While companies have established business ethics policies, more work is required to fully integrate them into corporate culture

The Institute of Business Ethics (IBE) surveys UK companies every three years on their ethics policies and programmes. The first was in 1995 and this triennial series provides an insight into how UK business has approached the challenge of “doing business ethically” over the past two decades.

Much has changed. In 1995, IBE estimated that six out ten larger companies had codes of ethics (or similar). In 2010, that number is closer to 80% of the FTSE100.

Using a code of ethics as a tool to mitigate against integrity (and other) risks can be considered an established part of how companies do business. Whereas in the beginning, we were interested to see whether or not companies were explicitly stating their values, now we are more interested in how codes of ethics and their associated ethics programmes are used in encouraging ethical behaviour.

It is clear that a code of ethics left to go dusty in an office drawer is not going to assist anyone in living up to their organisation’s ethical values. And yet the results of this, the sixth IBE survey, contain some notable surprises.

Training deficit

One always hopes for a curve of continuous improvement. However, in this survey we were surprised to find that only six out of ten UK companies provide training in business ethics for all their staff.

This is a drop of ten percentage points from 2007, when training was provided by seven out of ten UK companies. The method most favoured for ethics training by UK companies is in-house seminars (78%) followed by e-learning (67%).

Training in business ethics ensures that staff are supported in understanding what ethical values mean for their organisation, and can make decisions to “do the right thing”.

Short-sighted cuts

Although we are going through difficult times, cutting back on ethics training is a short-sighted thing for companies to do. Many think that deep down, this financial crisis is the result of unethical behaviour – we need to learn from that.

In these straitened times, it is even more important that ethics remains top of the agenda. IBE research, published as Does Business Ethics Pay – Revisited,has shown that, over a five year period, businesses that train their staff to understand and apply the codes of ethics financially outperform those that do not by a significant margin on four indicators of financial performance.

Most employees are not “bad” people. They do not set out to do unethical things, or to compromise their values or the values of their company.

Rigorous on relevance 

However, when faced with the pressures of business – pressure to succeed, to “make the numbers”, to deliver on time, to follow the boss’s orders – individuals can sometimes make decisions without considering the ethical implications.

Unless they understand what their organisation’s code of ethics means for them in their day-to-day work, they are unlikely to recognise the ethical dimension of a business problem.

The cost to business if it fails to support staff to “do the right thing” can far outweigh the cost of a training budget – fines from regulators, loss of confidence from investors, loss of reputation amongst customers, loss of assets through fraud – all of these potential integrity risks could be averted by investing in ethics training for all staff.

For the first time, the IBE’s triennial survey also included companies listed on the stock exchanges of Spain, Italy, France and Germany. Generally, the answers to questions about uses of the code of ethics showed little difference between companies in the UK and continental Europe.

Attract and retain

However, an interesting finding was that references to the corporate code of ethics in the recruitment process are more likely to be made by continental European-based companies – in Spain (60%, Italy (60%), France (57%) and  Germany (50%) – than those in the UK (38%).

Ethical due diligence in recruitment involves assessing potential employees in terms of their fit with the ethical culture and values of the organisation. This can help to ensure that those selected are more likely to uphold the organisation’s values and set a positive example to others.

Where candidates can demonstrate some level of ethical “sensitivity”, they may be less likely to conduct business or make decisions in a way that could undermine the organisation’s ethical stance and risk undermining its reputation.

Using a code of ethics in this process is an excellent starting point for any organisation seeking to establish an ethical culture, where the aim is to have a shared understanding of the types of behaviours that are expected and acceptable.

But perhaps more importantly, it shows that the company’s ethics programme is a living, breathing thing. Encouraging staff to think about ethics right at the start of an employee’s career sends the message that “doing the right thing” is taken seriously by the organisation.

Continuing to develop that understanding with follow-up ethics training – whether it be awareness raising, e-learning, embedded within other training, or as part of continual professional development – shows that the ethics programme is still alive, pulsing throughout the corporate culture.

Simon Webley is research director at the Institute of Business Ethics.

Corporate Ethics Policies and Programmes: UK and Continental Europe Survey 2010, by Simon Webley with Sabrina Basran, David Harris and Andrew Hayward is available free from: http://www.ibe.org.uk/userfiles/codes_survey_2010final.pdf.

Hard copies are available to order for £20: See www.ibe.org.uk.