Transcript Implementing Codes of Ethical Conduct: From Theory to Practice A. Scott Carson, PhD

Implementing Codes of Ethical
Conduct: From Theory to
Practice
A. Scott Carson, PhD
Queen’s School of Business
Names for codes
Code of conduct
 Codes of ethical conduct
 Cannons of ethical conduct
 Ethical principles
 Code of business conduct
 Code of conduct and ethics
 Code of professional responsibility
 Global business citizenship

Who establishes a code?

Business
Company
Industry
Professional
Global business
 Government codes
 Everything!: bloggers, internet, warriors,
schools, universities, sports, administrators,
ecotourism, law enforcement, health
alliances, military, etc.
What codes do

Codes generally seek to provide direction to
employees, management and board members
about how to conduct themselves with respect
to
Each other
Stakeholders
The organization, profession, etc.
 Codes usually contain a combination of ethical
descriptions and directions, and non-ethical
descriptions and procedural directives
Ethical content: Air Canada’s conflict
of interest policy
“A conflict of interest may arise in any situation
in which an employee's other business or
personal interests impair his or her judgment to
act honestly and with integrity or otherwise
conflict with the interests of the Company.
Ethical Description
All such conflicts should be avoided. The
Company expects that no employee will
knowingly place himself or herself in a position
that would have the appearance of being in
conflict with the interests of the Company.”
Ethical Direction
Procedural content: Air Canada reporting
In-Person Report
Information about known or suspected violations of this Code
or of any laws, rules, or regulations by any employee should be
reported promptly and may be reported to the employee's
immediate supervisor or the Corporate Secretary.
Anonymous Reporting
An employee may report anonymously any questionable
financial reporting, or known or suspected cases of fraudulent
or dishonest activities or conflicts of interest. In this regard,
please consult Air Canada's Ethics Reporting Program which is
available on ACaeronet under “My Work” and “Policies and
Procedures”.
Non Ethical Procedures
Code formation, revision and implementation
cycle
Identifying
values
Revising the
Code
Monitoring
Performance
Writing the
Code
Implementing
the Code
Code formation, revision and implementation
cycle
Identifying
values
Revising the
Code
Monitoring
Performance
Writing the
Code
Implementing
the Code
EthicsCentre: Codes Project
CODES OF CONDUCT IN THE PRIVATE SECTOR: A REVIEW OF THE
ACADEMIC LITERATURE FROM 1987 TO 2007
Scott Carson, Mark Baetz, Shelley McGill
Incorporate
universal values
•Trust
•Respect
•Responsibility
•Fairness
•Citizenship
•Caring
Identifying
values
Respect and incorporate the
values of the country
Respect the
autonomy
of the individual
Professionals should
incorporate the values
of their practice
Incorporate the organization’s
principles and values
Structure
•Reflect broad socioeconomic concerns
•Make priorities clear
•More emphasis on spirit than
letter of the law
•Issue general guidelines
•Ensure relevance
•Ensure usefulness
•Country specific
Language
•Simple language
•Minimize the negative
•Be future oriented
Content
•Fair reporting
•Protection for whistle blowers
•Confidentiality
•Emphasis on public interest
Writing the
Code
Process
•Teamwork in creating the code
•Diversity on the team
•Top level support
•Assigned responsibilities
International codes: Environmental
training
•Culture
•Politics
•Economic environment
Broadly acceptable
Widely publicized
Implementing
as
•Inculcating
•Re-enforcing
•Measuring
Implementing
the Code
Revising the
Code
Measurement
Verification
Monitoring
Performance
Continuous
Implementation
Identifying
values
Revising the
Code
Monitoring
Performance
Writing the
Code
Implement the
Code
Typical implementation approach: Teaching
rules
 Teaching
the content of the code
Workshops
On-line program
 Orientation
 Seminars
 Ethics officer support
 Follow-up
Implementation as Code Education: A
preliminary note

Implementing a code cannot be as simple as learning
rules because
 Codes
in themselves do not provide adequate context to enable
a full understanding of the rules themselves
 The code does not provide sufficient context to develop the
overarching rules and principles necessary for accessing the
ethical validity of code provisions
 Implementing a code should be a broader process involving
stakeholders in other parts of the codes formation and
implementation cycle to promote a culture of integrity

A crucial piece of code implementation is understanding
the ‘regulatory regime’ of which a code is a part
 Overall corporate strategy which the ‘regulatory regime’ and code
impacts

Following a code implies an underlying
theory of ‘rationality’: Theoretical disputes

Some researchers maintain that codes are sets of rules
that employees and others follow without rational
reflection
 Rules
are non rational because of rote procedures (Schwartz,
2000)
 Moral conduct (hence acting in accordance with codes) is mainly
acting on intuition (Sonenshein, 2007) not rational reflection
 A significant part of moral conduct is acting virtuously, which by
its nature is instantaneous not a matter of reflection (Solomon,
1993)

If rules are followed by rote, they are not only non
rational, they violate the moral autonomy of the
individual and reflect a political control mechanism by
management over employees (Schwartz, 2000)
Underlying theories of ‘rationality’ in ethics:
the potential irrelevancy of rules
Procedural Models
1. Deductive reasoning procedure
1.
2.
3.
Step 1: Consider the situation
Step 2: Generate alternatives
Step 3: Apply a principle or rule in making a judgment
Stage theory (e.g., Kohlberg, Piaget)
2.
1.
2.
Invariant stages of human moral development from simple rule
following at the beginning to application of social principles at
end
Person-situation model -- Treviño (1986): Moral responsiveness
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
Individual factors: Moral responsiveness: ego strength, proximity, control
Organizational factors: culture, characteristics of job
Rationality models continued
Psychological Process Models
3. Issue-contingent model (Jones, 1981)

Characteristics of the issue itself

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Intensity: benefits/harms, social consensus, probability of consequences,
time between action and consequences, feeling of nearness, concentration
of affect
Intensity correlates with moral issue recognition
Sensemaking-Intuitionist Model (SIM) (Sonenshein,
2007)
4.

A critical response to ‘rationalist’ models above

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Phase 1: Issue construction: social and personal influences
Phase 2: Intuitive judgments based on experience and social pressures
Phase 3: Post facto explanation and justification
Rationality models continued
Philosophical Models
5. Non-rationalist – Virtue ethics (Solomon, 1993)


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Business virtues: honesty, openness, integrity, collegiality
Spontaneous, no thought, no deliberation
Not the application of rules
Not rule/principles governed because no clear universals
Non-classical rationality Model (Deinhart, 1995)
6.


Classical rationalist theory: necessary, universal, rule-guided
Brown’s theory: defensible, reliable non rule-guided judgments

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Body of background knowledge
Relevant information about the case at hand
Rationality models continued
Classical rationality (R.M. Hare, 1952/72)
7.



Learning something (or to do something) involves learning a
generalizable rule or principle
Moral learning is necessarily learning of principles/rules –
learning to do moral acts of a certain kind
Could not make a moral judgment without



1.
2.
3.
Subsuming it under a principle
Indentifying the kind of judgment or act that it is
What is means for something to be a rational decision
Understand the context of the situation and why it is a moral
issue
Understand alternatives and their consequences
Apply a moral rule or principle to the alternatives in order to
select the best moral decision or action
Discussion and critique
The ‘deductive procedure’, ‘person-situation’ and ‘issue
contingent’ models are rule-governed either because
they prescribe rule-following processes or presuppose
rules in making judgments
 The ‘sensemaking-intuition’, virtue ethics and nonclassical rationality models reject rules as necessary for
ethical decision making (SIM is mixed)
 Hare’s classical rationality model does not prescribe any
decision making procedure or psychological process.
Only necessary conditions for something to count as a
rational ethical decision:

1.
2.
3.
Context
alternatives/consequences
Principle or rule
Discussion continued

Hare’s position is compatible with rule-governed models
and accommodates SIM objections to them
 Subjectivity
and situation construction
 Uncertainty and equivocality
 No rigorous time sequence deliberation

SIM collapses into rule-governed models
 Becoming
experienced starts with rule-governed
actions/judgments
 Situations with less uncertainty and equivocality can be rulegoverned
 SIM’s final stage is explanation/justification which is a rulegoverned condition
Discussion continued

Virtue ethics and non-classical rationality are both
vulnerable to claim that without some form of
generalizable rule or principle, there would be no way of
telling what kind of act or situation is being considered.
 Everything
is an instance of something more general
 This is compatible with creating new rules which Dienhart/Brown
contend


Rules are logically necessary to moral decision making
and behavior
Codes provide at least some of the rules in
organizational life
A moral challenge: Respect for persons?

Codes of conduct do not respect the moral autonomy of
the person (Schwartz, 2000)
 No
agreement by employees of ethical standing of rules: devoid
of ethical content
 Not an outcome of a process of ethical evaluation
 Management tool of control, paternalism, indoctrination,
organizational protection
 Codes constrain ethical independence
 Codes alienate employee from his or her own morality
Rebuttal of the moral challenge

The non-rational following of rules thesis reflects a
simple misunderstanding of codes
 Contain
some procedural rules that require little reflection but
many principles in codes require in-depth reflection
 Even simple rules require the application of moral principles and
rules in order to establish their moral validity (following Hare’s
account)

How some organizations implement codes is not
necessarily how they should be implemented, especially
as regards the active involvement of employees and
other stakeholders in code formation, implementation
and revision (more detail later)
Implementation, education and the
Regulatory Regime (RR)

Guiding corporate conduct in the
marketplace
Legislation:
corporate, tax, workplace health
and safety, bribery, securities dealing,
banking, insurance
Regulations and regulatory bodies to
implement legislation: securities commissions,
stock exchanges
RR continued
Self-regulatory
bodies: investment dealers, public
accountants, advertising, engineers, lawyers
Rules internal to the organization: byelaws,
policies (employment, harassment, whistle
blowing, safety, environmental)
Informal policies: circulated by memo, stated
verbally
Principles as ‘rules’: mission, vision, values

In aggregate, all of these directives
constitute the ‘regulatory regime’
Codes and the RR
Codes are imbedded in the RR
 The RR guides conduct in an organization

How
to behave
As a context for the organization’s pursuit of
business objectives
RR and strategy
Organizational strategies reflect a further
layer of directives
 The RR is both a decision making
framework and catalyst for strategy

Framework:
Appropriateness of proposed
strategies and actions
Catalyst: Suggests strategies to promote parts
of the RR (e.g., CSR strategies)
Regulatory regime and strategy
Mission, Vision, Values
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Action Plans
Organizational Policies
Legislation, Regulation
Code of Ethics
Shared Principles/Values
Regulatory Regime
Internal inter-connectedness
Codes can contain reference to policies
 Principles and norms of the company can
be imbedded in the code
 Codes sometimes restate required legal
compliance

Two approaches to ethics in business
1.
Compliance culture
 Reactive: externally and internally
 Rule-guided behaviour
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
Legislation
Regulations
Company policies
Conforming to expectations
Codes are compatible with a compliance
culture
Approaches continued
2.
Culture of integrity: Robust ethical climate
 Proactive
 Broad principles
 Aspirations
 Codes to establish expectations
 Unwritten norms
 Stories, symbols
 Expectation that members of the
organization will always try to act with
integrity
Implementation and the culture of integrity
Identifying
values
Revising the
Code
Monitoring
Performance
Organizational
Stakeholders
Writing the
Code
Implement the
Code
The culture of integrity and involving
stakeholders

Direct involvement of stakeholders, especially
employees
 Identifying
values
 Writing the code
 Revising the code, which includes revising values identification


Culture of integrity requires greater level of
understanding to be effective
Good decision makers are able to draw sound
conclusions from what the RR makes available
1.
2.
3.
Alternative courses of action which the RR helps to understand
Ethical principles which the RR provides in the Code
Outcomes of decision making drawn in part from the RR
Organizational strategy to promote integrity
Increasingly comprehensive grasp
of RR combined with improving
ability to employ ethical principles
in judgments
Rudimentary knowledge
of the code and modest
Understanding of the
RR
Compliance
Culture
Culture of
Integrity
Compliance
linked to a
developing
ethics culture
Sophisticated knowledge
of the RR and relationship
to strategy. Adept at using
ethical principles to make
decisions.
Integrity and gradations of knowledge
Three tasks for ‘code education’
1.Promote learning of the RR
2.Reinforcing the principles in the code
3.Developing ethical decision making ability
using principles and the RR
Basic Decision Making
1.Knowledge of code
content
2.Some knowledge of
ethical principles
3.Constrained ability to
apply principles in
decision making
Advanced Decision Making
1.Extensive knowledge of RR
2.Sophisticated grasp of
ethical principles
3.Ability to apply principles
to knowledge of RR in
decision making
Gradations of improvement
as knowledge of the RR becomes
broader and deeper.
Implementing codes as ethics education
Education – not just in the specific provisions of the
code, but in the RR in which it is imbedded
 Five principles of code education
1. Highest quality of learning and development in each
employee
2. Experience, educational background and role in the
organization should guide depth of required
understanding in the RR.

Ethics education continued
4.
5.
6.
Education in the RR should not be confining to career
advancement and new responsibilities
Go beyond simply learning principles and the RR.
Should encourage critical assessment
Education should be full and complete: ongoing over
time. Too much to absorb all at once