EffectiveCorporateCodesofEthics:PerceptionsofCodeUsersMarkS.SchwartzABSTRACT. The study examines employee, mana-gerial, and ethics ofcer perceptions regarding theircompanies codes of ethics. The study moves beyondexamining the mere existence of a code of ethics toconsider the role that code content and code process(i.e. creation, implementation, and administration)might playwithrespect totheeffectiveness of codes ininuencing behavior. Fifty-seven in-depth, semi-struc-tured interviews of employees, managers, and ethicsofcers were conducted at four large Canadian com-panies. The factors viewed by respondents to beimportant with respect to code effectiveness include:provisions of examples; readability; tone; relevance;realism; senior management support; training; rein-forcement; living up to standards; reporting require-ment; anonymous phone line; communicatingviolations; and enforcement. The factors found to bepotentiallyimportantinclude:justicationforprovisions;employeeinvolvement; andsign-off requirements. Fac-tors found not tobe important include: objectives forthe code; prior distribution; testing; and relating onesperformancereviewtocompliancewiththecode.KEYWORDS: behavior, codes, content, effectiveness,ethics, processIntroductionCompanies are increasingly being pushed towardsadopting a written document, typically referred to asacodeofethics.Forexample,intheU.S.,underthe Federal Sentencing Guidelines for Organizations(1991), companies can have their sentences miti-gated if they can demonstrate that they had aneffective compliance program in place prior to theoffence. Oneof theelements of aneffectivecom-plianceprogramarecompliancestandards,whicharereasonablycapableof reducingtheprospectofcriminal activity (UnitedStates SentencingCom-mission, 1991). Compliance standards havebecomecommonlyunderstoodtorefertoacodeofethics. While referring to the Federal SentencingGuidelines minimumrequirements for aneffectivecomplianceprogram, Chancellor WilliamT. AllenoftheU.S. CourtofChanceryof Delaware, inthecase Re: Caremark International (1996), held thatmembers of boards of directors couldbeheldper-sonally liable for failing to properly monitor the legalandethicalbehavioroftheircompaniesemployees.The case implied that directors should at a minimumensurethattheircompaniespossessacodeofethicsas part of aneffectivecomplianceprogram(Grun-feld,2002).In addition, recent corporate scandals, such asEnron, WorldCom, Adelphia, TycoInternational,and Qwest, have led to legislative developmentssuch as the SarbanesOxley Act (2002), whichrequirespubliclyheldcompaniestodisclose(e.g.inits annual report) whether ornot thecompanyhasadoptedacodeof ethics for its principal executiveofcer,nancialofcer,principalaccountingofceror controller, or persons performing similar func-tions, and if not, the reasons why not. Similarly,proposed listing requirements for the NewYorkStock Exchange (2002) and the Nasdaq stock market(2002) require companies toadopt anddisclose iftheypossess a codeof ethics. Basedontheabovedevelopments,astrongcasecanbemadethatcodesofethics,whilenotanexplicitlegalrequirementforall companies, have virtually become legallyMarkS.SchwartzisAssistant Professorof businessethicsandbusinesslawat YorkUniversity(Toronto,Canada).Previ-ouslyhewas lecturer of business ethics intheLegal StudiesDepartment at The WhartonSchool, Universityof Penn-sylvania.HereceivedhisPh.D.fromtheSchulichSchool ofBusiness, YorkUniversityin1999. His researchinterestsinclude corporate ethics programs, corporate social responsi-bility,andsocial investment.Journal of BusinessEthics 55: 323343, 2004.2004KluwerAcademicPublishers. PrintedintheNetherlands.required, at least for U.S. public companies(Grunfeld,2002).With all of the current activity promoting theadoptionof codes of ethics, thereappears tobeanimplicit assumptionamonglegislators, governmentregulators, and the boards of the various stockexchangesthatcodesofethicsareapotential meanstoinuence corporate andemployee behavior. Inother words, companies should be required toexpendresourcestodevelopandimplementacodeofethicsinordertoreducethechanceofimproperconductbytheiragents.Butisthisinfactthecase?Docodesreallymakeadifferencewhenitcomestobehavior?Ifso, underwhatcircumstances?Thepropositionthat codesmight makeadiffer-encewouldappear tomakeintuitivesense, partic-ularly in light of the WorldCom scandal. At the timeof its scandal, WorldComdidnot posess acodeofethics. AccordingtoWorldComs Boardof Direc-tors Investigative Report, the only mention ofethicswascontainedinasectioninWorldComsEmployee Handbook that simply stated that fraudanddishonestywouldnot betolerated(WorldCom, 2003, p. 289). When a draft version ofa formal code of ethics was presented to BernieEbbers (the former CEO) for his approval before thefraud was discovered in 2001, his response wasreportedly that the code of ethics was a colossalwaste of time (WorldCom, 2003, p. 289). Fol-lowingthescandal, andas part of thenewCEOsEthics Pledge tomakeethics anintegral part ofhow WorldCom does business, the companyadoptedaCodeof Business Ethics intheFall of2002 (WorldCom, 2003, p. 289). Although having acodeofethicscertainlymaynothavepreventedthescandal, it is hardtoimaginehowethics couldbemadeanintegral partofacompanysbusinessprac-tices without at least adopting a code of ethics,particularlyforacompanyaslargeasWorldCom.Before one can begin examining whether codes ofethics really do make a difference in inuencingbehavior, some claricationis required. Acertaindegreeof confusionremains as towhat a codeofethics evenconsists of. Codes of ethics have alsobeen referred to as codes of conduct, codes ofpractice, corporate credos, mission statements, orvaluesstatements(Berenbeim,1988;Murphy,1989,1995;EthicsResourceCenter,1990a;ClarksonandDeck, 1992; LEtang, 1992; Stevens, 1992, 1994;Driscoll et al., 1995). Numerous denitions of acode of ethics have beenprovided (Harris, 1978;Berenbeim, 1988; Pitt and Groskaufmanis, 1990;Hosmer, 1991; Townley, 1992; Robertson andSchlegelmich, 1993; Weaver, 1993; Stevens, 1994;Brandl andMaguire, 2002; Ferrell et al., 2002). Areviewoftheproposeddenitionsseemstosuggestthe following general denition: A code of ethics is awritten, distinct, andformal document whichcon-sists of moral standards used to guide employee and/orcorporatebehavior.The denitionincludes three components. Therst component, moral standards tobeapplied, hasalsobeenreferredtoas avaluesystem, aspirationalideals, guidelines, ethical principles, norms andbe-liefs, or groundrules. Themoral standards provideguidance to employees to understand what behaviorsare morally acceptable or improper. The secondcomponent, towhatortowhomdoesthestandardapply, is generallyemployee behavior or conduct,but alsoincludes theorganizations behavior. Onemight considerthesetwotypes of behavioras rep-resenting behavior against or on behalf of therm, as a corporation can only truly act through itsagents. Thethirdcomponent is that thedocumentitself is written, distinct (i.e. stand-alone), and formal(i.e.explicit).Several theoristssuggestthatethical behaviorcanbeinuencedbyacodeof ethics, inadditiontoanumber of other individual factors, suchas gender,nationality/culture,age,religion,typeofeducation,type of employment, years of employment, andpersonality, beliefs andvalues, as well as situationalfactors, suchas peer groupinuence, topmanage-ment inuence, rewards and sanctions, type ofethicaldecision,organizationsize,andindustrytype(FordandRichardson, 1994). Interms of therolecodes of ethics might playininuencingbehavior,Ferrell andGresham(1985) as part of their con-tingencymodel suggest that: Ethics relatedcor-porate policy will inuence ethical/unethicalbehavior Corporate policyandcodes of ethicsthat areenforcedwill producethehighest level ofcompliancetoestablishedethical standards (1985,p. 93). Trevino(1986) introduces aperson-situa-tioninteractionist model of ethical decision-mak-ing. She includes codes as part of the corporateculture variable. She states that: Another wayorganizations attempt to guide members ethical324 MarkS.Schwartzbehavior is by developing formal codes of ethicalconduct (1986, p. 613). Brass et al. (1998) developa social network model of unethical behavior.One of the organizations factors inuencingbehaviorincludescodesofconduct,whichcansignicantly decrease the prevalence of unethicalbehaviorinorganizational contexts(1998,p. 15).Based on the theoretical models, a number ofstudieshavebeenconductedinanattempttoverifyif codes are in fact a variable which inuencebehavior.Asopposedtobeingconclusivehowever,theresults of thestudies areclearlymixed. Severalstudies (10/22) havefoundthat codes areeffective(e.g. HegartyandSims, 1979; LaczniakandInder-rieden,1987;FerrellandSkinner,1988;Richetal.,1990; Singhapakdi andVitell, 1990; Kitson, 1996;McCabe et al., 1996; Pierce and Henry, 1996;Adams et al., 2001; Somers, 2001). Other studies (2/22) have foundthat the relationshipis weak(e.g.Murphy et al., 1992; Weeks and Nantel, 1992),while numerous other studies (10/22) have foundthatthereisnosignicantrelationshipbetweenthetwovariables (e.g. Fordet al., 1982; Hunt et al.,1984; Chonko and Hunt, 1985; Akaah and Riordan,1989; Callan, 1992; AllenandDavis 1993; Badar-accoandWebb,1995;Briefetal., 1996;ClarkandLeonard, 1998; Farrell etal., 2002).Although the above studies examine the po-tential effect of codes, they do not provide anexplicit denition of code effectiveness beyondinuencing behavior. For the purposes of thisstudy, code effectiveness is dened as includingthree components: (1) corporate agents (e.g.employees andmanagers) behaveinamanner thatis consideredby the company tobe legal and/orethical innature (i.e. as denedinthe code); (2)any non-compliant behavior is reported and/oraddressed by the company to prevent its repeti-tion; and (3) the compliant behavior (or thereportingof non-compliant behavior) is at least inpart due to the existence of the code itself. Anineffective code of ethics is one that has failedtoprevent illegal orunethical behavioronthepart ofcorporate agents that was prohibitedinthe code.Code effectiveness can exist to different degreesandcanbe measuredamong different hierarchicallevels of anorganization(e.g. senior management,lower level employees, etc.), within differentdivisions (e.g. sales, manufacturing, etc.), or be-tween different locales (e.g. head ofce, foreignofces/plants, etc.).Buildingontheimportant contributions of pre-viouscoderesearch, thisstudyseekstogaingreaterinsight intothevarious characteristics of corporatecodes of ethics andhowsuchcharacteristics mightrelate to code effectiveness. To accomplish thisobjective, thestudy: (i) examines several aspects ofcode content and code process beyond the mereexistenceofacode;and(ii)focusestheexaminationfrom the perspective of the users of codes themselves(i.e.employees,managers,andethicsofcers).(i)CodecontentandcodeprocessWhat the empirical studies on code effectivenessmentioned above essentially fail to take into accountisthat themereintroductionof acodeisonlyonepotential factor in encouraging ethical behavior(Nijhof et al., 2003). For example, a studybytheEthics Resource Center found that when a code wasthesoleelement of anethics program, therewas anegativeeffect onemployeeperceptions of ethicalbehaviorasopposedtotheexistenceofethicstrain-ingandethicsofcesinadditiontoacode(1994,p.31). The Ethics Resource Center study suggests thatcodes,whilenecessary,areinsufcientasameansofencouraging ethical behavior among employees.AccordingtoAdamsetal. (2001, p. 209): Greaterunderstanding is needed on the process by whichcorporate ethics codes inuence employee behav-iorresearchis alsoneededontheeffects of char-acteristicsofthecodeofethics(emphasisadded).This study begins to address the concerns ofAdamset al.(2001)byexaminingwhetherthereareseveral aspects of code development itself that gobeyondthemereexistenceof thecodethat shouldalsobetakenintoaccount as potentiallyrelatingtocodeeffectiveness.Anumber of commentators of codes of ethicshave made recommendations onhowtoimprovecode effectiveness. These recommendations (dis-cussed in greater detail below) include the following:(1) Code content (a) provision of examples(Murphy, 1995; Gibbs, 2003); (b)positivetone(Austin, 1961; Harris, 1978; Ethics ResourceCenter, 1990a); RaibornandPayne, 1990); (c)EffectiveCorporateCodesof Ethics 325appropriatelength(TrevinoandNelson,1995);(d) relevance (Pitt and Groskaufmanis, 1990;Brandl and Maguire, 2002); and (e) realism(Harris, 1978; Murphy, 1988; Ethics ResourceCenter, 1990a);(2) Code creation (a) acceptable objectives(Trevino et al., 1999; Byrne, 2002); (b) em-ployee involvement (Molander, 1987; Arndt,1990; Sweeney and Siers, 1990; Ethics ResourceCenter, 1990a; Montoya and Richard, 1994;Messmer,2003);(3) Codeimplementation(a)seniormanagementsupport(EthicsResourceCenter, 1990a; Mon-toyaandRichard, 1994; Jordan, 1995; TrevinoandNelson, 1995; Brandl andMaguire, 2002);(b) sign-off (Pitt and Groskaufmanis, 1990; Lane,1991; Gibbs, 2003); (c)training(Benson, 1989;Gellerman, 1989; Pitt and Groskaufmanis,1990; Lane, 1991; Gibbs, 2003; Messmer, 2003);(d)reinforcement(TrevinoandNelson,1995);(4) Codeadministration(a)livinguptostandards(Trevino and Nelson, 1995; Gibbs, 2003; Mess-mer, 2003) (b) reporting violations (Gibbs, 2003;Messmer, 2003); (c) anonymous phone lines(Gellerman, 1989); (d) enforcement (Pitt andGroskaufmanis,1990;SweeneyandSiers,1990;Gibbs, 2003; Messmer, 2003); (e) connecting thecode to performance reviews (Pitt and Gros-kaufmanis, 1990; Raiborn and Payne, 1990).Theprimarydeciencyintherecommendationsthat have been made however is that they do not ap-peartobebasedonanyempiricalstudies.Suchrec-ommendationsappeartobesupportedmoreonthebasis of personal intuition or experience as opposed toany quantitative or qualitative research. According toAdams et al. (2001, p. 202): organizations havehad to rely primarily on anecdotal evidence and pre-scriptive recommendations for assessing the effec-tivenessofthecodestheyhave.Thereappearstobelittle empirical evidence to support or refute the oftenconicting recommendations made in the literature.(ii)Perceptionsfromusersof codesInadditiontofocusingoncodecontent andpro-cess, this study seeks to investigate whether therecommendations that have been made regardingcodeeffectivenessareinfactsupportedbytheusersof the codes themselves. Several business ethicsresearchersemphasizetheimportanceofidentifyingemployeeperceptionsinrelationtocodesofethics.Badaracco and Webb (1995, p. 8) indicate theimportance of getting the viewfromthe tren-ches (i.e. youngmanagers) as opposedtomerelyviews fromthe generals headquarters with re-specttotheeffectivenessof codesof ethics. Aspartof their assessment of ethics programs, Trevinoetal. (1999, p. 145) suggest that employee percep-tions matter and that: Employees can tell acompany a great deal about whats going onWotruba et al. (2001, p. 62) suggest that webelieveit is timetoshift attentionfromthecodesthemselves tothepersonswhosebehavioristhefocus of these codes. Similar to Badaracco andWebb(1995), Trevinoet al. (1999), andWotrubaetal.(2001),thisstudyisbasedonthepremisethatcode users perceptions are useful and should betaken into account when assessing what mightmakecodes effective. Theresearchquestiontobeexplored thenbecomes: according tothe percep-tions of corporatemanagers, employees, andethicsofcers, what aspects of code content and codeprocess might relatetotheeffectiveness of corpo-ratecodes of ethics? Figure1belowillustrates therelationshipbetweenemployeeperceptionsoncodecontent andprocess andcodeeffectiveness.What must be clear fromthe outset is that the studydoesnotattempttodirectlymeasurecodeeffective-ness. Instead, the study presumes that the views of theusers of codes should be considered relevant inassessing the potential effectiveness of codes of ethics,similar to therelevance of obtaining employee feed-backonorganizational practices or receivingcon-sumer feedback on a companys products or services.After discussing the methodology used for thestudy, the paper will examine aspects of codeCodeContentCodeProcessCode Effectiveness(Legal andEthical Behavior)EmployeePerceptions of Code Figure1. Employeeperceptionsandcodeeffectiveness.326 MarkS.Schwartzcontent and code process to explore whether there isany support to their being related to code effec-tiveness. Thepaperconcludes withpractical impli-cations for corporations that currently possess orintendtodevelopacodeofethics.MethodologyTo explore the research question, the study consistedof fty-sevenin-depth, semi-structuredinterviewsof employees, managers, andethics ofcers at fourlarge Canadian companies. The selection ofrespondents was randomfor three of four of thecompanies, while a snow ball technique was used forthe fourth company. Of those contacted, 92% agreedto be interviewed. A total of 58% of the respondentswere male (33/57), while 42% were female (24/57).In terms of organizational level, 60% of therespondents were managers (34/57), while 40%werenon-managers(23/57).Ofthemanagers,15%(5/34)labeledthemselvesseniormanagers.Sevenofthoseinterviewedwereethicsofcers,meaningthattheywereresponsiblefor theadministrationof thecode. The types of positions of the non-managementrespondents included: telephone operators, salesrepresentatives, bank tellers, administrative assistants,andassemblerson theproductionline. The rangeoftime working for the company ranged from3months to33years, withanaverageof 13.4yearsspent at thecompany. Theresearcher individuallyinterviewedall of the participants, with51of theinterviews being tapedandtranscribed. Upontherequest of several respondents, sixinterviews werenot taped, althoughextensivenotes weretakenoftheir responses. The average length of the interviewswas 65minutes. Respondents answers werecodedusing qualitative researchsoftware (i.e. NUDIST)andthenanalyzedaccordingtothevarious catego-riesofcodedevelopment.Thecompanies represent avarietyof industries:telecommunications; banking; manufacturing; hightechnology. They are among Canadas largestcompanies, each earning billions in revenues andhaving tens of thousands of employees. Three ofthe four companies conduct multi-national activi-ties. Oneof thecompanies was thesubsidiaryof aU.S. parent company. The companies fall withinthe upper echelon with respect to having well-developed ethics programs in relation to otherCanadian companies, each possessing an ethicsofcer as well as conducting training on theircodes, whereas most Canadian companies do notengageinethics training(only39%) nor posess anethics ofcer (only 42%) (KPMG, 2000). Theselectionof companies withextensive ethics pro-grams was intentional, as it was presumed thatemployee awareness of their companys code andthecodes potential impact onbehavior wouldbemorelikelyincompanies withtrainingandethicsofcers than in those without (Ethics ResourceCenter, 1994). Areviewof the four companiescodes suggests that their orientation was bothvalue-based and compliance-based (Paine, 1994,Trevinoetal.,1999).Eachcompanyscodeinitiallyidentieda set of vesevencore values or prin-ciples, in addition to more detailed provisions ofexpectedbehavior. Thelengthof thecodes variedfrom21to65pages.Theinterview-basedmethodologywaschosentomovetheinvestigationof codes beyondquestion-nairesintoanactual corporatesettinginvolvingtheactual users of the code. Out of the 22 studiesaddressingthe effectiveness of codes of ethics (seeabove), 19 used a research method other thaninterviews. Atotal of 17studies usedsurveyques-tionnaires, while two used an in-basket exercise, andonealabexperiment.OtherthanstudiesconductedbyBadaraccoandWebb(1995),Kitson(1996),andAdams, et al. (2001), no other study was identied intheliteraturewhichusedin-personinterviews as aresearchmethodologytoinvestigatecodes.As anexploratorystudyandinorder toobtainpreliminary data on whether content and processfactors affect code effectiveness, it has been suggestedthat a qualitative research methodology based oninterviews withthe actual users of codes is moreappropriatethanquantitativemethods(Randall andGibson, 1990, p. 466; Liedtka, 1992, p. 163; Creswell1994, p. 146). BadaraccoandWebbinterview30recent Harvard MBA graduates for their views on theusefulness of corporateethics programs. Theystate(1995, p. 25) webelievethat therearemanyimportant studies yet tobe done that would be variantsof thisone. Thesewouldrelyuponin-depthinter-views rather than questionnaires, and they wouldexamine business ethics from the viewpoint of peopleatlowerlevelsofanorganization.OurbeliefisthatEffectiveCorporateCodesof Ethics 327these studies for understanding the role of businessethics in organizations and for making it more effec-tive could prove quite signicant. In addition, thestudyalsoincludedforthersttimethosewhoareresponsible for the administration of codes, the ethicsofcers.FindingsanddiscussionCodecontentInterms of codecontent, several aspects wereex-ploredtodeterminewhether respondents hadanyconcerns, whichcouldultimatelyimpact theeffec-tiveness of the code in inuencing behavior.Respondents were asked questions regarding theimportanceof thefollowing: (a) thejusticationforthe subject matter in their codes; (b) the provision ofexamples; (c)thetoneof thecode(i.e. negativelan-guage such as dont do x versus positive oraspirationallanguagesuchasdoyortrytodoy);(d) the length of the code; (e) the relevancy of thecode, and (f) the realismof the codes expectedbehaviormatters.(a) Justication. Although several code researchershaveexaminedwhichissues aremoreprevalent incodes andwhichones are missing(Chatov, 1980;White and Montgomery, 1980; Cressey and Moore,1983;SandersonandVarner,1984;Mathews,1987;Hite et al. 1988; Ethics Resource Center, 1990b;LefebvreandSingh,1992;Berenbeim,1999;FarrellandCobbin, 2000; Kapstein, 2004), what has notbeen sufciently examined is whether employeesviews of theircodes content canaffect theirdesiretocomplywiththecode. Just as thedesireof citi-zenstoobeythelawmightbeaffectedbywhetheronebelieves thelaw isjustied (Perry, 2002)or thata societal norm exists tosupport the legislation(McAdams, 1997), the same may be the case forexpected behavior as outlined in a corporationscodeof ethics. Toexaminethispossibility, respon-dents were asked whether they believed that thecontent (i.e. subject matter) of their codes couldhave an impact on the codes effectiveness.Although the vast majority of respondents agreedwithorhadnoconcernswiththeircodescontent,and thus did not believe that the content wouldimpact codeeffectiveness, therewereafewprovi-sions that didcause some concern. Several provi-sions were perceived by respondents to beunjustiedonthebasisofbeingtoooverbearingorunfair, implyingthattheseprovisionswouldhaveagreaterlikelihoodof notbeingfollowed.Inventions. For example, provisions dealingwithinventions, and the requirement of employees to handoveranyinventions madetothecompany, evenifthey were developed outside of normal workinghours, was perceived as being unduly unfair:I might have a bit of a problem with the sectionthat talks about patents and copyrights, if you come upwith an invention on your personal time that [thecompany]saysthatitwouldclaim,Idontagreewiththat.Ifitissomethingthatyoudoanditissomethingon your own, it is not work related, but it turns out tobe an invention I dont think [the company] shouldhave the right totake the patent for that [emphasisadded].It appears that suchaprovisionpotentiallyextendsthe codes reach or coverage beyond what is deemedtobeacceptable, byenteringwhat might becon-sideredtheprivateaffairsofanemployee.Sexual Harassment. Despite the renewed vigorwithwhichcompaniesarenowaddressingtheissueof sexual harassment, several respondents felt thattheircodeshadgonetoofar:sexuallyharassingpeople Imean,ifyoucameuptomeandput your handonmyshoulder, I mean,comeongivemeabreak,am[I]goingtosay,Dontdo that or You are harassing me? Some womenwould,itisstupid[emphasisadded].Environment. Several respondents raised an issue interms of the fairness for being disciplinedfor notcomplyingwithenvironmentalresponsibilitiesassetoutintheircodes:All I know is that its part of the code [and] I think itsa good practice, but I dont know if it should be part ofthecode.LikeareyoutellingmeifIdontrecycle,Iminbreachofthecode?[emphasisadded].Thefollowingrespondentfocusedontheappro-priateness of certain punishment for a potentialcodeviolation: Should you lose your job if you are caughtthrowinggarbageontheroad?[emphasisadded].328 MarkS.SchwartzOther provisions that raised concerns for therespondentsincludedopeningupasecondbusiness,requirements to donate ones time to volunteeractivities, or theinabilitytomakefacilitatingpay-ments.Onemightspeculatethatanemployeespotentialdisagreementwiththecodescontentduetoaper-ceivedlackof justicationmight diminishthepo-tential that the employee wouldcomplywiththecode. It alsoappears tobethe casethat for thoseprovisions that arenot clearlyjustiable, sufcientjustication would be required before employeeswould accept and comply with the expected behavior.(b) Provisionof examples. Accordingtorespondents,theprovisionof exampleseitherinthecodedocu-ment itself or at least during the training on the codewas a very important means by which to facilitate anemployees understandingof the codes provisionsandultimatelycodeeffectiveness. Thisndingsup-ports what is discussed in the literature on theimportanceof providingexamples (Murphy, 1995,p.731;Gibbs,2003,p.40).Considerthefollowingstatementsbyrespondents:I think [the code] does a good job, because itactuallygives yousome examples as tohowtheissue may relateto employees It makes it extremelydifcult for an employee not to understand this. Ithinkitisgreat.I thought actually the examples really broughtthings home.I thought oneof the best things theydidwastoputtheexamplesin.The respondents made it clear that a code (ortraining based on the code) that lacks relevantexampleswouldmostlikelyremainineffective.(c) Negativetone. One of the most serious chargesagainst codes by code commentators is that theyare often too negative in tone, a series of thoushalt nots which does little to inspire employeestodotheright thing(Austin, 1961; Harris, 1978,p. 315; Ethics Resource Center, 1990a, p. III-2;Raibornand Payne, 1990, p. 883). Inthis sense,the code is used as more of a controlling, top-down instrument, and may ultimately be lesseffective in inuencing behavior in a positivefashion. Todate, theseviews arenot supportedbyanydata. Toassess whether employees actuallyfeltthisway, therespondentswereaskedwhethertheybelieved their codes to be too negative in tone.Not only did most employees respond that theircodes werenot toonegative, but that codes shouldbe negative in tone. This nding appears to con-tradict what onetends tondintheliteratureoncodes. Respondents expected their codes to benegative inorder tobe effective, inother words,to have the ability to clearly identify whatbehavior is expectedor prohibited.One of the reasons suggested is that a code writtenin a negative tone provides clearer expectations thanonewritteninapositivefashion:No, I think it should be negative Because its clearer tounderstand. Andthats what I meanbytheblackandwhiteissue.Ifthereweregrayissues peoplewouldtake that and misconstrue it and they could go back andsay, well it doesnt really say yes or no, do it or dont. Ithinkyoudjust beopeningupyourself for a lot ofmisinterpretation but if its clear and concise, nega-tive or not, it doesnt matter, it needs to be very clear No, I dont nd it offensive at all [emphasis added].Aswell, several respondentsstatedthat thepurposeof a code is not to inspire, and therefore need not bepositive in tone: Well, it is not meant to be apump-me-upbookletOneof thereasons codes that are writtenwithnegative language (e.g. dont do x) have beencriticizedinthe literature is because it is believedthat activities that are not expressly prohibited by thecode may be seen by employees as being permissible(Harris,1978,pp.314315;Murphy,1995,p.730).What the studyfound, however, was that a codewritten in positive or inspirational language (e.g. trytodox) might infact provideemployees withanevengreateropportunitytoengageininappropriateactivity. Inother words, positive-tonedcodes maycreate even more loopholes for employees thannegative-tonedcodes:No, because I thinkif yousaytry or strive, thenpeoplethinktheyhaveabit of anoptionIt gives themtoomanyoptionstoget out of thesituationandsay,Ohwell, Itriedbut[emphasisadded].ifIdonttell yousomeof thethingsyoucantdo,youwouldassumeyoucan[emphasisadded].EffectiveCorporateCodesof Ethics 329Oneexampleinparticular helps todemonstratethepotential for employees tomisinterpret a codethat does not explicitly prohibit an activity in anegative fashion. One of the companys codes beginsitsacceptanceof giftssectionby statingthatNotall gifts are unacceptable. It also states that thetimingandnatureofthegiftareimportantcircum-stancestoconsider, andthatitisimportanttocon-sideranygift asapotential conictof interest. Thecoderefers employees tothecompanys morede-tailedconict of interest policy that uponexami-nation explicitly prohibits cash gifts. Despite this,several respondents includinga bankbranchman-ager believed that acceptance of cash gifts atChristmas time from a wealthy customer wasacceptable according to the code. This exampleappears tosuggest that a codewhichis writteninpositiveoropen-endedlanguage(e.g. not all giftsareunacceptable)versusclearandspecicnegativelanguage (e.g. do not accept cash gifts), has agreater potential tobemisinterpretedina mannerwhichpermitsaninappropriateactivity.(d) Length. Another possible criticism of codes is thatwhenthedocuments aretoolengthy, theyrequiretoo much time to be properly read, and on that basisalone code effectiveness could be impacted (Trevinoand Nelson, 1995; p. 246). The company codes usedinthisstudydidvaryinlength, asfollows:CompanyOne: 55 PagesCompanyTwo: 21 PagesCompanyThree: 65 PagesCompanyFour: 25 PagesMost respondents felt that their codes werenottoolengthy.Afewdidndthemtoolengthybasedon their current time constraints. For those that weredissuaded fromreading their codes due to theirlength,several stillbelieved that thecodes couldnotbemadeanymoreconcise, duetotheneedtobeusedas a reference document. This positioncon-formswiththatfoundintheliterature:Codesmustconsist of enoughdetail toprovidesufcient guid-anceon expected behavior(Pitt andGroskaufmanis,1990, p. 1638; Laczniak and Murphy, 1991, p. 269).Afewrespondents didbelievetheir codes weretoolengthywhichcoulddissuadeothersfromevenreadingthedocument:wedonthaveenoughtime.if it was thicker, I wouldnt even sit down and readit,Idonthavetimeforthat.Iwasbakingcookiesandittookmelikefourtraysofcookiestoreadthat Anumber of other respondents noted that al-though their codes might be considered lengthy, thepurposeof thedocument was toact as areferenceandthereforetheentiredocumentneednotbereadatonetime:Well, youdont just goandreadthe whole thing.I dont think it really could be shorter because Ithinkwhat happens is that some people get thisandtheyreadit andtheymust goquickly throughit, andtheyput it away. Soit is thereas areferenceif theyneedit.Eventhoserespondentswhobelievedtheircodestobe lengthy felt that it would be impossible toshortenthem:No, Imean, howcanyoushortenit?Yeah, maybe. Obviously I havent read the wholething which may mean that its too lengthy. But on theother handImnot suretheycanget awaywithanythingotherthanthat.There thusappears to be a certain ideal length forcorporatecodes, beyondwhichthecodebecomesoverlycumbersomeandless likelytobereadandthereforecompliedwith.(e) Relevance. Another concernis whether compa-nies areprovidingtheir employees withcodes thataddress activities that aredeemedtoberelevant totheemployeeinquestion(Pitt andGroskaufmanis,1990,p. 1639;Brandl andMaguire, 2002). The vastmajority of respondents indicatedthat their codeswere relevant to their activities. Respondents didsuggest that only those provisions that are clearlyrelevant tend to be read and remembered whichsuggestsapotential impactoneffectiveness:I denitely did not pay a lot of attention to itbecause I didnt really need it in my everyday life, rightnow. You knowthere are some things that youoverlookbecauseit is not pertainingtowhat evolvesaroundyounow.330 MarkS.SchwartzThey will remember bits and pieces, whatever happenstoberelevanttothem.This factormaybecomemoresignicant assev-eral U.S. companies may choose tosimply adoptgenericcodes of ethics tocomplywiththeSarban-nesOxley Act as opposed to developing a code that ismore directly related to the nature of its business andtheactivitiesofitsemployees.(f) Realistic. If companies are expecting theiremployeesto engage in behavior which isperceivedby employees to be unrealistic or unattainable, manysuggest that the code has the potential tolose itslegitimacy(Harris, 1978, p. 312; Murphy, 1988, p.909;EthicsResourceCenter,1990a,p.V-1).Alloftherespondents believedthat their codes werenotplacing unrealistic demands or expectations uponthem. This belief appears tobe conrmedbytherespondentsstatingthatmostifnotall of theircodesaresimplycommonsenseasindicatedabove:thereis nothingintheretellingthemtodosome-thingthat theycant do. Everythingis intheir clenches,theycandoit[emphasisadded].Interms of code content, the studyfoundthatemployees: sometimes require justication forcertain code provisions that do not make initialsense; prefer examples that facilitate understandingof the codes provisions; desire codes that arenegative intone (inadditiontopositive) topro-videgreater clarityinterms of what is appropriatebehavior; and favor codes that are of appropriatelength, are relevant, andare realistic.Codecreationprocess(a)Codeobjectives. One of the rst issues in the crea-tionprocessiswhatemployeesthinkthereasonsarewhy the company has a code, and whether such viewsinuence the potential impact of the code overbehavior.Byrne(2002)arguesthat:Codesofbusi-ness behavior, however arrived at, function with-out up-front rational justication. One study foundthat a key factor in the success or failure of an ethics/compliance programis employees perceptions ofmanagements motivation for the establishment of theprogramitself (Trevino et al., 1999). This study,however, did not nd support for such a position.When the respondents were asked why theythought theircompanyhadacodeof ethics, sevendifferent objectives or reasons emerged. The differentobjectives included: (1) protecting the companysreputationorimage; (2)improvingthebottomlineforthecompany; (3)establishingbehavioral expec-tations for employees; (4) enhancing public relations;(5)demonstratingcorporatecitizenship;(6)protect-ing employees (e.g. allowing themtoknowtheirrights); (7)duetolegal requirements. Afewobser-vations are noteworthy. Many respondents noted theconnection between several of the above reasons andthe ultimate improvement of the bottom line for thecompany. Althoughseveral respondents mentionedpublicrelations as anobjective, theyalsoindicatedthattheircompaniesdonotwavethecodeintheair tocustomers orthepublic. Instead, thepublicrelations impact is based on the code leading toappropriateemployeebehavior that is observedbycustomers orthepublic. As well, despiteCanadianlaw not requiring companies to enact a code, severalrespondentswereunderthatimpression.Respondents were then asked whether theirperceptions of the companys objectives inenact-ing a code might affect whether they or otherswould comply with the code. None of therespondents raised any objections to the entirerange of possible code objectives, suggesting thatthe perceivedobjectives of employees donot ap-pear to be a factor that might inuence theeffectiveness of codes.(b) Employee involvement. It has alsobeensuggestedthat employees shouldbe directlyinvolvedinthecodecreationprocess(Messmer, 2003, p. 14). Oneof the reasons for this suggestionis basedonthepractical consequenceof enhancingtheemployeessenseofownershipoverthecode(Molander,1987,p. 628; Arndt, 1990; Sweeney and Siers, 1990, p. 34;EthicsResourceCenter, 1990a, p. II-3; Montoyaand Richard, 1994, p. 714). The study examined thisissuebyaskingtherespondents whether their par-ticipationortheparticipationofotheremployeesinthe creation of the code was an issue for them in anyrespect.EffectiveCorporateCodesof Ethics 331When asked whether it is important to know thatemployeeswereinvolvedinthecreationorrevisionof the code, approximately two-thirds of respon-dentsindicated thatitdidnotmatterto them,whileonly one-third felt that it was important. Forexample, one respondent stated: No. As long as itsapplicable tome, I meanI basicallydont carewhowritesit [emphasisadded].Themajorityof respondents felt that their par-ticipation in the creation of the code would notnecessarilyincreasebuy-inforthecode.Whattheirparticipation would do, however, is increase thechances that thecodes content wouldberelevantandrealistic.Again,thisndingseemstocontradictthe literature discussingthe necessity of employeeinvolvementinthecodecreationprocessinrelationto enhancing code buy-in, at least for the majorityofrespondents.CodeimplementationprocessThestudyexploredrespondentsviewswithrespectto several aspects of the code implementation processwhich might inuence the codes effectiveness: (a) thetiming of the codes distribution; (b) senior manage-ment support; (c) the sign-off process; (d) training; (e)reinforcement; and (f) testing on the code.(a) Distributingcode before employment commences. Al-though not discussed in the literature on codes,respondents wereaskedwhether thetimingof thedistribution of thecode (i.e.prior to employment asopposedtoafterbeinghired)wasofanyconcerntothem.Althoughitdidnotappeartobemuchofanissue, respondents generally believed that it would bemoreappropriatetodistributethecodepriortothecommencement of ones employment, just incasetherewassomethinginthecodewhichonewouldnotbeabletolivewith:Yeah, I think so. Just to give a person an understandingyou know of the corporations values. If theressomething in there I dont agree with, then I guess Iwouldnttakethejoborsomethinglikethat.Otheremployeesdidnot believethat givingoutthe code prior to employment was an importantissue due to the minimal chance an employee wouldobject toits content: I dont seethat wouldbeamajor problem because there is nothing in there thatisreallydramatic;itisallprettybasic,humanrights,commonsense,ethical stuff.(b) Senior management support. One of the factorsaffectingcodeeffectiveness mentionedintheliter-ature is the necessity of employees knowing thatsenior management supports their companys code(Ethics ResourceCenter, 1990a, p. II-1; MontoyaandRichard, 1994, p. 714; Jordan, 1995, p. 305;Trevino and Nelson, 1995, p. 252; Brandl andMaguire, 2002). The respondents conrmed theimportanceof perceivingsenior management sup-port. Although several employees felt that their ownsenior management supported the code, when askedtoprovideevidence,manywereunablehowevertoidentify specic examples. Some of the examplesemployees wereabletopoint toincludedhearingmanagementspeakaboutthecode,seeingmanagerslead by example, and discovering that managersknowand understand the code. For example, allrespondents believed it was a good idea to see a letterfromtheCEO:heisendorsingit.Heissayingthatyeah,Ibuyintothisconcept Iamboundbythesamerulesyouare.(c)Sign-off process. Thereisgeneral consensusintheliteraturethatinorderforcodestobeeffectivetheymust be accompanied with a sign-off provisionwhereby employees acknowledge that they haveread, understood, and/or compliedwiththe code(Pitt and Groskaufmanis, 1990, p. 24; Lane, 1991, p.31; Gibbs, 2003, p. 41), althoughothers raisecon-cerns that possiblecynical views amongemployeesmightdevelop(TrevinoandNelson,1995,p.247).Three of the four companies state in their codes thatemployees are requiredtoreviewthe code eitherannuallyorperiodically.There were a number of respondents whopointedout someof theirconcernswithrespect tothe sign-off procedure. The concerns include: (i)general hesitation; (ii) therequest of unions not tosign; (iii) lackof utility; (iv) reects lackof trust;and (v) suggests pushiness on the part of theircompany.Oneconcernrelatedtoareectionof alackoftrustorexcessivepaternalism:332 MarkS.Schwartzif my manager wanted to read through it with me, Iwouldbesomewhat insulted, becauseI wouldthinkcomeon, havealittlebitmorefaithinme.Intermsofpushinessonerespondentindicated:Ifeel handingout thebooklet isne. Idont feelthat theyneedtohavepeoplesignacopythough. Imean,I thinkthatsbeinga littlepushy.I thinkjustthefactthattheyhandout thebooklet topeopleIthinkthats goodenough. Theyshouldnotneedtosignsomethingtosaytheyvereadit[emphasisadded].Other respondents suggested that requiringemployees tosign-off onthe code is a goodideaprimarilybecause it wouldincrease awareness andprovide anincentive toread the document. Sev-eral respondents indicated that it was importantthat their managers appeared to take the annualsign-off process seriouslyinorderforthemtotakeit seriously. As one respondent noted however,having a manager take you through the processdoes not necessarilyguaranteeemployeeinterest inthe code:really, inall honesty, whenthemanager is sittinghere reading all that stuff, you are probably thinking, IwonderwhatIamgoingtobuyforsuppertonight?Althoughingeneralthesign-offprocessappearedto be acceptable by the respondents, there were still anumberofconcernsraisedregardingtheprocedure.The data indicates that employees must perceive thatthe sign-off process is more about enhancingawareness rather thanamechanismthat is foundedonalackof trust betweenemployerandemployeein order for the sign-off process to serve a con-structivepurpose.(d) Training. All code commentators concur thatwithoutsufcienttraining, codesremainineffectivein inuencing behavior (Benson, 1989, p. 318;Gellerman, 1989, p. 77; Pitt and Groskaufmanis,1990,p.24;Lane,1991, p.131; Gibbs,2003, p.40;Messmer, 2003, p. 13). The U.S. Federal SentencingGuidelines includes effectively communicating thestandards toall employees (e.g. training) as oneoftheelementsof aneffectivecomplianceprogram(UnitedStatesSentencingCommission,1991).Thestudyfoundthat althoughtrainingwasper-ceivedpositively by most of the respondents, toomuchtrainingcouldbeperceivedbyemployees tobeawasteof timeandmoney, whichmayreducethelegitimacyofthecode.Several respondents notedthevalueintraining.Essentially,trainingsessionsprovidetheexplanationrequired for employees to become aware of thecodes usefulness, orat least toindicatetheimpor-tancethecompanyattachedtothecode:[The training sessions] are howyou make it real toeveryoneby showing thembacking up a book.Anyonecancreateabook, bigdeal. Youbackit upwiththesessionwhereyougiveexampleswhyweredoing it, why dowe have integrity, why is this soimportant, howcan your actions impact a [multi-milliondollar]company?[emphasisadded].like, theroomwas just packedwithpeople. Youobviouslygot thesensethat it was veryimportant Imean [its very rare] that we all get together like that soits usually something quite important [emphasisadded].Other respondents notedthat theremayalreadybe too much training, that training will not have anyeffect onunethical individuals, that awrittendoc-ument is sufcient, and that ethics training is boring:Wehavegottrainingcomingoutofourears.If you have a person thats unethical, you can put themintoaweekcourseandtheyll still beunethical.Somecommentators suggest that thedecisionofwhoshouldconductthetrainingmighthaveanim-pactonhowemployeesperceivethecode(TrevinoandWeaver,1995,pp.249,250).Whenaskedwhoshouldconduct the training, approximately three-quarters of the respondents believed that it should beconductedin-house(i.e.bymanagersorethicsof-cers) versus one-quarter whobelievedthat outsideconsultants were more appropriate.There were several reasons proposed as to why anoutsideconsultant as opposedtoamanager shouldconducttraining.Somemanagersmaynothavetheabilitytoengageincodetraining:My manager knows no more than I do. So I wouldrather that apersonwhohas beentrainedandhas acourseonthistotrainus.EffectiveCorporateCodesof Ethics 333Other respondents were concerned whetheremployees would be open if their manager con-ductedthetraining:Alotof peopleareveryintimidatedbymanagement.SoI wouldhavetosay, if youreallywantedtogetsome results, it would probably [be] better tohavesomeone who was from the outside, just for the overallhonestythat peoplewouldhave. Peoplearegoingtobe more honest if it is someone who is not theirmanager becauseit couldaffect their career or pro-motionorwhatever.Some respondents perceived their managers aslacking the legitimacy necessary to conduct thetraining:Isurewouldntwantmymanagerteachingethics.Idhavetogofor theoutsideconsultant. [Mymanager]probablycantsaytheword[ethics].Therewereseveral reasons whythemajorityofrespondents believedthat training shouldbe con-ductedin-house. Forexample, managerswereper-ceivedasbetterunderstandingthecorporateculturethanconsultantsrenderingthembetterequippedtodothetraining:Whenyougettheoutsideconsultants,youalwaysgettheWhatdoyouknow?Youdontworkhere, sortofthing.animmediatemanagercouldrespondtoaspecicquestion If it was anoutsideagencydeliveringit,basicallytheyarejustreadingthebook.Inaddition, greater buy-in canbe demonstrated andacquiredifthemanagerconductsthetraining:Management [has]gottowalkthetalk.Ifyouasamanager cant explain it to your employees, youre notinstillingagreatdeal of condencethatyoull under-standitwhentheyhaveanissue.I think its more personal if its conducted bymanagement and it also sends the message that itssomething they believe in and theyre willing toabide by.The respondents indicated that withrespect totraining, codes will be more effective overall ifmanagers conduct the training as opposed to outsideconsultants.(e) Reinforcement. Reinforcement throughnewslet-ters, e-mails, or executivespeeches, has beensug-gested as playing a role in code effectiveness(TrevinoandNelson,1995,pp.248253).Thiswasconrmed by the respondents whoindicated thatwithout constant reinforcement, the code wouldtendtohaveonlya minimal impact onemployeebehavior. Reinforcement appears toallowemploy-eestoperceivetheseriousnessandimportancetheircompany places on compliance with the code.Otherwise, the document becomes less of a concern,andmoreeasilydisregarded:its just adocument. Adocument doesnt changetheculture,itdoesntchangevalues,itdoesntchangebehaviorwithout everything else the document isjust adocument. Youneedtheconstant education, re-education, awareness, examples and build that examplebaseandpresentitonaregularbasis.Justputtinginadocument,no[emphasisadded].(f) Testing. Although testing on the code has notbeenraisedinthe literature as a factor that couldincreasecodeeffectiveness, it was presentedtotherespondents for their perspective. Respondents ap-pearedtohate tests ingeneral, andcertainly pre-ferred not to be tested on their codes of ethics. Someof the issues raisedregardingtestinginclude: howdoes onefail thetest; perceptions of patronization;noguarantees that results of testing will relate toonesactual behavior;andthatthetestingprocessismerelyawasteoftime.CodeadministrationprocessTheliteratureoncodesraisesanumberofpotentialissues with respect to code administration and itsimpact oncodeeffectiveness. Theissues examinedforthepurposesofthestudyincluded:(a)livinguptothecodes standards; (b) reportingviolations ofthecode; (c) anonymous phoneline; (d) commu-nicationof violations; (e)enforcement; and(f)per-formancereviewsinrelationtothecode.(a) Living up tostandards. As part of the code admin-istration process, it has been suggested that companiesmust be seen to be acting with integrity, that is, living334 MarkS.Schwartzup to their own standards (Trevino and Nelson, 1995,p. 197; Gibbs, 2003, p. 41; Messmer, 2003, p. 13).Without this general perception, the administration ofthe code may become unattainable. Almost everyemployee indicated that their companies appeared tobe living up to the standards that had been set out inthe code. There were a fewexamples, however,where this did not appear to take place in the minds ofthe respondents and which appeared to generatecynicism:Respect for Customers: All of a sudden, it is notquality, it is quantity. After the old [phone] boardwent, theygot thesemachines, its hurryup, get offthe phone, dont talk to the customers, you donthave time It was like the customer did notmatter anymore. That poor little guy, Mr. Smith,what time is it, but we dont give out the time[the company] does not care about the customeranymore money they do [care about] [thecompany] has gottentoobig.Downsizing:Withthecodeofethics, andstuff,whatit entailsinthere,is likeIwishtheydidnt havetocut[jobs]period. Tomeitislikebusinessethics, likethecompanyis sayingtoyouthesearetherules, I lovehaving you as my employee, this, that...but the bottomline is when they have to do what they have to do, thatisit.Discrimination and Harassment: harassment, thatswhat I hadaproblemwithit says discriminationand harassment, race, national or ethnic, colored,religion, age, sex, Icanttell youhowmanytimes at[thecompany] Iwas condemnedforbeingaJew, bymanagersaswell.One ethics ofcer discovered that the com-panyspoliciesonexpensesforworkingoutduringbusiness trips and drinking bottled water fromahotel mini-bar conictedwiththecodes emphasisonhealth:Employee Health: Okaywetalkinthecodeofconduct [about] beinghealthyandfamily, all thisstuff, andI was inHongKonglast year andIpaidmyvedollarstogotoagymandworkoutandwhen I got back I expensed it and it got kicked back tome expense wise and they said, Im sorry we dont payfor gymcosts. Well thats crazy. Ahugedisconnect onwhat wesayand[what wedo]Wealsosaidthat wedontpayforanykindof [drinks]fromthemini-bar,well youknow, water is abigdeal whenyougotoColombia [emphasisadded].Accordingtotherespondents, perceivedincon-sistencybetweenthecodeandhowthecompanyisactually behaving appears to relate to the codespotential effectiveness.(b) Reporting violations. Most commentators suggestthat theabilitytoreport wrongdoingis extremelyimportant if codes are to be effective (Gibbs, 2003, p.40;Messmer,2003,p.13).Several researchershaveexploredtheindividual andsituational factors thatmight inuence whether employees report codeviolations(i.e.blowthewhistle).Someofthemoreprevalent situational variables that have been consid-ered to affect the decision to blowthe whistle include:theseriousness of the violation, perceivedrespon-siveness, and the presence of others (Miceli and Near,1988; Miceli et al., 1991; Sims and Keenan, 1998).Each of the four companies codes discussesemployees obligations whenthey observe a codeviolation. The provisions require employees toreport any andall code violations. The provisionsalso indicate that failure to do so could result indiscipline. Respondents were askedhowthey feltabout the obligationtoreport all code violations.Despitemanyrespondents not beingawareof thereporting obligations as stipulated by the compa-nies codes, most respondents still believed thatemployees should be obligated to report all vio-lations. Bynot reportingtheviolation, onewas ineffect condoning the illicit behavior: I thinkbynot reportingcertainthings, thenyouarereallycondoningtheir behavior, youareanaccessorytothe fact.Other respondents took a different positionbysuggesting that companies may be creating codeprovisionsthatareimpossibletoenforce:Ithinkthatitspointlesstosaywecanobligateyoutoreportwrongdoing howare you goingtoforcemeto do it? People dont want to feel compelled [todo]things.Theymightrebel iftheyfeel that Despite the requirement to report code violations,whatbecameabsolutelyclearwhenemployeeswereaskedwhether theywouldreport violations of thecodeisthatnotallviolationswouldimmediatelybereported. In other words, the respondents are alreadyEffectiveCorporateCodesof Ethics 335preparednot toexplicitlycomplywiththeir codesandreport all violations. Insomecases, evenethicsofcers indicated that they might have difcultyreportingtheir supervisors. Instead, all respondentsindicatedthatthedecisiontoreportviolationsde-pends. Whenasked, What does it dependon?,several factors were revealed. These factors included:(i)whethertheemployeehasbeenwarned; (ii)thenature of the offence (e.g. stealing scotch tape versusa companycomputer); (iii) whoviolatedthecode(e.g. manager, friend, or star performer); (iv) thecertaintyoftheoffensehavingbeencommitted;(v)the likelihoodof actionbeingtaken; (vi) whetherother employees are aware and/or condone the vio-lation; (vii) whether they must continue workingalongside the violator (e.g. due to breakdown oftrust); and(viii) whether retributionis feared(e.g.being blacklisted).Figure2summarizes thefactors whichinuencetherespondents decisionwhethertoreport acodeviolation:(c) Anonymous phoneline. Thefact that respondents(includingethicsofcers)will not automaticallyre-port code non-compliance raises signicant issues forcompanies interms of their codes potential effec-tiveness. One way to counter concerns over possibleretributionis toimplement ananonymous phonelinefor employees toreport concerns (Gellerman,1989, p. 78). TheU.S. Federal SentencingGuide-lines includes the establishment of a reportingchannel that protects against retribution as one of theelements of an effective compliance program(UnitedStates SentencingCommission, 1991). Al-most all of the respondents believed that having sucha line served a purpose, for example: sometimesyoudont feel comfortabletalkingwiththepeoplearoundherewhoyougoingtoreport [theviola-tionto] ifyou dontwant to talkto your manager?Many respondents, however, raised concerns overabuseandactual protectionof their anonymity. Atthesametime, thereweresomerespondents whodidnot agreeat all withtheconcept of ananony-mous phone line. Surprisingly, a number ofrespondents fromeachof thefourcompanies werenot awarethat suchalineexisted. Themajorcon-cerns were the perception of the line as a snitch line,itspotential abuse,andthelackofactual protectionovercondentiality.(d)Communicateviolations. Whethercommunicatingcodeviolations toemployees wouldimprovecodeeffectiveness is anissuethat theliteratureoncodesdoesnotappeartohaveaddressed.Eachofthefourcompaniestendedtogotovariouslengthstocom-municate employee code violations and the resultingdisciplinary action to the offending employees.Overall, the respondents believed communicatingviolations would increase the effectiveness of thecode. A number of reasons were suggested as to howthe publication of violations would be benecialincluding increasing employees awareness of thecode and the fact that it is actually being enforced bythe company. Other respondents, however, raisedseveral concerns regarding the communication ofviolations suchas limiting the communications toserious violations, rather thanthosewhicharenotobviousviolations. Inaddition, thecommunicationshouldnot disclose anynames. It mayalsoact toprovide the opposite effect by giving employeesideas, andmayinfact discourage employees fromcomingforwardtoreportviolations.Otherrespon-dentsmentionedtheirconcernthatissuesoflackoftrust areraisedwhenviolations arecommunicated.Manyrespondentsfelt that therumormill wassuf-cienttocommunicateviolationsofthecode.Aware of ViolationReportViolation(i) Warning was Given(ii) Serious Violation(iii) Individual Not Friend/Star/Manager(iv) Certainty of Offense(v) Likelihood of Action(vi) Others DontKnow/Condone(vii) Must Continue Working With Person(viii) No Fear of RetributionFACTORSFigure2. Factors inuencing decision to report codeviolations.336 MarkS.Schwartz(e) Enforcement. Several commentators have suggestedthat enforcement of thecodeis essential toacodebeing effective (Pitt and Groskaufmanis, 1990, p. 25;SweeneyandSiers,1990,p.39,Gibbs,2003,p.40;Messmer, 2003, p. 14). The U.S. Federal SentencingGuidelines (1991) includes consistent enforcement asone of the elements of an effective complianceprogram. It hasevenbeensuggestedthat theper-ception of justice (e.g. code enforcement) can directlyinuencethemisconductof theobserver(Trevino,1992, p. 647). Mostrespondentsbelievedthattheircodes were in fact being enforced:there[havebeen]thingsthat[went]on maybesomeone might get their wrist slappedor whatever,but people were not dismissed. Now, they aredismissing people and I think it is importantto set thatsortof example,youarenotgoingtogetawaywithitPeopledontgetawaywithitnow.Several respondents stated, however, that theydidnotbelievethecodewasbeingenforced:I mean executives also should be following the samerules. Unfortunately, theycandowhatever thehelltheywant, butnooneistheretowatchthem.Idontthink[thecodes]beingenforcedatall.Management is alsoseenbyonerespondent as nottakingactionwithrespecttotheracistactivitiesofamanager:Thebossisracist,very.Ifyouare[thesamerace]yougetbreaks, andifyourenot Actuallyitsbeenre-ported. Time andtime againtoupper managementaboutthisguyandnothingsbeendone.Although the respondents responses did notindicatethatlackofenforcementwouldpreventthecodefromstill havinganimpact, itclearlydoesin-creasethelevel ofcynicism:Ididnt feel cynical, Ijust thought [thecode] was ajokecompared to what I was seeing around me, what otheremployees were doing to get a sale or the way they weretalking or behaving in the ofce [emphasis added].Theyrecynical about what goes onaroundhere. Sothat means thecodeIsuppose. Theyreverycynical.They have a big chip on their shoulderaboutwhats happening withcertainemployees. Howcer-tain employees are getting away with the things Ivementionedtoyouandnothing is being done. Yes.Its causing morale problems. And has for sometimepeoplenot showingupandeverybodyinthedepartment knowingtheyhaveanother jobandyouknowits beingreportedandstill nothingdoneandthat sort of thing[emphasis added].Therespondents madeit clearthat without consis-tent and unbiased enforcement, the code may not betakenseriously.(f) Performance review. Contrarytotheliteratureoncodeswhichtendstorecommendrewardingethicalbehavior (Pitt andGroskaufmanis, 1990, p. 1645;Raiborn and Payne, 1990, p. 888), most respondentsbelievedthatcomplianceordoingtherightthingisalreadypart of your jobfor whichyouare beingcompensated, andthereforeneednot beexplicitlyrewardedinanysense:No. Becausegoodethical behaviorispart of ourjobYoushouldnt berewardedfor doingsomethingthat is expectedof you. Youshouldberewardedforgoingoverandabovethecall ofduty.Its the right thing to do. Why should we be rewardedfordoingtherightthing?Other respondents pointed out the difculty inmeasuringethical behavior:I dont think theres really any way you can measure apersonontheircompliance. Ithinkyoucanmeasurethemif theyre not incompliance of the code, but I dontthink it can be the other way around.Themajorityofrespondentssuggestedthatonesperformancereviewshouldnot berelatedtocodecompliance, but rather onlywithones non-com-pliancewiththecode.Interms of codecontent andcodeprocess (i.e.creation, implementation, and administration), anumber of concerns or potential concerns were raised,or insomecases werefoundtobenon-issues foremployees. Table I represents a summary of theconcerns orlackof concernforeachstageof codedevelopment. Those aspects that were mentioned by amajority of the respondents (i.e. more than half) weredeemedtobeimportant interms of codeeffec-tiveness. Those aspects that were mentionedby aminority of respondents (i.e. less than half) weredeemed potentially important, while those notEffectiveCorporateCodesof Ethics 337mentionedbyanyrespondents weredeemednotimportant.LimitationsandconclusionInterms of thestudy, theviews of actual users ofcodes of ethics help to shed light on which elementsof code content, creation, implementation, andadministrationaredeemedimportant inrelationtopotential codeeffectiveness.Therewereseverallimitationstothestudyhow-ever. The research was qualitative in nature, and wasbased on self-reported data. Research on directbehavioral evidence related to the code should also beTABLEI.Codedevelopmental stagesandeffectivenessCodedevelopmentstageRelationshiptocodeeffectivenessConcernsofrespondentsContentJustication Potentiallyimportant JustifyprovisionsifnotclearotherwiselessacceptanceExamples Important Examplescritical toensureunderstandingofcodeTone Important NegativetonenecessarytoensureexpectationsareclearLength Important LengthydocumentcandissuadeattemptstoreaditRelevance Important Must be relevant otherwise employees may not read and/orrememberprovisionsRealistic Important ExpectedbehaviormustbeachievableCreationObjectives Notimportant AllobjectivesacceptableincludingbottomlineorpublicrelationsEmployeeinvolvement Potentiallyimportant Involvement not necessarily required but could lead to morerelevantcodeImplementationPriordistribution Notimportant Priordistributionofminimal concernbutcouldnthurt;employ-eeswill mostlikelynotobjecttocodecontentSeniormanagementsupportImportant Sufcient support frommanagement must beobservedor codewill notbetakenseriouslySign-off PotentiallyImportant Sign-offcangenerateincreasedawarenessbutpotentialindicationoflackoftrustTraining Important Training must be sufcient or potential lack of awareness of codesusefulnesswill resultReinforcement Important Reinforcementmustbesufcientorcodewill beconsideredjustanotheravorofmonthTesting Notimportant Testingineffective; potentiallypatronizingAdministrationLivinguptostandards Important CodemustbeabidedbycompanyotherwisecynicismgeneratedReportingviolations Important Necessarytoobligatereportingof code violations but concernsoverpossibleretributionAnonymousphonelines Important Useful to provide anonymous phone line but concerns overprotectionofanonymityCommunicateviolations Important Communicating violations benecial as a deterrent to otheremployeesundercertainlimitationsEnforcement Important EnforcementmustbeconsistentorcynicismgeneratedPerformancereview Notimportant Performance review should not be based on code; ethical behaviorisalreadypartofonesjobrequirements338 MarkS.Schwartzconducted (e.g. Farrell, et al., 2002), along with spe-cic case studies involving code compliance and non-compliance. Whether anemployees perceptionoftheimportanceofacodeaspectactuallyleadstotheemployee abiding by the code can also be questioned.For example, employees might have felt that the sign-offprocedurewaspushyoruntrustworthy,yetrequiring a sign-off might remain important in termsof that particular employee or other employees abid-ing by the code. Social desirability bias might also havetaken place. In terms of the sample, only large Cana-diancompanieswereincludedinthesample,asop-posed to smaller rms. In addition, the study did notattempt to empirically measure and assess therespondentss views regarding code content and pro-cess, other than indicating whether a majority, aminority, or none of the respondents deemed certaincode aspects to be important. This was primarily duetothelimitednumbersof respondentsinterviewed,andthefact that thestudywas intendedas a pre-liminaryinvestigationof theimportanceof severalcodecontentandprocessvariablesaccordingtotheusers of the code. Further empirical research should beconductedtohelpverifywhether theinitial assess-ment is accurate.Interms of future research, other codecontent(e.g.prioritizationofvalues)orcodeprocessaspects(e.g. respondents views of therms ethics ofce)might be considered as well. Additional researchquestions might alsobeexaminedsuchas whetherthere might be linkages among the various codeaspects. For example, would distribution of the codeprior to employment act as a signal indicating strongmanagement support? Howdo all of the variouscodeaspects relatetoanethical corporateculture?Whichfactors are more important relative totheothers?(e.g. seeingtheirmanagersleadbyexamplerather than merely hearing their managers speakaboutthecode,etc.).Basedonthe study, if the views of the studysrespondents are to be taken into account,additional research should also be conducted tohelpverifythe following:CodecontentCompanies should provide examples in the codedocumentorduringcodetraining, aswell asmain-tainanegativetoneforcertainactivitiessuchasgiftgivingandreceiving. Provisionsthat maynotseemapparent should include a rationale to help justify theexpectedbehavior.CodecreationEmployees shouldbeinvolvedintheprocess, notnecessarilyin orderto gaintheirbuy-inor senseofownership, but to help ensure a relevant and realisticdocumentisproduced.CodeimplementationSeniormanagersmustbeseentosupport thecode,the sign-off process must be seen to be for thepurposes of enhancing awareness, training effortsmust provide employees with examples and anopportunity to ask questions, training should beconductedbymanagers, andreinforcement of thecodeneedstotakeplace.CodeadministrationCompanies must live up to their codes standards, andaddress the potential retribution concerns ofemployees.Anonymousphonelinesshouldbepro-vided. Enforcement must be consistent and impartial.Othersomewhat counter-intuitivendings fromthestudyincludethefollowing: themajorityof respondents believethat codesshouldbenegativeintone, ratherthanpositive(and that positive/inspirational language in acodecancontributetoinappropriateactivity); most employees will not immediately reportcodeviolations, whichmight raiseissues aboutcodeefcacy; the majorityof employees are unaware of theexistence of an anomymous phone line forreportingviolations; most respondents believe that performance re-viewsshouldnotberelatedtocodecompliance,butratherwithcodenon-compliance.This study attempts to address a deciency inthe current research on codes of ethics byEffectiveCorporateCodesof Ethics 339engaging in qualitative in-depth research, and byspeaking with the actual users of codes, to gaingreater insight into whether what has beenclaimedbycodecommentators is infact thecase.Suchexploratory researchis necessary before rec-ommendations are made by consultants, or legis-lation identifying elements of an effectivecomplianceprogramis enacted. Inaddition, ratherthan simply posing the code variable, additionalfactors (i.e. codecontent andprocess) that supportor hinder thecodes inuenceshouldbeidentiedinthe literature oncode theory, whichis still inits infancy.Inadditiontoenhancedlegislative enforcementand additional emphasis on ethics education atbusiness schools as recommended by U.S. Presi-dent George Bush (CNN, 2002), the emergenceof corporate codes of ethics represents one ofmany ways to address corporate misconduct.Unfortunately, the phenomenon of corporatecodes, despitegrowingtremendouslyinpopularityover recent years, still faces resistance, skepticism,and cynicism from many within the corporate(e.g. former WorldComCEOBernie Ebbers, seeabove) and academic communities. According toPitt andGroskaufmanis (1990, p. 1630): Corpo-rate codes of conduct boast as many critics asproponents. Many continue to argue that codescanbecomealegal pitfall (Pitt andGroskaufmanis,1990), are unnecessary due to the existence ofgood internal auditing and legal constraints (Ber-enbeim, 1988, p. 91), andtendtobeusedmerelyas windowdressing (Benson, 1991, p. 18). Partof the reason for these views might be the con-tinued lack of attention placed by academics andsenior managers at corporations on the variousaspects of codecontent andcodeprocess. Infact,it may be the case that code content and codeprocess are the keys to explaining why somecompanies such as Enron, despite possessing acode of ethics, have faced major scandals, whileothers have been able to avoid them (such asthrough internal reporting of misconduct byemployees with resultant action taken). Unfortu-nately one doesnt hear very much regarding thecompanies that managedtoavoidscandals due totheir codes of ethics.The study found employees, managers, and ethicsofcers do not necessarily support certain codecontent andcodeprocess variables currentlyinuseandrecommendedbyothers. Whether this lackofcodeusersupporttranslatesintoalesseffectivecodeof ethicsisnot clear, andthusshouldbesubject togreaterempiricalresearch.Whatthisstudyindicateshowever is that code content and process bestpractices shouldbesubjectedtogreater empiricalscrutinybeforetheyareadvisedor evenmandatedbygovernments. Thestudysupports theclaimthatthe mere existence of a code alone will unlikelyinuence employee behavior, and companies merelypossessinga code might legitimatelybe subject toallegations of window-dressing. 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