BUSINESS ETHICS

CONCEPT OF ETHICS

• THE CONCEPT OF ETHICS COMES FROM THE GREEK WORD “ETHOS”, MEANING BOTH AN INDIVIDUAL’S CHARACTER AND A COMMUNITY’S CULTURE.

• THE INSTITUTE FOR GLOBAL ETHICS DEFINES ETHICS AS THE OBEDIENCE TO THE UNENFORCEABLE.

• BUSINESS ETHICS IS APPLIED ETHICS.

• IT IS THE APPLICATION OF OUR UNDERSTANDING

OF WHAT IS GOOD AND RIGHT TO THAT

ASSORTMENT OF INSTITUTIONS, TECHNOLOGIES,

TRANSACTIONS, ACTIVITIES, AND PURSUITS THAT

WE CALL BUSINESS.

• WHAT IS MEANT BY THE TERMS GOOD AND RIGHT?

• ETHICS HAS A VARIETY OF DIFFERENT MEANINGS.• ONE OF THE MEANINGS GIVEN TO IT IS: “THE

PRINCIPLES OF CONDUCT GOVERNING AN INDIVIDUAL OR GROUP.”

• A SECOND-AND MORE IMPORTANT-MEANING OF ETHICS IS “THE STUDY OF MORALITY.”

• ALTHOUGH ETHICS DEALS WITH MORALITY, IT IS NOT QUITE THE SAME AS MORALITY.

• ETHICS IS A KIND OF INVESTIGATION-AND INCLUDES BOTH THE ACTIVITY OF INVESTIGATING AS WELL AS THE RESULTS OF THAT INVESTIGATION-WHEREAS MORALITY IS THE SUBJECT MATTER THAT ETHICS INVESTIGATES.

• THEN, WHAT IS MORALITY?• CAN BE DEFINED AS THE STANDARDS THAT AN

INDIVIDUAL OR A GROUP HAS ABOUT WHAT IS WRONG, OR GOOD AND EVIL.

• GENERALLY PEOPLE BELIEVE BUSINESS ETHICS INVOLVES ADHEREING TO LEGAL, REGULATORY, PROFESSIONAL AND COMPANY STANDARDS.

• ALSO, KEEPING PROMISES AND COMMITMENTS AND ABIDING BY GENERAL PRINCIPLES LIKE FAIRNESS, TRUTH, HONESTY AND RESPECT.

• A CONCETE CASE.• B.F.GOODRICH, A MANUFACTURER OF VEHICLE

PARTS, WON A MILITARY CONTRACT TO DESIGN AND TEST, AND MANUFACTURE AIRCRAFT BRAKES FOR THE A7D, A NEW AIRPLANE THE AIRFORCE WAS DESIGNING.

• TO CONSERVE WEIGHT, GOODRICH GUARANTEED THAT ITS COMPACT BRAKE WOULD WEIGH NO MORE THAN 106 POUNDS, CONTAIN NO MORE THAN FOUR SMALL BRAKING DISCS OR “ROTORS”. AND STOP THE AIRCRAFT WITHIN A CERTAIN DISTANCE.

• THE CONTRACT WAS POTENTIALLY QUITE LUCRATIVE FOR THE COMPANY AND SO MANAGERS WERE ANXIOUS TO DELIVER A BRAKE THAT “QUALIFIED” BY SUCCESSFULLY PASSING TESTS SHOWING IT COULD STOP THE AIRCRAFT AS REQUIRED.

• KERMIT VANDIVIER, A GOODRICH EMPLOYEE, WAS GIVEN THE JOB OF WORKING WITH GOODRICH ENGINEERS TO WRITE UP THE REPORT OF THE TESTS RUN ON THE BRAKE, WHICH THE GOVERNMENT WAS UNLIKELY TO QUESTION.

• UNFORTUNATELY, VANDIVIER LATER WROTE, WHEN THE SMALL BRAKE WAS TESTED, THE BRAKE LININGS ON THE ROTORS REPEATEDLY “DISINTEGRATED” BECAUSE “THERE SIMPLY WAS NOT ENOUGH SURFACE AREA ON THE DISCS TO STOP THE AIRCRAFT WITHOUT GENERATING THE EXCESSIVE HEAT THAT CAUSED THE LININGS TO FAIL.”

• HIS SUPERIORS, HOWEVER, TOLD HIM THAT “REGARDLESS OF WHAT THE BRAKE DOES ON TESTS, WE’RE GOING TO QUALIFY IT”

• AFTER SEVERAL TESTS WERE RUN, VANDIVIER WAS TOLD TO WRITE UP A REPORT STATING THAT THE BRAKE HAD PASSED THE TESTS.

• VANDIVIER EXPLAINED TO HIS SUPERIORS THAT “THE ONLY WAY SUCH A REPORT COULD BE WRITTEN WAS TO FALSIFY TEST DATA.”

• HIS SUPERIOR REPLIED, “HE WAS WELL AWARE OF WHAT WAS REQUIRED, BUT THAT HE HAD BEEN ORDERED TO GET A REPORT WRITTEN REGARDLESS OF HOW OR WHAT HAD TO BE DONE.”

• THEREFORE, VANIVIER HAD TO DECIDE WHETHER HE WOULD PARTICIPATE IN WRITING UP THE FALSE REPORT.

• HE LATER STATED• MY JOB PAID WELL, IT WAS PLEASANT AND CHALLENGING,

AND THE FUTURE LOOKED RESONABLY BRIGHT. MY WIFE AND I HAD BOUGHT A HOME…….IF I REFUSED TO TAKE PART IN THE A7D FRAUD, I WOULD HAVE TO EITHER RESIGN OR FIRED. THE REPORT WOULD BE WRITTEN BY SOMEONE ANYWAY, BUT I WOULD HAVE THE SATISFACTION OF KNOWING I HAD NO PART IN THE MATTER. BUT BILLS AREN’T PAID WITH PERSONAL SATISFACTION, NOR HOUSE PAYMENTS WITH ETHICAL PRINCIPLES.”

• THE NEXT MORNING HE TELEPHONED HIS SUPERIOR AND TOLD HIM THAT HE WAS READY TO BEGIN THE QUALIFICATION REPORT.

• VANDVIER’S BELIEFS THAT IT IS RIGHT TO TELL THE TRUTH AND WRONG TO ENDANGER THE LIVES OF OTHERS, AND HIS BELIEFS THAT INTEGRITY IS GOOD AND DISHONESTY IS BAD, ARE EXAMPLES OF MORAL STANDARDS THAT HE HELD.

• MORAL STANDARDS INCLUDE THE NORMS WE HAVE ABOUT THE KINDS OF ACTIONS WE BELIEVE ARE MORALLY RIGHT AND WRONG AS WELL AS THE VALUES WE PLACE ON THE KINDS OF OBJECTS WE BELIEVE ARE MORALLY GOOD AND MORALLY BAD.

• THROUGH A MATURING PROCESS, A PERSON MAY DEVELOP STANDARDS THAT ARE MORE INTELLECTUALLY ADEQUATE AND SO MORE SUITED FOR DEALING WITH THE MORAL DILEMMA OF ADULT LIFE.

• AS VANDIVIER’S OWN STATEMENTS MAKE CLEAR, HOWEVER, WE DO NOT ALWAYS LIVE UP TO THE MORAL STANDARDS WE HOLD.

• WE DO NOT ALWAYS DO WHAT WE BELIEVE IS MORALLY RIGHT NOR DO WE ALWAYS PURSUE WHAT WE BELIEVE IS MORALLY GOOD.

• WHAT ARE THE CHARACTERISTICS THAT DISTINGUISH MORAL STANDARDS FROM STANDARDS THAT ARE NOT MORAL?

• THERE ARE FIVE CHARACTERISITICS THAT HELP PIN DOWN THE NATURE OF MORAL STANDARDS.

• FIRST, MORAL STANDARDS DEAL WITH MATTERS THAT WE THINK CAN SERIOUSLY INJURE OR BENEFIT HUMAN BEINGS.

• IN THE VANDIER CASE, IT WAS CLEAR THAT LYING IN THE GOVERNMENT REPORT AND ENDANGERING THE LIVES OF PILOTS WERE BOTH FELT TO BE SERIOUS HARMS AND SO BOTH WERE MORAL MATTERS.

• SECOND, MORAL STANDARDS ARE NOT ESTABLISHED OR CHANGED BY THE DECISIONS OF PARTICULAR AUTHORITATIVE BODIES.

• LAWS AND LEGAL STANDARDS ARE ESTABLISHED BY THE AUTHORITY OF A LEGISLATURE.

• MORAL STANDARDS, HOWEVER, ARE NOT ESTABLISHED BY AUTHORITY.

• INSTEAD, THE VALIDITY OF MORAL STANDARDS RESTS ON THE ADEQUACY OF THE REASONS THAT ARE TAKEN TO SUPPORT IT AND JUSTIFY THEM, SO LONG THESE REASONS ARE ADEQUATE, THE STANDARDS REMAIN VALID.

• THIRD, MORAL STANDARDS SHOULD BE PREFERRED TO OTHER VALUES INCLUDING (ESPECIALLY) SELF-INTEREST.

• THAT IS, IF A PERSON HAS A MORAL OBLIGATION TO DO SOMETHING, THEN HE OR SHE IS SUPPOSED TO DO IT EVEN IF THIS CONFLICTS WITH OTHER, NONMORAL VALUES OR SELF INTEREST.

• IN THE VANDIVIER CASE, FOR EXAMPLE, IT IS FELT HE SHOULD HAVE CHOSEN THE MORAL VALUES OF HONESTY AND RESPECT FOR LIFE OVER THE NONMORAL VALUE OF KEEPING HIS WELL PAID , PLEASANT, AND CHALLENGING JOB.

• FOURTH, AND GENERALLY, MORAL STANDARDS ARE BASED ON IMPARTIAL CONSIDERATIONS.

• THE FACT THAT YOU WILL BENEFIT FROM A LIE AND THAT I WILL BE HARMED IS IRRELEVANT TO WHETHER LYING IS MORALLY WRONG.

• ALTHOUGH IMPARTIALITY IS A CHARACTERISTIC OF MORAL STANDARDS, IT MUST BE BALANCED WITH CERTAIN KINDS OF PARTIALITY IN PARTICULAR, WITH THE PARTIALITY THAT ARISES FROM LEGITIMATE CARING AND PREFERENCE FOR THOSE INDIVIDUALS WITH WHOM WE HAVE A SPECIAL RELATIONSHIP, SUCH AS FAMILY MEMBERS AND FRIENDS.

• LAST, MORAL STANDARDS ARE ASSOCIATED WITH SPECIAL EMOTIONS AND A SPECIAL VOCABULARY.

• A CAREFUL READING OF VANDIVIER’S STATEMENTS, SUGGESTS THAT HE LATER FELT SHAME AND REMORSE ABOUT WHAT HE DID.

• HENCE, BUSINESS ETHICS IS A STUDY OF MORAL STANDARDS AND HOW THESE APPLY TO THE SOCIAL SYSTEMS AND ORGANIZATIONS THROUGH WHICH MODERN SOCIETIES PRODUCE AND DISTRIBUTE GOODS AND SERVICES AND TO THE BEHAVIOURS OF THE PEOPLE WHO WORK WITHIN THESE ORGANIZATIONS.

• THERE ARE THREE DIFFERENT KINDS OF ISSUES THAT BUSINESS ETHICS INVESTIGATES: SYSTEMIC, CORPORATE AND INDIVIDUAL.

• SYSTEMIC ISSUES IN BUSINESS ETHICS ARE ETHICAL QUESTIONS RAISED ABOUT THE ECONOMICAL, POLITICAL LEGAL AND OTHER SOCIAL SYSTEMS OR INSTITUTIONS WITHIN WHICH BUSINESSES OPERATE.

• THESE INCLUDE QUESTIONS ABOUT THE LAWS, REGULATIONS, INDUSTRIAL STRUCTURES, AND SOCIAL PRACTICES, WITHIN WHICH BUSINESSES OPERATE.

• ONE EXAMPLE WOULD BE QUESTIONS ABOUT THE MORALITY OF THE GOVERNMENT CONTRACTING SYSTEM THROUGH WHICH B.F.GOODRICH WAS ALLOWED TO TEST THE ADEQUACY OF ITS OWN BRAKE DESIGN FOR THE A7D.

• CORPORATE ISSUES IN BUSINESS ETHICS ARE ETHICAL QUESTIONS RAISED ABOUT A PARTICULAR ORGANIZATION.

• THESE INCLUDE QUESTIONS ABOUT THE MORALITY OF THE ACTIVITIES, POLICIES, PRACTICES, OR ORGANIZATIONAL STRUCTURE OF THE COMPANY AS A WHOLE.

• ONE SET OF EXAMPLES OF THIS KIND OF ISSUE WOULD BE QUESTIONS ABOUT THE MORALITY OF B.F.GOODRICH’S CORPORATE CULTURE OR THE QUESTIONS ABOUT THE COMPANY’S CORPORATE DECISION TO “QUALIFY” THE A7D BRAKE.

• FINALLY, INDIVIDUAL ISSUES IN BUSINESS ETHICS ARE ETHICAL QUESTIONS RAISED ABOUT A PARTICULAR INDIVIDUAL OR PARTICULAR INDIVIDUALS WITHIN A COMPANY AND THEIR BEHAVIOURS AND DECISIONS.

• THESE INCLUDE QUESTIONS ABOUT THE MORALITY OF THE DECISIONS, ACTIONS, OR CHARACTER OF AN INDIVIDUAL.

APPROACHES TO BUSINESS ETHICS• BUSINESS ETHICS USUALLY MEAN ANY ONE OF

THREE THINGS:(1) AVOID BREAKING THE CRIMINAL LAW IN ONE’S WORK-RELATED ACTIVITY;(2) AVOID ACTION THAT MAY RESULT IN CIVIL LAW SUITS AGAINST THE COMPANY; AND(3) AVOID ACTIONS THAT ARE BAD FOR THE COMPANY IMAGE.

• BUSINESSES ARE ESPECIALLY CONCERNED WITH THESE THREE THINGS SINCE THEY INVOLVE LOSS OF MONEY AND COMPANY REPUTATION.

• IN MOST ISSUES OF BUSINESS ETHICS, WE CAN LOOK AT THREE DIFFERENT WAYS OF DERIVING STANDARDS OF BUSINESS ETHICS.

• DERIVING BUSINESS ETHICS FROM THE PROFIT MOTIVE. SOME BUSINESS PEOPLE ARGUE THAT THERE IS A SYMBIOTIC RELATION BETWEEN ETHICS AND BUSINESS IN WHICH ETHICS USUALLY EMERGES FROM A PROFIT-ORIENTED BUSINESS.

• THERE ARE BOTH WEAK AND STRONG VERSIONS OF THIS APPROACH.

• THE WEAK VERSION IS OFTEN EXPRESSED IN THE DICTUM THAT GOOD ETHICS RESULTS IN GOOD BUSINESS, WHICH SIMPLY MEANS THAT MORAL BUSINESSES PRACTICES ARE PROFITABLE.FOR EXAMPLE, IT IS PROFITABLE TO MAKE SAFE PRODUCTS SINCE THIS WILL REDUCE PRODUCT LIABILITY SUITS.

• THE STRONG VERSION OF THIS PROFIT APPROACH TAKES A REVERSE STRATEGY AND MAINTAINS THAT IN A COMPETITIVE AND FREE MARKET, THE PROFIT MOTIVE WILL IN FACT BRING ABOUT A MORALLY PROPER ENVIRONMENT.

• THAT IS, IF CUSTOMERS DEMAND SAFE PRODUCTS, THEN THEY WILL BUY FROM ONLY THOSE BUSINESSES THAT MEET THEIR DEMANDS.

• BUSINESSES THAT DO NOT HEED THESE DEMANDS WILL NOT SURVIVE.

• SINCE THIS VIEW MAINTAINS THAT THE DRIVE FOR PROFIT WILL CREATE MORALITY, THE STRONG VERSION CAN BE EXPRESSED IN THE DICTUM THAT GOOD BUSINESS RESULTS IN GOOD ETHICS.

• BUSINESS ETHICS RESTRICTED TO FOLLOWING THE LAW. A SECOND APPROACH TO BUSINESS ETHICS IS THAT MORAL OBLIGATIONS IN BUSINESS ARE RESTICTED TO WHAT THE LAW REQUIRES.

• IN A CULTURALLY PLURALISTIC SOCIETY, THE ONLY BUSINESS-RELATED MORAL OBLIGATIONS THAT ARE MAJORITY-ENDORSED ARE THOSE OBLIGATIONS THAT ARE ALREADY CONTAINED IN THE LAW.

• THESE INCLUDE A RANGE OF GUIDELINES FOR HONESTY IN ADVERTISING, PRODUCT SAFETY, SAFE WORKING CONDITIONS, AND FAIR HIRING AND FIRING POLICIES.

• STRICTLY FOLLOWING THIS LEGAL APPROACH TO BUSINESS ETHICS MAY INDEED PROMPT BUSINESSES TO DO THE RIGHT THING, AS PRESCRIBED BY LAW.

• ONE OF THE KEY PROBLEMS WITH RESTRICTING MORALITY SOLELY TO WHAT THE LAW REQUIRES IS THAT EVEN IN THE BEST LEGAL CONTEXT THE LAW WILL LAG BEHIND CERTAIN UNSCRUPULOUS, YET LEGAL BUSINESS PRACTICES.

• FOR EXAMPLE, IN THE PAST, DRUG COMPANIES COULD MAKE EXAGGERATED CLAIMS ABOUT THE MIRACULOUS CURATIVE PROPERTIES OF THEIR PRODUCTS.NOW GOVERNMENT REGULATIONS PROHIBIT ANY EXAGGERATED CLAIMS.

• THUS, PRIOR TO THE ENACTMENT OF A LAW, THERE WILL BE A PERIOD OF TIME WHEN A BUSINESS PRACTICE WILL BE DEEMED IMMORAL, YET THE PRACTICE WILL BE LEGAL.

• THIS WOULD BE A CONTINUING PROBLEM SINCE CHANGES IN PRODUCTS, TECHNOLOGY, AND MARKETING STRATEGIES WOULD SOON PRESENT NEW QUESTIONABLE PRACTICES THAT WOULD NOT BE ADDRESSED BY EXISTING LEGISLATION.

• DERIVING BUSINESS ETHICS FROM GENERAL MORAL OBLIGATIONS. THE THIRD APPROACH TO BUSINESS ETHICS IS THAT MORALITY MUST BE INTRODUCED AS A FACTOR THAT IS EXTERNAL FROM BOTH THE PROFIT MOTIVE AND THE LAW.

• THIS APPROACH IS EXPRESSED MOST CLEARLY IN THE FOLLOWING;-

• PROPER ETHICAL BEHAVIOUR EXISTS ON A PLANE ABOVE THE LAW. THE LAW MERELY SPECIFIES THE LOWEST COMMON DENOMINATOR OF ACCEPTABLE BEHAVIOUR.

• THE MOST CONVENIENT WAY TO EXPLORE THIS APPROACH IS TO CONSIDER THE SUPRA-LEGAL MORAL PRINCIPLES.

• FIVE FAIRLY BROAD MORAL PRINCIPLES ARE AS FOLLOWS:-HARM PRINCIPLE: BUSINESS SHOULD AVOID CAUSING UNWARRANTED HARM.FAIRNESS PRINCIPLE: BUSINESS SHOULD BE FAIR IN ALL THEIR PRACTICES.HUMAN RIGHTS PRINCIPLE: BUSINESS SHOULD RESPECT HUMAN RIGHTS,AUTONOMY PRINCIPLE: BUSINESSES SHOULD NOT INFRINGE ON THE RATIONALLY REFLECTIVE CHOICES OF PEOPLE.

• VERACITY PRINCIPLE: BUSINESSES SHOULD NOT BE DECEPTIVE IN THEIR PRACTICES.

• THE ATTRACTION OF THESE PRINCIPLES IS THAT THEY APPEAL TO UNIVERSAL MORAL NOTIONS THAT NO ONE WOULD REASONABLY REJECT.

• BUT THE PROBLEM WITH THESE PRINCIPLES IS THAT THEY ARE TOO GENERAL AND ABSTRACT IN NATURE.

• AN ALTERNATIVE APPROACH IS TO FOCUS INSTEAD ON CONCRETE SITUATIONS THAT AFFECT THE PARTICULAR INTERESTS OF CONSUMERS, WORKERS, SHAREHOLDERS, OR THE COMMUNITY.

• THE STAKEHOLDER APPROACH TO BUSINESS ETHICS ATTEMPTS TO DO THIS SYSTEMATICALLY.

• A STAKEHOLDER IS ANY PARTY AFFECTED BY A BUSINESS PRACTICE, INCLUDING EMPLOYEES, SUPPLIERS, CREDITORS, COMPETITORS, GOVERNMENTS AND COMMUNITY.

• ANOTHER WAY OF LOOKING AT CONCRETE MORAL OBLIGATIONS IN BUSINESS IS TO LIST THEM ISSUE BY ISSUE.

• THIS IS THE STRATEGY BEHIND CORPORATE CODES OF ETHICS.

• IT ADDRESSES SPECIFIC TOPICS SUCH AS CONFIDENTIALITY OF CORPORATE INFORMATION, CONFLICTS OF INTEREST, BRIBES, AND POLITICAL CONTRIBUTIONS.

• A CORPORATE CODE OF ETHICS IS A REASONABLE MODEL FOR UNDERSTANDING HOW WE SHOULD ARTICULATE MORAL PRINCIPLES AND INTRODUCE THEM INTO BUSINESS PRACTICE.

• THE PRACTICAL ADVANTAGE OF THIS APPROACH IS THAT IT DIRECTLY STIPULATES THE MORALITY OF CERTAIN ACTION TYPES.

• BUT THE LIMITATION OF THE CORPORATE CODE MODEL IS THAT THE PRINCIPLES OFFERED WILL APPEAR TO BE MERELY RULES OF PRUDENCE OR GOOD MANNERS UNLESS WE CAN ESTABLISH THEIR DISTINCTLY MORAL CHARACTER.

• FOLLOWING ANY OF THE ABOVE THREE APROACHES TO BUSINESS ETHICS WILL BRING US CLOSER TO ACCEPTABLE MORAL BEHAVIOUR THAN WE MIGHT OTHERWISE BE.

FEW EXAMPLES

• IN 1991, THE BODY SHOP, A WELL KNOWN RETAILER, TOOK THE DECISION TO PHASE OUT THE USE OF PVC FROM ITS PACKAGING AND PRODUCTS.

• NO ITEM OF PVC DESTINED FOR SALE HAS BEEN PURCHASED SINCE 1992.

• THIS DECISION WAS TAKEN AS A PRECAUTIONARY APPROACH TO THE ENVIRONMENTAL IMPACT OF PVC MANUFACTURE AND ASSOCIATED HEALTH IMPLICATIONS.

• THE BODY SHOP COMMENTS:

WHILST THE COMPANY ACKNOWLEDGES THE VERSATILITY OF PVC AS A PACKAGING AND PRODUCT MATERIAL, OUR CONCERN ABOUT THE SOCIAL AND ENVIRONMENTAL IMPLICATIONS ASSOCIATED WITH PVC OVERIDES ANY DECISION TO USE IT IN OUR PRODUCTS, PACKAGING OR SHOP FITS.

• JOHN LEWIS, A U.K. RETAIL CHAIN, HAD TO RESOLVE A NUMBER OF ETHICAL ISSUES WHEN IT CONSIDERED CLOSING DOWN A DEPARTMENT STORE.

• ONE OF ITS MOST FOUNDING PRINCIPLES IS THAT EMPLOYEES ARE “PARTNERS” IN THE BUSINESS.

• IT ALSO PLACES GREAT IMPORTANCE TO OTHER STAKEHOLDERS, SUCH AS CUSTOMERS AND SUPPLIERS, AND ITS IMPACT ON THE LOCAL COMMUNITY AND THE ENVIRONMENT.

• CLOSING THE STORE WOULD HAVE MEANT MAKING 400 PARTNERS REDUNDANT.

• INSTEAD, THE COMPANY CHOSE TO PLACE THEIR INTERESTS ABOVE SHORT-TERM FINANCIAL CONSIDERATIONS.

• THE CHAIRMAN, SIR STUART HAMPSON, EXPLAINS:THE BOARD DEFERRED REDUNDANCIES WHILE DEVELOPING A NEW STORE IN A STRONG TRADING LOCATION NOT VERY FAR AWAY. THIS MEANT OVER-MANNING BY 100 PEOPLE AT A TIME WHEN THE RETAIL ECONOMY WAS SUFFERING FROM RECESSION, BUT THIS WAS A PRACTICAL DEMONSTRATION THAT WE WERE A COMPANY WHICH RECOGNISED SUCCESS DEPENDED ON PEOPLE, AND WE WERE PREPARED TO STAND BY OUR PARTNERS.

NEW ECONOMY, NEW ETHICS

DRIVERS OF THE NEW ECONOMY

• FOUR POWERFUL FORCES ARE DRIVING CHANGE: TECHNOLOGY, GLOBALISATION, THE INCREASING VALUE OF INTANGIBLE ASSETS AND THE SO-CALLED “WAR FOR TALENT”.

• THESE FORCES ARE RESHAPING THE WAY COMPANIES MANAGE THEIR RELATIONSHIPS

• IN DIFFERENT LOCAL, NATIONAL AND INTERNATIONAL CONTEXTS WITH INDIVIDUALS AND WITH THEIR ORGANISATIONS.

• THE SUCCESS OF THESE RELATIONSHIPS HINGES ON THE WILLINGNESS OF COMPANIES TO BECOME MORE OPEN AND ACCOUNTABLE – EXPLICIT ABOUT THE CONTRACT BETWEEN THEM AND THEIR STAKEHOLDERS; ABOUT A FULL RANGE OF OBJECTIVES WHICH INCLUDE SOCIAL AND ENVIRONMENTAL IMPACT, NOT JUST FINANCIAL; AND ABOUT THE EXTENT TO WHICH THEY DELIVER AGAINST THEIR OBJECTIVES.

• TECHNOLOGY IS REVOLUTIONISING THE NATURE AND SPEED OF COMMUNICATION WITHIN AND BETWEEN COMPANIES.

• THE INTERNET, IN PARTICULAR, ALLOWS FOR HUGE AMOUNTS OF DATA AND INFORMATION TO BE RAPIDLY TRANSMITTED, ANYWHERE, ANY TIME.

• THIS ENABLES COMPANIES TO FORGE EVER-CLOSER RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS.

• BUT IT ALSO POSES RISKS, SOME OF WHICH ARE DUBBED AS “CYBERLIABILITIES”.

• EXAMPLES SUCH AS “CYBERLIBEL, COPYRIGHT INFRINGEMENT, BREACH OF CONFIDENCE, NEGLIGENT VIRUS TRANSMISSION, INADVERTENT CONTRACTS AND COMPUTER HACKING”.

• SOME OF THE PAYOUTS SUGGEST THAT COMPANIES SHOULD BE PAYING MORE ATTENTION.

• FOR EXAMPLE, PETROLEUM GIANT CHEVRON SUFFERED PUBLICLY WHEN A FEW WORKERS CIRCULATED TEO CO-WORKERS e-MAIL TITLED “25 REASONS WHY BEER IS BETTER THAN WOMEN”.

• SOME EMPLOYEES CONSIDERED THE MESSSAGE OFFENSIVE AND TOOK CHEVRON TO COURT, WINNING A$2.2 m SETTLEMENT.

• IN ANOTHER CASE, A BRITISH INSURANCE COMPANY PAID OUT ₤450,000 FOR ALLEGED DEFAMATION OF A COMPETITOR BY e-MAIL.

• GLOBALISATION: MANY FORCES ARE DRIVING GLOBALISATION: COMMUNICATIONS TECHNOLOGY, IMPROVEMENTS IN THE TRANSPORT STRUCTURE, DEREGULATION, FREER TRADE AND FREER MOVEMENT OF PEOPLE.

• THE SAME CONDITIONS THAT HAVE DISSOLVED MARKET BARRIERS HAVE ALSO ENABLED PRESSURE GROUPS ACROSS THE GLOBE TO LINK UP AND EXERT GREATER PRESSURE ON BUSINESSES.

• THE ENVIRONMENT, HUMAN RIGHTS, GENETIC MODIFICATION HAVE BECOME MUCH MORE VISIBLE ISSUES.

• THIS HAS BEEN POSSIBLE BECAUSE OF THE ABILITY OF THE GROUPS TO INTERACT USING THE INTERNET.

• WHAT ONCE WAS LOCAL POCKETS OF RESISTANCE, VIEWED AS EXTREMIST, HAVE BECOME UNITED AND ORGANISED MOVEMENTS ACROSS THE GLOBE, AND CONSEQUENTLY MORE EFFECTIVE.

• AS BRANDS AND PRODUCTS SUCH AS COCA-COLA AND MICROSOFT ESTABLISH THEMSELVES GLOBALLY, LOCAL DIVERSITY IS BEING AFFECTED, IF NOT REPLACED, BY GLOBAL CONSISTENCY.

• MAKING A SUCCESSFUL GLOBAL BUSINESS INVOLVES WORKING IN A BUSINESS ENVIRONMENT WHICH HAS MANY DIFFERENT LANGUAGES, DIFFERENT CULTURES, DIFFERENT TAX REGIMES AND DIFFERENT RULES AND REGULATIONS.

• MANAGERS IN GLOBAL BUSINESSES CAN HELP THEIR FIRMS TO BE SUCCESSFUL AND TO MINIMISE ETHICAL CONFLICT IN SEVERAL WAYS.

―KNOW AND COMPLY WITH LOCAL LAWS, AND REGIMES RELATING TO FINANCE, TAX, AND EMPLOYMENT.

―BE SYMPATHETIC TO LOCAL CUSTOM SUCH AS DRESS CODES.

―BE AWARE OF GLOBAL PRESSURE GROUPS THAT ARE RELEVANT TO THEIR INDUSTRY.

―MAINTAIN AND ACCOMMODATE DIVERSITY WITHIN THE COMPANY THROUGH WORKING PRACTICES, MANAGEMENT STYLES, EMPLOYMENT BENEFITS AND PERFORMANCE MANAGEMENT PROCESSES.

INTANGIBLE ASSETS: THE IMPORTANCE OF INTANGIBLE IN THE NEW ECONOMY HAS BECOME EVER MORE APPARENT.

• TRADITIONALLY, COMPANIES WERE VALUED IN LARGE PART ON THE TANGIBLE ASSETS;

• ACCORDING TO BRICK-AND-MORTAR ASSETS SUCH AS LAND, BUILDINGS, EQUIPMENT AND INVENTORY.

• THESE ASSETS ALL APPEARED IN THE BALANCE SHEET.

• IN RECENT YEARS VALUE HAS BEEN CALCULATED BASED ON A MUCH WIDER RANGE OF ASSETS BUT FEW OF IT MAKE IT ON TO BALANCE SHEETS.

• THEY INCLUDE: ORGANISATIONAL ASSETS, SUCH AS THE ABILITY

TO INNOVATE, AND VARIOUS FORMS OF INTELLECTUAL PROPERTY, SUCH AS CODIFIED KNOWLEDGE ABOUT A PRODUCT OR PROCESS;

CUSTOMER ASSETS, SUCH AS THE NUMBER OF CUSTOMERS AND THEIR LOYALTY TO A BUSINESS;

EMPLOYEE AND SUPPLIER ASSETS, SUCH AS HUMAN CAPITAL (THE LEVEL OF KNOWLEDGE AND SKILL OF THE WORKFORCE) AND RELATIONSHIP WITH KEY SUPPLIERS.

• INTANGIBLE ASSETS ARE, BY THEIR VERY NATURE, ELUSIVE – HARD TO QUANTIFY AND TRACK.

• THEIR VALUE WILL VARY ACCORDING TO THE PERCEPTION AND ATTITUDES OF INDIVIDUALS AND GROUPS, INCLUDING STAFF, CUSTOMERS, SUPPLIERS, JOURNALISTS AND ANALYSTS, SHAREHOLDERS AND OTHER STAKEHOLDERS.

• THUS THE PART THEY PLAY IN ETHICAL ISSUES CAN BE COMPLICATED.

• EVEN SO, SOME PRACTICAL STEPS CAN BE TAKEN TO REDUCE POTENTIAL FOR ETHICAL CONFLICT, SUCH AS

UNDERTTAKE REPUTATION STUDIES TO UNDERSTAND HOW THE BRAND IS PERCEIVED.

ACTIVELY MANAGE STAKEHOLDER RELATIONS, MONITORING EXPECTATIONS AND PERFORMANCE LEVELS.

ACCOUNT FOR THE NON-FINANCIAL PERFORMANCE OF THE ORGANISATION AND REPORT ON IT.

DEVELOP AND IMPLEMENT POLICIES FOR CORPORATE SOCIAL RESPONSIBILITY OR CORPORATE CITIZENSHIP.

THE WAR FOR TALENT

• TALENTED PEOPLE, WHO POSSESS KNOWLEDGE, SKILLS AND IDEAS, ARE AMONG THE MOST VALUABLE INTANGIBLE ASSETS OF THE NEW ECONOMY.

• AND BECAUSE THEY ARE INCREASINGLY IN DEMAND THEY ARE INCREASINGLY VALUABLE.

• INCREASINGLY, TALENTED PEOPLE WILL INVEST THEIR ENERGY AND TALENT ONLY IN ORGANISATIONS WITH VALUES AND BELIEFS THAT MATCH THEIR OWN.

• IN ORDER TO ACHIEVE THIS MATCH, COMPANYS’ NEED TO BUILD CULTURES, COMPENSATION ANDBENEFITS PACKAGES, AND CAREER PATHS THAT REFLECT AND FOSTER CERTAIN SHARED VALUES AND BELIEFS.

VALUE – BASED CODES

• MANY LARGE CORPORATIONS SET OUT THEIR PURPOSES AND VALUES AS PART OF MANAGING STAKEHOLDER RELATIONSHIPS.

• BUT IF THESE LAUDABLE STATEMENTS ARE TO HAVE ANY REAL EFFECT, COMPANIES MUST TRANSLATE THEM INTO PRACTICAL GUIDELINES FOR THEIR EMPLOYEES AND OTHERS WITH WHOM THEY DO BUSINESS.

• SUCH GUIDELINES, OR ETHICAL CODES, SET OUT DESIRABLE CONDUCT AND BEST PRACTICE, AND PROVIDE FRAMEWORKS TO HELP EMPLOYEES RESOLVE ETHICAL DILEMMAS THEY MAY ENCOUNTER IN THEIR WORK.

• ETHICAL CODES TYPICALLY SPELL OUT A COMPANY’S OBLIGATIONS TO FIVE CONSTITUENCIES.EMPLOYEESSHAREHOLDERSSUPPLIERSCUSTOMERSTHE COMMUNITY (INCLUDING ITS PHYSICAL ENVIRONMENT)

• AN EFFECTIVE AND CREDIBLE CODE SHOULD BE ALIVE IN THE SENSE OF CONSTANTLY EVOLVING AND RESPONDING TO EMERGING ISSUES IN BUSINESS.

• FOR INSTANCE, MANY RECENTLY CREATED OR REVISED CODES TACKLE REAL 21st-CENTURY PROBLEMS, SUCH AS SOFTWARE COPYING, SUBSTANCE ABUSE, THE USE OF THE INTERNET BY EMPLOYEES AND WORKPLACE HARASSMENT.

• IF AN ETHICAL CODE IS TO HAVE ANY CREDIBILITY, A COMPANY MUST BE WILLING TO DISCIPLINE ANY EMPLOYEE FOUND GUILTY OF A BREACH OF IT.

CROSS-CULTURAL PROBLEMS

• THE MOST DIFFICULT AREAS OF BUSINESS ETHICS CONCERN DILEMMAS THAT ARISE WHEN DOING BUSINESS IN COUNTRIES WHERE LAWS, VALUES AND CUSTOMS ARE DIFFERENT FROM THOSE OF THE HEADQUARTER COUNTRY.

• COMPANIES MAY FIND THEMSELVES CAUGHT UP IN DIFFICULT ISSUES OF RIGHT AND WRONG AND MAY NEED TO CHOOSE BETWEEN THE COMPANY’S OBLIGATIONS TO DOMESTIC STAKEHOLDERS AND ITS OBLIGATIONS TO THE HOST COUNTRY.

• EIGHT MAJOR ISSUES THAT MULTINATIONALS MUST ADDRESS WHEN “INTERNATIONALISING” THEIR DOMESTIC CODES OF BUSINESS PRACTICE.

• THEY ARE:-

BRIBERY AND CORRUPT PAYMENTS; EMPLOYMENT AND PERSONNEL ISSUES; MARKETING PRACTICES; THE IMPACT OF THE MULTINATIONAL ON THE

DEVELOPMENT OF HOST COUNTRIES; EFFECTS ON THE NATURAL ENVIRONMENT; CULTURAL IMPACTS OF MULTINATURAL OPERATIONS; RELATIONS WITH HOST GOVERNMENTS; RELATIONSA WITH

HOME COUNTRIES.

• THE AIM MUST BE TO ANTICIPATE THE PROBLEMS BEFORE THEY BECOME PUBLIC ISSUES.

• ONE EXAMPLE IS THE PRINCIPLE OF THE EQUAL TREATMENT OF MEN AND WOMEN.

• MOST DOMESTIC CODES OF ETHICS HAVE A POLICY ON NON-DISCRIMINATION ON GROUNDS OF GENDER; INDEED, MANY SAY THEY HAVE AN EQUAL OPPORTUNITIES POLICY.

• YET IN COUNTRIES WHERE A MUSLIM CULTURE PREDOMINATES, THE POLICY HAS TO BE APPLIED IN A DIFFERENT WAY FROM THAT WHICH IS NORMAL.

• FOR INSTANCE, UNILEVER’S CHAIRMAN DISCUSSED IN A SPEECH IN 1997, HOW THE PRINCIPLE OF “EQUAL OPPORTUNITIES” FOR EVERYONE INCLUDED IN HIS COMPANY’S CODE COULD BE BROUGHT INTO LINE WITH A LEGAL BAN ON WOMEN WORKING OUTSIDE THE HOME.

• HE STATED:

THAT BAN IS BASED ON RELIGIOUS PRINCIPLES AND IS APPLIED IN, FOR INSTANCE, SAUDI ARABIA. WE FEEL THAT WE MUST RESPECT THE CULTURE AND THE LAW OF THE LAND, REGARDLESS OF OUR PERSONAL VIEW ON THIS. THAT MEANS THAT NO WOMEN WORK IN OUR BUSINESS THERE. FOR THE MEN WHO WORK THERE THE PRINCIPLE OF ‘EQUAL OPPORTUNITIES’ APPLIES IN FULL AND NATIONALITY, SOCIAL STATUS OR RELIGIOUS BACKGROUND ARE NOT ALLOWED TO PLAY A ROLE IN RECRUITMENT OR PROMOTION.

• AN ANALYSIS OF THE CODES OF TEN MULTINATIONALS INDICATES THAT THE MOST COMMON CROSS-CULTURAL ISSUES ADDRESSED WERE:

GIFTS (HOSPITALITY AND BRIBES); CONFLICTS OF INTEREST; INSIDER DEALING; EQUAL OPPORTUNITIES AND DISCRIMINATION; PROTECTION OF THE ENVIRONMENT.

CONCLUSION

• BUSINESS ETHICS MANAGEMENT IS LARGELY ABOUT MANAGING THE RISK TO AN ORGANISATION’S REPUTATION.

• ANY RISK MANAGEMENT PROGRAMME THAT DOES NOT INCLUDE A STRONG EMPHASIS ON BEHAVIOUR IS FUNDAMENTALLY FLAWED.

• THE SUCCESS OF A BUSINESS ETHICS PROGRAMME WILL ULTIMATELY DEPEND ON HAVING THE RIGHT COMBINATION OF SPIRIT AND STRUCTURE.

• IT WILL ALSO DEPEND ON THE CAUSE BEING CHAMPIONED AND SUPPORTED BY SENIOR MANAGERS.

CASE STUDIES

E.I.DuPONT NEMOURS

• THE POLICY AS ADOPTED BY THE BOARD OF DIRECTORS

• IT ALWAYS HAS BEEN AND CONTINUES TO BE THE INTENT OF THE COMPANY THAT ITS EMPLOYEES MAINTAIN THE HIGHEST ETHICAL STANDARDS IN THEIR CONDUCT OF COMPANY AFFAIRS.

• THE COMPANY’S LONG-STANDING POLICY WITH RESPECT TO (1) GIFTS, FAVOURS, ENTERTAINMENT AND PAYMENTS GIVEN OR RECEIVED BY EMPLOYEES, (2) POTENTIAL CONFLICTS OF INTERESTS; AND (3) AND CERTAIN OTHER MATTERS.

• THE ESSENCE OF THIS POLICY IS THAT EACH EMPLOYEE WILL CONDUCT THE COMPANY’S BUSINESS WITH INTEGRITY, IN COMPLIANCE WITH APPLICABLE LAWS, AND IN A MANNER THAT EXCLUDES CONSIDERATION OF PERSONAL ADVANTAGE.

• STRICT ADHERENCE TO THIS POLICY WILL PROTECT THE COMPANY AND ITS EMPLOYEES FROM CRITICISM, LITIGATION OR EMBARASSMENT THAT MIGHT RESULT FROM ALLEGED OR REAL CONFLICTS OF INTEREST OR UNETHICAL PRACTICES.

• ANY EMPLOYEE WHO IS AWARE OR SUSPECTS ILLEGAL ACTIVITY, FRAUD OR ANY OTHER VIOLATION OF THE COMPANY’S ETHICAL STANDARDS MUST REPORT HIS OR HER CONCERN.

PAYMENT BY THE COMPANY

1. GIFTS, FAVOURS AND ENTERTAINMENT MAY BE GIVEN TO OTHERS AT COMPANY EXPENSE ONLY IF THEY MEET ALL OF THE FOLLOWING CRITERIA.

a. THEY ARE CONSISTENT WITH CUSTOMARY BUSINESS PRACTICES.

b. THEY ARE NOT EXCESSIVE IN VALUE AND CANNOT BE CONSTRUED AS BRIBES OR PAY-OFFS.

c. THEY ARE NOT IN CONTRAVENTION OF APPLICABLE LAW OR ETHICAL STANDARDS; AND

d. PUBLIC DISCLOSURE OF THE FACTS WILL EMBARRASS NEITHER THE COMPANY NOR THE EMPLOYEE

2. IN CONNECTION WITH THE SALES BY THE COMPANY, COMMISSIONS, REBATES, DISCOUNTS, CREDITS, AND ALLOWANCES SHOULD BE PAID OR GRANTED ONLY BY THE BUSINESS UNIT ON WHOSE BOOKS THE RELATED SALE IS RECORDED, AND SUCH PAYMENTS SHOULD:

a. BEAR A REASONABLE RELATIONSHIP TO THE VALUE OF GOODS DELIVERED OR SERVICES RENDERED;

b. BE BY CHEQUE OR BANK TRANSFER TO THE SPECIFIC BUSINESS ENTITY WITH WHOM THE AGREEMENT IS MADE OR TO WHOM THE ORIGINAL RELATED SALES INVOICE WAS ISSUED-NOT TO INDIVIDUAL OFFICERS, EMPLOYEES OR AGENTS OF SUCH ENTITY OR TO A RELATED BUSINESS ENTITY;

c. BE MADE ONLY IN THE COUNTRY OF THE ENTITY’S PLACE OF BUSINESS; AND

d. BE SUPPORTED BY DOCUMENTATION THAT IS COMPLETE AND THAT CLEARLY DEFINES THE NATURE AND PURPOSE OF THE TRANSACTION.

AGREEMENTS FOR THE COMPANY TO PAY COMMISSIONS, REBATES, CREDITS, DISCOUNTS OR ALLOWANCES SHOULD BE IN WRITING. WHEN THIS IS NOT FEASIBLE, THE PAYMENT ARRANGEMENT SHOULD BE SUPPORTED BY AN EXPLANATORY MEMORANDUM FOR FILE PREPARED BY THE APPROVING BUSINESS AND/OR FUNCTION AND REVIEWED BY DuPONT LEGAL.

3. IN CONNECTION WITH THE COMPANY’S PURCHASES OF GOODS AND SERVICES, INCLUDING COMMISSIONS RELATED THERETO, PAYMENTS SHOULD BE MADE ONLY IN THE COUNTRY OF THE SELLER’S OR PROVIDER’S PLACE OF BUSINESS OR IN THE COUNTRY IN WHICH THE PRODUCT WAS DELIVERED OR SERVICES RENDERED.ALL SUCH PAYMENTS SHALL BE CONSISTENT WITH CORPORATE AND TRADE PRACTICE.

GIFTS RECEIVED

1. EMPLOYEES SHALL NEITHER SEEK NOR ACCEPT FOR THEMSELVES OR OTHERS ANY GIFTS, FAVOURS OR ENTERTAINMENT WITHOUT A LEGITIMATE BUSINESS PURPOSE, NOR SEEK OE ACCEPT LOANS (OTHER THAN CONVENTIONAL LOANS AT MARKET RATES FROM LENDING INSTITUTIONS) FROM ANY PERSON OR BUSINESS ORGANIZATION THAT DOES OR SEEKS TO DO BUSINESS WITH, OR IS A COMPETITOR OF, THE COMPANY.IN THE APPLICATION OF THIS POLICY:a) EMPLOYEES MAY ACCEPT FOR THEMSELVES AND MEMBERS OF THEIR FAMILIES COMMON COURTESIES USUALLY ASSOCIATED WITH CUSTOMARY BUSINESS PRACTICES;

(b) AN ESPECIALLY STRICT STANDARD IS EXPECTED WITH RESPECT TO GIFTS, SERVICES, DISCOUNTS, ENTERTAINMENT OR CONSIDERATIONS OF ANY KIND FROM SUPPLIERS; AND

(c) IT IS NEVER PERMISSIBLE TO ACCEPT A GIFT IN CASH OR CASH EQUIVALENTS (e.g. STOCKS OR OTHER FORMS OF MARKETABLE SECURITIES) OF ANY AMOUNT.

CONFLICTS OF INTEREST

1. EMPLOYEES SHOULD AVOID ANY SITUATION WHICH INVOLVES OR MAY INVOLVE A CONFLICT BETWEEN THEIR PERSONAL INTERESTS AND THE INTEREST OF THE CONPANY.AS IN ALL OTHER FACETS OF THEIR DUTIES, EMPLOYEES DEALING WITH CUSTOMERS, SUPPLIERS, CONTRACTORS, COMPETITORS OR ANY PERSIN DOING OR SEEKING TO DO BUSINESS WITH THE COMPANY ARE TO ACT IN THE BEST INTERESTS OF THE COMPANY TO THE EXCLUSION OF CONSIDERATIONS OF PERSONAL PREFERENCE OR ADVANTAGE.EACH EMPLOYEE SHALL MAKE PROMPT AND FULL DISCLOSURE IN WRITING OF A PROSPECTIVE SITUATION WHICH MAY INVOLVE CONFLICT OF INTEREST.

• THIS INCLUDES:

a. OWNERSHIP BY AN EMPLOYEE OR, TO THE EMPLOYEES KNOWLEDGE, BY A MEMBER OF THE EMPLOYEE’S FAMILY OF A SIGNIFICANT FINANCIAL INTEREST IN ANY OUTSIDE ENTERPRISE WHICH DOES OR SEEKS TO DO BUSINESS WITH, OR IS A COMPETITOR OF, THE COMPANY.

b. SERVING AS A DIRECTOR, OFFICER, PARTNER, CONSULTANT OF, OR IN A MANAGERIAL POSITION WITH, OR EMPLOYMENT IN A TECHNICAL CAPACITY BY, AN OUTSIDE ENTERPRISE, WHICH DOES OR IS SEEKING TO DO BUSINESS WITH OR IS A COMPETITOR OF THE COMPANY.

c. ACTING AS A BROKER, FINDER, OR GO-BETWEEN OR OTHERWISE FOR THE BENEFIT OF A THIRD PARTY IN TRANSATIONS INVOLVING OR POTENTIALLY INVOLVING THE COMPANY OR ITS INTERESTS; AND

d. ANY OTHER ARRANGEMENTS OR CIRCUMSTANCES, INCLUDING FAMILY OR OTHER PERSONAL RELATIONSHIPS WHICH MIGHT DISSUADE THE EMPLOYEE FROM ACTING IN THE BEST INTEREST OF THE COMPANY.

INSIDE INFORMATION• EMPLOYEES SHALL NOT1. GIVE OR RELEASE, WITHOUT PROPER AUTHORITY, TO

ANYONE NOT EMPLOYED BY THE COMPANY, OR TO ANOTHER EMPLOYEE WHO HAS NO NEED FOR INFORMATION, DATA OR INFORMATION OF

.

• A CONFIDENTIAL NATURE OBTAINED WHILE IN COMPANY EMPLOYMENT.

2. USE NON-PUBLIC INFORMATION OBTAINED WHILE IN COMPANY EMPLOYMENT (INCLUDING INFORMATION ABOUT CUSTOMERS, SUPPLIERS, OR COMPETITORS) FOR THE PERSONAL PROFIT OF THE EMPLOYEE OR ANYONE ELSE.

POLITICAL CONTRIBUTIONS• EMPLOYEES SHALL NOT MAKE ANY CONTRIBUTION OF

COMPANY FUNDS, PROPERTY OR SERVICES TO ANY POLITICAL PARTY OR COMMITTEE OR TO ANY CANDIDATE FOR OR HOLDER OF ANY OFFICE OF ANY GOVERNMENT-NATIONAL, STATE OR LOCAL.

• THIS POLICY DOES NOT PRECLUDE (a) THE OPERATION OF A POLITICAL ACTION COMMITTEE UNDER APPLICABLE LAWS; (b) COMPANY CONTRIBUTIONS, WHERE LAWFUL, TO SUPPORT OR OPPOSE PUBLIC REFERENDA OR SIMILAR BALLOT ISSUES; OR (c) POLITICAL CONTRIBUTIONS, WHERE LAWFUL AND REVIEWED IN ADVANCE BY THE OFFICE OF THE CHAIRMAN, OR BY A COMMITTEE APPOINTED BY THE OFFICE OF THE CHAIRMAN FOR THIS PURPOSE.

ACCOUNTING STANDARDS AND DOCUMENTATION1. ALL ACCOUNTS AND RECORDS SHALL BE DOCUMENTED

IN A MANNER THAT:a. CLEARLY DESCRIBE AND IDENTIFY THE TRUE NATURE OF

BUSINESS TRANSACTIONS, ASSETS, LIABILITY OR EQUITY, AND

2. NO RECORD, ENTRY OR DOCUMENT SHALL BE FALSE, DISTORTED, MISLEADING, MISDIRECTED, DELIBERATELY INCOMPLETE OR SUPPRESSED.

ANNUAL REPORTINGEVERY SENIOR LEVEL OFFICER SHALL FILE WITH THE OFFICE OF THE CHAIRMAN AN AFFIRMATION OF PERSONAL COMPLIANCE WITH THE BUSINESS ETHICS POLICY IN THE PRECEDING YEAR.ANNUALLY, INTERNAL AUDITING SHALL REVIEW ALL STATEMENTS FILED WITH THE OFFICE OF THE CHAIRMAN AND SUBMIT REPORT TO THE OFFICE OF THE CHAIRMAN.THE OFFICE OF THE CHAIRMAN, AFTER CONSIDERATION OF THE REPORT, WILL FORWARD IT FOR CONSIDERATION BY THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS.

ENRON• FOLLOWING THE COMPANY’S COLLAPSE, ENRON

HAS BECOME A BY-WORD FOR CORPORATE IRRESPONSIBILITY.

• THE FINANCIAL MISREPRESENTATION THAT COVERED-UP THE GIANT BLACK HOLE AT THE HEART OF THE COMPANY’S FINANCES HAVE FUELLED INTEREST IN HOW SUCH CORPORATIONS CAN BE IDENTIFIED AND HELD TO ACCOUNT.

• THIS IS MADE ALL THE MORE CHALLENGING ON ACCOUNT OF THE FACT THAT ENRON WAS DOING THE WHOLE “SOCIAL RESPONSIBILITY THING” WITH ITS CSR REPORTING, ENVIRONMENTAL AND COMMUNITY PROGRAMMES.

ENRON THE COMPANY• IN JUST 15 YEARS, ENRON GREW FROM NOWHERE

TO BE AMERICA’S SEVENTH LARGEST COMPANY, EMPLOYING 21,000 STAFF IN MORE THAN 40 COUNTRIES.

• FAR FROM BEING A WATCHWORD FOR IRRESPONSIBILITY, THE COMPANY WAS ABLE TO BOAST IN THE TOP QUARTILE OF FORTUNE

MAGAZINE’S 100 BEST COMPANIES TO WORK FOR

ON THE ALL STAR LIST OF GLOBAL MOST ADMIRED COMPANIES

FORTUNE MAGAZINE’S MOST INNOVATIVE COMPANY IN AMERICA SIX YEARS RUNNING

• THE COMPANY HAS PUBLISHED A SOCIAL AND ENVIRONMENTAL REPORT, WHICH LOOKED AT THE MOVES IT WAS TAKING WITH REGARD TO ITS ENVIRONMENTAL IMPACT, ITS EMPLOYEE RELATIONS, ITS ANTI-CORRUPTION AND BRIBERY POLICIES, AND ITS COMMUNITY RELATIONS PROGRAMMES.

• IN THIS REPORT, CEO KENNETH LAY DESCRIBED HOW THE COMPANY’S BEHAVIOURS WERE GUIDED BY ITS VISION AND VALUES; SPECIFICALLY

• RESPECT: MUTUAL RESPECT WITH COMMUNITIES AND STAKEHOLDERS AFFECTED BY THE COMPANY’S OPERATIONS

• INTEGRITY: EXAMINING THE IMPACTS, POSITIVE AND NEGATIVE, OF THE BUSINESS ON THE ENVIRONMENT AND ON SOCIETY, AND INTEGRATING HUMAN HEALTH, SOCIAL AND ENVIRONMENTAL CONSIDERATIONS INTO THE COMPANY’S MANAGEMENT AND VALUE SYSTEM

• EXCELLENCE: CONTINUING TO IMPROVE PERFORMANCE AND ENCOURAGING BUSINESS PARTNERS TO ADHERE TO STANDARDS

WHAT ARE THE ISSUES• THE FIRM PROJECTED ITSELF AS A HIGHLY

PROFITABLE, GROWING COMPANY – AN IMAGE WHICH QUICLY TURNED OUT TO BE AN ELABORATE MISTRUTH.

• ENRON’S STATEMENTS ABOUT PROFITS WERE SHOWN TO BE UNTRUE, WITH MASSIVE DEBTS CONCEALED SO THAT THEY DIN’T SHOW UP IN COMPANY’S ACCOUNTS.

• NOT ONLY THAT, THE COMPANY WAS SEEN TO HAVE BEEN EXTRAORDINARILY ACTIVE IN POLITICAL LOBBYING.

• LARGE NUMBERS OF LEGISLATORS CLOSE TO THE COMPANY IN ONE WAY OR ANOTHER.

• IT RAISED QUESTIONS ABOUT HOW APPROPRIATE SUCH CLOSENESS BETWEEN A CORPORATE AND THE POLITICAL SYSTEM ACTUALLY IS.

• ANOTHER QUESTION WAS HOW THE SITUATION COULD HAVE EVADED DETECTION FOR SO LONG.

• THE FIRM’S ACCOUNTANTS, ANDERSONS, WERE INVOLVED IN THE SHREDDING OF DOCUMENTS RELATING TO ENRON’S ACCOUNTS – A FACT WHICH SUGGESTS A SIGNIFICANT DEGREE OF COMPLICITY.

• FINANCIAL REPORTING WAS NOT SUFFICIENTLY TRANSPARENT AND ROBUST TO PICK UP ON THE ENRON PROBLEM.