in place in order to mains t ream ethics in anenterpr ise. A low of 15 per cent of enterpr ises had app ointed a s pecific officerfor ethical matt ers (see Figure 5).

U ses m ade of codesT he frequency repor ted of the numb er of codes used for resolution of an ethicalquest ion and for revision of an org anizations p olicy on an y issu e were the sam e,at 30 per cent. In 10 per cent of respondent enterprises th e code was used t osan ction a d irector. T he grea test frequency rep orted of the use of codes was inrelation to th e sanction of employees. T he pa rticulars ar e shown in T able I.

Figure 5 .Frequency of somemainstream indicators

Ethics committee

Support mechanisms

Ethics officer

0 10 40


20 30 50


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T he r epor t ed f r equenc ie s o f en t e rp r i s es wh ich ha d u sed war n ings andrepriman ds were the highest. However, those for discharge a nd referral forcriminal prosecution were substantial. What is worthy of note is that the mostfrequently repor ted use of the codes in Aust ralian enterp rises is the sanction ofemployees. T his did not m ean th at other less tang ible outcomes were notconsidered more importan t b y enterprises.

Prom otion of t he ex istence of a code to the publicEnt erpr i ses were a lmost evenly divided on the mat ter of promot ing theexistence of their codes to the pu blic 50 per cent d id and 45 per cent did n ot.Most of the promotion wa s by w ay of inclusion in the enterprises ann ual repor t,

which was used by 39 enterpr i ses out of the 51 tha t rep or ted the pub l icpromotion of their code. Only 2 p er cent d isclosed th e existence of their codes ingeneral advertising. Seven per cent used their codes as part of their marketingstrateg y, Only 3 per cent u se their codes as a ba sis to resolve disputes w ithcustomers.

Public access to codesT he nu mb er of enterp rises (40 per cent) wh ich mad e copies of their codesavai lable to the pub l ic genera l ly w as a s imi lar ra te to enterp r i ses whichpromoted their codes to the p ublic. Fifty-five per cent did n ot allow p ublicaccess. T he reticence in pr oviding a ccess to th e general comm unity is contra ryto the pride and pr oprietary interest stak eholders ought to have in their codes.

There was, not unexpectedly, a correlation between those enterprises whichpromoted the existence of their codes to the public and those which providedwide access to th eir codes (r = 0.58).

Frequency Percentageenterprises frequency

Result (number) (per cent)

Warning 38 38

Reprimand (recorded on file) 34 33

Probation 6 6

Demotion 10 10

Temporary suspension 9 9

Discharge 29 28

Reimbursement to enterprise 10 10

Referral for criminal prosecution 17 17

Civil action taken 3 3

Table I.Code use t o sanction

employees


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Respondents perspectivesT he responses to the questionna ire by enterpr ise man agement provided aninsight into the level of commitment and attitudes towards ethics codes andculture in Australian enterpr ises. In this way t hey are furth er indicators ofmainstreaming.

Ethics education. The resp onses on th e perceived need for edu cation in ethicshave already been rep orted in this art icle.

T he pur pose of codes. Respondents were given six possible objectives ofcodes and ask ed to indicate their ord er of preference. Overall, the m ost high lyra t ed objec t ive wa s t o provide gu idelines for emp loyees and di rectorsbehaviour (61 per cent first preference). The lowest rat ed wa s to m aximizeprofits (3 per cent first preference). Th e ran kings of the others were as follows:

2 = to be a socially responsible organizat ion.

3 = to establish a better corporate culture.

4 = t o im prov e m an ag em en t.

5 = to ensure employees comply with local , s tate and commonwealthlaws.

T he preferences shown by resp ondents d id indicate some outward -lookingtra its in their persp ectives of a codes pu rp ose.

In this outwa rd-looking asp ect , the respond ents were also requested toprovide an indication of their view on the purpose of their codes in another

question in the su rvey wh ose ethical behaviour towards whom w as the codeintended to improve? Seventy-two per cent of resp ondents indicated that thecode was intended to improve the ethical behaviour of employees towards theorganization an expected response. However, 78 per cent also answeredemp loyees toward s th e general pu blic. Fifty per cent said, directors toward sthe orga nization and 57 per cent directors towa rds t he general pu blic.

T he effecti veness of codes. Resp ondents were given th e opportu nity to recordtheir opinions on the effectiveness of their codes in resolving ethical issuesrelating to var ious group s of stak eholders in the orga nization. A five-pointLikert scale w as used from always effective (5) to ineffective (1). Th e resu ltsfell into two g roups, with a s har p d ifference in p erceived effectiveness betweenthem. Within each g roup th e ratings were only m arginally different. A code was

seen a s m ore effective when it ap plied t o people who w ere closely a ligned withthe organization and, consequently, more easily subjected to the operations ofthe code and its sa nctions. T he results are shown in Table II.

Conclusion

As reported in our previous article, codes of ethics are a growing feature ofbusiness life in Australia. The attitudes of business leaders in enterprisestowards the presence of a code in their individual organ izations are a crucialelement in the way a code is positioned as m ainstrea med or not.


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The findings of this study include the relative newness of codes in Australianbig business, with a median origin date of 1990. This has not provided a longtime-scale for enterp rises to get it right, with a ll the su pp ortive str uctures t hata su ccessful code needs. Even th e writing of the codes th emselves was d one bynon-trained people, often lawyers. The lack of ethics committees, ethics officersand ethics training for those to whom th e codes relate might be taken a s a signthat enterprises have rus hed to tak e up th e ethics ba nner w ithout sufficientthough t and planning on t he elements needed to create a successful ethical

cul ture. T he f indings show a considerable gap between th e expression bymanagement of their ideals and perceptions of an ethical culture on the onehand , and the lack of action repor ted by them to ma instream ethics in theirorgan ization on th e other.

The establishment of a code is but a first step. It is regrettable that manyenterpr i ses d id not cons ider the need for e thics t ra ining an d p ropr ietaryposs ession of codes as ma jor contribu tions toward s an effective ethical cultur e.Yet the opport unity rema ins for the enterp rises with codes to build such aculture and to foster and strengthen its growth with ongoing mechanisms oftraining, regular communication from the ethics committee, an ethics officer,annu al reviews and audits. Otherwise the opportun ity is squand ered to buildethical markets with honourable standa rds of t rus t and ease of operat ions

without mass ive blackletter law a nd overbu rdening self-protective strategies,which are less effective, time consum ing a nd costly. In a ny case, it is n ot the w aypeople, destined t o be a comm unity, ought to live.

References

1. Far rell, B.J. and Cobbin, D.M., Evalua tive study of ethical codes and cultures in Aust ralianenterprises, paper presented to the Et hics in Business and the Professions Conference,Massey University, New Zealand , 1993.

2. Robin, D., Giallourak is, M., David, F.R. and Moritz, T.E., A different look at codes ofethics, Business Horizons, Vol. 32 No. 1, 1989, pp. 66-73.

Effectivepercentagefrequency

Managers 62

Directors 59

Employees 59

Organization 58

General community 42

Suppliers 41

Customers 39

Shareholders 31Table II.

Code effectiveness

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3. Pelfrey, S. and Peacock, E., Ethical codes of conduct are improving, Business Forum,Sprin g, 1991, pp. 14-8.

4. Schlegelmilch, B.B. and Houston, J.E., Corp orate codes of ethics in large UK compan ies: anempirical investigation of use, content and attitudes, Eur opean Journ al o f M arket ing( U K ), Vol. 23 No. 6, 1989, pp. 7-24.

5 . Singer, P., Practical Ethics, Camb ridge University P ress, Cambridge, 1979.

6. Beauchamp, T.L. and Bowie, N.E., Ethical T heory and Business, Prentice-Hall, EnglewoodCliffs, NJ, 1988.

7. Far rell, B.J. and Cobbin, D.M., M ainstreaming (E thical Codes and Cultur es), University ofTechnolog y, Sydney, 1993.

8. Bygrave, C., Corpor ate ethics, pap er presented to the University of Technology, Sydneyand Er nst & Young, 29 March 1994.

9. Federick, R. (Ed.), News, Centre for Business Ethics, Bentley College, Waltham, MA, Winter1993.

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