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ABSTRACT. Business codes are an oft-cited man-
agement instrument. But how common are codes
among multinationals? And what is their content? In
an unprecedented study, the codes of the largest
corporations in the world have been collected and
thoroughly analyzed. This paper presents the results
of that study. Of the two hundred largest companies
in the world, 52.5% have a code. More than half
of these codes describe company responsibilities
regarding quality of products and services (67%),
adherence to local laws and regulations (57%) and the
protection of the natural environment (56%). Many
codes make reference to principles governing stake-
holder relations (e.g. transparency (55%), honesty
(50%) and fairness (45%)), corporate core values (e.g.
teamwork (43%)), appropriate conduct among
employees (e.g. discrimination (44%) and intimida-
tion (43%)) and treatment of company property by
employees (e.g. conflict of interests (52%), corruption
(46%) and fraud (45%)). Monitoring compliance withthe code is addressed in 52% of the codes. Based on
this content study, three types of codes are distin-
guished: the stakeholder statute (72%), the values
statement (49%) and the code of conduct (46%). The
results of this inquiry present a benchmark for the
evaluation and development of both individual and
international business codes.
KEY WORDS: business code, business principles,
code of conduct, compliance, ethics management,
international business ethics, mission statement, multi-
nationals, norms, values
Introduction
The interest in corporate social responsibility,sustainable business practice, corporate gover-
nance, business ethics, and integrity and com-pliance management has grown markedly in the
past decade (Waddock et al., 2002). It is not onlystakeholders who expect companies to pay
greater attention to norms, values and principles;
companies themselves are acknowledging theimportance of responsible business practice
(Waddock et al., 2002). But what are a companysresponsibilities? And how can the board and
management ensure that the company meets itsresponsibilities? A much recommended manage-
ment instrument to achieve this is a business code(also referred to as a corporate code of ethics (e.g.
Cressey and Moore, 1983), a code of conduct(e.g. White and Montgomery, 1980) or an
integrity code (e.g. Petrick and Quinn, 1997)).Scholars (see for example McIntosh et al., 2002),
international governing bodies (e.g. the United
Nations, the European Union and theOrganization for Economic Cooperation and
Development), business associations (e.g. theInternational Chamber of Commerce) as well as
special interest groups (e.g. the InternationalLabor Organization and Transparency
International) have been calling on companies
to develop their own business codes. But whatis a business code and what is its function?
A business code is a policy document that
defines the responsibilities of the corporation
towards its stakeholders and/or the conduct thecorporation expects of employees (Kaptein and
Wempe, 2002). A code clarifies the objectives thecompany pursues, the norms and values it
upholds and what it can be held accountable for.
Business Codes of
Multinational Firms:
What Do They Say? Muel Kaptein
Journal of Business Ethics 50: 1331, 2004. 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Muel Kaptein is professor of Business Ethics and IntegrityManagement at the Erasmus University, Rotterdam, TheNetherlands. He also works as a consultant for KPMGIntegrity, where he assisted about thirty companies in thedevelopment of their code of business.
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A code aims to reduce the occurrence of
incidents, to improve the extent to which stake-holder expectations are realized, to boost stake-
holder confidence in the company and toencourage the authorities to relax regulations and
controls (see, for example, Ethics ResourceCenter, 1980; Raiborn and Payne, 1990).
How common are codes among companies?
And what is their content? Many studies havebeen conducted into the prevalence of codes in
specific countries (see Table I). Various publica-tions have also appeared on the content of codes
in specific countries. Research has also beenconducted into the content of business codes of
multinational firms with reference to one or
more issues such as bribery, child labor andhuman rights (see Table II).
To date, no research has been conducted toexamine the prevalence and full content of
business codes of the largest corporations in theworld.
This paper presents the results of an analysis of
the codes of the two hundred largest multina-tional firms. What do they tell us? What are the
most cited issues? Which issues are barely men-tioned? What wording do companies choose to
express their responsibilities? How uniform anddiverse are the codes? Is there a core set of
14 Muel Kaptein
TABLE I
Research conducted on the prevalence of business codes
Country Most recent Researcher Research method Percentage
study of codes
United States 1999 Weaver et al. Survey of Fortune 1000 with a 78%
response rate of 26%
Canada 2002 KPMG Canada Survey of largest 800 companies and 77%
200 public sector organizations with
a response rate of 13%
Japan 1997 Nakano Survey of largest 2199 companies 37%
with a response rate of 7.2%
India 2002 KPMG India Survey of largest 800 companies with 78%
a response rate of 20%
South Africa 2002 KPMG Survey of 1026 public and private 71%
South Africa organizations with a response rate of
16%
Australia 1996 Farrell and Cobbin Survey of largest 537 companies with 42%
a response rate of 42%
England 1999 London Business Survey of largest 350 companies with 78%
School and a response rate of 12%
Arthur AndersenGermany 1999 KPMG Germany Survey of largest 1000 companies 54%
and the University with a response rate of 25%
of Erlangen-Nrnberg
Belgium 2002 KPMG Belgium Telephonic survey of all of the largest 53%
100 companies
Netherlands 2003 Employer association Telephonic survey of all of the largest 54%
VNO-NCW, KPMG 100 companies
and Ethicon
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universal norms that multinational firms uphold
and, if so, how can they be described?A content analysis of business codes delineates
the responsibilities multinationals proclaim. To besure, the existence of codes does not imply that
companies strictly adhere to them (Sims andBrinkmann, 2003), but an analysis of the content
of business codes nevertheless reveals what kind
of ethics companies claim to uphold. The resultscould, among other things, serve as benchmark
in evaluating and developing individual andinternational business codes (e.g. the OECD
Guidelines for Multinational Enterprises, theUNs Global Compact and the Caux Principles).
Business Codes of Multinational Firms 15
TABLE II
Research conducted on the content of codes
Researchers Year Object of research Themes researched
White and Montgomery 1980 30 codes of U.S. companies Several issues
Cressey and Moore 1983 119 codes of largest companies Several issues
in U.S.
Mathews 1987 202 codes of 485 companies in U.S. Several issues
Schlegelmich and Houston 1989 31 codes of the largest 200 Several issues
companies in England
Langlois and Schlegelmich 1990 189 English, French and West Several issues
German company codes
Employer association 1991, 1999 Respectively, 21, 38 and 54 codes Several issues
VNO-NCW, KPMG and 2003 of the largest 100 companies
and Ethicon
Lefebvre and Singh 1992 75 of the largest 500 companies in Several issues
Canada
Farrell and Cobbin 1996 95 codes of the largest 537 Several issues
companies in Australia
Council of Economic 1997 71 codes of 360 companies Sourcing Guidelines
Priorities for Labor Rights
OECD 1998 98 codes of randomly chosen Fair business practice,
companies labor rights, environ-
mental stewardship and
corporate citizenshipILO 1999 215 codes of multinationals Labor rights
Van Tulder and Kolk 2000 13 international companies in the Several issues
sporting goods industry
Ashridge Centre for 2000 52 business codes of Fortune 500 Human rights
Business and Society companies
Gordon and Miyake 2001 246 codes of international companies Bribery
Kolk and Van Tulder 2002 55 business codes of Fortune 500 Child labor
companies
KPMG Belgium 2002 53 codes of the largest 100 companies Several issues
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Clearly, it is not to implied here that the moral
obligation of companies to include an issue intheir codes is directly proportional to the
frequency with which an issue presents itself. Themoral legitimacy of an ethical standpoint is not
determined by numbers (Donaldson and Dunfee,1999). The frequency with which issues areincluded in codes does, however, allow us to
deduce that the more an issue is mentioned, thegreater the number of companies there are who
endorse it. It can thus be asserted that the greaterthe frequency with which an issue is addressed
the greater reason a company should have for notincorporating this issue in its business code.1
An examination of the prevalence of codes andthe issues they deal with subsequently generates
the question of how the similarities and differ-ences among the codes could be explained. In
this paper, the collected data will be used to carry
out an in-depth analysis of the different codetypes that can be found in practice. Is there uni-
formity among business codes with the sameobjective and target group and what bearing do
differences in this regard have on the issues thatare addressed? Thereupon, the influence of
cultural and continental divisions on code typeand content will be examined.
This paper aims to give the reader a bettergrasp of the content of business codes. The
empirical effectiveness of business codes,however, falls beyond the scope of this paper (see
for example Schwartz, 2001). The content of
individual codes is not evaluated either.This paper starts with a discussion of the
methodology of the research conducted. Follow-ing this, the issues in the analyzed codes are
arranged according to theme and prevalence. Onthe basis of this analysis, we distinguish three
types of codes. The paper concludes with an
overview of the most significant findings and anumber of suggestions for companies to improvetheir business codes.
Methodology
This study focuses on the two hundred largest
corporations in the world, using the SCOPECore Company list (Van Tulder et al., 2001). In
2001, the respective company headquarters were
contacted by phone with the inquiry of whetherthe company had a business code. A business
code was defined as an independent, company-specific policy document which delineates
company responsibilities towards stakeholdersand/or employee responsibilities. Documents thatformulate responsibilities towards a single stake-
holder (e.g. a code for suppliers), a mission state-ment that merely formulates economic
objectives, or rules of conduct for employeeswith regard to a single issue (e.g. a code for the
use of e-mail and the Internet) were excludedfrom this definition.
In the telephonic contact, a connection withthe department of Public Affairs or Corporate
Communications was requested. The companyrepresentative was addressed in the official locallanguage. Since a range of terms are used to refer
to business codes in practice, the companyrepresentative was assisted as much as possible
with synonyms and different descriptions of acode. If the person in question had doubts, we
asked to be put in contact with a colleague (fromanother department). In some cases, we were put
through to Human Resources, Legal Affairs orCorporate Security. The companies that claimed
to have a code were requested to send us anoriginal copy. Two companies that claimed to
have a code but did not want to make it public
due to its confidential nature were not includedin the list of companies with a code given that
it could not be verified.At the beginning of 2002, the managing
directors of the companies that maintained thatthey did not have a code were contacted by mail
to establish whether this was indeed the case. Theletters were written in the official language of the
country where headquarters was based. Two
additional codes were eventually received. Finally,a search was conducted on the web sites ofcompanies that repeatedly stated that they did not
have a code and other public resources on
company codes were also consulted. This did notyield any additional codes. The search was ended
on 1 August 2002.The aim of this approach was to collect as
many codes as possible so that the proportion ofcompanies with a code could be represented as
16 Muel Kaptein
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reliably as possible. This contrasts with a few of
the studies listed in Table I that have been con-ducted. Simply approaching companies with a
questionnaire could have an adverse effect on thereliability of ones findings. Companies with a
code are more likely to respond with the resultthat on the basis of the total response rate, thepercentage of companies with a code could
appear higher than what is actually the case (seefor example the study conducted in England by
the London Business School with a response rateof 12%).
The Japanese codes that were received weretranslated into English by a native speaker and
checked by a second native speaker. This wasfollowed by a content analysis. In this analysis, an
inventory was made of the different items con-tained in the codes. The corporate integrity
model developed by Kaptein and Wempe (2002)
served as basis for classification. The modeldistinguishes between (1) company responsibili-
ties towards stakeholders, (2) principles governingstakeholder relationships, (3) corporate values
and (4) employee responsibilities towards thecompany. In addition, the codes were analyzed
for the degree to which they contained referencesto implementation, compliance and monitoring
along with their length and tone. The analysisleft aside the distinction that can potentially be
drawn between ethical and economical norms
and responsibilities (Robin et al., 1989). It is,after all, not possible to deduce from the text of
a companys business code whether the commit-ment, for example, to deliver high quality
products is motivated by ethical and/or economicconsiderations. This is also why this study
employs the concept of business codes rather thancodes of business ethics.
The prevalence, title and size of codes
How many multinational firms, then, have a
code? Of the one hundred largest companies inthe world, 58% have a code. Of the successive
group of one hundred companies, 47% have acode. This means that of the two hundred largest
multinationals, 52.5% have a business code.Business codes are most prevalent among U.S.
companies, a finding that is consistent with an
earlier study of Langlois and Schlegelmilch
(1990). The U.S. has a long tradition of businesscodes (see for example White and Montgomery,
1980). The large number of Japanese companies
in the top 200 and the relatively small propor-tion of Japanese companies with a code lower thetotal percentage of company codes. The preva-
lence of company codes by country is outlinedin Table III.
The vast majority of the analyzed codes (79%)belong to companies based in the U.S., France,
Germany and Japan. In the analysis below, we
will examine the differences among codes fromthe Americas (largely represented by the U.S.),
Europe (largely represented by Germany and
France) and Asia (largely represented by Japan).The titles of the codes diverge strongly, for
instance, Standards of Business Conduct
(Exxon Mobil), What We Stand For (BPAmoco), and Legal and Ethical Policy (BTR).
Of all the titles employed, 36% contain the wordconduct, 17% principles/guidelines, 9%
ethics, 6% values and 4% integrity.The size of the different codes varies, as pre-
sented in Table IV, from 1 page (e.g. Nichemen)
to 79 pages (3M), and from 50 words to almost18,000 words.
The content of business codes
In the following section, the content of the codesof the two hundred largest companies are
analyzed and discussed with reference to (I)stakeholder responsibilities, (II) stakeholder prin-
ciples, (III) corporate values, (IV) internalemployee conduct and (V) implementation and
compliance. Thereupon, we shall identify the
types of codes that can be distinguished on thebasis of the content analysis that has been carried
out.
I. Stakeholder responsibilities
In its Global Business Standards, Sara Lee
declares that we have a responsibility to our-selves, to each other, to our consumers, to our
Business Codes of Multinational Firms 17
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stockholders, to our business partners and to our
communities. But what are these responsibili-ties? What kind of responsibilities do companies
embrace? In Table V, the issues that are addressed
in the examined codes are depicted by stake-holder.
Most corporate codes, whether extensively orconcisely, pay attention to consumers, investors,
employees, society and the natural environment.Specifying responsibilities towards competitors
and suppliers is significantly less widespread.
Although some issues are frequently referred to(such as delivering quality and achieving returns)
the terms in which this is stated may differ. The
quality levels companies pledge to deliver to cus-tomers are subject to a number of qualifications
such as high quality (Nestl), highest quality(Merck/HP), excellent quality (Coca-Cola)
and customers first choice for quality (BritishTelecom). Greater divergence can be found in
18 Muel Kaptein
TABLE III
Prevalence by country
Country Top 100 Top 101200 Total
More than 10 companies in top 20001. United States 071% (17/24) 066% (23/35) 068% (40/59)
02. France 060% (6/10) 033% (4/12) 045% (10/22)
03. Germany 050% (7/14) 038% (3/8) 045% (10/22)
04. Japan 050% (15/30) 027% (8/30) 038% (23/60)
Fewer than 10 companies in top 20005. Netherlands 100% (1/1) 100% (2/2) 100% (3/3)
06. England/Netherlands 100% (2/2) 00 100% (2/2)
07. England/United States 100% (1/1) 00 100% (1/1)
08. Canada 00 100% (1/1) 100% (1/1)
09. Sweden 100% (1/1) 00 100% (1/1)
10. Switzerland 100% (3/3) 067% (2/3) 083% (5/6)
11. England 050% (1/2) 100% (3/3) 080% (4/5)12. Italy 050% (2/4) 100% (1/1) 060% (3/5)
13. South Korea 033% (2/6) 00 033% (2/6)
14. Venezuela 000% (0/1) 00 000% (0/1)
15. Mexico 000% (0/1) 00 000% (0/1)
16. Brazil 00 000% (0/2) 000% (0/2)
17. Spain 00 000% (0/3) 000% (0/3)
Total 058% 047% 052.5%
TABLE IV
Number of pages of business codes
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Business Codes of Multinational Firms 19
TABLE V
Responsibilities towards stakeholders
Degree to which it is
mentioned (n = 105)
I. Customers (or: consumers, clients, buyers)
Supplying sufficient/good/high/highest/superior/excellent/reliable/top quality/
original products and services and offering good value 67%
Sustaining or enhancing the health and safety of consumers 35%
Providing reasonable/competitive/fair prices (and payment conditions)
commensurate with quality 34%
Continually improving quality of products and services 28%
Providing products and services at the right place and time and in the right
amount (accurately, timely, continuity) 10%
Preventing misuse/abuse of products 03%
Helping consumers to use products responsibly 02%
Providing customized products for minorities 01%
II. Capital providers (or: stockholders, owners, investors)
Achieving a maximum/superior/satisfactory/sound/competitive/acceptable/
above-the-market-average return on the capital in the long term, in fair
proportion to the market-related risk 41%
Conserving, protecting and (above-the-market-average/maximize) increasing
the owners/investors assets/capital 09%
III. Employees (or personnel, staff, human capital, including applicants and temporary employees)
Encouraging/optimizing personal development/growth/use of talents 40%
Treating employees with dignity/respect 39%
Valuing diversity/equal opportunity 31%
Offering productive/responsible/challenging/pleasant/enriching work and working
environment 23%
Offer ing good/competitive/excellent terms of employment/compensation 12%
Providing stable and secure job opportunities 09%
Making the best possible use of each persons skills, abilities and knowledge 09%
Conforming to sound labor standards 08%
Refraining from child labor 04%
Creating/enabling/guaranteeing a balance between work and private life 02%
IV. Suppliers, joint ventures, contractors and distributors
Ensuring equal opportunity 14%
Seeking mutually beneficial/long-term relationships 12%
Paying competitive market prices in timely manner 06%
Making reasonable demands 03%
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20 Muel Kaptein
TABLE V (Continued)
Degree to which it is
mentioned (n = 105)
V. Society (or local community)Observing, both directly and indirectly, all relevant local laws and regulations 57%
Being a good corporate citizen through charitable donations, educational and
cultural contributions, and employee participation in community and civic affairs 36%
Enhancing the quality of life/contributing to sustainable development/improvement 18%
Respecting human rights/dignity (of those affected by the activities) and
promoting them wherever practicable 11%
Supporting public policies and practices that promote human development and
democracy 8%
Supporting/participating in local initiatives that promote peace, security,
diversity and social integration. E.g. collaborating with community organizations
(for example government agencies and industry groups) dedicated to raisingstandards of health, education, product safety, workplace safety and prosperity 7%
Recognizing governments legitimate obligation to society (legitimizing
government authority) 6%
Doing business with stakeholders who do not systematically violate national and
international social standards 4%
Abandoning commercial activities in countries where it is made impossible to
promote/respect human rights 2%
Setting an example in countries where human rights are seriously and
systematically violated 2%
Adopting practices that permit the transfer and rapid diffusion of technologies and
know-how 2%
Timely payment of taxes 1%
VI. Competitors
Refraining from seeking access to competitors assets through improper means 21%
Refraining from casting competitors in a bad light or criticizing them publicly 2%
VII. Natural environment (health, safety and environment)
Preventing/preserving/restoring the natural environment or treating the
environment with due care 56%
Offering safe, clean, orderly and healthy working conditions; eliminating/
preventing injuries/incidents 49%
Preventing/limiting/reducing/controlling negative environmental impacts such
as the direct and indirect pollution of soil, water and air, noise, creation of wasteproducts and use of hazardous materials 31%
Collecting and having waste processed separately and re-using or recycling it where
possible 21%
Using energy and other natural resources effectively and prudently/efficiently 20%
Preventing incidents 16%
Promoting development of environmentally friendly products 10%
Supporting research and development of environmental technologies 7%
Preventing harm to animals and helping to optimize animal welfare 2%
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the level of returns to shareholders: acceptable
(Shell), sufficient (Hewlett Packard), satisfac-tory (Philips), superior (Ito Yokado Group),
best possible (Merck), excellent long term(British Telecom) and maximize long term
(BP). With respect to the natural environmentand competitors, there is greater textual unifor-mity. The terms in which companies express
their position towards society are more diverse.A few examples include a harmonious rela-
tionship with society (Ito Yokado Group),contributing to the well-being of society
(AT&T), benefit humankind (Bayer), majorcontribution to development of society
(Deutsche Telekom), betterment of society(Coca-Cola), meeting legal obligations (Fiat)
and being a good corporate citizen (Toshiba).Striking is that when the results are analyzed
by continent, references to environmental
responsibilities appear 45% more in Europeanthan they do in American codes. Responsibilities
towards competitors are referred to 52% morein American codes than in European as well as
Asian codes.
II. Stakeholder principles
In addition to articulating stakeholder interests,
a code can also communicate and elaborate on
the principles the company upholds. Stakeholderprinciples are general requirements for company
and employee conduct: they govern the rela-tionship between company and stakeholders
(Kaptein and Wempe, 2002). Table VI depicts themost cited stakeholder principles.
Stakeholder principles generally do not receiveas much attention as stakeholder interests.
Transparency (55%), honesty (50%) and fairness
(45%) are the most cited principles. Fairness, forexample, is referred to in connection with theselection of suppliers, the distribution of benefits
and burdens and the assessment of employee
performance. As Merck declares . . . we treatour suppliers with honesty, fairness and respect.
Shell applies fairness also to its competitors:. . . to compete fairly . . . will not prevent
others from competing freely . . . Good stake-holder communication (e.g. transparency,
honesty, dialogue, and responsiveness) is men-tioned most. For example, Nestl . . . invites
government officials, health professionals and
consumers to draw its attention to any Nestlinfant formula marketing practices in developing
countries which they consider are not in con-formity with the above commitment and BT
states that it will . . . use [its] values and prin-ciples in dialogue with other organizations . . ..
Comparing the most frequently mentionedprinciples in the business codes by continent
shows that American codes specifically empha-size the principle of honesty (64% in comparison
with 45% in European and 38% in Asian codes);European companies place relative more emphasis
on the principles of transparency (68%, comparedto Asian 54% and American companies 52%) andthe principle of empathy (30%, compared to
Asian 21% and American companies 11%); and Japanese companies place somewhat more
emphasis on the principle of trust (29%, incontrast with American 22% and European
companies 17%). The principle of fairness ismentioned less often in American codes (35%)
than in European (50%) and Asian (46%) codes.
Business Codes of Multinational Firms 21
TABLE VI
Stakeholder principles
Extent to which
it is cited
(n = 105)
01. Transparency 55%
02. Honesty/truth 50%
03. Fairness/impartiality 45%
04. Trust 23%
05. Empathy/respect/diversity 20%
06. Stimulating stakeholders to
raise concerns 19%
07. Accountability 18%
08. Dialogue/open communication 14%
09. Equality 12%
10. Responsiveness 11%
11. Keeping promises 10%
12. Coherence/uniformity 04%
13. Freedom/autonomy of
stakeholders 03%
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III. Corporate values
Apart from stakeholder principles which pertain
specifically to stakeholder relationships, organi-zations also express their core values in a code.
Core values refer to those qualities a companydeems desirable and which should ground allbusiness conduct and outcomes (Kaptein and
Wempe (2002)). Table VII presents a summaryof the organizational values that can be found in
the examined codes.
The core values cited in the codes diverge
strongly. Merck, for example, asserts that . . .we strive to create an environment of mutual
respect, encouragement and teamwork . . .while AT&T states that We treat each other
with respect and dignity . . . The most oftencited values are teamwork (43%), responsibility(33%), open communication (29%) and innova-
tion (29%). Noteworthy is that the value of effec-tiveness is seldom mentioned explicitly. Shell is
one of the exceptions in asserting that The mostimportant contribution . . . to the social and
material progress of countries . . . is in per-forming basic activities as effectively as possible.
American codes make comparatively less mentionof values than do European codes. Open com-
munication can be found in 35% of the Europeancodes, while it amounts to 25% in Americancodes. European codes mention teamwork 1.5
times more often than do Japanese and Americancodes. Humility, harmony, dedication, innova-
tion, creativity and team spirit are largely foundin business codes of Asian origin. Innovation and
creativity, for example, are respectively men-tioned 73% and 46% more in Asian codes than
in American and European codes. By contrast,the value responsibility/conscientiousness can be
found just as often in American (30%) as in Asian(35%) and European codes (33%).
IV. Internal conduct
Business codes can also clarify what is expected
of employees in their engagement with oneanother and their treatment of organizational
assets. Contrary to the categories discussed above,the latter refers to employee conduct versus the
company as opposed to employee conduct on
behalf of the company (Mathews, 1987). TableVIII provides an overview of the items referredto in this area.
Many codes include a diverse range of rules
of conduct employees must obey among them-selves (particularly discrimination (44%) and
intimidation (43%)) and with respect to thecompany. Most forms of conduct listed in
Table VIII such as engaging in fraudulent prac-tices, leaking confidential information and sexual
22 Muel Kaptein
TABLE VII
Core values of/within the organization
Extent to which
it is mentioned(n = 105)
01. Teamwork/mutual support/
interdependence/co-
operation/team-spirit 43%
02. Responsibility/
conscientiousness 33%
03. Open communication 29%
Innovation, creativity,
pioneering 29%
05. Customer oriented 19%
06. Flexibility 17%
07. Efficiency 16%
08. Professionalism 14%
Entrepreneurship 14%
Pride/dignity 14%
11. Loyalty 13%
12. Motivation/enthusiasm/
energy/spirit/encouragement 12%
13. Participation 11%
14. Shared purpose/unity 10%
15. Exchanging ideas/learning 09%
Independence 09%
17. Consistent and unequivocal
public image 08%18. Effectiveness 06%
Productivity 06%
20. Cost-awareness 05%
21. Discipline 04%
Diligence/perseverance/
dedication 04%
23. Courage/daring 03%
24. Harmony 02%
25. Humility 01%
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intimidation are prohibited. The norms formu-lated in the codes diverge most with respect to
the acceptance of gifts. Acceptance of gifts or
invitations is mostly subject to certain conditions,for example, that the value is below $50 (GTE)
or purely symbolic (Fiat), that their acceptance
Business Codes of Multinational Firms 23
Extent to which
it is mentioned
(n = 105)
IV. AuthoritiesNo conflicting side-line
activities/conflict of interests 52%
No corruption or bribery 46%
Prohibition or restriction on
acceptance of gifts 47%
No favoring of family and
friends 34%
V. Corporate timeNo alcohol and drug use 17%
No private surfing on the inter-net during working hours 03%
Sufficient effort 02%
Keeping to stipulated times 01%
No unjustified calling in sick 01%
No arms/weapons in the
workplace 01%
VI. StaffNo discrimination 44%
No intimidation/harassment/
threatening 43%
Treating one another with
respect 35%
No sexual harassment 26%
Treating one another fairly 20%
No unwelcome or unsolicited
physical and verbal sexual
advances 16%
Respect for privacy 14%
No racism or racist
insinuations 12%
No verbal abuse 11%
No physical violence 11%
No tasteless/obscene jokes/
gestures or material 10%No bullying 10%
No gossiping/ridiculing/
insulting 06%
No favoritism 03%
Extent to which
it is mentioned
(n = 105)
I. Corporate fundsAdherence to sound financial
accounting principles 46%
No fraud 45%
No diversion of funds
(embezzlement) 19%
No misuse of funds for
personal gain 18%
No misuse of funds for
business purposes 16%
Correct handling of expensereturns 08%
No unjustified billing of hours 07%
II. Corporate equipmentProper use of equipment and
goods 29%
Protection and conservation of
equipment and goods 18%
No theft of business equipment
or goods 18%
Prohibition of or restriction on
taking business equipment
home for private use 17%Prohibition or restriction on
private use of means of
communication 14%
No neglect of maintenance 03%
III. Corporate informationNo leakage of confidential
information (like trade
secrets) 50%
No use of insider information
when trading shares of
other securities 44%
No unauthorized use of accesscodes 10%
TABLE VIII
Employee conduct towards the company and among themselves
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is always agreed with the supervisor (Deutsche
Telecom), a social courtesy (NTT), that thecompany officer or his/her delegate [has]
approve[d] its acceptance (Kodak), that it isgenerally accepted business practices of ones
country and industry (Sara Lee) or that itspurpose is to create goodwill (Xerox).
V. Implementation and compliance
A quarter of the codes make reference to
implementation of the code. GTE for instance,points out the central role of managers: GTE
supervisors have an additional responsibility formaintaining a climate in which legal and ethical
business conduct is the norm; communicating toemployees the seriousness of GTEs commitment
to such conduct; encouraging open discussion
of employees business concerns; accepting andprocessing reports filed by employees of possible
misconduct; and, never compromising GTEsstandards to achieve a goal or objective, no matter
how important that goal or objective seems at themoment. GTE also refers to a Business Conduct
Line for employees with questions about inter-pretation and compliance with the code.
Some 52% of the codes indicate that compli-ance with the code is monitored. British
Telecom, for instance, sheds light on its moni-toring practices as follows: We are committed
to communicating, measuring and appropriate
reporting of our performance against these
principles.
Profiles of business codes
The analysis thus far (in keeping with mostscientific analyses of codes) has treated business
codes as a uniform concept. The question,however, is whether the diversity in the codes
content is not (partly) the result of the type ofcode individual companies have in mind. On the
basis of the collected and analyzed codes, we candistinguish three clusters of codes: (1) the stake-
holder statute/business principles, (2) the valuesstatement and (3) the code of conduct. 72% of
the codes formulate responsibilities towards stake-holders (the so-called stakeholder statute orbusiness principles), 49% express the corporate
core values in a coherent manner (the so-calledvalues statement) and 46% set down norms and
rules for employee conduct (the so-called codeof conduct).2 A number of codes integrate two
or even three approaches. Each type is elaboratedon in Figure 1. The types of corporate codes
differ, among other things, in focus (for internaland/or external use), level of abstraction, size,
use of pronoun and attention to compliance.Based on a content analysis of codes of
business in the U.S., Mathews (1987) concludesthat U.S. companies are more concerned with
conduct against the company than on behalf of
24 Muel Kaptein
Figure 1. Frequency of type of codes
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Business Codes of Multinational Firms 25
TABLEX
Typeofcodes
Focus
Objects
Levelof
Size
Useof
Tone
Compliance
Countries
abstraction
personal
paragraph
pronoun
Stakeholder
Internaland
Responsibilities
Mostlyhigh
Asingleto
Oftenfirst
Predominantly
Mostly,in
Especially
statute/
externaluse
andprinciples
afewpages
personplural
descriptive
termsof
European
business
towards
e.g.external
(46%)and
principles
stakeholders
reportingand
Asian
mechanisms
(40%)
forcomplaints
companies
ofstakeholders
Values
Primarilyfor
Organizational
Mostlyhigh
Asingleto
Oftenfirst
Predominantly
Hardly
Especially
statement
internaluse
values
afewpages
personplural
descriptive
Asian
andtoalesse
r
(47%)and
degreefor
European
externaluse
(32%)
companies
Codeof
Primarilyfor
Desirable
Mostly
Afewto
Often
Predominantly
Largely,in
Especially
conduct
internaluse
employee
detailed
manypages
secondor
prescriptive
termsof
U.S.
conduct
thirdperson
e.g.sanction
companies
singular
mechanisms
(53%)
andwhistle-
blowers
procedures
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the company. From this study, it would indeed
appear that codes of conduct are a particularlyAmerican phenomenon. Asian and European
companies, however, choose for a stakeholderstatute/business principles or a values statement
more often than do American companies.Mathewss conclusion with respect to Americancodes is also only a partial reflection of the
present state of affairs. Many American codes(74%) address stakeholder responsibilities, stake-
holder principles and/or, to a lesser extent, corevalues. As this is often (64%) accompanied by a
detailed explication of the norms and rules foremployee conduct in regard to the company, the
latter often overshadows the rest (at least as faras number of words and visual impact are con-
cerned).Calculating anew the frequency with which
issues are referred to by code type shows that
more uniformity can be found especially amongcodes of conduct. For example, the percentage
of codes of conduct that address fraud, bribery,use of confidential information and upholding
proper social norms between employees increaseby a factor of 1.8 compared to the total per-
centage of business codes that refer to theseitems.3 Of all the codes of conduct, 91% address
these issues. Regarding business codes which canbe defined as values statements, much variation
can still be found in the corporate values thatare mentioned.
Conclusion
This paper consisted of three steps. First, we
made an inventory of the codes of the twohundred largest companies in the world. Second,
we analyzed the content of the collected codes.
Finally, we examined to what extent the contentof the codes can be related to the type and originof codes.
It was found that 58% of the hundred largestcompanies (and 52.5% of the two hundred largest
companies) in the world have a code of conduct.On the one hand, this figure can be viewed as
positive: more than half of the largest multi-
national firms acknowledge and define theirresponsibilities, principles, values and/or norms
in a written policy document. On the other
hand, almost half of the largest multinationalfirms at the time of this study do not have
a code.Although a business code is not a statutory
requirement, it would appear advisable for com-panies who do not have a code to (re)considerwhether it might be desirable to develop and
introduce a business code (Schwartz, 2002). Asmore companies adopt a code, those who refrain
from doing so will increasingly be confrontedwith stakeholders who will want to know why
a code is not viewed a desirable instrument tomanage ethics, integrity and social responsibility.
This study did not examine the reasons com-panies may have for not adopting a code. A
follow-up study could focus on this question andexamine to what extent companies have ethicallyjustifiable reasons for not having a code.
This paper has shown that both similarities anddifferences can be found in the content of codes,
both with respect to responsibilities towardsstakeholders, stakeholder principles, corporate
values, as well as conduct against the company.Codes generally describe the responsibilities a
company assumes with respect to employees, cus-tomers, capital providers and society as a whole.
In general, companies do not employ opposingnorms. They specifically differ in what they
include and exclude from their codes and thewording that is used (for instance in terms of
levels of commitment).
Finally, this paper has shown that an impor-tant determining factor in the content of a code
is the target group the company has in mind:external and/or internal stakeholders. In the case
of the former, the code will focus mostly onresponsibilities towards stakeholders and the
principles that apply. In the case of the latter,
the code will mostly formulate rules for conduct.If the analyzed codes are grouped according totype, uniformity in content increases markedly.
The diversity in the content of corporate
codes (also within countries) is not necessarily anegative sign. It could very well be an indica-
tion of the authenticity of the codes in the sensethat companies draw up codes to suit their par-
ticular circumstances as opposed to merelycopying those of other companies, model codes
26 Muel Kaptein
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or codes of international institutions. At the same
time, a number of topical social issues such ashuman rights receive slight attention in the
codes.This study offers a benchmark for companies
to assess their codes against other corporate codesand the items they address. As companies becomemore international, comparisons with the cor-
porate codes of companies in the countries wherethey do business become more desirable.
Stakeholders judge the quality of individualbusiness codes partly with reference to the quality
of other corporate codes in that country. Forexample, in an Asian country, a typically
American code of conduct could be regarded astoo comprehensive and forceful while the
business principles of a European company couldbe viewed as too ambitious and abstract.
The benchmark that is presented in this paper
is neither a proposal for a model code nor doesit suggest that uniformity among business codes
is necessarily desirable. The benchmark givescompanies and stakeholders cause for examining
the reasons why a company does not take a standon a given issue. If a company decides to address
an issue in its code, it is important that it usesits own words and tailors it to its own circum-
stances. This overview is especially useful forcompanies who do not have a code but who
would like to develop such a policy document.
One of the first steps in developing a code is todecide on the type of code the company deems
fitting (a stakeholder statute/business principles,a values statement and/or a code of conduct), the
issues it elects to address and the terms in whichthe code will be shaped.
The benchmark offers stakeholders support inquestioning companies on the content of the
code: Why does your company include issue X
but not issue Y? Why do you, as company, for-mulate it like this and not like other companiesdo? Why do you not mention, for example, fair
play, knowing that 45% of companies do? For
international institutions that have issued astandard for corporations (e.g. the UN and the
OECD) this overview offers an aid in evaluatingtheir own standards on comprehensiveness and
the extent to which companies have adoptedtheir standard. The more companies embrace a
given issue, the more reason exists for other
companies to ask themselves why they have
omitted it.By performing a periodical analysis of the
content of business codes, we can track the
extent to which there is evidence of furtherhomogenization or diversification in codes (forexample in terms of structure, issues and
wording).
Recommendations
An assessment of content is just one aspect of theoverall evaluation of a business code. Another
factor concerns the extent to which a code
demonstrates a companys awareness of relevantand topical issues, organizational dilemmas andstakeholder expectations (Kaptein and Wempe,
1998). Judging individual codes merely based ondesk-research and just in terms of comprehen-
siveness is therefore not justified. Moreover, somenorms may be so self-evident for instance the
prohibition on killing someone in the workplace that it need not be included in the code despite
the fact that it remains valid.
Another significant aspect is the processthrough which the code is established and
institutionalized. A code is nothing, coding iseverything (Kaptein and Wempe, 1998). The
quality of individual business codes can there-fore only be determined by conducting research
on these aspects as they manifest in practice.We can, nevertheless, in random order, put
forward a number of general suggestions forimproving codes.
Accountability: The impact and credibility ofa code can be enhanced by making a com-
mitment to stakeholders to periodicallyaccount for implementation and compliance
with the code, for example in an annualreport (Van Tulder and Kolk, 2000). Only
4% of the analyzed codes address externalreporting.
Feedback: A company can use a code as ameans to invite internal and external stake-
holders to share their ideas on improvingthe code or even its implementation.
Business Codes of Multinational Firms 27
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Although many companies have institu-
tionalized and refer to an internal ethicshotline (Kaptein, 2002), it is often unclear
to external stakeholders who they can turnto. Only 5% of the examined codes indicate
that the company would appreciate externalstakeholders to report incidents and whothey can contact.
A stimulating work environment: A key factorin the proper implementation of a code is
that managers create a work environmentwhich enables and encourages employees to
observe the code (Benson, 1989; Tucker etal., 1999). Few codes give a clear and con-
vincing account of its implementation(25%) and the role fulfilled by management
(16%). Companies could therefore considerplacing more emphasis on the responsibility
the organization (and management in
particular) has in stimulating and creatingthe conditions for employees to comply
with the code. Periodic update: If a code is to be a relevant
and meaningful document, it is not only itsimplementation that should be attended to
in great detail; it should also be updated atregular intervals (Ethics Resource Center,
1990). Some business codes have not beenmodified in more than ten years, which
increases the likelihood that new issues will
not be attended to. It is therefore advisablethat companies consider stipulating
(maximum) intervals between updates intheir codes. If a company refrains from
doing so updates might repeatedly be post-poned. Moreover, in the event that updates
do occur unexpectedly, it could create sus-picion among stakeholders that something
must be (fundamentally) amiss to have
prompted adjustment of the code. Apartfrom that, most companies (86%) make nomention of the process through which the
code came into being.
Clear status of the code: Most codes areunclear about the status of the code, that
is, to what extent the codes express decla-rations of intent or actual business practice.
It is often also unclear how the code relatesto other regulations within and beyond the
boundaries of the company. In 67% of the
codes it is not clarified whether the norms
and values subscribed to in the code are alsoworked out in greater detail in separate
policy documents and regulations.
Availability of the code: Through this researchproject, first hand experience was gainedof how cumbersome it can be to obtain
company codes (in a few cases it took morethan four months and in another few it took
between twelve and fifteen telephone callsbefore the document was sent by mail). It
also appeared that some companies regardtheir code as confidential or classified
information. Apart from that, codes are
often unavailable via the intranet or in
English (despite the fact that these com-panies maintain business relations inEnglish-speaking countries).
Convincing message: Some codes areabstractly formulated. In theory, an abstract
code could be as effective (or even moreeffective) as a detailed code (Kaptein and
Wempe, 1998). In that case, it is importantthat (even more of) an effort is made with
implementation (due to the demand itplaces on employees to translate it to their
specific functions). Companies with abstract
codes should therefore examine how it canbe made clear to users and readers that
abstraction is not an admission of weaknessbut rather a considered admission of
strength. Clear structure: As we have seen, there is
strong divergence among the codes in termsof structure. The structure depends, among
other things, on the type of code thecompany has in mind (for instance orga-
nizing it according to stakeholder group or
values). At the same time, some codesdisplay considerable lack of coherence andissues appear to have been assembled at
random. Organizational values especially are
at times scattered in the text or mentionedonly in the introduction. The impact of
core values in particular, lies in their selec-tion (Collins and Porras, 1994).
Appropriate presentation: Despite the fact thatthe content of and process through which
28 Muel Kaptein
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codes are established are of chief impor-
tance, the appearance of codes also sayssomething about a companys regard for its
code (White and Montgomery, 1980). Aglossy publication, for example, can
generate suspicion that the company is moreconcerned about its appearance than itscontent. On the other hand, taking care
with a codes presentation and style reflectsa companys regard for the code and, by
implication, the length of time it expectsthe code to serve (from being of one-off use
to being a reference). The examined codesvary from being presented in the form of a
few standard photocopies to full color textand photos printed on quality paper.
Unique identity: The strength of and com-mitment to the code is largely reflected in
the extent to which the code is tailored to
the companys unique circumstances(Pemberton and Pendergraft, 1990). The
texts of the codes display strong similaritiesparticularly with regard to the natural
environment and rules of conduct withrespect to fraud and corruption. The
current growth of international codesincreases the likelihood that companies will
adopt these texts (almost) literally in theircodes. If external stakeholders and
employees are to regard the code seriously,
companies should avoid appearing to havebeen led by one or more codes of other
companies or international organizationswithout having thoroughly thought through
their position is on the issue at hand.
Finally, another important question is whethersome types of codes are more effective than
others (Schwartz, 2001). A general code that
appeals to employees sense of responsibilitycould be more effective than a very detailed codewhich can easily be interpreted as a vote of no
confidence (Treviio et al., 1999). We may
likewise ask what a code actually says about thefactual situation. The current growth in sustain-
ability reporting (KPMG, 2002) could perhapsserve as point of departure in formulating an
answer to this question. As yet, this study showsthat on paper, many companies have an eye for
the responsible treatment of stakeholders along
with the principles, values and norms that
ground sound conduct.
Acknowledgement
Thanks to the two referents for their very useful
comments on an earlier version of this paper.
Notes
1 An analysis of business codes unravels the norms
and values companies endorse and provides insight
into the extent to which companies actually share the
principles that have been developed in the academicfield of business ethics. An inventory of so-called
micro-norms is also in keeping with the call of
Donaldson and Dunfee (1999) to supplement their
Integrated Social Contracts Theory with empirical
research on the ethics of business.2 In calculating the prevalence of code types, each
code was examined to establish whether it elaborates
on at least two specific responsibilities towards stake-
holders, values or rules of conduct. Codes were
treated for instance as values statements only if the
company named the values as such and clustered them
as such in the code. If only a few scattered valuesappeared in the text, the codes were not treated as
values statements.3 This factor was calculated by dividing the number
of times an item occurs by the total number of codes
of conduct instead of by the total number of business
codes as was done earlier. This percentage was then
divided by the percentage of this item of the total
number of codes as presented in Table VIII.
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