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ABSTRACT
The wave of scandals that has inundated business since Enron has had far reaching consequences. Questions of ethics have taken on particular urgency as companies grapple with increased media scrutiny of governance matters, as well as of corporate social and environmental issues. This In Practice paper examines three principal responses from big business: (1) the infusion of ethical principles in corporate cultures, (2) the appointment of 'Chief Ethics Officers', and (3) the adoption of strict ethical guidelines and codes of conduct. The Reputation Institute (RI) finds that corporate ethics has become an indelible feature of stakeholder engagement - not just as a set of principles but as a process affecting decision-making at all levels. Ethics are in fact so critical to long-term business sustainability that they will increasingly form the basis of serious executive leadership.
'Reputation is what other people know about you. Honor is what you know about yourself.'
Lois McMaster Bujold
A Civil Campaign, 1999
INTRODUCTION
Since 2001, the USA has faced a wave of corporate scandals, resulting in the liquidation of corporate assets, the demise of once-powerful corporate brands and extensive litigation. Among the more prominent were Enron, Arthur Andersen, Tyco International, Adelphia, Worldcom, Global Crossing, Martha Stewart Living Omnimedia and HealthSouth.
The tidal wave also swept through Europe from 2002 to 2004, with highly visible corporate names such as Vivendi in France, Ahold in The Netherlands, Parmalat in Italy, Yukos in Russia, Credit-Suisse in Switzerland and the Anglo-Dutch Shell all falling victim in its wake. The Public Broadcasting Service (PBS, 2004) provides an ongoing overview of recent corporate scandals and what is being done.
As a result, questions of corporate ethics have taken center stage in boardroom discussions. Three principal corporate responses have emerged from these discussions:
* Infusion of ethical principles and values into corporate cultures
* Appointment of 'Chief Ethics Officers'
* Adoption of stricter ethical guidelines and codes of conduct.
This paper examines how these three sets of internal responses have unfolded in the USA and compares them with developments in Europe. In a subsequent issue of RI In-Sights, the changes these scandals have induced in corporate governance and regulatory oversight will be examined.
INFUSION OF ETHICAL PRINCIPLES
The scandals have called attention to the prevalence...