A Code of Ethics is a business or an organization’s policy applicable to all its activities and relationships. It should identify principal responsibilities its stockholders, shareholders, employees and communities. Its main function is to provide guidance in cases of moral dilemmas. Many corporations have implemented codes of conduct that define unacceptable behavior and serve as a guideline for the practice of ethical conduct. This is a step in the right direction, but it is not enough for an organization merely to have written codes of ethics.
Many business organizations are also taking a more proactive position in the area of promoting the practice of ethical behavior. To reinforce the organization’s values and standards, ethics training programs should be held on a regular basis rather than being a one-shot deal. Business ethics should be practiced in every country around the world. The United States, Hong Kong and Russia are several countries that will be mentioned that practice business ethics.
In The United States, business ethics is a topic that businesses are becoming more aware of.
An article in USA Today Magazine in January 1998,states, “Companies are discovering the value of ethics”. The discussion of ethics in the business world goes hand and hand with the term, profit. It was thought that the more ethical a business is, the less profitable it is; the more profitable, the less ethical. In recent times, there is a positive relation between ethics and profit. Ethics serves as a foundation for the success of businesses. An ethical company provides a moneymaking opportunity and can be the source of a competitive advantage.
Employee and customer theft is a major problem for businesses, as a shrinking on the job and declining work ethic. A culture in which drug abuse certainly does not help minimize the problem of theft, businesses are ultimately forced to administer drug-screening tests. The expenses for the drug tests incur great costs for the businesses. Employees with the right values would not need to take the drug testing, thus the company would save money. Consequently, employers will try to hire employees who statistically are more likely to be honest. Ethical behavior is like a virtuous cycle between the customers, employees, and suppliers.
As a company builds trust, customers, employees and suppliers are less likely to act immorally. Another benefit of ethical behavior is that it provides a solution to what theorists call “collective action problems”. A way to tackle the problem is to provide incentive so that the cost-benefit ratio is reversed. In certain situations, production of goods or services requires a team effort so that the individual contribution of each team member cannot be isolated or measured. Any team member who acts in a purely self-interested manner would free ride off the others. The benefits of group activity are optimized only when free riding does not take place. When team members or work associates are bounded by trust and respect a common value will be present.
Another benefit of ethical behavior is that it preserves the social capital that makes a free market possible. A market coexists with many other institutions in society, including: the family, the church, and the political, criminal justice, and educational systems. Each of these institutions contributes toward making capitalism possible: The court system enforces contracts; the political system provides monetary stability; and the educational system trains future employees and prepares them for the workforce. Corporate misconduct raises the cost and reduces the amount of social capital.
The more businesspeople try to avoid the terms of their agreement, the greater the number of disputes that end up in court. Increased government activity adds to the cost of government. A market system needs moral capital as well. If capitalism is to be successful, there must be a widespread acceptance of certain moral norms, such as truth telling, and fair play. “As more and more people abandon these moral forms, the social capital that makes market activity possible, is depleted”, as stated by Norman Bowie.
Bowie also states, “America is obsessed with quarterly reports -one that forces managers to focus on the short run, rather than the long run.” If corporations took the moral point of view, they would focus on meeting the needs of their stakeholders and focus on providing secure work for their employees and quality products for customers. If this were done, profits would follow. American capital differs from the capitalism in other countries. Ethical behavior can lower costs, increase productivity, and preserve the social capital that makes capitalism possible. It is in the nations’ interest to ensure that American capitalism is a leader in ethics as well as in product development.
To help promote mutual understanding between the people of Hong Kong and foreign countries, as well as the development of business relationship, several major foreign countries have established their own chamber of commerce. “More recently, the ICAC and six chambers of commerce joined hands to boost corporate education as a way of increasing awareness of ethics in business.” The result was the founding of the Hong Kong Ethics Development Center in 1994.
Among those foreign chambers of commerce, the American Chamber of Commerce has been playing an active role in promoting worker welfare and safety, and business ethics. The American Chamber of Commerce was an active participant in the establishment of the Hong Kong Ethics Development Center. “The American Chamber of Commerce is the only foreign chamber of commerce which incorporates the codes of conduct as part of their position paper.” Although the basis brief of Hong Kong Independent Commissions Against Corruption (ICAC) is to fight corruption, it also helps firms devise codes of ethics. To those international firms with an attempt to set up their Codes of Conduct in Hong Kong, the ICAC provides some advice regarding the basic concepts and contents. Honesty, integrity and social responsibility must be included in the Codes of Conduct.
A study surveyed 197 second-year students who attended an international business course in an institution in Hong Kong, both at the beginning and the end of the term. Active learning about business ethics displayed significant effects on later ethical reasoning and judgment. A proactive finding is that business students learned business ethics to a lesser extent than did other students. The relative ignorance of business students needs special concern for enhancing their awareness of business ethics.
Although female students were significantly more ethical in exhibiting judgments than male students, they learned about business ethics to a lesser extent. Female students should be of particular concern for promoting their ethical development through business ethics education.
“Known as an amoral society, Hong Kong tends to be at risk for problems of business ethics.” “A study found that business students in Hong Kong were less ethical toward customers than Taiwanese and Japanese counterparts.” With the help of The American Chamber of Commerce and the Hong Kong Ethics Development Center, the people of Hong Kong will be on their way to succeed in becoming a more ethical nation. Perhaps, the surveys taken in the future will show outstanding results from Hong Kong’s ethical improvements.
The Hong Kong Institute of Land Administration has established their own code of ethics, which have twelve guidelines, which are as follows:
1.This Code is meant to ensure the professional competence and integrity of all members in providing their services to the client or the general public.
2.Members should devote their utmost effort to become competent by qualification and experience to perform services, which they are appointed to take. Furthermore, they have to constantly update and upgrade themselves in new developments, law and technologies to cope with the changing demand, practice and procedures, and Government policies.
3.Members have a duty to contribute towards the improvement of professional standards and the training of their staff as well as any other people interested in the profession through career development, lectures or running courses, etc.
4.Members shall endeavor to co-operate with other professionals, disciplines and individuals so as to achieve optimum results in respect of their tasks and assignments.
5.Members should not take part in any business, malpractice or any act of misbehavior, which may cause an adverse effect on, or damage to the public image and reputation of the Institute.
6.Members should not get involved in any suspected or known illegal dealings especially in connection with their profession or duties. They have the obligation to uphold justice in land administration and in providing their professional services.
7.In the event of any controversies occurred between members of the Institute, the respective Committees of the Council, or the full Council of the Institute should settle them either between themselves or without involving any non-member third party, outside bodies or the public media to safeguard the professional reputation of the Institute.
8.Members should not publicly criticize their fellow members of the Institute without the explicit consent given and in a manner approved by the Chairman in Council Meeting.
9.No member shall injure falsely or maliciously, directly or indirectly, the reputation, prospects or business of other members.
10.Any member charged under the prevailing laws of the Hong Kong Special Administrative Region (HKSAR) in connection with his/her professional activities or duties whether or not involving the Institute shall report the occurrence forthwith to the Institute.
11.Members must disclose to their employers or clients any personal or conflicting interest involved in the course of performing their duties or assignment. This also covers any benefit gained from a third party even not in breach of their professional responsibilities. If they are acting for their company, then any conflicting interest with other client(s) shall be disclosed to the client.
12.Members must protect the privacy of any data provided by or belonging to their clients for the sake of professional integrity as well as compliance with the relevant legislation of the HKSAR.
“Internally, a Code of Ethics conveys to all staff a clear idea of the accepted conduct for achieving business goals.” It also helps maintain consistent standards of behavior throughout the company. Externally, the Code of Conduct enhances a company’s reputation for fair and responsible dealing. “It also strengthens Hong Kong’s reputation as an international business center where honesty and fair play prevails.” An effective Code of Conduct reduces costs and enhances profits because: it reduces incidents of corruption fraud and other malpractices, it reduces conflict if interests situations, it enhances the trust of your customers, suppliers and contractors.
It enhances the credibility of your buyers and salespersons; it enhances the loyalty and goodwill of your employees and other stakeholders. Individual companies as well as the Hong Kong business community continue to enjoy a reputation of honesty and fair play. Another country that is practicing business ethics is Russia. Although many people still view Russia as a corrupt country it is trying to modernize in the business world as compared to Hong Kong and the United States.
Corruption has become a way of life for Government officials in Russia. Bribe taking, in fact, is a widespread practice throughout the Russian bureaucracy. A number of U.S. and other Western businesses and businessmen routinely pay bribes to Russian Government officials in order to conduct their businesses in Russia. “Indeed, the most prevalent crime in Russia today is bribery”. “Of those charged with bribery and corruption in Russia in 1993, over forty-two percent were Government officials and over twenty-five percent were law enforcement officers”.
Not only do Russian officials routinely accept and even demand bribes, they have also entered into an illicit partnership with organized crime and with clandestine business groups. “Former Communist apparatchiks, who continue to work within the Russian bureaucracy, exploit previously made black-marketers relationships to profit in the new post-Revolutionary Russian system.”
Not only does the Mafia kill and steal in Russia, it does so in the United States as well. “The Russian Mafia is increasingly engaged in crime in the West.” Mafia members are involved in “theft, extortion, money-laundering, gun-trafficking, drug running, prostitution, smuggling, loan sharking, contract killing and more. The U.S. Department of Justice (DOJ) has established task forces to deal with the Russian Mafia in New York, Los Angeles, and Miami. Thus, U.S. businesses that pay bribes and protection money in Russia may be unintentionally financing Russian criminal activity back in the United States. “Bribe-taking is standard practice among Russian Government officials, a fact of which the Yeltsin Administration is well aware.” In 1994, the Yeltsin Government reported that seventy to eighty percent of private businesses were paying extortion money to organized criminal gangs.
Eighty percent of all U.S. businesses in Russia have bribed a Russian government official at least once. It is not uncommon for businesses in Russia to employ assassins in the collection of business debts. ” In 1993, organized crime controlled forty percent of the turnover in goods and services in Russia, according to the Russian Ministry of Internal Affairs.” Moreover, the growth of organized crime has severely hampered the growth of private small businesses in the Country. The success of Russian democracy represents a fundamental pillar of U.S. foreign policy.
The U.S. Government spends millions of U.S. tax dollars to promote democratic and market, economic reforms in Russia. Meanwhile, U.S. businesses and businessmen who pay bribes to Russian Government officials may be unwitting supporters of organized crime in Russia. More importantly, bribery of Russian Government officials undercuts efforts to create an open and democratic government in Russia. On the brighter side the Russian Government is taking action to control the ethical standards of the country.
On November 8, 2000, the first Center for Business Ethics (CBE) in Russia was officially registered in St. Petersburg. The new Center evolved out of the private sector voluntary initiative, the “Declaration of Integrity in Business Conduct in St. Petersburg”, supported by over 130 leading companies in the community.
“The Center for Business Ethics has two founding partners: a US company “Sovereign Ventures, Inc.” and a Russian firm “Bronze Lion”. The main counterpart of CBE is the Ethics Resource Center (ERC), headquartered in Washington DC, with over 50 years experience specializing in consulting businesses on corporate culture.” The mission of the newborn organization is to institutionalize ethical business in St. Petersburg. CBE provides an anti-corruption toolbox for businesses from ever industry operating in the region. Members of the new Center can obtain the following services: assistance in development a company’s code of conduct, advice on the effective ways of repudiation of bribery, hints on fair tax payment, development of ethics training programs for employees, publicity for ethical leadership, raising issues connected with business ethics a given industry branch. They can also network with other ethical businesses and thereby find natural partners for growth.
“The Center for Business Ethics is a response to demand from local and government business leaders who founded the “Declaration of Integrity” for a non-profit organization that could sustain a variety of new programs designed to create a culture of ethics compliance in St. Petersburg.” – says Matthew Murray, President of “Sovereign Ventures, Inc.”, who will also serve as the first President of the Board of CBE.
The team of business ethics experts working for the Center consists of several Russian attorneys, a senior accountant and a journalist. They have been professionally trained by in the US at the Ethics Resource Center or other organizations in international practices of business ethics. The 6 experts include: Anna Ossipova (director), Anton Andreyev (ethics consultant), Elena Fedyushina (ethics consultant), Alina Mitzkevich (ethics consultant), Natalya Clark (PR manager), Oksana Trofimova (senior accountant).
The first project launched by the Center for Business Ethics is an “Island of Integrity” designed to promote open tenders in the construction business and attract further investment to St. Petersburg. “It has been less than one week since our Center was opened, and the Open Society (Soros) Foundation has offered CBE a grant for the “Island of Integrity”. – Announced Anna Ossipova, Director of CBE- “It shows that the momentum behind voluntary initiatives to undertake honest business is growing”.
The Saint Petersburg Ethics Center proposed the development of the St. Petersburg Ethics Center (SPEC). The organization’s mission will be to help cultivate the social capital or core values. SPEC will create the institutional framework to ensure sustainability of business ethics initiatives in the city. It will locally develop and retain important skills and capacities. The organization will serve as the legal framework to raise local and international funds in support of its programs. It will become a resource for the community at large, and the champion of the ethics dialogue in St. Petersburg.
Specifically, SPEC will initially undertake a variety of proactive business ethics and anti-corruption initiatives and programs such as: Promoting the declaration of integrity; providing training, education and technical assistance; fostering dialogue about ethics education at the university and professional levels; assisting professional and trade associations to develop codes of conduct, ethics programs and enforcement infrastructure for their membership. Other programs include: increasing awareness about corruption and the strategies to fight it; identifying concrete steps to encourage public-sector reform and conduct research and generate new learning. “The new learning generated through these activities will then inform the work of SPEC through the creation of culturally relevant approaches and strategies for the other programs of the organization.”
Government corruption in Russia is a historical burden on economic and political modernization. Russia must find its own path to root out corruption, using the multitude of positive values and ethical traditions found in Russian culture. They are beginning a long-term process to integrate their strong moral traditions with international standards of business ethics. The present project is designed to sustain these accomplishments by developing and launching SPEC to institutionalize ethical business practices between businesses and government officials in ST. Petersburg and other regions of Russia.
1 Shrinking occurs when an employee or customer steals from a company in which they work or shop, and the outcome is less profit and shortage in inventory.
2 A Collective action problem occurs when an obvious public good cannot be achieved because it is not in the self-interest of any individual who is part of the problem to take steps to resolve it.
3In Hong Kong, there are the American Chamber of Commerce, the Australian Chamber of Commerce, the British Chamber of Commerce, and the Canadian Chamber of Commerce.
4According to an article “International Business Ethics: Hong Kong from Joseph M. Katz Graduate School of Business
5 According to an article “International Business Ethics: Hong Kong from Joseph M. Katz Graduate School of Business
6 College Student Journal. December 1999. © 1999 Project Innovation (Alabama)
7 College Student Journal, December 1999. In Ikels, C 1989. Becoming a human being in theory and practice: Chinese views of human development. In D.I. Kertzer & K.W. Schaie (Eds.), Age Structuring in comparative perspective (pp.109-134). Hillsdale, NJ: Lawrence Erlbaum
8College Student Journal, December 1999. In Nyaw, M.K., & Ng, I. (1994). A Comparative Analysis of Ethical Beliefs: A Four Country Study. Journal of Business Ethics, 13, 543-555.
As stated in Corporate Code of Conduct
As stated in Corporate Code of Conduct
To Whom Belongs Power in Russia? Ministry of Thieves-in-Law: An Attempt at Breaking into Politics, Izvestia, July 20, 1994, at 1, 5 [hereinafter Izvestia].
George Nikides, Journalists Hit TV Mafiya, Moscow Times, Oct. 5, 1994, at 10. While virtually all activities were controlled by the Government in the former Soviet Union, there are now a large number of government officials working in what is now the private sector. Id. As the Author notes:
See To Whom Belongs Power in Russia?, supra note 4, at 1, 5; Money Talks, supra note 8, at 10. Stephen Handleman, Comrade Criminal 55-56 (1995).
Daniel Klaidman, How To Police an Ex-Police State, Legal Times, July 11, 1994, at 12.
Leonid Bershidsky, Aids Say State Loans Still Open to Bribery, Moscow Times, July 13, 1994, at 1-2. Officials in the Yeltsin Administration admitted that bribes often determine who and what organizations get government loans and assistance. Id.
U.S. Business and the Russian Mob
As stated in Defense Industry Initiative on business ethics and conduct
As stated in the Ethics Resource Center
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