Last week’s departure of HP’s well paid CEO on ethical grounds shows the corporate codes of conduct are now taken much more seriously, reports Francesca Boothby

Just days ago Mark Hurd, CEO of Hewlett-Packard was forced to resign following allegations he had failed to adhere to the company code of conduct.

An investigation by outside legal counsel and overseen by the board found that although he was cleared of any sexual harassment element, he had violated HP’s Standards of Business Conduct in connection to unpaid expenses and misusing company assets.

The case has caused corporate scandal and divided opinion. Some corporate governance experts believe the board overreacted, that Hurd should have been given a stern ‘ticking off’ but ultimately allowed to remain in his position. Others maintain that the board acted courageously and Hurd had to go as a matter of principle.

This case draws attention to the effective application of a corporate code of ethics. HP’s board has also come in for severe criticism for apparently failing to grasp that dismissal, termination “for cause” was an option. As things stand the company has had to pay over $30 million in compensation, money that effectively comes out of profits to shareholders. Termination would have cost the company a lot less.

Although not a legal requirement, codes of conduct are something most companies today impose as a way of guiding behaviour. As Simon Webley, head of research at the UK Institute of Business Ethics points out, “ethics start where law and regulation finish”.

Corporate consistency?

Theoretically, written codes should make breaches of ethical behaviour more obvious, give more authority to whistleblowers and highlight corporate values. Bearing in mind the recent predicament of the HP board however, it would appear that for some companies effective communication across all levels proves difficult.

Nigel Laurie, lecturer in business ethics at Birkbeck College, part of the University of London, says the key is consistency. He emphasises that similarly to being in a court, where everyone is equal before the law, whether the employee be a junior secretary or part of executive management they must be treated the same. Laurie says it’s essential that management lead by example and are penalised when they step out of line.

David Vogel from the Haas School of Business at the University of California observes that: “I don't think such codes by themselves make any difference; what matters is the commitment of the firm to enforce them. My sense is that the dismissal of Hurd will send a much more powerful signal to HP employees than any corporate communication program”.

Practice helps

On a more practical day-to-day level, Simon Webley says that from his extensive experience in the field, one of the most effective methods of communicating ethics across the business is a simple one.

At the beginning of a regular meeting such as a monthly management discussion, a ten minute exercise where employees are asked to read a short example of a dilemma and then discuss it with their neighbour for a couple of minutes, can have a great impact.

The key to this practice, which should ideally be repeated a minimum of four times a year on top of other training, is the open discussion where situations become real. It achieves communication across all levels and about different issues, says Webley. He believes this method is a way of sustaining regular reminders of how to make the right ethical decisions in companies.

The case of HP and Mark Hurd shows the growing inclination for today’s boards to take ethics codes extremely seriously. His dismissal emphasises the modern importance of consistent communication across all levels of a company. The departure of Hurd, a previously well-respected boss, shows that corporate desire to protect brand and reputation means that no one, not even the CEO, is immune.



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