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Ethical Capability as aCompetitive Advantage
- Three Case Studies within the Volvo
Corporation
Mårten FuchsCecilia Hanning
INTERNATIONAL BUSINESS AND ECONOMICS PROGRAMME
Department of Business Administration and Social SciencesDivision of Industrial Marketing
2001-01-04
Master’s Thesis
ACKNOWLEDGEMENTSFirst of all we would like to thank our supervisor Tim Foster. It was a pleasure working withyou. We would furthermore like to thank Ms. Tornberg, Ms. Nilsson, Mr. Adolfsson, and Mr.Wood for taking their time with our questions regarding topics that only a couple of thesiswriting students would be able come up with.
Mårten would like to thank his family for putting up with him this last Christmas. The samegoes for you Mr. Backert… He would also like to take this opportunity to address Mr.Sångberg, call me when you have your script ready. Mårten would further like to thank theUniversity in Luleå for providing him with this once in a lifetime opportunity of referring tohimself in third person singular. He would finally like to quote Bruce Springsteen who sangthat “poor man wanna be rich, rich man wanna be king and the king ain’t satisfied ‘till herules everything”.
Cecilia would like to thank her family and friends for the support and engagement whilewriting this thesis. Several people took a great interest in the work and have encouraged meenormously. My husband Jan took the responsibility for the laundry and the cooking. You cancontinue with the laundry, however I’d like to eat a broader variety of dinners than meatsauceand spaghetti and leftovers from that. Then, I’d like to thank my mother Maria who babysatmy son Filip when needed; and my friend Kajsa for the empathy shown and expressed. Myapologies to those whom I have forgotten to mention.
SAMMANFATTNINGSyftet med denna uppsats är att skapa ökad förståelse för hur etisk förmåga kan användas somen konkurrens fördel. Uppsatsen beskriver, utforskar och försöker förklara vem som ärinvolverad i etisk ledning, en etisk kod, etisk träning och fördelarna respektive riskerna medatt formalisera etik inom en organisation. Tre olika fallstudier inom Volvo har genomförts ochresultaten visar bland annat att användandet av en etisk kommitté är starkt beroende avföretagets storlek samt att ett av huvudskälen till att ha en etisk kod är att den definierar vadsom minst kan förväntas av de anställda. Denna undersökning visar vidare att etik är ett såstort område att det blir svårt att genomföra meningsfull etisk träning samt att en positiv effektav att formalisera etik är att det klargör för externa intressenter vad som kan förväntas avorganisationen.
ABSTRACTThe aim of this thesis is to provide a better understanding of how ethical capability can beused as a competitive advantage. This thesis describes, explores and tries to explain who isinvolved in ethics management, a code of ethics, ethics training, and the advantages versusrisks with formalizing ethics within an organization. Three different case studies within theVolvo Corporation have been conducted. The findings of this study suggest that the use of anethics committee is highly related to the size of the company and that one of the mainpurposes of a code is that it defines the minimum expectations of the employees. This studydoes furthermore show that ethics is such a big area that it is difficult to cover all the differenttopics in a training program and that a positive effect of formalizing ethics is that it makesclear for external parties what to expect.
TABLE OF CONTENTS1. INTRODUCTION ................................................................................................................. 1
1.1 BACKGROUND ............................................................................................................. 11.2 PROBLEM DISCUSSION .............................................................................................. 3
1.2.1 BUSINESS ETHICS .................................................................................................. 31.2.2 INTERNATIONAL BUSINESS ETHICS ................................................................... 41.2.3 ETHICAL BEHAVIOR AS A COMPETITIVE ADVANTAGE .................................. 4
1.3 PURPOSE AND RESEARCH QUESTIONS ................................................................. 71.4 DEMARCATIONS.......................................................................................................... 81.5 DISPOSITION OF THE THESIS ................................................................................... 8
2. THEORETICAL FRAMEWORK ....................................................................................... 10
2.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT......................................... 102.1.1 ETHICS COMMITTEES ......................................................................................... 102.1.2 ETHICAL OMBUDSPERSON ................................................................................ 12
2.2 A CODE OF ETHICS.................................................................................................... 132.2.1 CODES OF ETHICS OUTSIDE THE U.S.............................................................. 142.2.2 THE PURPOSE WITH CODES OF ETHICS......................................................... 152.2.3 THE CONTENT OF A CODE OF ETHICS............................................................ 162.2.4 INTERNATIONAL CODE OF ETHICS.................................................................. 192.2.5 CODES OF ETHICS, WHO AND WHY? ............................................................... 21
2.3 ETHICS TRAINING ..................................................................................................... 222.3.1 INTERNATIONAL ETHICS TRAINING ................................................................. 24
2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 252.4.1 ADVANTAGES........................................................................................................ 252.4.2 RISKS ...................................................................................................................... 26
3. CONCEPTUAL FRAMEWORK AND EMERGED FRAME OF REFERENCE ............. 27
3.1 CONCEPTUALIZATION............................................................................................. 273.1.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICSMANAGEMENT............................................................................................................... 273.1.2 RESEARCH QUESTION TWO: A CODE OF ETHICS ......................................... 283.1.3 RESEARCH QUESTION THREE: ETHICS TRAINING ........................................ 293.1.4 RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITHFORMALIZING ETHICS................................................................................................. 30
3.2 EMERGED FRAME OF REFERENCE ....................................................................... 30
4. METHODOLOGY .............................................................................................................. 32
4.1 RESEARCH PURPOSE ................................................................................................ 324.2 RESEARCH APPROACH ............................................................................................ 324.3 RESEARCH STRATEGY............................................................................................. 334.4 DATA COLLECTION .................................................................................................. 354.5 SAMPLE SELECTION ................................................................................................. 384.6 DATA ANALYSIS........................................................................................................ 404.7 QUALITY STANDARDS: VALIDITY AND RELIABILITY .................................... 414.8 METHODOLOGY FIGURE ......................................................................................... 43
5 DATA PRESENTATION..................................................................................................... 44
5.1 CASE 1:VOLVO, SWEDEN......................................................................................... 445.1.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT.............................................. 445.1.2 A CODE OF ETHICS ............................................................................................. 46
5.1.3 ETHICS TRAINING ................................................................................................ 495.1.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 50
5.2 CASE 2: VOLVO U.S.A. .............................................................................................. 515.2.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT.............................................. 515.2.2 A CODE OF ETHICS ............................................................................................. 525.2.3 ETHICS TRAINING ................................................................................................ 535.2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 54
5.3 CASE 3: VOLVO IN CHINA ....................................................................................... 555.3.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT.............................................. 555.3.2 A CODE OF ETHICS ............................................................................................. 565.3.3 ETHICS TRAINING ................................................................................................ 595.3.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 59
6.ANALYSIS........................................................................................................................... 61
6.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICSMANAGEMENT................................................................................................................. 61
6.1.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN................................. 616.1.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A. ....................................... 626.1.3 WITHIN-CASE ANALYSIS OF CASE 3; VOLVO CHINA...................................... 636.1.4 CROSS-CASE ANALYSIS OF RESARCH QUESTION ONE ................................. 63
6.2. RESEARCH QUESTION TWO: A CODE OF ETHICS............................................. 656.2.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN................................. 666.2.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A ........................................ 676.2.3 WITHIN-CASE ANALYSIS OF CASE 3: VOLVO CHINA...................................... 686.2.4 CROSS-CASE ANALYSIS OF RESEARCH QUESTION TWO............................... 69
6.3. RESEARCH QUESTION THREE: ETHICS TRAINING .......................................... 726.3.1 WITHIN-CASE ANALYSIS OF CASE ONE: VOLVO, SWEDEN........................... 726.3.2 WITHIN-CASE ANALYSIS OF CASE TWO: VOLVO, U.S.A................................. 726.3.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA .......................... 736.3.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION THREE........................... 73
6.4. RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITHFORMALIZING ETHICS ................................................................................................... 75
6.4.1 WITHIN-CASE ANALYSIS OF CASE 1: VOLVO, SWEDEN................................. 756.4.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO, U.S.A. ...................................... 766.4.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA .......................... 766.4.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION FOUR............................. 77
7. CONCLUSIONS AND IMPLICATIONS........................................................................... 79
7.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT ........................................ 797.2 A CODE OF ETHICS.................................................................................................... 807.3 ETHICS TRAINING ..................................................................................................... 817.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 827.5 IMPLICATIONS ........................................................................................................... 82
7.5.1 IMPLICATIONS FOR MANAGEMENT ................................................................. 827.5.2 IMPLICATIONS FOR THEORY............................................................................. 837.5.3 IMPLICATIONS FOR FUTURE RESEARCH........................................................ 83
LIST OF REFERENCE ........................................................................................................... 84
APPENDICES
APPENDIX 1: INTERVIEW GUIDE (ENGLISH VERSION)
APPENDIX 2: INTERVJU GUIDE (SWEDISH VERSION)
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1. INTRODUCTIONThis chapter will start out by providing the reader with a background to what a competitiveadvantage may be. It will then move on and discuss the various theoretical frameworks thathave tried to explain competitive advantage. Of these frameworks the resource-based view ofthe firm is highlighted and discussed further. The emphasis that is put on the resource basedview leads the reader into the problem discussion. This section of the chapter focuses on toolsavailable for enhancing ethical capability within an organization. At the end of the chapterthe reader will be provided with the purpose and research questions of this thesis.
1.1 BACKGROUNDAccording to Ma (1999) competitive advantage is defined as the asymmetry or differential inany firm-attribute or factor that allows one firm to better serve the customers than itscompetitors and hence create better customer value and achieve superior performance. Suchattributes could be a superior location (e.g. Wal-Mart’s often monopolized location in ruralareas in the USA); domination of shelf-space in retail (e.g. Coca-Cola’s or Pepsi’s dominancein super markets); exclusive or favorable access to supply (e.g. De Beers in the diamondmarket); a well-known brand name (e.g. Cartier) or efficiency in business operations (e.g.Toyota’s just-in-time manufacturing and inventory system). (Ma, 1999)
Ma (1999) further states that strategic management practitioners and researchers have longbeen preoccupied with the phenomenon of persistent superior performance demonstrated byhighly successful firms. Due to this, a great deal of attention has been focused on the natureand causes of competitive advantage. To date, various theoretical frameworks have attemptedto explain competitive advantage. (Ma, 1999)
Schumpeter (cf. Ma, 1999) stated that time honored theory of creative destruction forces us torethink the importance of innovation, competing against time and destroying the oldequilibrium as well as established convention. Recently, the knowledge-based view articulatesthat creating a learning organization and fostering knowledge generation and exploitationshould be the fundamental basis for competitive advantage in an increasingly information-based economy. (Senge, 1990; Nonaka, 1991)
The neo-classical economic tradition has made important contributions to our understandingof competitive conduct (Litz, 1996). Porter (1980) emphasized, through the traditionalindustry analysis approach, the importance of industry structure and market position.
In the past ten years a number of strategic management scholars, (Wernerfelt, 1984; Grant,1991; Barney, 1991; Prahalad and Hamel, 1990; Teece, Pisano and Shuen, 1997) havebreathed new conceptual life into a framework that has been dormant for over two decades.The concept, currently referred to as the resource-based view of the firm (Barney, 1991),seeks to understand inter-firm performance differentials as a reflection of the differentunderlying resource endowments enjoyed by competing firms.
Barney (1991) states that if a firm possesses resources that are valuable, rare, inimitable, andthe firm has the organizational capability to exploit these resources, it possesses a sustainablecompetitive advantage.
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Webster’s Third International Dictionary (1986) defines a resource as a “capability or skill inmeeting a situation” (p. 1934). Building from this definition, the resource-based view of thefirm essentially proposes that a firm is defined by the resources it controls (Teece, 1996).
The concept of the resource-based view of the firm has as stated before recently made asignificant comeback. However, the concept’s origins trace back several decades. (Litz, 1996)Beginning with Schumpeter’s (1934) insights on the firm-specific advantages resulting fromentrepreneurial skills, and continuing with Selznick’s (1957) emphasis on “distinctivecompetence” and Penrose’s (1959) view of the firm as “a collection of resources”, atheoretical perspective focusing on the intra-organizational sources of competitive advantageevolved.
In 1984 Wernerfelt defined resources as “those (tangible and intangible) assets which are tiedsemi-permanently to the firm” (p.172). Prahalad and Hamel (1990) re-framed resources ascore competencies. According to Prahalad and Hamel (1990) core competencies are thecollective learning in the organization and these competencies have three distinguishablefeatures:
! It provides potential access to a wide variety of markets.! It makes a significant contribution to the perceived customers benefits of the end
products.! It is difficult for competitors to imitate.
In 1991 Grant explored linkages between a firm’s resources and its profitability and Barney(1991) proposed that resources could be characterized as simultaneously valuable, rare, non-substitutable and inimitable. To the extent that an organization’s physical assets, infrastructureand workforce satisfy these criteria, they qualify as resources. Barney (1991) further statesthat a firm is defined by the resources that it controls and that these resource-based differencesexplain differences in performance across firms.
According to Barney (1991) three general types of resources can be sources of competitiveadvantage:
! Physical capitol (e.g., plant, equipment, finances)! Organizational capitol (e.g., structure, planning, systems)! Human capitol (e.g., skills, judgment, adaptability)
Barney (1991) concludes by stating that it should be noted that sources of competitiveadvantage include both tangible and intangible resources. Barney (1991) and others (Senge,1990; Brenneman, Keys & Fulmer, 1998) have argued that certain firm specific, intangiblesources of advantage (such as organizational history, culture and learning) can be particularlyimportant to sustaining competitive advantage precisely because these resources areextremely difficult to imitate.
Litz (1996) has pointed out that strategic management literature has to a great deal overlookedsocial responsibility and ethical response capabilities as potential sources of competitiveadvantage. He argued that “to the extent that the firm is able to recognize its interdependence,reflect on the ethical standards appropriate to the situation, and react in a timely andresponsive manner, it possesses valuable, rare, inimitable and non-substitutable assets, that is,it possesses strategic resources.” (p.1360)
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Considering the above statement by Litz this thesis intends to lift out and further study thefield that is concerned with organizations ethical capability. Ethical capability has beendefined by Buller and McEvoy (1999) as an organization’s ability to identify and respondeffectively to ethical issues in a global context, as a potential source of competitive advantage.The problem discussion below will focus upon business ethics and how this particular issuemay be used as a competitive advantage.
1.2 PROBLEM DISCUSSIONThe word ethics is derived from the Greek word ethos, which refers specifically to the“character and “sentiment of the community” (Carroll & Gannon, 1997, p. 4). According tothe Longman Dictionary of Contemporary English (1995), ethics is defined as “moral rules orprinciples of behavior for deciding what is right and wrong” (p. 466).
Deresky (1998) states that we believe that there are right and wrong ways to behave towardsothers, proper and improper actions, fair and unfair decisions. No one can say with certaintythat a given standard is correct or incorrect provided it can be shown that the standard trulydoes express an obligation to others, and not just a benefit to ourselves. (Hosmer, 1987;Deresky, 1998).
What is right, proper and fair? According to Hosmer (1987) these are all ethical terms and thatthese terms are all going to become more important in the future than in the past as oursociety becomes more crowded, our economy more competitive and our technology morecomplex. The terms and what they imply will according to Hosmer (1987) be particularlyimportant for the business executive, whose decisions can affect many people in ways that areoutside their own control.
1.2.1 BUSINESS ETHICS
In the world of business the term “business ethics” is often used when referring to anorganization’s ethical conduct. Business ethics is defined by Drummond and Bain (1994) as“the study of how personal moral norms apply to the activities and goals of commercialenterprise. It is not a separate moral standard, but the study of how the business context posesits own unique problems for the moral person who acts as an agent of this system” (p. 11).Drummond and Bain (1994) further state that there are many different aspects of businessethics and that these generally fall into three basic areas of managerial decision-making:
! Choices about the law – what it should be and whether or not to, obey it.
! Choices about the economic and social issues that are beyond the law’s domain -usually called the “gray areas” or “people values”. These concern the tangible andintangible ways one treats others, and include not only the moral notions of honesty,promise keeping and fairness, but also the avoidance of injury and the voluntaryreparation for harm done.
! Choices about the pre-eminence of one’s own self-interest – the degree to which one’sown well being comes before the interests of the company or of other people insideand outside the company. Included are decisions concerning rights of ownership andhow much money is to be retained or distributed elsewhere.
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Drummond and Bain (1994) conclude that the ways the choices regarding the above listedissues are framed, analyzed and either maintained or abandoned form the basis of businessethics. The validation of business ethics is simply a way of acknowledging that, indeed, thereare choices to be made concerning the means and ends of business that have an essentiallymoral ingredient (Drummond & Bain, 1994).
1.2.2 INTERNATIONAL BUSINESS ETHICS
The term international business ethics refers to the business conduct or morals oforganizations in their relationship with individual and entities (Ashegian & Ebrahimi, 1990).These norms, in turn, are based on broadly accepted guidelines from religion, philosophy, theprofessions and the legal systems (Deresky, 1998).
The biggest single problem for organizations in their attempt to define a corporate wideethical posture is the great variation of ethical standards around the world. Many practices thatare considered unethical or even illegal in some countries are accepted ways of doing businessin others. Many western organizations are being placed at a disadvantage by refusing to goalong with a country’s accepted practices, such as bribery, or being criticized at home forusing unethical tactics for getting the job done. (Deresky, 1998)
1.2.3 ETHICAL BEHAVIOR AS A COMPETITIVE ADVANTAGE
Corporate social responsibility theorists argue that management should incorporate ethics intostrategic goals because it is the “right” thing to do. (Wood, 1991) Current research isindicating that integrating ethics into the strategic management process is not only right, butalso the profitable thing to do (Key & Popkin, 1998).
Litz (1996) identified three crucial resources for competitive advantage based on ethicalcapability:
! Perceiving interdependence! Thinking ethically! Responding ethically.
Perceiving interdependence specifically acknowledges the stakeholder perspective of thefirm. According to stakeholder theory, a firm that recognizes and effectively satisfies thediverse needs of its various stakeholders will be able to sustain its institutional legitimacy(Freeman, 1984). Waddock and Graves (1997) have tied corporate social performance toincreased financial performance and Frooman (1994) found that unethical behavior leads todecreases in stock price. Arthur (1984) analyzed corporate failures and disasters and foundthat the evidence strongly suggested that incorporating ethics in before-profit decision-makingcould improve strategy development and implementation and ultimately maximize corporateprofits.
Thinking ethically involves the resource of ethical awareness. This implies an understandingof the various ethical frameworks as well as sensitivity to the differences among ethicalperspectives across cultures. (Buller & McEvoy, 1999)
Responding effectively involves the resource contribution of effective issues management thatis, taking the appropriate ethical action in a timely manner. Discerning the appropriate ethicalresponse is complex and the ability to apply relevant ethics models is critical to the decision-
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making process. This capability assumes that the first two capabilities, perceivinginterdependence and thinking ethically, are in place. (Buller & McEvoy, 1999)
Buller and McEvoy (1999) concludes that to the extent an organization can develop thecapability to perceive, deliberate about, and respond effectively to ethical issues, it canenhance their competitive advantage. These advantages may be developed through effectivedialogue with stakeholders and through organizational practices. Litz (1996) states that to theextent the firm is able to recognize its interdependence, reflect upon the ethical standardsappropriate to the situation, and react in a timely and responsive manner, it possessesvaluable, rare, inimitable and non-substitutable assets, that is, it possesses strategic resources.
In box 1, presented below, a short description of the Exxon Valdez accident is provided. Thisreal-life case is useful to explain the importance of including ethics in decision-making. Theinformation in the box will be commented below.
Box 1: THE EXXON VALDEZ OIL SPILL
When the Exxon Valdez left the Alaska Pipeline Terminal at 9:12 p.m., on March 23, 1989.The 987 foot ship, second newest in Exxon Shipping Company’s 20-tanker fleet, was loadedwith 1 264 155 barrels of crude oil bound for Long Beach, California. Tankers carryingNorth Slope crude oil had safely transited Prince William Sound more that 8 700 times inthe 12 years since oil began flowing through the trans-Alaska, with no major disasters andfew serious incidents. This experience gave little reason to suspect impending disaster. Yetless than three hours later, the Exxon Valdez grounded at Bligh Reef, rupturing eight of itseleven cargo tanks and spewing almost 11 million gallons of crude oil into Prince WilliamSound.
No human lives were lost as a direct result of the disaster, though four deaths wereassociated with the cleanup effort. Indirectly, however, the human and natural losses wereimmense to fisheries, subsistence livelihoods, tourism and wildlife. (Alaska Oil SpillCommission, 1990)
An investigation into the Exxon Valdez oil spill in Prince William Sound in US coastal watersrevealed a chain of strategic planning and corporate decision making that had ignoredfundamental ethical aspects of decisions. Cost efficiency goals resulted in decisions thatreduced key personnel on tanker ships and limited available clean-up equipment. A personneldecision to overlook driving while intoxicated charges involving Captain Hazelwood wasmade so that existing personnel could continue to be utilized. The results of these decisionscontributed to the disaster. (Bowen & Power, 1993)
Key and Popkin (1998) state that in the case of Exxon Valdez the events that occurred wereresults of poor decision making, not “accidental” occurrences. Exxon failed to identify andevaluate the ethical components of their decisions. This failure led to poor financial outcomeas well as poor ethical outcome. (Key & Popkin, 1998)
According to Asforth and Gibbs (1990), Greening and Gray (1994) and Wartick (1992)negative media attention, such as in the case of the Exxon Valdez, may prompt organizationsto respond in ways that will preserve or restore their legitimacy. These authors further state
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that corporations may respond to media scrutiny of their ethical failings by adopting one ormore elements of a formal ethics program in order to demonstrate their intentions for futuregood behavior. (Drummond & Bain, 1994)
According to Weaver, Trevino and Cochran (1999) theory suggests that ethics programs canenhance company performance, usually by bringing an organization’s decisions and actionsmore into conformity with societal ethical expectations. Weaver, Trevino and Cochran (1999)further states that ethics programs can also contribute to legitimacy by signaling that thecompany conforms to societal expectation in its internal organizational processes andstructures.
What tools, within a formal ethics program, are then available for an organization in order toenhance its ethical awareness, which helps it avoid disasters such as the Exxon Valdezincident or to gain a competitive advantage? Kaptein (1998) states that there are all kinds ofmeasures available for the development of the ethical content of a corporation. Drummondand Bain (1994) argue that it has now become widely accepted that the ethical behavior ofemployees can be influenced by specific organizational strategies. It should however be notedthat Nijhof, Fisher and Louise (2000), Brytting (1997) and Drummond and Bain (1994) arguethat there are also risks associated with formalizing ethics within an organization. First, it isimpossible to cover all potential unethical exercises. Secondly, the codes are often toogeneralized. Thirdly, the code will not work unless employees truly believe in it. The threemost discussed instruments for formalizing ethics within an organization are however, a codeof ethics, a training program, and an ombudsperson (Kaptein 1998).
Singhapakdi and Vitell (1991) found that marketers in organizations which have codes ofethics that are enforced, tended to be more sensitive to ethical problems when they occurredand to choose ethical alternatives in the decision making process. A considerable number oforganizations have developed their own code of conduct; some have gone further, joiningwith others around the world to establish standards to improve the quality of life for workers.Companies such as Avon and Toys R Us have joined the Council on Economic Priorities(CEP) to establish a system called SA8000. (Business Week, October 20, 1997)
Moreover, there are four international codes of conduct that provide some consistentguidelines for multinational enterprises (MNEs). These codes were developed by theInternational Chamber of Commerce, the Organization for Economic Cooperation andDevelopment, the International labor Organization, and the United Nations Commission onTransnational Corporations (Deresky, 1998).
At this stage it is important to notice the differences in the use of the different terms. Deck(1994) states that the terms “Codes of Ethics” and “Codes of Conduct” are often usedinterchangeably.
According to Deck (1994) Codes of Ethics are statements of values and principles that definethe purpose of the company. These codes seek to clarify the ethics of the corporation and todefine its responsibilities to different groups of stakeholders as well as defining theresponsibilities of its employees. These codes are expressed in terms of credos or guidingprinciples. Such a code says: “This is who we are and this is what we stand for,” with theword “we” including the company and all its employees, whose behavior and actions areexpected to conform the ethics and the principles stated in the code. (Deck, 1994)
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Codes of Conduct are according to Deck (1994) statements of rules: “This is what you must(or must not) do,” as distinct from the code of ethics, which is stating: “This is how we expectyou to behave.” Codes of Conduct are typically comprised of a list of rules, stated eitheraffirmatively or as prohibitions1. (Deck, 1994)
Other ways of enhancing ethical awareness within an organization is ethical training and theuse of an ethical ombudsperson (Kaptein, 1998; Drummond & Bain, 1994). The simplesttraining program consists of an external expert conducting a lecture followed by a questionand answer session. A rather interactive form of training is a workshop in which, in additionto a lecture, time is set aside to discuss cases. A strong point of a training program is thatparticipants distance themselves from the day-to-day course of business and systematicallyexchange concrete experiences. (Kaptein, 1998)
An increasing number of organizations are investigating the position of a corporateombudsperson. Although doubts are sometimes expressed that the position of ethicalombudsperson does not really work, a small but increasing number of companies areexperimenting with this position. (Drummond & Bain 1994)
Related to the position of a corporate ombudsman is the use of an ethics office. The Center forBusiness Ethics2 (1992) (Cf. Journal of Business Ethics p.863-867, 1992) has investigated theuse of ethical offices. Brytting (1998) states that very few studies have been made on the useof ethics offices, however he does refer to studies made by the Center for Business Ethics andPerry. Perry (cf., Brytting, 1998) found that 6% of the companies have ethics offices, 9% havea board of directors ethics committee. Of the largest corporations, employing more than50000 people, 15% have ethics offices and 23% have a board of directors ethics committee(Brytting, 1998).
1.3 PURPOSE AND RESEARCH QUESTIONSHartman (1998) states that an organization that desires to act with integrity it must firstarticulate its values, its priorities. Among the most prevalent forms of values articulation is acode of ethics. Once the firm has defined its individual value structure, individual decisionmakers within the firm have guidance in connection with difficult dilemmas. Hartman (1998)further states that other strategies (e.g. the use of a corporate ethics ombudsperson) exist tocommunicate corporate values as well as to continually update corporate programs and makethem more effective. (Drummond & Bain, 1994) Litz (1996) stated that sound ethical practiceis an overlooked potential source of competitive advantage while Buller and McEvoy (1999)proposed that ethical capability is a sustainable source of competitive advantage.
Considering these statements by Hartman (1998) we arrive at the purpose of this thesis, whichis to gain a better understanding of how ethical capability can be used as a competitiveadvantage.
1 The terms codes of conduct and codes of ethics are used interchangeably by both previous researchers and theinterviewees for this thesis. The authors of this thesis have however limited themselves by using the term codesof ethics in the analysis chapter.2 The Center for Business Ethics at Bentley College was established in 1976. The center is dedicated toproviding a nonpartisan forum for the exchange of ideas on business ethics in an industrial society. Thisparticular report was prepared by: Joan Whitman Hoff, Project Director and Research Fellow; Robert E.Frederick, Research Scholar; W. Michael Hoffman, Director; Judith B. Kamm, Associate Director; and PeterRubican, Graduate Assistant.
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In order to reach the purpose of this thesis, four research questions have been stated:
! How can the people involved in ethics-management within an organization be described?
! How can an ethical code be described?
! How can ethics training be described?
! How can the benefits versus risks with formalizing ethics within an organization bedescribed?
1.4 DEMARCATIONSIt is beyond the scope of our study to cover all aspects of our research purpose. As stated inthe problem discussion there is a wide range of tools available for a company that wishes toenhance its ethical capability. We have therefore demarcated our research to look at the abovestated research questions from an organizational point of view.
1.5 DISPOSITION OF THE THESISThe figure below presents an overlook of the disposition of the following chapters. Thereaftera brief explanation of the contents in each chapter is provided to the reader.
Figure 1.1: Thesis Disposition
! Chapter two consists of a literature review.
CHAPTER 2LITERATURE
REVIEW
CHAPTER 3FRAME OF
REFERENCE
CHAPTER 4METHODOLOGY
CHAPTER 5EMPIRICALFINDINGS
CHAPTER 7CONCLUSIONS
CHAPTER 6ANALYSIS
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! Chapter three provides the reader with a conceptualization and a frame of reference basedon the literature review.
! Chapter four states the method of the investigation used in our study.
! Chapter five consists of the empirical data collected.
! Chapter six provides the reader with an analysis of the conceptualized literature reviewand the empirical data.
! Chapter seven contains conclusions as well as implications for management, theory andfurther research.
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2. THEORETICAL FRAMEWORKIn this chapter we will introduce the reader to the previous research that form the foundationand scientific background for the research questions investigated in this thesis. The previousresearch will be presented in the same order as the research questions, that is, the first part ofthe theory chapter will cover the previous research carried out regarding that particular areaand so on.
2.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT
2.1.1 ETHICS COMMITTEES
In a study carried out by the Center for Business Ethics in 1992 it was found that ethicscommittees were used by 25% of the companies on the Fortune 1000 list.3 It was also foundthat the function of the ethics committee seemed more oriented to policy-making than dealingwith specific violations or complaints.
According to the Center for Business Ethics (1992) the functions of an ethics committee maybe listed as follows:
! To review and update ethics policies! To handle infractions of the code! To answer questions on ethics policy! To develop corporate policy
To review and update ethics policies was considered to be the primary function by an ethicsoffice with the other functions following as seen in the list above.
An ethics platform, ethics committee, ethics project group, or integrity group, or integritycoordinating committee are different names for a structural relationship of one or more peoplewho are responsible for making policy for the development, perpetuation and protection of themorally relevant aspects of the corporation. The ethics office is a general term for theseinstitutions. (Kaptein 1998)
How the ethics office takes form depends on the roles it is assigned (Center for BusinessEthics, 1992). According to Kaptein (1998) an ethics office may take the following roles:
Initiator: The ethics office stimulates the organization of ethics. The ethics office is thedriving force and motivation behind keeping the process of ethical development andsafeguarding going.
Coordinator: The office coordinates activities relating to ethics management and with othermanagement activities taking place within the organization. The ethics office creates synergyand cohesion in the measures and activities to be undertaken.
Channeler: The office creates communication channels between the corporation and itssurrounding, between employees and management, and among departments. The office canserve as a point of contact for complaints, problems, solutions, and ideas, both for employees
3 Fortune Magazine publishes the 1000 top performing companies each year.
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as for other stakeholders. In this sense, the office is an intermediary, a Janus-head, or aproblem-and-solution broker.
Advocate: The ethics office follows corporate policy critically and positively. The ethicaladvocate is someone whose job is to think of and raise the right ethical question. In this role,the ethics office acts as the devil’s advocate.
Facilitator: The ethics office realizes the pre-conditions in which the ethical developmentmay take place. For example, the ethics office can offer instruments which departments canuse for their ethics programs.
Mediator: Finally, the ethics office mediates in both internal and external conflicts.
It is generally preferable to assign the ethics portfolio to someone in the top of the corporationso as to guarantee the support and establishment at the highest levels. In this way, thecommunication lines from upper management to the ethics office are kept as short as possible.It is, however, undesirable that someone from upper management becomes part of the ethicsoffice if this would impair the trustworthiness of the office. The office’s credibility isespecially important in situations where the office serves as a reporting point for unethicalconduct. In relation to the position of the ombudsman there is a specific requirement thatemployees may in no way be dependent upon the ombudsman, in terms of compensation,promotion, or otherwise. In this case, it is preferable to have a staff official rather than a linemanager to fill this position. In addition, a well-functioning ombudsman must be able toguarantee complete anonymity to employees if they insist on it. It is crucial for theombudsman that his position is not combined with another staff position, which couldpossibly turn against the interest of the employees. The position of the ombudsman losescredibility if the same person is also responsibility for internal investigations into corruption,fraud and criminality. (Kaptein 1998)
Drummond and Bain (1994) are also discussing ethics committees. They state that an effort tofocus attention on past and current decision could take the form of an ethics committee. Thecommittee membership should be rotated among all employees, thereby exposing them toethical problems submitted by either employees or managers. A decision by the committeewould provide firm, clear guidelines for action. Drummond and Bain (1994) mention the caseof Motorola, who has experimented successfully with the concept of ethics committees.McDonald (2000) concludes that a review of ethical committees in operations suggests thattheir function is more orientated towards policy making than handling infractions and/oremployee complaints.
Benson and Ross (1998) found in their study that the ethics committee meets at least everymonth. An ethics committee was found to include:
! Someone from management, usually the plant manager.! Someone from Human Resources! Someone who is non-managerial, usually a shop or clerical worker.
In studying business ethics among the Fortune 500 industrials and 500 service corporations,as listed in 1994, Weaver, Trevino and Cochran (1999) found that the majority of ethicsoffices serve in largely coordinating or supporting roles. They further found that in mostcases, the person in charge of the ethics office reports to a very high level of administration
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with 72% of ethics office heads reported to persons at the level of executive vice president orhigher (including 18% who reported directly to the CEO).
2.1.2 ETHICAL OMBUDSPERSON
On the topic of establishing an ethics officer and/or ethics ombudsperson McDonald (2000)states that the term “ethics ombudsperson” is to be favored as it has a less emotive andregimental ring than “ethics officer”. McDonald (2000) further state that while their roles areessentially similar – to be the instrumental, hands-on focus for establishing an ethical culturethrough a variety of activities and programs. The ethics officer is seen to be a problem solverwith a hands-on focus instrumental in establishing an ethical culture through a variety ofactivities and programs while an ethics ombudsperson generally acts as a third party resolverof disputes (Dunfee & Werhane, 1997).
McDonald (2000) states that while definitions vary from company to company, it appears thatsome characteristics are common to most ombudsperson positions. Further, McDonaldmentions that the role is primarily a combination of investigation, counseling and advice. As aconsequence of being approached, an ombudsperson may be required to investigate ethicalcircumstances and advise on an appropriate resolution or action writes McDonald. Also,independence and confidentiality are considered of key importance and an ombudspersonmust not be seen to be taking sides according to the author. McDondald (2000) concludes thatan ombudsperson generally has fully assimilated the corporate value system and is confidentin handling questions that address all dimensions of the organization’s corporate policy.
Drummond and Bain (1994) state that an increasing number of organizations are investigatingthe position of corporate ombudsperson. They further state that while the formal definitionmay vary from company to company, it appears that some characteristics are common to mostombudsperson positions:
! An investigative, counseling and advisory role – as a consequence of beingapproached or on his/her own initiative, an ombudsperson could investigate ethicalcircumstances and advice on potential problem areas. He/she may on occasion attemptto resolve ethical conflicts.
! Independent – the ombudsperson must not be seen to be taking sides in any discussionand must have the trust of both management and employees. A prerequisite forindependence is confidentiality if the position is to be effective.
! Experience within the company – the position is suitable for an older respectedemployee who has, with experience, assimilated the corporate value system.Specifically, the position is appropriate for an individual nearing retirement or a“plateau employee”.
Drummond and Bain (1994) conclude their reasoning regarding an ethical ombudsperson bystating that an important issue is who the responsibility for choosing the ombudsperson fallsupon. If top management unilaterally nominates the titleholder, there is a risk that the positionmay not have the confidence of lower-level employees (Drummond & Bain, 1994).
According to Kamm (1993) the Ethics Officer is a person that has, as one of her formalresponsibilities, to work with ethical issues related to the activities of her organization. Kamm
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(1993) furthermore states that the Ethics Officer is usually an insider with 10 or more years ofexperience in the company. According to Kamm (1993) the Ethics officer is:
! Mostly placed at the very top of the hierarchy, reporting directly to the CEO or theboard.
! In a position where they are able to give advice, in open discussions or confidentially.
! Active in the work of disseminating the code of conduct.
! In a position where he investigates and takes actions on code violations.
! Reviewing and modifying the code of conduct and monitor adherence to it.
! Responsible for creating a code of ethics.
Weaver, Trevino and Cochran (1999) found that the assignment of ethics activities within anorganization to a single individual may look like it offers a higher degree of firm commitmentto ethics, but that need not be the case, as such individuals actually may devote only a smallportion of their time to ethics-related tasks, even when their titles include the terms “ethics” or“compliance”. In their research, Weaver, Trevino and Cochran (1999) found that 54% of thefirms reported having a single officer specifically assigned to deal with ethics and conductissues, in keeping with the United States Sentencing Commission’s recommendations for aneffective ethics program. They further found that firms with a single officer assignedresponsibility for ethics indicated a wide disparity in the proportion of time that the persondevotes to ethics activities, ranging from as little as 1% to as much as 100%. Of the firmsreporting a single officer responsible for ethics, 54% indicated that this officer spends notmore than 10% of his or her time in ethics related activities. At the other extreme, 14%reported 91% to 100% of the officer’s time spent in ethics-related functions. (Weaver,Trevino & Cochran, 1999) The authors conclude that formally assigning ethics to someonedoes not in itself guarantee that ethics-related issues receive much executive attention.
2.2 A CODE OF ETHICSWith reference to ethical codes, Singhapakti and Vitell (1990) generally found that marketersin organizations which have codes of ethics that are enforced tend to be more sensitive toethical problems when they occurred and to choose ethical alternatives in the decision makingprocess. Deck (1994) states that there are two types of codes with different intents andpurposes: codes of ethics and codes of conduct.
Codes of ethics are statements of values and principles that determine the purpose of thecompany. They aim to clarify the ethics of the company and to define its responsibilities tothe different groups of stakeholders as well as determining the responsibilities of itsemployees. The meaning with codes of ethics is to say, “This is how we expect you tobehave”, whereas the purpose with codes of conduct is to state the rules determining whatmust or must not be done. The rules are stated either affirmatively or as prohibitions. Penaltiesfor violating the rules can be identified and systems for how to appeal defined. (Ibid) Someauthors do not separate these from each other and instead they look at them with their contextas two words for the same thing (Drummond and Bain, 1994).
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The most visible sign of a company’s ethical philosophy are probably the codes of ethics. Inorder for a code of ethics to be meaningful, it must realistically focus on the potential ethicaldilemmas, which may be faced by employees; it must be communicated to all employees; andit must be enforced. Further, a meaningful code of ethics cannot rely on blind obedience. Itmust be accepted and internalized by the employees who are required to implement it. Thus,managers must attend not only to the content of the code but also to the process ofdetermining that content. To be most effective, a code should be developed and disseminatedin an open, participate environment involving as many employees as possible. (Drummondand Bain, 1994)
The beliefs and norms of an organization can be turned into an ethical code. This code isgenerally proposed, discussed and defined by the senior executive in the firm and thenpublished and distributed to the employees and shareholders. The norms in this code arestandards of behavior, the way the managers want the other people in the organization to actwhen confronted with a given situation. The norms are usually stated as a series of negativestatements, what the employees should not do. The beliefs in the code are standards ofthought, the ways that the managers in the organization want the others to think. The beliefsare generally stated in a positive way. (Hosmer, 1987)
A corporate code of ethics is defined by Deresky (1998), as “a statement setting downcorporate principles, ethics, rules of conduct, codes of practice or company philosophyconcerning responsibility to employees, shareholders, consumers, the environment or anyother aspect of society, external to the company” (p. 69). This code of ethics is usually writtenin general terms, noting obligations to these different groups (Hosmer, 1987).
According to Ferrell (1999), a code of ethics should clarify “the underlying professionalvalues and principles” (p.225). These values should define the overall conditions fororganizational decisions, and are usually coming from accepted customs as well as the desiredcorporate behavior. The values should be explained in the code with examples of howprofessionals can implement this vision. (Ferrell, 1999).
Brytting (1997) explains a code of ethics as documents with principles of how a specificcompany should conduct business ethically and how they should act in ethically sensitivesituations. The shapes of these codes of ethics vary significantly. They can be extensive inbrief, public or secret (Brytting, 1997).
2.2.1 CODES OF ETHICS OUTSIDE THE U.S.
One trend that is being increasingly documented is that ethical codes are being found morefrequently in businesses outside the United States (Langlois and Schlegelmilch, 1990). In astudy of large European firms, conducted in the late 1980s, Langlois and Schlegelmilch(1990) reported that 51% of the German firms, 41% of the British firms, and 30% of theFrench firms had ethical codes in place. Schlegelmilch and Houston (1989) surveyed 200large companies in the United Kingdom to determine the extent to which they had codes ofethics in place. They found that 42% of the companies had codes, with the majority of thefirms being in the consumer and industrial sectors.
In 1997 Brytting studied ethical support structures in the private sector in Sweden.Specifically, the research focused on whether or not companies had formal codes of ethics,ethics committees, ethics officers, and ethics training. The author mentions that some 19% ofthe respondents indicated that they had codes of ethics, with written codes being the most
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common in capital management of farming sectors and least prevalent in the business industryand communications firms. Overall, Brytting (1997) concluded that moral support structures,primarily in the form of codes of ethics and ethics officer positions, are becoming morecommon in Sweden as well as in other countries.
2.2.2 THE PURPOSE WITH CODES OF ETHICS
There are several reasons for why a company has a code of ethics. One of them is to manageor respond to internal organizational activity (Weaver, 1993). A code can help to encourageemployees to include particular values in their own decision-making, or to offer help andassistance to employees struggling with ethical questions in business (Weaver, Trevino andCochran, 1999). A code may be used as a symbolic management tool and provide a languagefor conceptualizing the events of organizational activity, and thereby redefine some behavioras problematic and other as preferred. A code may also be used as a mean for making rolesand expectations within the organization clear. (Weaver, 1993)
Within the firm a code of ethics can provide a legitimate reason for control and supervision,control for the sake of ethics may prove to be more acceptable in the organization than controlfor the sake of profit (Weaver, 1993). Weaver (1993) does however note that codes of ethicscan be a dishonest way of gaining legitimacy in the eyes of shareholders. The goal of the codecan also be to control or regulate the behavior of employees in order to follow legalrequirements (Weaver et. al., 1999). Another reason for having a code of ethics might be awish to manage or respond to specific stakeholders’ demands or expectations in order toachieve benefits, or to avoid harm to the firm (Weaver, 1993).
According to Kaptein (1998) a written corporate code of conduct fulfills a number ofcommunicative functions. Internally, the code may have an orientation function: it increasesawareness in relation to the moral aspects of activities. The code may further have anexplanatory function: a code gives clarity in regard to responsibilities. A third aspect ofhaving an ethical code is that it has a committing function: a code imposes a minimum numberof expectations that apply to everyone. A code may also create checks and balances in thatemployees can call each other to account in living up to the code’s requirements, this meansthat the code has a correcting function. Externally the code may have a distinguishingfunction: a code increases the recognizability of the corporation for the stakeholders toparticipate in the corporation and provides thereby grounds for the stakeholders to participatein the corporation. (Kaptein, 1998)
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2.2.3 THE CONTENT OF A CODE OF ETHICS
Weaver (1993) presents a summary of issues that are often part of a company’s code of ethics.These are shown below in table 2.1.Table: 2.1
! General matters pertaining to the code:# Purpose of the code# Context of the code, code history and development; supporting programs# Firm history and traditions, market/societal conditions# Administration of the code; Compliance measures; sanctions# Authority of code (Firm or individual self-interest; firm traditions; ethical principles; legal
requirements)
! Nature of the company# Company goals, missions, philosophy, management style# Responsibility to shareholders# Organizational structure (e.g., decentralization as a goal)# Character of organizational communications# Record keeping practices# Technological innovation
! Employee issues# Employee/company responsibilities to each other# Expectations for employee self-development# Substance abuse; employee health# Harassment, intimidation, etc# Rights of employees (e.g., privacy, termination issues)# Employee political activities# Workplace safety, quality (e.g., smoking policies)# Conflicts of interest, nepotism# Standards for judging salary & benefits# “Moonlighting,” other external activities# Contact with media# Whistle blowing# Use of company equipment, supplies, good name, etc# Use of proprietary information (e.g., intellectual property)# Use of confidential information (e.g., insider trading)# Use of computer information systems# Security and espionage# Relationships with government agencies and officials# Policies on gifts, entertainment, travel, etc# Bribes, kickbacks, etc (domestic or foreign)
! Legal matters# Compliance with law (e.g., antitrust, non discrimination, OSHA, etc)# Avoid regulation
! Firm’s status and actions in the market# Firm reputation and Integrity# Competition, treatment of competitors# Purchasing, sales and negotiating policies# Product safety and quality# Marketing practices, advertising (e.g., honesty)
! Responsibilities to society# Community and charitable activities# Environmental protection, hazardous waste, energy use# Public safety and education# Support for a political/economic system (e.g., free markets)
Source: Weaver, 1993, p. 54.
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Weaver’s (1993) summary is divided into six areas. These are general matters pertaining tothe code, Nature of the Company, Employee issues, Legal matters, Firm’s status and actionsin the market and Responsibilities to the society. According to Weaver (1993), the internalissues of the company, such as employee rights and responsibilities are getting more frequentattention compared to the company’s relation to external parties. Internal issues seem to havemore immediate consequences and are easier to control then the company’s external relation.When issues regarding society or community are brought up the policies seem to focus on forexample contributions to charity, and environmental concern. (Weaver, 1993)
Kaptein (1998) states that there are multiple types of codes of behavior, which may apply tocorporations. Codes can be divided by the level they apply to. There are codes atinternational, supranational, national, sectoral, company, professional, and individual level. Acorporate code of ethics is distinguished from the other codes that the company itselfdetermines the content and the use of the code. (Kaptein, 1998)
Furthermore, Kaptein (1998) mentions that both the substance of an explicit code and theprocess of compiling, writing, communicating, safeguarding and enforcing it are important inachieving an effective code of ethics.
McDonald (2000) found in her case study that there was a need to document ethical policies.In her article on practical proposals for organizations she lists them as follows:
! An introductory message from the Managing Director.
! Employment practices. The section addresses equality of opportunity, opencommunication and commitment to developing employees. Rather than starting with aseries of “ do nots” in this section, the company first emphasized their responsibilitiesto employees.
! Ethics in general: This section highlights the importance of ethics over legality –“Even when the law is permissive, companies should use the course of highestintegrity”. Also addressed is the issue of different cultural settings – “ Honesty is notsubject to criticism in any culture”, and that “The means as well as the ends” areimportant – “We do not care how results are obtained, not just that they are obtained”.
! Conflict of interest. This Section highlighted issues of concurrent employment,handling confidential information, use of insider information, unauthorizedappropriation of company services or property and the importance of disclosure.
! Bribery, gifts and entertainment. This section covered the culturally sensitive issue ofsoliciting or accepting any advantage from clients, suppliers or any person inconnection with the company’s business.
! Safety/Occupational Health. In what may appear to be curious inclusion in a code ofconduct, the sections on safety and occupational health provide the company with yetanother opportunity of stating its commitment to employees and their welfare.
! Customer relations. The inclusion of customer satisfaction also serves to giveemphasis to the core values of the organization.
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! Relations with suppliers and contractors. This section covered competitive tendering,evaluation, selection and monitoring.
! Environment. This section of the code dealt with business conduct in accordance withrespect to the environment.
! Responsibilities to shareholders and the financial community. This section reflects thesize and position of the company and details their record keeping, and informationprovision responsibilities.
! Monitoring of compliance and the means of enforcement. The final section of the codereminds employees of their personal responsibilities in regard to the code, avenues forinformation and disciplinary outcomes which result from violation.
McNamara (2000) states in his “A Complete Guide to Ethics Management” that if yourorganization is quite large, e.g., includes several large programs or departments, a corporationmay want to develop an overall code of ethics and then a separate code to guide each of yourprograms or departments. McNamara (2000) also mentions that codes should not bedeveloped out of the Human Resource or Legal departments alone, as is too often done.McNamara (2000) suggested the following guidelines for a company’s ethical code:
! Review any values need to adhere to relevant laws and regulations.! Review which values produce the top three or four traits of a highly ethical and
successful product or service in your area.! Identify values needed to address current issues in your workplace.! Consider any top ethical values that might be prized by stakeholders.! The “Six Pillars of Character”.! Associate examples of behavior to the ethical codes.! Indicate that all employees are expected to conform to the code of ethics.! Obtain review from key members of the organization.
By reviewing any values need to adhere to relevant laws and regulations the organization isaccording McNamara (2000) ensured that it is not (or is not near) breaking any of them. Ifyou are breaking any of them, you may be far better off to report this violation than to try tohide the problem. Often, a reported violation generates more leniency than outside detectionof an unreported violation, particularly per the new Federal Sentencing Guidelines. Increasepriority on values that will help your organization operate to avoid breaking these laws and tofollow necessary regulations. (McNamara, 2000)
Reviewing which values that produce the top three or four traits of a highly ethical andsuccessful product or service in “your” area is according to McNamara (2000) important. Thiscould be for example for accountants: objectivity confidentiality, accuracy, etc. Identifywhich values produce behaviors that exhibit these traits. (McNamara, 2000)
McNamara (2000) states that it is important to identify values needed to address currentissues in your workplace. Appoint one or two key people to interview staff to collectdescriptions of major issues in the workplace. Collect descriptions of behaviors that producethese issues. Identify which values would generate those preferred behaviors. There may bevalues included here that some people would not deem as moral or ethical values, e.g., team-
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building and promptness, but for managers, these practical values may add more relevanceand utility to a code of ethics. (McNamara, 2000)
To take ethical values that might be prized by stakeholders into consideration is according toMcNamara (2000) important. For example, consider expectations of employees,clients/customers, suppliers, funders, members of the local community, etc. (McNamara,2000)
According to McNamara (2000), the following list that is referred to as the “Six Pillars ofCharacter” developed by The Josephson Institute of Ethics is important to consider whensetting up an ethical code:
# Trustworthiness: honesty, integrity, promise-keeping, loyalty# Respect: autonomy, privacy, dignity, courtesy, tolerance, acceptance# Responsibility: accountability, pursuit of excellence# Caring: compassion, consideration, giving, sharing, kindness, loving# Justice and fairness: procedural fairness, impartiality, consistency, equity, equality,
due process# Civic virtue and citizenship: law abiding, community service, protection of
environment
Compose your code of ethics; attempt to associate with each value, two example behaviorswhich reflect each value. Critics of codes of ethics assert that they seem vacuous becausemany list ethical values and do not clarify these values by associating examples of behaviors.(McNamara, 2000)
McNamara (2000) states that it is important to include wording that indicates all employeesare expected to conform to the values stated in the code of ethics. Add wording that indicateswhere employees can go if they have any questions (McNamara, 2000).
Obtain review from key members of the organization. Get input from as many members aspossible. (McNamara, 2000)
2.2.4 INTERNATIONAL CODE OF ETHICS
Jackson (1997) states that if the organization is carrying out business abroad it should becareful not to let its code of ethics remain in national mores. Instead the organization shouldembrace recently evolved standards, many of which have been promulgated especially forinternational business (Frederick, 1991).
According to Rallapalli (1999) many companies have developed their own ethical codes ofconduct while business ethics has not yet become global. Unethical behavior on theinternational market creates an urgent need for a shared global code of ethics (Rallapalli,1999).
The Caux principles are considered to be the first international code of ethics for internationalbusiness (Hartman, 1998). Carlson and Blodgett (1997) stated that the aim of the code is to seta world standard against which business behavior may be measured. The Caux principleswere developed when international business managers from Europe, Japan and the USAgathered in Caux, Switzerland. The common goal for the meeting was the belief that businessorganizations can be a strong force and push for a positive change in the quality of life for the
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world. According to Hartman (1998) the foundation for the formulated guidelines at Cauxwhere the Minnesota principles, created in 1992 by the Minnesota Center for CorporateResponsibility.
Hartman (1998) further states that from a societal point of view the Caux principles show thatcorrect action is important. To make immoral choices regarding employment, trade,intellectual property or environmental protection might lead to undesired consequences suchas child labor, unfair trade practices, copyrights pirating and environmental pollution. Apartfrom the Caux principles there are a number of other international ethical codes. Among theseare codes developed by the United Nations Commission on Transnational Corporations, theInternational Chamber of Commerce, the Organization for Economic Cooperation andDevelopment and the International Labor Organization. (Deresky, 1997)
According to Jackson (1997) the United Nations Commission on Transnational Corporationshas established a set of obligations towards host countries that transnational organizationsought to follow. According to the United Nations Commission, Transnational Corporationsshould:
! Respect national sovereignty.
! Be adherent to economic goals and development objectives of host countries.
! Contribute to host countries economic development and develop mutually beneficialrelations with them.
! Respect social and cultural objectives, values and traditions of host countries.
! Respect human rights and fundamental freedoms.
! Not discriminate on the basis of race, color, sex, religion, language, national andethnic origin or political or other opinion.
! Provide equality of opportunity.
! Oppose apartheid.
! Not interfere in internal affairs of host countries or in intergovernmental relations.
! Stay away from corrupt practices, such as payments to public officials ascompensation for performing or refraining from performing duties in connection withthe Trans National Corporation’s transactions.
! Contribute to the social development of host countries.
! Co-operate with host governments in accomplishing national objectives for localequity participation.
! Be contributing to managerial and technical training of nationals in host countries, andfacilitate their employment at all levels of management.
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2.2.5 CODES OF ETHICS, WHO AND WHY?
Formally identified codes of ethics have been introduced in most US firms in the last twentyyears. A high degree of companies introduced codes of ethics during 1993-94 and one reasonfor this might have been the implementation of the United States Sentencing Commissionguidelines in 1991. (Weaver, Trevino & Cochran, 1999)
According to the study of 1000 US corporations carried out by Weaver et al. (1999), 98%claimed to have some kind of formal document on ethics and conduct issues. Of those 98%,67% dealt with these issues through regular policy manuals, 78% had also separate codes ofethics. This indicates that the majority of American organizations use more than one way toset forth their standards of appropriate conduct. 22% noted the use of other means to specifyethics policies of the company, including for example occasional letters, bulletins,memoranda, video documents, posters, mission statements and top executive speeches. (Ibid)In Sweden Brytting (1997) found that 46% of the investigated companies used formalstructural measures within the field of business ethics. By formal structural measures Brytting(1997) refers to organizational structures created to support or influence employees when theyhave to make choices in work situations that involves moral conflicts.
Firm size is one factor of many that affects a company’s usage of code of ethics. The size ofthe firm may be positively correlated with the usage of codes of ethics according to Weaver(1993). Ethics codes probably consume capital and other resources that smaller firms can notafford. Larger firms may have greater public visibility, and are therefore exposed to greaterexternal pressure to manage their ethics. Larger firms may also operate over a greaterdiversity of markets with greater variations of local customs. They have therefore strongerneeds to guarantee a common set of behavior assumptions for the members of theorganization. (Ibid)
A second factor that influences the company to have a code or not is the industrialenvironment in which the firm operates (Weaver, 1993). Some industries, for example, law,medicine, engineering, and accounting, have found it necessary to develop codes thatencourage acceptable behavior, to develop public trust, reliability and consistency in services(Ferrell, 1999).
In Brytting’s (1997) study over Swedish private companies, he found that capital managingwas the industry where codes of ethics were most common. Industries such as privateeducation, research and medical service were excluded from the study, due to the fact that inthese areas there were other forms of ethics established that played a more significant rolethan business ethics (Brytting, 1997).
Only because a company does not have a distinct code of ethics, it can not be taken forgranted that the company does not give attention to ethics in its formal policies. It is forexample possible that firms address their ethical issues in the context of regular employeepolicy manuals instead of in a separate code of ethics. One should not assume that firmsreporting little in the way of formal ethics program thereby are unethical firms. (Weaver et al.,1999) On the other hand it cannot be taken for granted that companies with the best code ofethics never behave unethically (Schaefer & Zaller, 1999).
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2.3 ETHICS TRAININGWest, Berman, Bonczek & Kellar (1998) state that ethics training has become more importantas organizations have attempted to ensure that their managers and employees act in wayswhich avoid legal wrongdoing and promote a positive climate for employee relations. Ethicstraining is furthermore according to West et al (1998) an approach meant to promote ethicalbehavior to managers and employees and ethics training increases attention to ethical issuesand behavior.
Kaptein (1998) states that ethics training has a significant influence on the perceptions ofconduct among employees. Ethics training also provides circulation of information among theemployees and discussion of new laws and standards of ethics (West, et al 1998). It oftentakes years of experience and training to know what is acceptable in an organization (Ferrell,1999).
As early as 1984-85, 44 percent of the companies in a survey conducted by the Center ofBusiness Ethics in America had ethics training for its employees (Nakano, 1999). More recentstudies have found that 44 percent of the largest US corporations provide their employeeswith some kind of ethics training (Clark and Leonard, 1998).
Weaver et al (1999) state that in the companies in their survey, depending on employee rank,one-fifth to one-third of employees receive no ethics training or education of any kind. Onlyone-fifth to one-fourth of employees in the study receive some ethics education or training atleast once a year. For most of the employees, ethics training and education occursapproximately every five years (Ibid).
Callahan (1998) and Powers and Vogel (1980) have suggested that ethical training hasmultiple objectives. Gandz and Hayes (1998) state that there are four objectives with anethical training program. The first goal is the fostering of awareness of the ethical componentsof managerial decision-making. The second goal is the legitimization of ethical componentsas an integral part of such managerial decision-making. A third goal is the provision ofconceptual frameworks for analyzing the ethical components and to help individuals becomeconfident in their use. The final goal of an ethics training program is according to Gandz andHayes (1998) the helping of participants to apply ethical analysis to day-to-day businessactivities.
During a training program there are many issues that are important to discuss, for examplehow ethics can be managed and interpreted in the day-to-day activity of the organization. Atraining program in ethics is a way to improve the ethics of an organization (Kaptein, 1998).Kaptein (1998) suggests that the following issues should be included in an ethics-trainingprogram:
! Teach the employees to identify the moral components in their performance.
! Clarify the importance of ethics for stakeholders and the organization.
! Provide methods of outlining, analyzing, resolving and implementing moral issues.
! Avoid or reduce uncertainty about who is responsible for what and to what degree.
! Create, discuss and resolve actual moral issues.
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! Communicate, reinforce, clarify and develop the code of conduct and other ethicmeasures.
! Explain and test the use of tools that can be applied during the development process.
According to Kaptein (1998) the easiest way of conducting a training program is to have anexternal expert lecturing about the subject followed by a seminar with questions and answers.Another way of conducting the training is to have workshop and discuss fictional or actualcases to which the employees should find solutions. These workshops are most efficient if themanager leads them and when the manager has been trained by external leaders in order tolead such a workshop. (Kaptein, 1998)
This method brings advantages as well as drawbacks. The advantages are that the managershows that ethical issues are important and when the managers have to teach others, they learnmore. The drawback with this is that it takes a lot of time for the managers to prepare andconduct the training program. Another disadvantage is that the participants might be afraid tobe honest, which might lead to that the desired discussion will not be achieved, because theyare worried that what they say might later be used against them. An alternative for themanagers to lead this training is to have an external trainer who is experienced in this kind oftraining. This brings the advantage that these persons can become ombudsmen within the areaof business ethics. (Kaptein, 1998)
A dilemma discussion is also a tool to conduct ethical training. This method takes form in theway that one employee introduces an ethical problem to two other participants. These twohelp their colleague to find options and to evaluate the pros and cons with these options. Therest of the group participating in the training observes the discussion and give feedback.(Kaptein, 1998)
According to McNamara (2000) the ethics program is essentially useless unless all staffmembers are trained about what it is, how it works and their roles in it. The nature of thesystem may invite suspicion if not handled openly and honestly. In addition, no matter howfair and up-to-date is a set of policies; the legal system will often interpret employee behavior(rather than written policies) as de facto policy. Therefore, all staff must be aware of and actin full accordance with policies and procedures (this is true, whether policies and proceduresare for ethics programs or for personnel management). This full accordance requires trainingabout policies and procedures writes McNamara (Ibid). Below is his “Training Basics forSupervisors and Learners”:
! Orient new employees to the organization’s ethics program during new-employeeorientation.
! Review the ethics management program in management training experiences.
! Involving staff in review of codes is strong ethics training.
! Involving staff in review of policies (ethics and personnel policies) is strong ethicstraining.
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! One of the strongest forms of ethics training is practice in resolving complex ethicaldilemmas. Have staff use any of the three ethical-dilemma-solution methods in thisguidebook and apply them to any of the real-to-life ethical dilemmas also listed in thisguidebook.
! Include ethical performance as a dimension in performing appraisals.
! The best ethics trainer: Bill Goodman, Chief Human Resource Officer at Aveda,describes, “We start our training even in our job ads,” then adds, “but the best traineris the behavior of our leaders.”
2.3.1 INTERNATIONAL ETHICS TRAINING
Judgements in ethical questions differ between cultures due to the different ethical valuespeople carry. The emphasis on international business training is to learn how other cultures dobusiness and adapt to their way of business. This might lead to that companies have tocompromise on their ethical standards. (Smeltzer and Jennings, 1998)
International ethics training should entail a great deal more than one-day “ethics awareness”workshops and seminars (Jackson, 1997). Jackson (1997) further presents several keyelements that should be considered when formulating a global ethics-training program:
The first key element is to stress the importance of “verstehen” i.e. to understand (Gadamer,1979): the idea of understanding traditions and social norms from the “inside” instead of as adetached external observer. Learning the foreign language itself helps. (Jackson, 1997)
It is furthermore important to stress the moral importance of the individual person, notcultural stereotyping, which usually leads to prejudice (Jackson, 1997). Further, Jackson(1997) states that it is important to remember Kant: people (and this means “foreign” peopletoo) should not be treated merely as a means to generating more business, but as an end.
According to Jackson (1997) an organization should create a cosmopolitan ethical culturewithin the firm, founded on the developed moral norms for international business, such as theUN code for TNCs. The ethics-training program can be used to deal with managerial causesof ethical misconduct to which international companies are especially vulnerable. Examplesof this can be; inadequate supervision; psychological distance existing at far off geographicallocations; lack of legal and regulatory checks in underdeveloped host counties. (Jackson,1997)
Put emphasis on the components of cosmopolitan ethical awareness in ethics training: Usemorally sensitive cultural-education to prevent prejudice. Intend to look at the host country’slaws, customs and people from the “inside” instead of being an external detached observer.Focus on understanding human rights and challenges of respecting them in internationalbusiness activities. (Jackson, 1997)
Jackson (1997) also states that it is important to find good ways to communicate internationalethics matters to the workforce, use communication tools such as newsletters and e-mails.These are good mediums for supplying special guidance needed in locating ethical issueswhen doing business abroad. To have an ethics hotline hocked up to electronic mail, and keepthe line confidential, is an excellent tool for international communications. It can be used as a
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forum for questions about the meaning of the code and also for swapping reports on ethicalsituations the colleagues are confronting in different legal and cultural environments throughout the world. (Jackson, 1997)
2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZINGETHICS
2.4.1 ADVANTAGES
According to Brytting (1997) a code of ethics has certain advantages. One can be that thecode motivates the people in the organization by using peer pressure. The code can provide apermanent guide to what is right and wrong; hence give guidance to the employees. It can alsobe an independent ground for appeal. For business itself it can specify the socialresponsibilities, and at last it works against unethical behavior that may be a threat to freeenterprising in general. A condition for the advantages to be valid is some form of existingtool of enforcement. Another requirement is the need for a proper interpretation of the code. Itneeds to be worded in a universal language and has to be interpreted and changed to actualworking situations throughout the whole organization. A way to encourage employees is toinvolve them in an activity of writing and updating the code. (Brytting, 1997)
According to Drummond and Bain (1994) the benefits of a code of ethics includes thefollowing: Firstly it is a mean of clarifying the management’s opinions of what it is thatmakes behavior unethical. Secondly it helps the employees to consider ethical issues beforebeing actually confronted with the real situation. It also gives the employees an opportunity torefuse to go along with an unethical action. The code of ethics is a tool to define the limits ofwhat makes behavior acceptable or unacceptable. It is a tool in providing a mechanism forcommunicating the managerial philosophy in the area of ethical behavior. Finally it assists inthe introduction and training of employees. (Drummond & Bain, 1994)
Nijhof et al. (2000) state that one of the positive aspects of a formal code of ethics clearlystates what employees should do to act in a responsible way, that is, the code provides theemployees with a clear guidance for decision-making. Another positive aspect is that anethical code makes clear what external parties can expect from the company or in otherwords, the code states what the organization stands for. A final positive aspect of a corporateethical code is according to Nijhof et al. (2000) that fulfillment is measurable.
Total Quality Management includes high priority on certain operating values, e.g., trustamong stakeholders, performance, reliability, measurement, and feedback. Eastman andPolaroid use ethics tools in their quality programs to ensure integrity in their relationshipswith stakeholders. Ethics management techniques are highly useful for managing strategicvalues, e.g., expand market share, reduce costs, etc. McDonnell Douglas integrates their ethicsprograms to into their strategic planning process. Ethics programs promote a strong publicimage. Attention to ethics is also strong public relations-admittedly; managing ethics shouldnot be done primarily for reasons of public relations. But, frankly, the fact that anorganization regularly gives attention to its ethics can portray a strong positive to the public.People see those organizations as valuing people more than profit, as striving to operate withthe utmost of integrity and honor. Aligning behavior with values is critical to effectivemarketing and public relations programs. Consider how Johnson and Johnson handled theTylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and
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CEO of San Francisco-based Business for Social Responsibility, puts it best: “Ethical values,consistently applied, are the cornerstones in building a commercially successful and sociallyresponsible business.” (McNamara, 2000)
2.4.2 RISKS
The arguments against ethical codes are according to Drummond and Bain (1994) thefollowing: Even if the guidelines are detailed it is impossible to cover all the potentialunethical exercises. Secondly, codes of ethics are often too generalized. It is seldom that thecode of ethics gets prioritized. Finally, ethical behavior that has been brought on by an ethicalcode will only work if the code has been internalized and the employees truly believe in it.
There are according to Nijhof et al (2000) basically three disadvantages with a formal code ofethics; resistance to coercion, indoctrination of employees and danger of moral inversion.These three disadvantages will be further discussed below.
In a formal approach to an ethical code certain rules are written down. Through monitoringand assessment systems the compliance to these rules are forced upon the employees. Due tothis it is a natural reaction to resist these rules to a certain extent. (Beer, 1988) According toNijhof et al (2000) this resistance can only be overcome when compliance with certain normsis felt from within. Resistance to coercive organizational norms is encouraged because aformal approach does not appeal to any feeling of care or compassion. Because procedures arefixed in a managerial environment there is a distinction between those who design the rulesand those who have to carry them out. This results in the disappearance of a feeling ofcompassion that is essential for notions of care. (Jagger, 1995) According to Nijhof et al(2000) one of the preconditions for positive reactions from others is that they have to beconvinced that decision makers actually care for them. It will be hard to convince others ofthis with only an abstract reference to organizational norms. (Nijhof et al, 2000)
Formal codes of conduct are based on the assumption that an organization should provide thenorms and values needed to distinguish between right and wrong. From a change perspective,in formal approach to ethical codes, the traditional way of dealing with ethical issues is first to“unfreeze” the employees, then move them through several training and communicationsessions and thereafter “refreeze” the participants on the basis of the organizational way ofdealing with ethical issues. In this process the personal values of the employees are replacedby the organizational norms that come out of the ethics training. In this process people inorganizations are indoctrinated with external values, which, in itself from a normativeperspective, can be criticized. (Boje and Winsor, 1993; Willmott, 1993)
Nijhof et al (2000) state that the indoctrination of employees can partly be overcome byformulating a code of conduct in a “bottom up way”. Through dialogue within an organizationall employees have the opportunity to influence and co-determine the organizational norms. Inthis way, employees set the organizational norms that are then written down in a formaldocument, i.e. the ethics code. This does not halt the indoctrination of employees but, at least,the employees are indoctrinated by values that are a compromise or, in the ideal situation, aconsensus of the views of all employees. (Nijhof et al, 2000)
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3. CONCEPTUAL FRAMEWORK AND EMERGEDFRAME OF REFERENCEThe first chapter provided an introduction to the subject and ended with four researchquestions, which were covered by a literature overview in the second chapter. The purpose ofthis chapter is to display the conceptualization that will allow us to answer this thesis’research questions. The reader will also be provided with a frame of reference, which hasemerged from the conceptualization and will be presented in the end of the chapter.
3.1 CONCEPTUALIZATIONAccording to Miles and Hubermann (1994) a conceptual framework “explains, eithergraphically or in a narrative form, the main things to be studied” (p. 18). The authors add thatthis is most easily done after a list of research questions has been constructed, which has beendone in chapter one of this thesis.
The first research question revolves around how the people involved in ethics managementcan be described. The second question centers on how an ethical code can be described. Thethird question focuses on how an ethical training program can be described. The finalresearch deals with how the benefits versus risks with formalizing ethics within anorganization can be described.
For all the four research questions, the lists presented under each question may be consideredto be eclectic (i.e. composed of elements drawn from various sources), these sources have, asstated before, been covered in chapter two.
The conceptualization has served as the basis for the interview guide that has been designed inorder to collect data for this thesis. The interview guide may be found in Appendix A andfollows the same structure as the conceptualization does.
3.1.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICSMANAGEMENT
In chapter two studies by Kaptein (1998), the Center for Business Ethics (1992), Benson andRoss, (1998) and Drummond and Bain, (1994) were presented. These studies revolved aroundwho should be involved in ethics management within an organization. The studies focusedupon two main areas, the use of an ethics office or committee and the use of a single ethicalombudsperson.
♦ THE FUNCTION OF AN ETHICS COMMITTEE
! The Initiator.# Stimulates the organization of ethics, the driving force (Center for Business
Ethics, 1992; Kaptein, 1998).
! The Coordinator.# Answers questions regarding the organization’s ethics policy (Center for
Business Ethics, 1992; Kaptein, 1998).
! The Channeler.
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# Creates communication channels between the corporation and itssurrounding, between employees and management, and among departments(Kaptein, 1998).
! The “Devils Advocate”. (Kaptein, 1998).
! The Facilitator.# Offers instruments, which departments can use for their ethics programs
(Kaptein, 1998).
! The Mediator.# Mediates in both internal and external conflicts. (Kaptein, 1998)
♦ WHO IS INVOLVED IN AN ETHICS COMMITTEE
! Someone from top management (Kaptein, 1998; Benson and Ross, 1998).
! Members in the committee are rotated among the employees (Drummond and Bain,1994).
! Someone from the Human Resource Department (Benson and Ross, 1998).
! Someone who is non-managerial.# A shop or clerical worker (Benson and Ross, 1998).
♦ ETHICAL OMBUDSPERSON
! Has experience from within the company and is fully integrated into the corporatevalue system (McDonald, 2000; Drummond and Bain, 1994; Kamm, 1993).
! Independent, reporting directly to the CEO or to the board (Drummond and Bain 1994;Kamm, 1993).
! An investigative, counseling and advisory role (McDonald, 2000; Drummond andBain, 1994; Kamm, 1993).
! If selected by top management there is a risk of impairing the trustworthiness(Drummond and Bain, 1994).
! Resolves ethical conflict (Dunfee and Werhane, 1997; Drummond and Bain, 1994).
! Is responsible for ongoing ethical work and updating of the code (Kamm, 1993).
3.1.2 RESEARCH QUESTION TWO: A CODE OF ETHICS
A number of authors have studied the wide area of a code of ethics, among them are Weaver,(1993); Kaptein, (1998); Weaver, Trevino, Cochran, (1999); Hosmer, (1987); Drummond &Bain, (1994) Deresky, (1997) and McDonald (2000). The different areas regarding a code ofethics were covered in chapter two. However, these areas interacted and mixed with eachother. In this thesis three main areas were found to be of particular interest since these three
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covered most of the other areas involved. These areas were; the purpose of a code, who isinvolved in developing the code and the content of a code of ethics.
♦ THE PURPOSE OF A CODE
! Minimum expectations of employees (Kaptein, 1998; Weaver, 1993).
! Making roles and expectations within an organization clear (Weaver, 1993; Kaptein,1998).
! Assist employees by including ethical values in decision making (Weaver et al., 1999).
! A distinguishing function externally (Kaptein, 1998).
! A correcting function, the code corrects checks and balances in that employees cancheck each other in living up to the code (Kaptein, 1998).
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
! Senior executives (Hosmer, 1987).
! As many employees as possible (Drummond & Bain, 1994).
♦ THE CONTENT OF A CODE
! One code or one for each level: international, supranational, national, sectoral,individual (Kaptein, 1998).
! General information regarding the code and the organization (Weaver, 1993;McDonald, 2000).
! Conflicts of interest, e.g. handling confidential information, bribes, “whistle blowing”(Weaver, 1993; McDonald, 2000).
! Relations with customers, suppliers and contractors (Weaver, 1993; McDonald, 2000).
! Social responsibility (Weaver, 1993; McDonald, 2000).
! Responsibilities to shareholders and investors (Weaver, 1993; McDonald, 2000).
3.1.3 RESEARCH QUESTION THREE: ETHICS TRAINING
Kaptein, (1998); McNamara, (2000) and Jackson, (1997) have carried out research in the fieldof ethical training programs. These authors’ previous research efforts were covered in chaptertwo.
♦ ETHICS TRAINING
! Teach the employees to identify the moral components in their work. (Kaptein, 1998;McNamara, 2000).
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! Create, discuss and resolve moral issues and apply them to real-life ethical dilemmas(Kaptein, 1998; McNamara, 2000).
! Communicate, reinforce, clarify, develop and review the ethical code with the staff(Kaptein, 1998; McNamara, 2000).
! Avoid or reduce uncertainty about who is responsible for what and to what degree(Kaptein, 1998).
.! The training is carried out by an external consultant (Kaptein, 2000).
! Include ethical performance as a dimension in performing appraisals (McNamara,2000).
3.1.4 RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITHFORMALIZING ETHICS
As stated earlier there are both advantages and risks with formalizing ethics within anorganization. Nijhof et al. (2000); Brytting, (1997); Drummond and Bain, (1994) Boje &Winsor, (1993) and Willmott, (1993) have carried out research within this particular area.
♦ ADVANTAGES
! Clarifies management’s opinions of what it is that makes behavior ethical/unethical(Nijhof et al, 2000; Brytting, 1997; Drummond & Bain, 1994).
! Motivates employees to consider ethical values in decision-making (Brytting, 1997;Drummond & Bain, 1994).
! The code makes clear what external parties may expect from the organization (Nijhofet al, 2000).
♦ RISKS
! Resistance to coercion. Employees do not truly believe in the code, therefore the codeis force upon them (Drummond & Bain, 1994; Nijhof et al, 2000).
! The code is forced upon employees, who are being indoctrinated into something theydo not believe in (Boje & Winsor, 1993; Willmott, 1993).
! Danger of moral inversion. The emphasis on fixed ethical rules removes the necessityfor employees to ethically reflect on their behavior (Nijhof et al, 2000).
3.2 EMERGED FRAME OF REFERENCEAs stated earlier, the conceptualization above is what will allow us to answer this thesis’research questions. The frame of reference, which results from this conceptualization, is whatwill guide the data collection for this thesis. The emerged frame of reference is presentedgraphically below (see Figure 3.1)
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FIGURE 3.1. Authors’ own construction.
The frame of reference presented above shows that an organization that wishes to enhance itsethical capability needs to consider establishing ethical training programs as well as ethicalcodes, or in other words, formalizing the organization’s ethical efforts. In order to formalizethe ethical efforts the organization needs to involve people who are to be involved in theethics management within the organization. During these efforts towards enhancing theethical capability the organization needs to consider the advantages versus risks withformalizing the ethical efforts.
PEOPLE INVOLVED IN ETHICSMANAGEMENT
ETHICAL CODES
ADVANTAGES VERSUS RISKS WITHFORMALIZING ETHICS
ETHICS TRAINING
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4. METHODOLOGYIn this chapter the purpose, approach and strategy of the research in this thesis will bedescribed. Furthermore the data collection method, sample selection as well as validity andreliability issues will be presented. At the end of the chapter an overview of the methodologyis provided.
4.1 RESEARCH PURPOSEWiedersheim-Paul and Eriksson (1991) agree with Yin (1994) who states that there are threegeneral purposes of carrying out research.
! Exploratory! Descriptive! Explanatory
Exploratory studies aim for basic knowledge within the problem area (Wallén, 1996). Thesestudies are suitable when a problem is difficult to demarcate and when relevant theory isunclear. They are further appropriate when important characteristics and relations are hard todetermine. (Eriksson &Wiedersheim-Paul, 1997)
Descriptive research is appropriate when a problem is clearly structured but the intention isnot to conduct research about connections between causes and symptoms. The researcherknows what her or she wants to investigate but not the answers. (Eriksson &Wiedersheim-Paul, 1997)
Explanatory research is useful for studying relations between causes and symptoms (Eriksson&Wiedersheim-Paul, 1997). The researcher tries to identify the factors, which together causea certain phenomena (Eriksson &Wiedersheim-Paul, 1997).
Which category a study belongs to depends on ambitions and knowledge within the researcharea (Wallén, 1996). The research purpose of this thesis is mainly descriptive. This due to thefact that it was stated in the research purpose that this thesis wanted to gain a betterunderstanding of how ethical capability may be used as a competitive advantage. In this thesisa number of variables connected to the issue of how ethical capability can be used as acompetitive advantage will therefore be described. However, this thesis is also somewhatexploratory. This due to the fact that we have not been able to find studies that focus on theexact same problem as we have chosen to do in this thesis. Towards the end of the thesis theauthors’ own conclusions are presented by answering the research questions, this thesis isbeginning to explain the issues that have been described. This makes our study mainlydescriptive but with explanatory and exploratory influences.
4.2 RESEARCH APPROACHThere are two methods to choose from when conducting research in social science: qualitativeor quantitative method (Yin, 1993; Holme & Solvang, 1991). The most important differencebetween these two approaches is the use of numbers and statistics in the quantitative approachwhile the qualitative approach focuses on words. The choice of approach depends on theproblem definition as well as on what kind of information that is needed. However, these twoapproaches can also be combined. (Holme & Solvang, 1991)
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Quantitative research is often formalized and structured. It treats the research problem in abroad perspective and aims to make generalizations. The results from quantitative research areassumed to be measurable and presentable in figures. Quantitative research is very muchcontrolled by the researcher and statistical methods have a central role in the analysis ofquantitative information. In a quantitative approach, few variables are studied but on a largenumber of entities. (Holme & Solvang, 1991)
Qualitative research is used when the purpose of the study is to reach a deeper understandingof the research problem. Qualitative research means gathering, analyzing and interpreting datathat cannot be quantified. Central in qualitative research is to reach a deeper and morecomplete understanding of the data collected and the problem studied. (Holme & Solvang,1991) In qualitative research the conclusions are based on data, which are not quantified, suchas attitudes and values (Lundahl & Skärvad, 1992). Qualitative research is furthermorecharacterized by a great closeness to the respondents or to the source that the data is beingcollected from (Holme & Solvang, 1991). According to Denzin and Lincoln (1994)qualitative researchers stress the socially constructed nature of reality, the intimaterelationship between the researcher and what is being studied, and the situational constraintsthat shape inquiry. Lincoln (1994) concludes that in qualitative research the answers toquestions that stress how social experience is created and given meaning are sought after.
Our study has a qualitative approach since our research purpose requires that we study thephenomenon in depth. This approach is suitable due to the fact that we wanted to gain a better(i.e. deeper) understanding of how an organization may use ethical capability as a competitiveadvantage. Our research also demanded detailed answers regarding the interviewedorganizations’ feelings, values and attitudes about issues involving how to use ethicalcapability as a competitive advantage. As we now are focused on a qualitative researchapproach, the research strategy will be presented in the next section.
4.3 RESEARCH STRATEGYThere are a number of different ways in which one may conduct social science research. Yin(1994) lists five primary research strategies: Experiments, surveys, histories, analysis ofarchival information and case studies. Each of these strategies has certain advantages anddisadvantages. However, these advantages and disadvantages depend upon three conditions:
! the type of research questions asked! the control an investigator has over actual behavioral events! the focus on contemporary as opposed to historical phenomena
Table 4.1 displays these three conditions, in each of three columns, and shows how eachcondition is related to five major research strategies within the social sciences. Below thetable the different research strategies will be further explained.
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Table 4.1. Conditions for Research StrategiesRESEARCHSTRATEGY
Form ofResearchQuestion
RequiresControl OverBehavioralEvents?
Focuses onContemporaryEvents
Experiment How, why YES YES
Survey Who, what,where, howmany,How much
NO YES
Archivalanalysis(e.g.,economicstudy)
Who, what,where, howmany,How much
NO YES/NO
History How, why NO NO
Case Study How, why NO YES
Source: Yin, 1994, p. 6
The purpose of this thesis is to investigate how organizations can use ethical capability as acompetitive advantage. Due to this we do not require the control over behavioral events,which rules out experiments as a research strategy. Furthermore we want to focus on recentdevelopments within the chosen area, which rules out the historical strategy. This strategy isalso ruled out due to the fact that Yin (1994) states that this method is suitable only when norelevant persons are alive to report. Yin (1994) writes that surveys or the analysis of archivalrecords are quantitative in nature, they are furthermore advantageous when the research goalis to describe the incidence or prevalence of a phenomenon or when it is to be predictiveabout certain outcomes. This leaves us with only one research strategy, the case study.
In general, case studies are the preferred strategy when “how” or “why” questions are beingposed, when the investigator has little control over events, and when the focus is on acontemporary phenomenon within some real-life context says Yin (1994). Further, Yin (1994)states that the characteristics of a case study is that it provides a realistic description and itmakes it possible to investigate many different variables. Yin (1994) further states that thecase study is used when investigating contemporary events and the relevant behaviors cannotbe manipulated. Using a case study as the selected research strategy means that theresearchers investigate a few numbers of objects, like industries and companies, in manydimensions (Eriksson & Wiedersheim-Paul, 1997).
Yin (1994) adds that case study research may be carried out as either single- or multiple casestudies. Multiple case studies give the researchers the opportunity to compare, however, lesstime can be spent on each case. Holme and Solvang (1997) state that case studies providedetailed knowledge about the problem but it might be difficult to generalize from theconclusions that are drawn.
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According to Miles and Huberman (1994) the use of multiple case sampling will add to theconfidence of the findings. From investigating similar and contrasting cases the researchersare able to understand the findings from a single case and specify how and where and maybealso why it has this behavior. Multiple case sampling also adds to the validity, precision andthe stability of the findings. (Miles & Huberman, 1994)
For this thesis it was found that that the most suitable research strategy was the multiple,contrasting, case study strategy. This due to the fact that the research questions posed in theend of chapter one were of “how” character and that the research questions provided theresearchers with relatively many variables. A multiple case study was conducted since thiswould make the findings more robust and it would also make it possible to detect possiblesimilarities and/or differences. In addition, the intention was to investigate a limited numberof cases in different dimensions, this in order to receive as detailed and in-depth informationas possible from each case regarding our area of research. It has now been stated that thisresearch is a multiple case study, which takes this thesis to the next step, the data collection.
4.4 DATA COLLECTIONThe data collection process for case studies is more complex than those used in other researchstrategies. If the researcher chooses to conduct a case study he or she needs to maintain, whatYin (1994) refers to as, a methodological versatility. This versatility is not necessarilyrequired when using other strategies. The researcher further needs to follow certain formalprocedures to assure quality control during the data collection process. Data for case studiesmay be collected through six different sources. Yin (1994) proposes that no single source ofevidence has a complete advantage over the others. Instead the sources displayed in table 4.2complement each other with its individual strengths and weaknesses. Yin (1994) further statesthat “ a major strength of case study data collection is the opportunity to use many differentsources of evidence” (p. 91). The six different sources that are suggested by Yin (1994) willbe presented below in table 4.2 along with the strengths and weaknesses of the respectivesources. (Yin, 1994)
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Table 4.2: Six Sources of Evidence: Strengths and WeaknessesSOURCE OFEVIDENCE
STRENGTHS WEAKNESSES
DOCUMENTATION ♦ Stable: can be reviewedrepeatedly♦ Unobtrusive: notcreated as a result of thecase♦ Exact: contains exactnames, references anddetails of an event♦ Broad coverage: longspan of time, many eventsand many settings
♣ Retrievability: can below♣ Biased selectivity: ifcollection is incomplete♣ Reporting bias: reflects(unknown) bias of author♣ Access: may bedeliberately blocked
ARCHIVAL RECORDS ♦ (Same as above fordocumentation)♦ Precise and quantitative
♣ (Same as above fordocumentation)♣ Accessibility due toprivacy reasons
INTERVIEWS ♦ Targeted: focusesdirectly on case studytopic♦ Insightful: providesperceived causalinferences
♣ Bias due to poorlyconstructed questionnaires♣ Response bias♣ Inaccuracies due topoor recall♣ Reflexivity: intervieweegives what interviewerwants to hear
DIRECTOBSERVATIONS
♦ Reality: covers eventsin real time♦ Contextual: coverscontext of event
♣ Time consuming♣ Selectivity: unless broadcoverage♣ Reflexivity: event mayproceed differentlybecause it is beingobserved♣ Cost: hours needed byhuman observers
PARTICIPANTOBSERVATIONS
♦ (Same as for directobservations)♦ Insightful into inter-personal behavior andmotives
♣ (Same as for directobservations)♣ Bias due toinvestigator’smanipulation of events
PHYSICALARTIFACTS
♦ Insightful into culturalfeatures♦ Insightful into technicaloperations
♣ Selectivity♣ Availability
Source: Yin, 1994, p. 80
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Due to the fact that this thesis is a qualitative and not a quantitative case study the researchershave not been able to utilize archival records as a source of evidence. Direct observations andparticipant observations are also ruled out as possible sources of evidence for this case study,due to limitations regarding time and financial resources. Furthermore the researchers do notneed insights into cultural features and technical operations, which rules out physical artifactsas a source of evidence. This leaves this thesis with two sources of evidence, interviews anddocumentation.
Data may also be divided up into primary and secondary data. Primary data consists of datacollected by the researcher and is collected especially to address the specific researchobjective (Lundahl & Skärvad, 1992). Secondary data is already available since it wascollected for another purpose than the present problem (Aaker & Day, 1990) by someone else(Holme & Solvang, 1991). For this research secondary data in the form of documentation andprimary data in the form of interviews have been used.
According to Yin (1989) one of the most important sources of case study information is theinterview. Holme and Solvang (1991) state that interviews allow flexibility and closeness tothe respondent, which is important in qualitative studies. An interview also allows for in depthinformation (ibid) and for the interviewer to follow up the questions (Eriksson &Wiedersheim-Paul, 1991). According to Yin (1994) there are three different types ofinterviews, these are:
! Open-ended! Focused! Survey
Most commonly, case study interviews are of an open-ended nature, in which an investigatorcan ask key respondents for the facts of a matter as well as for the respondents’ opinionsabout events. In some situations, the investigator may even ask the respondent to propose hisor her own insights into certain occurrences and may use such propositions as the basis forfurther inquiry. (Yin, 1994)
In a focused interview the respondent is interviewed for a short period of time. In such cases,the interviews may still remain open-ended and assume a conversational manner, but theinterviewer is more likely to be following a certain set of questions derived from the casestudy protocol. (Yin, 1994)
The third type of interview entails more structured questions, along the lines of a formalsurvey. Such a survey can be designed as a part of a case study. (Yin, 1989)
Yin (1994) concludes that overall, interviews are an essential source of case study evidence,because most case studies are about human affairs. These human affairs should be reportedand interpreted through the eyes of specific interviewees, and well-informed respondents canprovide important insights into a certain issue. Eriksson and Wiedersheim-Paul (1997) statethat interviews can be conducted either in person or by telephone.
For this thesis interviews were chosen as the main source of evidence. The type of interviewthat was found to be the most appropriate was a focused interview. This due to the fact thatonly limited amount of time with the interviewees were allowed and that the researcherswanted to carry out the interview with questions that had been derived from already existing
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research on the topics that were found to be of interest. For the interviews an interview guidewhich had been derived from the conceptual framework was used. The questions that wereasked were of an open-ended nature. For the cases of this thesis this meant that before askingfor details, the researchers wanted to know what the respondents felt regarding the maintopics. More specifically the research questions were asked primarily and then the researchersmoved on by asking about the subtopics.
According to Yin (1994) documentary information is likely to be relevant to every case studytopic. This type of information can take many forms and should be the object of explicit datacollection plans. The different types of documentation are:
! Letters, memoranda! Agendas, announcements and other written reports of events! Administrative documents! Formal studies! News-clippings and other articles appearing in the media
For case studies, the most important use of documents is to confirm and augment evidencefrom other sources. (Yin, 1994) As mentioned above Yin (1994) discusses the importance ofmaintaining a methodological versatility in order to gain a better quality of the case study. Yin(1994) further states that one of the major strengths of the case study is that it enables theresearchers to use multiple sources. Yin (1994) writes that an important clue is to ask thesame question to different sources of evidence; if all sources point to the same answer theresearcher has successfully triangulated his data. Consequently Yin (1994) calls the use ofmultiple sources, when conducting a case study, for triangulation.
In order to, as suggested by Yin (1994), triangulate evidence for this thesis; documentationwas used along side with interviews. The documentation used has been in the form ofagendas and announcements.
4.5 SAMPLE SELECTIONJohansson-Lindfors (1993) argues that selective sampling is used in qualitative case studiesand that it involves purposive sampling. Purposive sampling implicates that the informationunits should be selected based on theoretical purpose and relevance. This implies that it mustbe assumed that the phenomenon or problem exists within the sample of information units.The sample is dependent on the purpose of the study rather than on whether the sample isrepresentative or not. (Ibid)
On multiple-case sampling, Miles and Huberman (1994) state that by looking at a range ofsimilar and contrasting cases, one can understand a single-case finding, grounding it byspecifying how and where and, if possible, why it carries on as it does. Miles and Huberman(1994) further state that by using multiple cases the researcher can strengthen the precision,the validity, and the stability of the “finding”.
Regarding generalization Miles and Huberman (1994) state that the researcher is generalizingfrom one case to the next on the basis of a match to the underlying theory, not to a largeruniverse. However if a finding holds in one setting and, given its profile, also holds in acomparable setting but does not in a contrasting case, the finding are more robust.
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Miles and Huberman (1994) state that how many cases a multiple case study should consist ofdepends how rich and complex the within case sampling is. For this thesis the researchquestions and conceptualization provided the researchers with a rather high complexity foreach case. In order to focus effectively and to fulfil the exploratory, descriptive and, thesomewhat, explanatory purpose of the research, it was decided that three cases were to beincluded in the sample.
The sampling of these three case studies involved four phases. These were:
! The selection of region(s)! The selection of industry! The selection of company! The selection of appropriate persons to interview
For this thesis it was found to be suitable to carry out research in three different regions, thisin order to find out whether the same views applied to the research question across bordersand regions. The three regions that were singled out and investigated were the Far East(China), Northern Europe (Sweden), and North America (United States). Of these threeregions two may be clustered together into the Western Hemisphere region, while the Chinesecase may also be denominated as the Eastern Hemisphere case.
The automotive industry was chosen mainly due to the fact that the industry deals with certainethical dilemmas such as environmental problems and product safety. Within this industry theVolvo Company was found to be appropriate, this due to the fact that the company is activewithin all three regions previously singled out. Furthermore it was found out during a pre-interview (i.e. the setting up of an interview) that the company was currently reviewing itsethical capability on a global basis.
According to Holme and Solvang (1991), selecting respondents with the right knowledgeabout the research area is crucial for qualitative research. Regarding finding suitable people tointerview, for this thesis, access to the Public Affairs manager of Volvo head quarters inSweden, Ms. Malin Nilsson, was gained through Ms. Karin Ekberg, who is currently workingfor Öhrlings/Pricewaterhouse Coopers. The contact with Ms. Ekberg was established throughthe company presentation of Öhrlings/Pricewaterhouse Coopers during a career fair at LuleåUniversity of Technology. Ms. Ekberg, who works as a consultant regarding issues that areclosely related to the field of this thesis, helped the researchers to identify Ms. Nilsson as theproper person to interview within the Volvo Corporation in Sweden.
Contact with Mr. Finn Adolfsson, who works for Volvo Buses in China, was established byphone. For the Chinese case Mr. Adolfsson was found to be the only one who were able totalk to the researchers regarding ethics within Volvo in China.
Regarding identifying the person to interview in the U.S.A a telephone call was made to thehead quarters of Volvo Construction Equipment in the U.S.A. There our call was directed tothe Vice President of Human Resources and Administration, Mr. Chuck Wood. Mr. Woodstated that he was the most knowledgeable person to talk to within in Volvo ConstructionEquipment North America regarding the issues that we wanted to discuss. Considering thisstatement, we did not proceed with another interview. It has now been clarified how thesample of this study was selected and this thesis will therefore move on to discussing the dataanalysis in the next section.
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4.6 DATA ANALYSISYin (1994) writes that the ultimate goal of analyzing data is to treat the evidence fairly, toproduce compelling analytic conclusions and to rule out alternative interpretations. Yin(1994) writes that before data may actually be analyzed, a researcher using case studies maychoose from two general analytical strategies, relying on theoretical propositions anddeveloping a case description. These will be further described below.
Relying on theoretical propositions is according to Yin (1994) the most common strategy.This means that the researcher derives his research questions from previous studies. The datacollected is then compared to the findings of previous studies. This strategy helps theresearcher to focus on relevant data and to ignore other, not relevant, data.
Developing a case description is according to Yin (1994) less preferable than the use oftheoretical propositions. This strategy may serve as an alternative to theoretical propositionswhen little previous research has been done. (Yin, 1994)
This thesis relies on theoretical propositions. This due to the fact that it was desirable, and itwas possible, to derive research questions from previous research and studies. Furthermore itwas desirable to compare the data that was found to the findings of previous studies.
When writing about qualitative data analysis, Miles and Huberman (1994) state that the focusis on data in the form of words. These words require, according to the authors, some sort ofprocessing. This processing is itself a form of analysis. Miles and Huberman (1994) havedefined data analysis “as consisting of three concurrent flows of activity” (p.10). Miles andHuberman (1994) explain these three stages as follows:
1. Data reduction: This should not be considered to be separate from analysis, but as a partof it. This reduction of the data is analysis that helps to sharpen, sort, focus, discard andorganize the data in a way that allows for “final” conclusions to be drawn and verified.The two authors add that data can be reduced and transformed though such means asselection, summary, paraphrasing or through being subsumed in a larger pattern.
2. Data display: This stage includes taking the reduced data and displaying it in an organizedand compressed way so that conclusion can be more easily drawn. Miles and Huberman(1994) state that good displays are a major avenue to valid qualitative analysis.
3. Conclusion drawing and verification: In this stage the researcher starts to decide what thedifferent findings means. Noting regularities, patterns, explanations, possibleconfigurations, causal flows and propositions does this. However, Miles and Huberman(1994) also add that the competent researcher should hold such conclusions lightly, whilemaintaining both openness and a degree of skepticism.
When analyzing data gathered for this thesis the three steps suggested by Miles andHuberman (1994) have been followed. For each research question data was reduced via awithin-case analysis. The within-case analysis was conducted by comparing empiricalfindings to the existing theories that were displayed in the conceptualization. Thereafter datawas further reduced and displayed in a cross case analysis. The cross case analysis was doneby comparing the findings, and detecting possible similarities and differences, of the differentcases to each other. In chapter seven, where we start to draw conclusions we have, as Milesand Huberman (1994) suggests, started to decide what the different findings of our research
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mean. This was done by restating each research question and then answer that question, basedon the findings of this study. As it now has been explained how the data was analyzed, thefollowing section will present the quality standards of this study.
4.7 QUALITY STANDARDS: VALIDITY AND RELIABILITYDue to the fact that a research design is supposed to represent a logical set of statements, onecan also judge the quality of any given design according to certain logical tests. (Yin, 1994)According to Yin (1994) four tests exist when judging the quality of the design of a research.These four tests are:
! Construct validity! Internal validity! External validity! Reliability
Construct validity includes the establishment of correct operational measures for the conceptsbeing studied. Yin (1994) writes that there are three tactics available in order to increaseconstruct validity. The first is to use multiple sources of evidence during the data collection.The second tactic is to establish a chain of evidence. This should also be done during the datacollection. The third and final tactic is, according to Yin (1994), to construct a case studyreport, which is reviewed by the key-informants.
For this thesis, documents and interviews have been used as sources of evidence. Thedocumentation has however only been used complementary to the interviews and it has notbeen included in the analysis. To establish a chain of evidence is, according to Yin “to allowan external observer-the reader of the case study, for example- to follow the derivation of anyevidence from initial research questions to ultimate case study conclusions” (p.98).Throughout this research, citations, to all the sources that have been used, have been made.The draft report has furthermore been reviewed by a supervisor as well as by fellow academicstudents.
Regarding the most suitable and knowledgeable persons to interview efforts were made tofind these within each case, this has been described under the section that discusses sampleselection. By using a tape recorder during the interviews, it was possible to double-check theanswers after the interviews and the risk of wrongly interpreting the answers was reduced.Three out of four interviews were conducted in Swedish, this due to the fact that therespondents were of Swedish heritage. These interviews were later translated into English,which includes the risk of translating errors. However, if the interviews had been conducted inEnglish, that might have led to misunderstandings and a less free conversation. One of thefour interviews was carried out in English, this due to the fact that the native language of therespondent was English. Regarding this interview the conversation was held in a foreignlanguage to the researcher, which might have led to misunderstandings during theconversation. On the other hand this conversation did not need to be translated.
Internal validity is used for establishing a causal relationship, whereby certain conditions areshown to lead to other conditions, as distinguished from false relationships. It should be notedthat internal validity is a concern only for causal or explanatory studies, where an investigatoris trying to determine whether event x led to event y. (Yin, 1994) Due to the fact that thisthesis is mainly descriptive, no further consideration has been taken to internal validity.
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To increase external validity, Yin (1994) emphasizes the importance of using replication logicin multiple-case studies. He further states that a theory must be tested through replication ofthe findings in similar surroundings, where the theory has specified that the same resultsshould occur. Once such replication has been made, the findings can be generalized to agreater number of surroundings. In this research the findings have been reached by testing therelevant theory in three different cases.
To conclude the discussion regarding validity it should be noted that Wiedersheim-Paul andEriksson (1997) state that validity is defined as a measurement instrument’s ability to measurewhat it is intended to measure. They further state that a good methodology affects the validityin a positive direction.
Yin (1994) states that reliability demonstrates that the operations of a study - such as the datacollection procedures - can be repeated. Yin (1994) further states that the objective should beto make sure that, if a later investigator followed exactly the same procedures as described byan earlier investigator and conducted the same case study all over again, the later investigatorshould arrive at the same findings and conclusions. It is concluded by Yin (1994) that the goalof reliability is to minimize the errors and biases in a study.
In this thesis the researchers have tried to carefully explain the procedures of the research, inthis, as well as in every other chapter. An interview guide, which shows how the researchquestions were conceptualized, has also been designed. The same interview guide has beenused for all of the interviews. The data collected for each of the cases as well as the structureof the thesis has been made in a way so that following researchers or readers can retrieve anydesired material. However, when conducting interviews, personal biases may to some extenthave been present although an effort was made to formulate relevant questions that wouldneither lead nor influence the respondent in any way.
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4.8 METHODOLOGY FIGURE
Volvo Sweden Volvo ChinaVolvo U.S.A
Survey CaseStudies
ExperimentHistory ArchivalAnalysis
Exploratory Descriptive Explanatory
Quantitative Qualitative
1. Choice ofResearchPurpose
2. Choice ofResearchApproach
3. Choice ofResearchStrategy
4. DataCollectionMethod
5. SampleSelection
6. DataAnalysis
7. QualityStandards Validity Reliability
DirectObservations
ParticipantObservation
ArchivalRecords
PhysicalArtefacts
Open-Ended
Survey
Within CaseAnalysis
Interviews(Primary source)
Documentation(Secondary source)
Focused
Cross-CaseAnalysis
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5 DATA PRESENTATIONIn this section the empirical data that has been gathered in the three cases of this thesis willbe presented. As discussed in chapter four this thesis focuses on three cases within the VolvoCorporation. These cases have merely been called the cases of Sweden, U.S.A and China andthey will be presented below in that order. Each section in this chapter will start out byproviding the reader with a short description of the interviewee and his/her responsibilities.Along with a description of the interviewee, a short description of the company that he/she hisworking for will be provided.
5.1 CASE 1:VOLVO, SWEDENThis section will provide the gathered data on the Swedish case. The data presented is basedon the interviews conducted with Ms. Malin Nilsson, who is President of Public Affairswithin the Volvo Group, and Ms. Paula Tornberg who is responsible for employee questionswithin staffs and Volvo Trucks. Within staffs Ms. Tornberg handles issues such as law,information, strategies, planning and personnel issues.
The Volvo Group is one of the world’s largest producers of trucks, buses and constructionequipment and hold a leading position in the fields of marine and industrial power systemsand aircraft engine components. From 1999, the Volvo Group focuses exclusively ontransport equipment for commercial use. Founded in 1927, Volvo today has 55, 600employees, production in almost 30 countries and a worldwide marketing organization. TheVolvo Group’s total sales amounted to 125 billion SEK in 1999. (Www.volvo.com)
Volvo Trucks develops, manufactures and markets medium heavy and heavy trucks for alltypes of transports, from construction to city distribution to long-distance hauling. In order tooffer customers a complete transport system, Volvo Trucks has developed a comprehensivesupplementary support services are financing, leasing and service agreements. Volvo Trucksare sold in more than 100 countries worldwide. The most important markets are WesternEurope as well as North and South America. Volvo plans on strengthening its long-termpresence in Asia and Eastern Europe. (www.volvo.com)
5.1.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT
According to Ms. Nilsson someone has to be responsible for ethics overall. The managementwithin the Volvo Group should be responsible for this and as Ms. Nilsson put it “own theissue”. However, the people on this level do not have the time to thoroughly work with ethics.One person should be responsible for it and that is according to Ms. Nilsson how Volvostarted with their environmental program. Today, Volvo has three to four people working fulltime with the environmental concerns Volvo has: the environmental accountant, theenvironmental coordinator and the environmental manager and the environmentalcommunicator.
Ms. Tornberg stated that although Volvo does not have a formalized ethics forum, ethics ispart of many departments within the organization. Ms. Tornberg further stated that ethicalissues are something that affects everyone within the company. Many of Volvo’s ethicalissues are focused on the HR department and how this department handles certain questions.
According to Ms. Tornberg ethics is something that reaches managers at different levels andin different departments. These managers often have different degrees of awareness regardingspecific ethical subjects. Ms. Tornberg further mentioned that managers need to motivate and
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work closely with employees and hence, handle sensitive employee questions that may arise.Ethics is furthermore something that goes all the way down to blue-collar worker level and anissue everyone within an organization is affected by. One example of this is according to Ms.Tornberg if it is okay to take an eraser home or not.
According to Ms. Nilsson the people working with ethics within a company may further havea network of people working with the same issues. Nike is according to Ms. Nilsson a goodexample. They claim to have over 100 people working with ethics and social responsibilitywhereas many only work part time and belong to such a network mentioned earlier.
♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
Ms. Nilsson stated that one person working and being responsible for ethics within anorganization is sufficient. She thought that a whole committee seemed to be a bit over the top.However, the lonely person needs help from others. There is too much work with informationspreading, training etc. for one person to control.
Regarding the background of such a person it is not necessary for him/her to have a longexperience within the company. According to Ms. Nilsson one requirement was that thisperson had a great interest in the subject of ethics and that this person was not afraid to raise“uncomfortable” ethical issues within the organization. Ms. Tornberg concluded that someoneshould be the driving force for what the company stands for regarding ethics.
Although that Ms. Nilsson felt that there was no need for a whole ethics office she stated thatthe single person working with ethics could work as the initiator of ethical issues as well asthe coordinator of these types of questions. On this issue Ms. Tornberg stated that if the needfor an ethics committee existed, there had been one. Ms. Tornberg further stated that nocertain person exists within Volvo who is in charge of ethics and it is therefore hard topinpoint any specific roles on to someone. Ms. Nilsson further added that the person workingas the initiator and coordinator might also work as the devils advocate, meaning that thisperson raises the ethical issues of certain decisions. Ms. Nilsson also stated that the personmight also take on the role of a channeler, meaning a person who opens up communicationchannels around the organization. Finally Ms. Nilsson stated that the person responsible forethical issues is suitable for a mediating role, both internally and externally as well as afacilitating role, supporting the different departments within ethical areas.
Even though no ethics committee or single ethical ombudsperson exists within Volvo, the HRdepartment does according to Ms. Tornberg however deal with many issues within ethics.This could be for example the issue of letting employees go. Regarding this issue the HRdepartment is probably, according to Ms. Tornberg, the most knowledgeable. The HRdepartment does also work closely with the employees and can often see what ethicaldilemmas that may arise, which then are discussed and hopefully avoided. According to Ms.Tornberg there is however no specific coordinator or a specific structure for this. Ms.Tornberg further stated the Americans have made more progress within this area due to thejudicial system, which punishes all who do not obey the ethical codes and policies that acompany has written down
Regarding to whom the ethical ombudsperson should report to Ms. Nilsson thought that theperson responsible for the strategic questions or the Vice President of the company wouldprobably be those most suitable for receiving these reports.
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On the issue of whether the ethical ombudsperson should be selected by the top managementor not, Ms. Nilsson felt that top management should be responsible appointing the person whois to work with ethics. The reason for this is that a company is not a country or a democracy.No position is staffed by a democratic election of who is to be appointed. Neither should it bepossible for the workforce to nominate someone within the company
5.1.2 A CODE OF ETHICS
According to Ms. Nilsson Volvo has an empathic feeling for its employees and for society atlarge and to have a code is highly important from a competitive perspective. The companysees itself as an organism and the code states that “this is what we stand for” as opposed tosomeone who just sells trucks. Furthermore according to Ms. Nilsson Volvo acts like a largefamily where everyone tries to work towards the best goal possible. Ms. Tornberg stated that“The Volvo Way” is somewhat a code of ethics. The document talks about the importance ofteamwork, leadership and respect for the individual. The Volvo Way further describes ethicalcodes and values, which apply to all within the company all over the world. According to Ms.Tornberg “The Volvo Way” could perhaps be adapted to the different markets around theworld.
♦ THE PURPOSE OF A CODE
According to Ms. Nilsson a code should express some kind of minimum standard that thecompany stands for. It is difficult to express to others (stakeholders) that “this is how wethink” without having values and norms written down. Management can conduct a nicespeech on a subject, however one does not know if this is something that comes from amanagement perspective only or if it actually is a feeling that everybody within the companyhas. If ethics is to be a key resource of the company, it has to come from within all employeeswithin the Volvo Group. Ms. Nilsson concluded that a company is not more ethical or sociallyresponsible than its “weakest link”, the weakest link should according to Ms. Nilsson bedefined by an ethical code. Ms. Tornberg stated that a code defines the minimum expectationsof the employees. A code could furthermore be of help when guiding employees to acceptablebehavior.
Ms. Nilsson stated that if Volvo wants to be ethical, the company has to find these ethicalvalues and norms within the individual himself to be transferred to the management who thencommunicate these values and norms through a communication process internally andexternally.
Regarding the purpose of a code Ms. Nilsson further stated a code should be part of thestrategy and an issue that should belong to the management. It will cost the company moneyto follow a code in the short run, however it will emit profits in the long run. Ms. Nilsson alsostated that a code acts as a guideline (“styrdokument”) and the company is able to use it forprojects. Furthermore the management must be dedicated to having a code to rely on in thestrategy process or else the code will end up last in the list of priorities.
According to Ms. Nilsson a code does not only act as a distinguishing function, externally. Togain and to comprehend the “internal” Volvo feeling among employees is highly important inorder to receive external trust i.e., trust from stakeholders and especially politicians. Ms.Nilsson did however feel that the customers are more distant to this issue. This aspect of acode as a distinguishing function has more to do with business-to-business relations ratherthan seller to buyer. The Volvo feeling and these codes of ethics or codes of conduct must
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come from the inside of each person working at Volvo and the company does not use codes ofethics as a PR tool.
Volvo does not intend to disperse a report (as they do within the financial and environmentalareas), on their ethical conduct at the moment. The reason for this is that there is not enoughinternal strength and support for such a public stand within the company. The risks involvedby giving out a report that is not sufficiently based within the organization could causeconflicts among employees and between employees and management, rather than having apositive effect. When a company hands out such a report, it is expected to follow it.Therefore, the internal understanding and support for a report must be strong prior to makingsuch a public stand.
According to Ms. Nilsson a code of ethics and/or a code of conduct does have a correctingfunction. The employees or an individual questioning the code must believe in the code orelse it would feel awkward to be questioned about it. Furthermore, the production workersmay question the management on the codes on working conditions. An example on such aquestion could be; “ Do we really have the best working conditions?” It is important then tohave the right channels for such a question to be delivered to the management. If one singleworker is opposed to the working conditions, he or she may be harassed by the fellow workersif the question is not channeled correctly or handled well by management.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
On the issue of who is involved in developing the code Ms. Nilsson stated that there are53,000 employees within the Volvo Corporation today and that it is impossible to becompletely democratic but the management must be open for suggestions. According to Ms.Nilsson the management develops the code together with the different departments in order tocover all the different aspects that these departments may add on a specific issue. By doingthis, the organization is able to construct an extensive code. When working on similar issuesVolvo has tried to ask themselves what they have accomplished so far within the specific areaand what falls within the frame of that area. After this is done a developing process begins.
On the issue of who is involved in developing a code Ms. Tornberg stated that regarding “TheVolvo Way” the initiative came from the company’s executive officer Mr. Leif Johansson.Ms. Tornberg further stated that it would be ideal if employees from the different companiesas well as from the different departments and both white- and blue- collar workers could havetheir say when developing a code. This group could be seen as a cross section of theemployees within the company. Such a group would however, according to Ms. Tornberg,need certain guidelines given to them by management.
According to Ms. Nilsson the management should control the initiating process in order tostart up the project of developing the codes of ethics and the codes of conduct to later involveothers. For example, when developing codes within the area of social responsibility, whereVolvo has three core values: environment, safety and quality, the company must take thesethree values into account when developing the codes. All departments responsible for thesethree values including people working with strategy, trademark, communication, and humanresources (HR) have to be involved in the developing process. The developing process shouldbe lead by the top management, however it is also important for management to look at othercompanies in order to find out how they have developed their codes and to do researchinternally among employees and among external stakeholders.
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♦ THE CONTENT OF A CODE
According to Ms. Nilsson it would be appropriate for Volvo to establish one very detaileddocument, an ethical code, which covers all the small details such as conflicts of interest,bribes, and “whistle blowing”. This document would probably be very extensive and it wouldnot be suitable for distribution. However, Ms. Nilsson stated that this document should beused as a guidebook that is available to all the members of the organization and if employeesfind themselves in a sensitive ethical situation they could turn to this document for guidance.Furthermore Ms. Nilsson stated that the guidebook could serve as a foundation for a smallerdocument that could be distributed internally within the organization, preferably on theorganization’s intranet. She also stated that it would be good to include general informationregarding the code and the organization.
Ms. Nilsson stated that within Volvo they are perfectly aware of that their responsibility forthe products does not end when the customers have purchased them. According to Ms.Nilsson the employees at Volvo are aware of that their products have a great impact on theenvironment and that there is a need to follow up on this aspect. Safety is also important forVolvo to focus on and develop codes for. These aspects need to be considered whendiscussing the content of a code.
“The Volvo Way” could according to Ms. Nilsson, be a good example of what would beconsidered to be important to include in a code of ethics. Ms. Nilsson felt that she personallywould like to include many more aspects in a company’s code of ethics or code of conduct.However, it is important to find out if it is necessary.
Ms. Nilsson further stated that it should be noted that ethical behavior does not end at“company borders”. Volvo asks their suppliers to live up to certain standards they believe areimportant. The company also checks their suppliers regularly to make sure they live up toVolvo’s expectations in regards to for example, the products. Training is offered by Volvo tothose suppliers that do not live up to the codes or requirements that Volvo has. Due to this it isimportant to make sure ones own company lives by the rules before questioning others andthat an ethical code could be of help in this particular issue.
According to Ms. Nilsson Volvo only buys transport services from ISO certified companies.These are not standardized around the world and it is frustrating to work with hundreds ofstandards. It is impossible to cover all areas and find codes of ethics for all, says Ms. Nilsson.The codes should preferably be on a global basis, however national laws and regulationscannot be ignored. In Brazil for example, Volvo works a lot with “The Volvo Way”. Ms.Nilsson ended this discussion by saying that she would like to find out how the corporationwants to do business and how the company prefers to work with employment issues, thendevelop the codes from there.
According to Ms. Nilsson, Volvo should find the minimum standard on each of its differentforeign markets due to the great difference in culture and thereby the difference in values onwhat behaviors (and i.e. codes) are important and which are not.
According to Ms. Nilsson, Volvo’s Swedish code of ethics and code of conduct should remainvalid across borders for Volvo if they are non-existent on international or national basis.However, the company does not follow up on how these codes are conducted on foreignmarkets. For example, in case of a fire emergency, different countries have different ways andstandards of controlling the safety and to prevent such an emergency.
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When asked if she had anything to add Ms. Nilsson stated that it is important for anorganization to “walk the talk” from a management perspective. “The Volvo Way”, focuseson energy, passion and respect for the individual. This booklet came out at a bad time whenVolvo tried to acquire Scania and nothing happened. The employees felt that they did not getany information on what was going on with the acquisition.
The third aspect of “The Volvo Way”, respect for the individual, was repudiated. Passion didnot work either. Passion is not something you can request from someone, it is something yougain. “The Volvo Way” has not been received very positively due to these factors. Thecompany had a vision on how “The Volvo Way” should be practiced and a communicationplan came at the same time on how this should be dispersed to the different Volvo plantsaround the world. However, there were no formal ways on how they were going to implementthis. One question that was asked by the management was: “ How do we work with this to beable to live up to this vision?” This indicates that you cannot just have a code, you must knowhow to apply it strategically so that everyone works by it. One part of implementing such astrategy would be to “Walk the Talk” by managers.
An example within the Volvo group on one who walks the talk is the Chief Executive Officer,Mr. Leif Johansson. According to Ms. Nilsson, Mr. Johansson buys green line products andrecycled items when shopping. These actions by Leif make the media, for example, believethat Volvo actually is socially responsible and environmentally concerned. Ms. Nilssonconcluded by stating that actions have a greater impact than words.
5.1.3 ETHICS TRAINING
On this topic Ms. Tornberg stated that first time group managers are trained in ethicaldilemmas. This is done by working with a number of real cases that have taken place withinVolvo. According to Ms. Tornberg these cases are good to work with in groups of onlyemployees or together with managers. These cases further make everyone think criticallyabout what is right and wrong in a specific situation. Ms. Tornberg has furthermore been incharge of organizing a network of managers from various departments where it was discussedwhether or not ethical dilemmas should be brought up as a subject to make the managers workwith real dilemmas among each other.
Ms. Nilsson felt that ethics training is important but she did not know exactly how it would becarried out. Volvo had training for its employees regarding their social responsibilityprogram. Ms. Nilsson did however not know if that is the best way to educate employees andmanagement about other ethical issues. To provide the employees with a “toolbox” for howethics should be used may be enough to guide the personnel and to do random samplecontrols among employees on how they have understood the ethics within the company.
Regarding an independent consultant that would carry out the training Ms. Nilsson felt thatthis was not recommendable. She felt that this might be quite risky for the company. Volvoneeds to believe in the ethical issues themselves and therefore the training must come fromwithin the company, not from the outside. However, Ms. Nilsson added, it might be wise touse a consultant in order to know how the entire process of developing codes, trainingemployees and setting up ethics officers works. On the issue of using an external consultantMs. Tornberg stated that this depends on the material one has to begin with. If a consultant isbrought in, he or she must according to Ms. Tornberg be extremely knowledgeable about thecompany. Ms. Tornberg concluded that it is probably easier that someone who has worked
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with the company for a while and, hence, knows the company well handles the ethicaltraining. It furthermore sounds a bit dangerous to give the whole responsibility to a singleperson and that these types of issues should be handled by managers within a company.
According to Ms. Nilsson the internal dialogue, during the educational process regardingethical issues, is of high importance. It is furthermore important not to make the ethicaltraining too complicated.
Regarding awarding employees for performing ethically Ms. Nilsson felt that this would beawkward. She stated that she could not imagine how this would work. On this topic Ms.Tornberg stated that it is necessary to measure the individual’s behavior in order to rewardhim or her. Volvo does measure customer satisfaction and maybe that could be a way ofdetermining whether that individual should have a raise or not. Another way of measuring thistype of performance is to let managers grade how satisfied they are with their input at workand compare that to what demands that they have had on themselves. According to Ms.Tornberg such as system is not impossible to implement, but Volvo does not have one today.
5.1.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS
♦ ADVANTAGES
According to Ms. Nilsson Volvo is a big global company and must take responsibility inregards to environmental concerns. If Volvo did not care about society or the environment,stakeholders would question the company. Further according to Ms. Nilsson, Volvo gains acompetitive advantage if the company uses well-formulated ethical codes for the employees.The market for good employees is highly competitive and Volvo must work on attractingthem as well as keeping them.
It is also important to be looked upon as an ethical company compared to other companies inthe same industry in order to gain and keep customers. Ms. Nilsson further added thatinvestors are interested in companies who engage in social responsibility programs and goodbusiness ethics. Investors check the companies accounting procedures and the companiespotential in the long run. According to Ms. Nilsson ethics is seen as a resource for the VolvoCompany and is used as one compared to other companies. A final positive side of aformalized ethics program within an organization is according to Ms. Nilsson that a codeforces the organization to be ethical.
According to Ms. Tornberg an ethical code will prevent employees from being confused. Acode would provide them with clear guideline on what Volvo wants. An ethical codefurthermore clarifies management’s opinions of what it is that makes behaviorethical/unethical and it also motivates employees to consider ethical values in decision-making. According to Ms. Tornberg ethics is furthermore important for external parties, i.e.stakeholders. It is according to Ms. Tornberg never good for a company’s profits to use forexample child labor. There are a number of examples of this. One example is IKEA that werecaught using child labor and another example is the case of ethical funds that were criticizedfor not being so ethical after a thorough analysis of the companies in the portfolios had beendone.
♦ RISKS
A formalized ethics system could according to Ms. Nilsson become rigid if it is toocomplicated and detailed. It is important to handle the code correctly and come around
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obstacles if they exist. On the risk of indoctrinating employees through a formalized ethicsprogram Ms. Nilsson stated that if employees are indoctrinated by the code, the organizationhas not lived up to it. Ms. Tornberg stated that she felt that indoctrination is a strong word andthat Volvo does not have such ethics that would threaten to do this. Maybe if the CEO Mr.Lennart Johansson made the employees pray each morning the situation would have beendifferent.
5.2 CASE 2: VOLVO U.S.A.In this section the interview with Mr. Chuck Wood, who is the Vice President of HumanResource Management and Administration within Volvo Construction Equipment (VCE)North America, Inc, will be presented. Mr. Wood further serves on the AB Volvo Council onCompensation & Working Conditions. Members of this council are directly responsible fordrafting ethics guidelines and principles. Mr. Wood is further responsible, along with localmanagement, for drafting and developing country/industry specific policies for the localcompany.
Volvo Construction Equipment is one of the world largest manufacturers of constructionequipment with a very competitive and broad product program. Within this particular businessarea, a total of more than 150 different models are produced. Production plants are located inSweden, Germany, France, the U.S., Canada, Brazil and Korea. Volvo ConstructionEquipment is a global company with sales in more than 100 countries, and offers qualifiedworldwide service and prompt global supply of spare parts. The majority of sales are in NorthAmerica and Western Europe.
5.2.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT
Regarding an ethics committee within VCE in North America Mr. Wood stated that thecompany does not have a formal ethics committee, however the company is moving towardshaving a HRM steering committee. This committee involves the President of the company,the Vice president and the General Plant Manager as well. Mr. Wood further stated thatethics would be initiated in the process of creating this committee.
Regarding the roles within the HRM steering committee Mr. Wood stated that the role of thecoordinator would fall upon the Vice President of Human Resources and Administration, thatis, Mr. Wood himself. The role of a coordinator would furthermore include an attorney, thisdue to the fact that ethical issues also involve legal issues.
Ethical issues within VCE are communicated through something that internally is called thepeople’s manual, which is a thick book covering a number of various aspects. Each employeewithin the company receives an issue of this book. According to Mr. Wood this manual maybe seen as the instrument that works as the channeling function.
The role of the Devils Advocate would not fall upon a single person, instead this kind of workwould occur when drafting the policy within the HRM steering committee. Furthermore Mr.Wood stated that this kind of work occurs every time the committee works on a policy.Regarding the role of the facilitator this responsibility would probably fall on the chairman ofthe committee, while an “inside” attorney would assume the role of the mediator.
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♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
On this issue Mr. Wood stated that Volvo is not the size of IBM and can therefore not justifyhaving a whole ethics committee. What the company does is that they use the HRMcommittee. The HRM committee is involved in all human resource issues, including ethics,and this committee develops all policies involving human resources, including the ethicalpolicies.
Mr. Wood stated that every company should have an ethics committee, however it is just amatter of if it should be combined with another committee or if it should be a freestandingentity. Within Volvo, the ethics committee is combined with the human resource steeringcommittee. Consequently, according to Mr. Wood, who is involved in the committeetherefore depends on what the ethics committee is combined with.
According to Mr. Wood, VCE North America does not have a single ethical ombudsperson.Instead, as with all other issues within VCE, the efforts within ethical issues are a team effort.Furthermore, VCE cannot justify having a person working full-time with ethics, this due tothe fact that such a position is not justifiable financially considering the size of the company.On the hypothetical question whether a person working full time with ethics within VCENorth America should be recruited from within the organization or not Mr. Wood stated thathe felt that that particular issue was not important from his point of view.
5.2.2 A CODE OF ETHICS
♦ THE PURPOSE OF A CODE
According to Mr. Wood there are mainly two reasons for a company, such as VCE NorthAmerica, to have a code of ethics. The number one reason according to Mr. Wood is tocomply with the law. The second reason is to avoid conflicts of interest between employeesand the company and the customers and the suppliers. Mr. Wood further added that in the U.Semployees need a constant reminder, in the form of a formal code, since the businessenvironment is so competitive.
Regarding the issue of a code setting the minimum standards for employees Mr. Woodresponded that VCE does not have minimum and maximum standards, just standards. Mr.Wood further stated that one cannot write standards really strictly; they have to be broad and abit loose in order so that employees can interpret other things into the code.
On the issue of a code helps the company to have a distinguishing function externally Mr.Wood stated that he was not aware of whether ethical policies were communicated externallyor not. Mr. Wood did however state that certain Volvo core issues, such as safety,environment and teamwork, are communicated. Mr. Wood further stated that these may belooked upon as broad issues and that they are communicated externally.
Mr. Wood further stated that if you are known as an ethical company your company is morestable and that through this the company gains a better reputation and is more apt to attractingbetter people and certainly more apt to having reliable suppliers and customers.
On the issue of a code having a distinguishing function externally Mr. Wood concluded thatthis is becoming more and more important since investors are starting to look up these issuesnowadays. According to Mr. Wood investors are checking up if the company uses child laboretc.
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♦ WHO IS INVOLVED IN THE DEVELOPMENT OF A CODE
Mr. Wood stated that in the case of VCE North America, the policies that are used today were“leftovers” from the Clark area, that is the company used to be Clark, before they wereacquired by Volvo and became VCE. According to Mr. Wood these policies were thenreviewed and updated by the lawyers according to the latest within the law. Furthermore, asmall group of senior people checked up on the policies to make sure they covered thebusiness aspects and the business environment adequately.
Regarding on who should be involved the development of a code Mr. Wood stated that if oneis talking about a democratic process it all depends on how far down the chain one want to go.In the U.S it is according to Mr. Wood impossible to have a group of employees settingpolicies and wages, this due to the fact that they would then violate the National RelationsLabor Act.
According to Mr. Wood, management typically develops these kinds of policies, but they areso standard in the U.S that the company would probably not see the need to get all theemployees involved. However, in the past policies have, according to Mr. Wood, beencirculated among the employees in order to get input from them.
♦ THE CONTENT OF A CODE OF ETHICS
According to Mr. Wood, VCE North America has a document that covers a wide variety ofdifferent issues. This document is divided up into different sections, one section is calledPerformance, Management, and Conduct, this section may be, according to Mr. Wood, lookedupon as a sort of code of ethics. Within this section the following policies are included:
! Anti trust compliance policy! Legal matters policy! Ethics and business transactions! Employee conduct! Harassment! Parents! Smoking! Safety
According to Mr. Wood these are different policies that are separately drafted. As aconclusion on this issue Mr. Wood stated that the U.S are great at having policies, whetherthese are followed or not is a different matter.
Regarding the different levels of a code of ethics Mr. Wood stated that VCE North Americarecently has developed a Human Resource (HR) agenda. According to Mr. Wood this is not apolicy, but more guidelines for the development of HR policies locally. In this policy issuessuch as the use of child and slave labor are brought up. Furthermore, on the issue of differentlevels of a code Mr. Wood concluded that it is impossible to force a code upon differentcountries, one can supply guidelines but not force a code upon different cultures.
5.2.3 ETHICS TRAINING
Ethics training is according to Mr. Wood provided, within certain areas and topics, tomanagement, for example harassment. When this training is conducted understanding theparticular issue and how to deal with it is highlighted. Regarding the length of the trainingsessions Mr. Wood stated that it is not possible to send people away for one to two day
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workshops since this would be impossible to fit into people’s schedules. Furthermore Mr.Wood stated that it is not an effective way for people to learn. According to Mr. Wood,managers like it in itty bitty chunks and said that the attention span would not be tip top in atwo-day workshop for example. Mr. Wood concluded that a one-hour video here or there issufficient.
Within VCE North America, an external consultant handles the ethics training. Volvo has, asstated above, an internal policy regarding ethics, however the external consultant goes,according to Mr. Wood, more into detail than what the internal policy does.
Regarding rewarding ethical behavior Mr. Wood stated that certain things are included in thecondition of the employment. Behaving ethically, just like arriving in time to work, areincluded in these conditions. If an employee has a problem with the ethical policy of thecompany, Mr. Wood stated that this person should feel free to look for a job elsewhere. Mr.Wood concluded the discussion on this issue by stating that one cannot tell a person that youare sliding down ethically, you need to shape up. Furthermore Volvo does not provide newemployees with a crash-course in ethics, that is what back up checks such asrecommendations and CVs are for. According to Mr. Wood it should be ethical people thatare hired.
As stated above ethics training is, according to Mr. Wood, only provided to the management.However, the other employees are expected to behave ethically and in accordance to themanuals. Mr. Wood concluded that in his opinion ignorance is no excuse for breaking the law.
5.2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS
♦ ADVANTAGES
According to Mr. Wood one advantage of formalizing ethics is that if ethics are formalized itprohibits the company from breaking the law. As an example Mr. Wood stated that if thecompany decides to terminate the employment of an employee for doing something unethical,that is not illegal, an ethical policy might be of use. This due to the fact that when theemployee’s lawyer state that he wants to know why the employee was terminated thecompany may point to the ethical policy and explicitly show that the employee violated thepolicy.
Mr. Wood further stated that the advantages of having a policy far outrank the negativeaspects of having one. Regarding the issue of formalizing ethics within an organizationclarifies management’s opinions of what it is that makes behavior ethical versus unethical Mr.Wood stated that he felt that this was one of the positive aspects of having formalized ethics.Furthermore Mr. Wood stated that another positive aspect of having formalized ethics withinan organization is that an ethical code makes clear what external parties may expect from anorganization. This mainly due to the fact that investors are more and more interested in howethical companies are.
On the issue of whether formalizing ethics within an organization motivates employees toconsider ethical components in their decision-making Mr. Wood stated that he felt that theword motivate was not the proper word to use. According to Mr. Wood motivate is a wordthat causes an employee to do something good as opposed to a word that prohibits him or herfrom doing something bad.
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Another advantage of having formalized ethics in an organization is that it reduces the risk ofthe company. As an example Mr. Wood stated that when it comes to harassment the companyhas a duty to communicate to employees that the company does not tolerate harassment. If nosuch policy exists, and a situation occurs where someone is harassed the company may behurt if they cannot show that they have a harassment policy. According to Mr. Wood thiswould imply that the company is not sensitive to this particular issue. Furthermore, by nothaving a formalized policy the company could get hurt legally.
♦ RISKS
According to Mr. Wood the risk with any policy is that the policy is not enforced or that thecompany make exceptions from the established policy. However the advantages, as statedbefore, outweighs the risks.
Regarding the risk of indoctrination of employees when formalizing ethics within anorganization Mr. Wood stated that this depends on what rule the company is trying to forceupon the employees. As an example Mr. Wood stated that if you force people that arestationed in the Far East, to go to a Buddhist temple everyday this could probably be seen asindoctrination of employees. The policies at VCE North America are however not designedthat way, the policies within VCE comply with the law and they do promote respect for theindividual. According to Mr. Wood the policies are pretty much just common decency. As aconclusion on the risks of formalizing ethics within an organization Mr. Wood could notrecall that VCE had ever received any complaints that the policies had been forced upon theemployees.
At the very end of the interview Mr. Wood stated that he felt that since Sweden is a moreethical society it is probably less of a need to formalize ethics, and write down ethical codeson paper, than what it is in the U.S.A, which is a less ethical society.
5.3 CASE 3: VOLVO IN CHINAIn this section the interview with Mr. Finn Adolfsson will be presented. Mr. Adolfsson is themanager of the Asian markets within the Volvo Bus Corporation he is further responsible forVolvo Bus’ Joint Ventures in China, Xian Silver Bus Corporation and Shanghai Sunwing BusCorporation.
Volvo Buses is the world’s second largest manufacturer of heavy buses and coaches. Therange compromises complete vehicles, chassis and bus bodies. Volvo also offers transportsolutions for public transport, leasing, financing and service contract maintenance. Productionis carried out in Europe, North America, South America and Asia for more than 60 markets.During the last five years, the production of vehicles has increased by 50%. Volvo Busesemploys approximately 8.900 persons, about 90% of whom work outside of Sweden.
5.3.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT
Mr. Adolfsson does not feel that ethics management is something that is the responsibility ofcertain people, according to Mr. Adolfsson ethics needs to be the responsibility of those whohave the business responsibility. Mr. Adolfsson did however add that there are exceptions andthat within a big corporation, such as Volvo AB, there might be a cause for having somethingalong the lines of an ethical code. This code would then preferably be known within thecorporation and the corporation would further try to live by the set standard. Mr. Adolfssonconcluded that, in his opinion the person carrying out some sort of business activity, and isresponsible for this activity, is also responsible for the ethical issues within this area.
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♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
Mr. Adolfsson stated that he felt that the thought of ethical committees and/or ombudspersonswas a bit foreign. When it comes to issues regarding business ethics and manners Mr.Adolfsson felt that in these issues the employees are formed by the company and by thegroups in which one is a part of. For example, ethics is a frequently recurrent issue inmanagement teams of different kinds where business is discussed. The ethical aspects that arebeing discussed might be for example how the company views its employees or the productsthat are being developed. Mr. Adolfsson stated that he found it hard to see that there was aneed for a special ethical organ within the Volvo Bus Corporation, Mr. Adolfsson didhowever add that this might be due to the fact that he was not used to this idea.
If one however chooses to open up the discussion regarding ethics one may, according to Mr.Adolfsson, look upon the three core values that Volvo has; product safety, environment andquality. If these core values are looked upon as also being ethical values Volvo works quiteexplicitly with ethics. For each of these three areas there is a manager who is responsible forthat particular area. These three people are found in different kinds of staff positions.According to Mr. Adolfsson these three managers are responsible for the differentdevelopment aspects and for their particular areas of responsibility in the ongoing businessactivities of the Volvo Bus Corporation. These three managers are furthermore responsible foradvocating that Volvo Bus Corporation meets the goals that are set up within these threeparticular areas. The three managers are according to Mr. Adolfsson placed at the HeadQuarters of Volvo Bus Corporation and they are in immediate connection with themanagement team.
According to Mr. Adolfsson one may actually say that these three persons, that areresponsible for the areas of quality, safety and environment are functioning as the initiators,coordinators, channelers, facilitators and the mediators. Mr. Adolfsson further stated thatwhen it comes to safety issues, that are important from many perspectives, not the leastconsidering the image of Volvo within this particular area and the more and more far reachingproduct liability laws that are being established. Due to the fact that this area is of suchimportance to Volvo a special committee has been established within this field.
5.3.2 A CODE OF ETHICS
♦ THE PURPOSE OF A CODE
Mr. Adolfsson stated that he had a very concrete view of the purpose of a code. If thecompany has a code this means that the employees know how they are expected to behave andhow they are expected to act in this issues. By having a code the managers of the companyalso know how to handle the employees’ questions within this particular area. According toMr. Adolfsson a code further creates clarity and it creates a situation where all the employeeswithin the company are working in the same direction.
Regarding the ethical rules within Volvo Mr. Adolfsson stated that these revolve mostlyaround bribes, commissions and agents. Mr. Adolfsson further stated that within these areasthe rules are pretty straightforward and clear. What could be added is according to Mr.Adolfsson that there have been a number of years since these rules were established and thatone might want to add a few areas to the already existing rules. These are areas that might nothave been considered to be ethical issues in the past but have now become ethically sensitiveissues such as exhaust emission and product safety. According to Mr. Adolfsson these types
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of issues could probably be described as ethical areas. Mr. Adolfsson did however admit thatwithin Volvo Bus Corporation this broadened view of ethics is not used.
Mr. Adolfsson stated that he felt that these issues are actually closely related to the corevalues of Volvo, these values are however not linked to business ethics on a daily basis.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
Mr. Adolfsson stated that he had not given this a lot of thought. Mr. Adolfsson did howeverstate that the rules regarding business ethics, seen in a narrow perspective, has come asproduct from the management, which has probably, according to Mr. Adolfsson, worked outcertain staff functions and organs considering the laws and regulations that the companyneeds to consider.
Mr. Adolfsson stated that he finds it hard to believe that this would be possible to deal with inanother way. A written document could possibly be circulated among employees butaccording to Mr. Adolfsson this would be difficult to handle, due to practical reasons, on abroad basis.
According to Mr. Adolfsson, it is furthermore important to consider that the averageemployee on an everyday basis does not consider explicit ethical issues. There are certainamounts of people who come into contact with these issues and think about them frequently.These people are also the ones that are most likely to be able to work intelligently with a code.
When it comes to issues regarding safety, emissions and quality there are a number of peoplewithin the automotive industry who are in contact with these particular issues. When it comesto these types of more implicit ethical areas there is a broad discussion and for example all theproduct developers feel a intimate relationship with the core values of Volvo.
♦ THE CONTENT OF A CODE
According to Mr. Adolfsson, there are ethical rules within Volvo, along with certain ways ofworking and attacking problems that are in relation with the three core values. Mr. Adolfssonfurther stated that theoretically it would be desirable to reflect upon business ethics within theareas where the company’s operations “connect” with society at large. A lot of the issues thatare included in the concept of business ethics are according to Mr. Adolfsson plain andsimple, for example to follow rules and regulations. One may of course, according to Mr.Adolfsson, have the ethical rules written down or one may leave it at being something thatgoes without saying.
Mr. Adolfsson further stated that there is a need for a company to create a profile and to createcompetitive power in a certain way and in this work the core values are very important.Regarding this work Volvo has a heritage when it comes to for example developing safeproducts. This heritage makes it natural and it also brings with it a certain way of going aboutproblems. Regarding business ethics it might be, according to Mr. Adolfsson, beneficial if thecompany performs a “search” and singles out the areas where it might be appropriate to havea written code or policy.
The risk with such a policy is however that it becomes too bureaucratic and it is questionablewhether this is desirable or not. It is however important according to Mr. Adolfsson thatcertain values and styles are a natural part of a company, this should further be a natural partof management communication and it is also something that the employees grow with within
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the company. If such a heritage exists, it eventually becomes natural what the decision shouldbe in a particular issue. Mr. Adolfsson further stated that although Volvo is a fairly old andlarge company there is a living contact between how things are handled today and how thefounders of the company, Assar Gabrielsson and Gustav Larsson, handled things back in the1920’s.
Regarding the extent of a written code Mr. Adolfsson stated that he usually tends to feel thatone should not overdo the writing of policies. If a company has too many written down rulesand regulations the management cannot expect the employees to master all of it. If one on theother hand keep the written material to a minimum it is possible to demand that the employeesare aware it. Mr. Adolfsson further stated that it might be appropriate, but probably notnecessary, with a document that belongs to the management and that extracts from thisdocument is being distributed among the employees.
It is however important according to Mr. Adolfsson, to have a clear view of the central areas.It is furthermore important to have a clear view of globalization and the development thatoccurs in society and in the business environment. Within these areas it is important formanagers to keep in mind what Volvo symbolizes.
Regarding the level of the code Mr. Adolfsson stated that he felt that a code should be globalwithin the company. It is according to Mr. Adolfsson nearly impossible to deal with issuesthat include values if the company has different values in different countries. It is important toremember that Volvo comes from somewhere and it stands for something and from thiscertain values evolve.
When it comes to adapting behavior to different markets Mr. Adolfsson brings up a tangibleexample; the regulations regarding emissions from buses. The rules and regulations withinthis area are very strict in Europe and in certain other areas of the world. This has promptedthe automotive industry to go to great lengths within for example engine development. Thequestion one may ask oneself is whether it is reasonable for a company to self inflict thedemand that the company should not market products that are not the most advanced producton any of its markets. This could be according to Mr. Adolfsson seen as an ethical issue.
The fact is that on certain markets in Asia no rules and regulations regarding emissions existwhile on other markets a very high degree of emission is allowed. If one then reviews whatkind of buses and to what prices they are being sold in these particular markets one finds thatVolvo by far outperforms these competitors regarding emission. The fact is that Volvo may,by selling slightly older buses, gain a foothold on a particular market and by doing so thecompany actually contributes to a better environment. In this case it is not a matter of a clear-cut ethical dilemma it is more an issue of selling to best possible price and still contribute to abetter environmental situation.
It should however be noted that, according to Mr. Adolfsson, Volvo Bus Corporation tries tomaintain only two technical levels of their products at the same time, one extremely advancedlevel and one slightly less developed that might be referred to as the prior generation. Itshould further be noted that this is in a market where new generations are replacing the priorgeneration of vehicles in a very rapid pace.
The result of the example above is according to Mr. Adolfsson that Volvo is doing business ina way that they may be very proud of regardless of what markets that are being discussed. The
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example further shows that one should not try to express in all to simple words and generalrules when it comes to ethics. Ethics becomes meaningful when one looks at the certainconditions within the particular areas.
5.3.3 ETHICS TRAINING
Mr. Adolfsson states that he is not sure whether the heading should be ethics or not. In orderfor training to be meaningful it needs to involve a number of different issues such as attitudetowards customers, product quality, the view of employees and emissions etc. Mr. Adolfssonfelt that he was not sure whether if it is meaningful to mix all of these areas, put the headlineof ethics on top of them, and then carry out training. Mr. Adolfsson did on the other hand feelthat it was necessary to develop each and every one of these areas and although one is guidedby certain core values the training is being carried out within these separate areas.
Whether an external consultant should be brought in to carry out the training dependsaccording to Mr. Adolfsson on the size of company and on how these issues have beenhandled traditionally. If Volvo were to carry out a training program within the ethical area ofsafety it would hardly require an external consultant since Volvo feels that they are marketleaders within this particular area. Mr. Adolfsson did however state that if training were to becarried out within Human Resources it might be meaningful to bring in an external consultant.Mr. Adolfsson concluded this discussion by stating that the issue of bringing in an externalconsultant much depends on what particular area of the broad topic of ethics that is beingfocused on.
On the issue of ethics training Mr. Adolfsson concluded that within the management teamsand marketing departments that may come into contact with ethical issues, in a narrow sense,it should exist an awareness regarding these issues. Furthermore there should be an ongoingdiscussion on the ethical topics that are dealt with.
5.3.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS
♦ ADVANTAGES
Mr. Adolfsson once again pointed out the fact that within Volvo Buses there is not a formalfunction named ethics. Mr. Adolfsson does however feel that it is important for anorganization to have ethics, or in other word to have clear values that are reflected in theproducts and in the behavior, especially in the core values. This is however according to Mr.Adolfsson something that is totally different from having a formal ethics department. Mr.Adolfsson views ethics as something very broad and he believes that it would be difficult toassign this issue to a single department. Mr. Adolfsson would want to work with ethics in aslightly different way, where a certain style of working with the issue is worked with and thenthis style is worked into the different sub areas like safety, quality, environment and treatmentof the employees etc.
According to Mr. Adolfsson one of the positive aspects of formalizing ethics within anorganization is that it makes clear what external parties may expect from the organization.According to Mr. Adolfsson it should be known that when one buys a Volvo product it shouldstand for certain things. This could for example be that although the product does not have thelatest in emission control it still goes to great lengths compared to other products on themarket. This is also true for the other core values within Volvo, it is important for a companyto be able to communicate to the customers the core values and what the company stands for.If a company communicates this it also needs to make sure that what is being communicated
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is also the truth internally. For this to be true the company must according to Mr. Adolfssonwork with its core values intensively.
Mr. Adolfsson concluded this discussion by stating that we need to remember that 20 yearsago when Volvo added environment, to quality and product safety, as one of their core valuesthis was seen upon as something strange and not on the same level as the other two values.However 20 years later, considering the development of the world, environment is lookedupon as something completely natural. This points out according to Mr. Adolfsson theimportance of working with these issues intensively and thoroughly.
♦ RISKS
There are of course according to Mr. Adolfsson a number of risks involved in formalizingethics within an organization. Regarding the core values of Volvo one obvious risk would beif something happened that pointed to the fact that Volvo products were not as safe as thecompany stated they were. It is always a risk if slip-ups occur in an area where the companyclaims to be very good. This means according to Mr. Adolfsson that there is always a riskassociated with having a certain profile of the company
Regarding the risk of indoctrinating employees Mr. Adolfsson felt that this was an interestingissue due to the fact that one is more than just an employee at Volvo. Values are somethingthat lies very close to the core of a human being and one should generally put a question markwhether a company should at all claim to formulate values. However Mr. Adolfsson likes tothink of this issue from a different perspective. When it comes to issues such as businessethics, the obedience of rules and regulations, putting emphasis on quality, product safety,environment and emission control it would make it harder for Mr. Adolfsson to work forVolvo if the company did not have the values that it actually has.
The risk of indoctrinating employees does, in other words, depend on what sort of values thatthe company wants their employees to adapt to. If the values of the company could be seen asoffensive or as something that is opposite of what certain employees tend to feel this might bea sensitive issue.
Mr. Adolfsson concluded the whole interview by stating that if one reasons in terms ofcreating a competitive advantage, rules and regulations are a little bit weak. If one on theother hand, consider values such as products, behavior and Volvo’s core values, it becomesmore interesting. Then one also comes very close to the title of this thesis, which is “Ethics asa Competitive Advantage”.
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6.ANALYSISIn the following chapter the material gathered for this thesis will be analyzed. As suggestedby Miles and Huberman (1994) the data will first be reduced, for this thesis this will be doneby a within-case analysis. Miles and Huberman (1994 further suggest that the data should bedisplayed. The data will be further reduced and displayed in this thesis in a cross-caseanalysis. The cross-case analysis will be presented at the end of the analyses of each researchquestion.
6.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVEDIN ETHICS MANAGEMENT.Studies conducted by Kaptein (1998), the Center for Business Ethics (1992), Benson and Ross(1998), and Drummond and Bain (1994) bring up the issue of ethics management within anorganization. The studies revolve mainly around the function of an ethics committee, who isinvolved in an ethics committee and the function and role of an ethical ombudsperson. At theend of the section a table, which summarizes the analysis, will be presented.
6.1.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN
Kaptein (1998) and the Center for Business Ethics (1992) state that there is a need for anethics committee within an organization. According to Ms. Nilsson it would be hard to justifythe use of a whole committee working with just ethics. On this issue Ms. Tornberg stated thatVolvo does not have a special committee for ethical issues but the HR department deals witha lot of issues that are of ethical nature. Ms. Tornberg further stated that ethical issues aresomething that affect everyone within a company. Although Ms. Nilsson felt that there was noneed for an ethics committee she stated that, in her opinion, there is a need for a singleombudsperson working with ethics within the Volvo Group. This statement is in accordancewith what is suggested by McDonald (2000), Drummond and Bain (1994), Kamm (1993) andDunfee and Werhane (1997) who mentions the use of an ethical ombudsperson. Ms. Nilssonfurther added that this person does not have to have been within the company for a long time,but rather more important that he or she is “burning” for ethical issues. This statementcontradicts McDonald (2000), Drummond and Bain (1994) and Kamm (1993), who have allstated that a single ombudsperson needs to have experience from within the company and isfully integrated into the corporate value system.
According to Ms. Nilsson the top management team should, as she put it, “own the question”of ethics. However, the people on this level of an organization does not have the time to workthoroughly with these types of questions and therefore the top management team needs toappoint a person, who is not afraid to raise ethical issues, to do the work. Ms. Nilsson furtherstated that it is fully legitimate that such a position is appointed by the top management andnot by some sort of democratic process, this due to the fact that Volvo is a company and notsome sort of democratic institution. This contradicts what Kaptein (1998), and Drummondand Bain (1994) stated when they said that if the top management appointed an ethicalombudsperson this would impair the trustworthiness of the position. Ms. Tornberg stated thatthe company needs someone who is the driving force of ethics within the organization. This isalso in accordance with what is being stated by the Center for Business Ethics (1992) andKaptein (1998) when discussing the initiating function of an ethics committee.
62
Kamm (1993) and Drummond and Bain (1994), state that a single ethical ombudspersonshould report to directly to the CEO or to the board. According to Ms. Nilsson, the ethicalombudsperson should report to the person responsible for strategic questions or the VicePresident of the company. Although, Ms. Nilsson felt that there was no need for a wholeethics office, she stated that a single person working with ethics could work both as acoordinator and the initiator, as suggested roles for a committee by the Center for BusinessEthics (1992) and Kaptein (1998). Kaptein (1998) further mentions the roles of a channeler, adevils advocate, a facilitator and a mediator as parts of an ethics committee. According to Ms.Nilsson, all these roles could be assigned to one single ombudsperson. It is however importantto notice that, according to Ms. Nilsson, a person working with ethics within an organizationneeds a network of people that he or she may turn to.
6.1.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A.
Mr. Wood stated that in his opinion it was not justifiable to have an ethics committee within acompany the size of VCE North America. Mr. Wood did however state that every companyshould have an ethics committee, which is in accordance with what is being suggested byKaptein (1998) and the Center for Business Ethics (1992). According to Mr. Wood it is just amatter of whether the ethics committee should be combined with another committee or if itshould be a freestanding entity.
Regarding having a single ethical ombudsperson, as discussed by McDonald (2000),Drummond and Bain (1994), Kamm (1993) and Dunfee and Werhane (1997), Mr. Woodstated that as with everything else within VCE North America ethics is a team effort. Mr.Wood could furthermore not see that it would be financially justifiable to have a personworking full time with ethics within VCE North America.
On the topic of an ethics committee, as suggested by Kaptein (1998) and the Center forBusiness Ethics (1992), Mr. Wood stated that VCE North America does not have a formalcommittee. Mr. Wood did however state that the company is moving towards an HRMsteering committee, which will deal with issues within the area of ethics. Kaptein (1998) andBenson and Ross (1998) state that someone from top management as well as someone fromthe Human Resource department should be involved in an ethics committee. This is inaccordance with what was stated by Mr. Wood, who said that the people involved in VCE’sHRM steering committee included the President of the company, the Vice President, theGeneral Plant Manager as well as the Vice President of Human Resources andAdministration.
According to the Center for Business Ethics (1992) and Kaptein (1998), one of the functionsof an ethics committee is to work as an initiator of ethical issues. According to Mr. Wood,ethics as a topic will be initiated in the process when the HRM steering committee is puttogether. Regarding the role of a coordinator, as discussed by the Center for Business Ethics(1992) and Kaptein (1998), Mr. Wood stated that this would partly fall upon the VicePresident of Human Resources and Administration. The coordinating role would furthermorefall upon an attorney, this due to the fact that ethical issues also involve legal issues.
According to Kaptein (1998), one of the functions of an ethics committee is to createcommunication channels between the corporation and its surrounding and between employeesand the management. According to Mr. Wood, ethical issues within VCE are communicatedthrough something that internally is called the people’s manual, which is a thick book
63
covering a number of various aspects. Mr. Wood stated that this document could be seen ashaving the channeling function, regarding ethics, within VCE North America.
Kaptein (1998) discusses that one of the functions of an ethics committee is to work as adevils advocate in ethical issues. According to Mr. Wood, this kind of work would occurwhen drafting an ethical policy within the HRM steering committee. Kaptein (1998) furtherdiscusses that a committee works as a mediator in both external and internal ethical conflicts.According to Mr. Wood, such work would fall upon an “inside” attorney. Mr. Wood furtherstated that the chairman of the HRM steering committee would work the facilitator, asdiscussed by Kaptein (1998).
6.1.3 WITHIN-CASE ANALYSIS OF CASE 3; VOLVO CHINA.
According to Mr. Adolfsson, ethics management is not something that is the responsibility ofcertain people. This contradicts what is being stated by the Center for Business Ethics (1992),Kaptein (1998), Benson and Ross (1998) and Drummond and Bain (1994), who suggest thatan ethics committee should be responsible for ethics within an organization. It also contradictswhat is being stated by Drummond and Bain (1994), McDonald (2000), Kamm (1993) andDunfee and Werhane (1997), who all suggest the use of an ethical ombudsperson within anorganization.
Mr. Adolfsson did however state that Volvo works, in a way, quite explicitly with ethics. Thisdue to the fact that Volvo’s three core values are ethical in nature. The three core values are;product safety, environment, and quality. For each of these three areas a special manager isassigned. According to Mr. Adolfsson these three managers may be seen as the initiators,coordinators, channelers, facilitators and the mediators within their respective fields ofresponsibility. This is in accordance with what is being discussed by the Center for BusinessEthics (1992) and Kaptein (1998).
Mr. Adolfsson did furthermore states that Volvo has a special committee within the field ofproduct safety, this due to the fact that this field is of vital importance of Volvo as well asthere are a number of far reaching product liability laws that need special attention. The use ofa committee within a field that is related to business ethics partially agrees with what is beingdiscussed by the Center for Business Ethics (1992) and Kaptein (1998).
6.1.4 CROSS-CASE ANALYSIS OF RESARCH QUESTION ONE
Miles and Huberman (1994) state that coding is analysis. To review and meaningfully dissecta set of field notes, while still keeping the relations between the parts intact is according toMiles and Huberman (1994), the “stuff of analysis” (p. 56). According to Miles andHuberman (1994), how one differentiates and combine the data one has retrieved is all part ofanalysis. Regarding coding, Miles and Huberman (1994) state that it is an option to dividecodes into a number of different schemes. One of these schemes is according to Miles andHuberman (1994) called perspectives, which involves ways of thinking about the settingshared by informants (“how things are done here”).
For this thesis the research questions have revolved mainly around topics that fit under the“how things are done here” category. It has furthermore been possible to detect certainpatterns that have made it possible to use a, for all the four research questions, standardizedcoding system. This coding system will be further explained below.
0 0 : Indicates that the respondent did not express an opinion regarding this variable.
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- - : Indicates that the respondent disagreed with previous research.- + : Indicates that the respondent interpreted the variable differently and gave his/her ownview on the matter.+ - : Indicates that the respondent partly agrees with previous research.++ : Indicates that the respondent agreed with previous research.
In table 6.1 the three broad topics of research question three, the people involved in ethicsmanagement, have been listed to the left of the table. The table includes a column where thedifferent variables have been listed while the three other columns include the findings of thethree cases. After the table the reader will be provided with a short discussion concerning thedifferences and similarities found in the different cases of this research question.
Table 6.1: The people involved in ethics management.
VARIABLE CASE 1Ms. NilssonMs. Tornberg
CASE 2Mr. Wood
CASE 3Mr. Adolfsson
The Initiator – +0 0
– + – +
The Coordinator – +0 0
– + – +
The Channeler – +0 0
– + – +
A Devils Advocate – +0 0
– + 0 0
The Facilitator – +0 0
– + – +
TH
EFU
NC
TIO
NO
FA
NE
TH
ICS
CO
MM
ITT
EE
The Mediator – +0 0
– + – +
Someone from topmanagement
0 00 0
++ 0 0
Membership in thecommittee is rotated
0 00 0
0 0 0 0
Someone from theHR-department
0 00 0
++0 0
WH
OIS
INV
OL
VE
DIN
AN
ET
HIC
SC
OM
MIT
TE
E
Someone who isnon-managerial
0 00 0
0 0 0 0
Experience fromwithin the company
– –0 0
0 0 0 0
Independent reportsto the C.E.O.
++0 0
0 0 0 0
Counseling andadvisory role
0 00 0
0 0 0 0
Impairedtrustworthiness ifselected bymanagement
– –0 0
0 0 0 0
Resolves ethicalconflict
0 00 0
0 0 0 0
AN
ET
HIC
AL
OM
BU
DSP
ER
SON
Responsible forongoing ethical work
0 00 0
0 0 0 0
Source: Authors’ own construction.
65
Regarding the function of an ethics committee the three cases show a conformity in the sensethat they all show that the respondents felt that the functions were useful, however, in adifferent setting than through a committee. Ms. Nilsson stated that she thought it would behard to justify having a committee working with just ethics, this is also what Mr. Wood feltwhile Mr. Adolfsson stated that ethics management was not something that belonged tocertain people. Ms. Nilsson interpreted the functions of an ethics committee as suitable for asingle person while Ms. Tornberg stated that although Volvo does not have an ethicscommittee these types of issues are quite commonly handled by the HR department. Mr.Wood did also point out that the HR department was used in issues regarding ethics.
Mr. Wood had his own interpretation of an initiating function. According to Mr. Wood, ethicswas initiated in the process of starting up a HRM steering committee. Mr. Adolfsson statedthat Volvo Buses had three managers responsible for the three areas of product safety,environment and quality. These three managers are also the ones responsible for initiating,coordinating, channeling, facilitating and mediating within their respective, ethical, areas.Mr. Wood stated that a coordinating role would fall upon the Vice President of HR andAdministration while the coordinating role would fall upon an attorney, due to the fact thatethical issues also involve legal issues. Regarding the channeling function Mr. Wood felt thatsomething that is internally referred to as the people’s manual would fill this function. Asstated before Ms. Nilsson felt that a single person could fill all the functions that have beendiscussed above.
On the issue of who is involved in an ethics committee the table shows mostly “no opinion”.This was due to the fact that, as explained above, none of the respondents felt that it wasnecessary to have a committee working with ethics. VCE North America is however using,what is being referred to as a, HR steering committee. In this committee Mr. Wood pointedout that someone from top management as well as someone from the HR department is a partof this committee.
As seen table 6.1 the area of an ethical ombudsperson is, with a few exceptions, filled with thecode for “no opinion”. According to Ms. Nilsson, the management should appoint a personwho is not afraid to raise ethical issues and this person should also report directly to theC.E.O. Ms. Nilsson further added that a single person working with ethics could need anetwork of people who can help out when the work becomes to overwhelming. On this issueMr. Wood stated that ethics, as everything else within Volvo, is a team effort. Mr. Adolfssondid, as mentioned above refer to the use of three managers within the three core values ofVolvo, product safety, environment and quality. These three areas are according to Mr. Woodethical in nature and the three managers therefore become responsible for ethical valueswithin the organization. Mr. Adolfsson did however not express any more opinions on thetopics suggested by the conceptual framework.
6.2. RESEARCH QUESTION TWO: A CODE OF ETHICSA number of authors have studied the wide area of a code of ethics, among them are Weaver,(1993); Kaptein, (1998); Weaver, Trevino, Cochran, (1999); Hosmer, (1987); Drummond &Bain, (1994) Deresky, (1997) and McDonald (2000). Mainly three areas are discussed; thepurpose of a code, who is involved in developing the code and the content of a code. In thefollowing sections these three areas will be analyzed by comparing the findings of the threecases of this thesis with the previous research conducted by the researchers mentioned above.
66
6.2.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN
♦ THE PURPOSE OF A CODE
Ms. Nilsson stated that a code should express some kind of minimum standard that thecompany stands for while Ms. Tornberg stated that a code defines the minimum expectationsof the employees. Ms. Nilsson further added that a company is not more ethical or sociallyresponsible than its “weakest link”, and this link should be defined by the ethical code. Thesestatements are in perfect accordance with what is being stated by Weaver (1993) and Kaptein(1998), who are saying that the purpose of a code is to define the minimum expectations ofemployees.
Weaver, Trevino and Cochran (1999) have stated that the purpose of a code is to assistemployees by including ethical values in decision making. This is partially validated by whatMs. Nilsson is saying when she states that a code acts as a guideline for the company. Ms.Nilsson did further state that the management must be dedicated to having a code to rely on inthe strategy process, or else the code will end up last in the list of priorities.
According to Ms. Nilsson, a code does not only act as a distinguishing function externally, thecode is further important to gain and to comprehend the “internal” Volvo feeling amongemployees, and this is highly important in order to receive external trust i.e., trust fromstakeholders and especially politicians. This statement adds to what is being discussed byKaptein (1998), who states that one of the purposes of a code is to provide an organizationwith a distinguishing function externally. Ms. Nilsson further added that she felt that thisfunction of a code has more to do with business-to-business relations rather than seller tobuyer.
Kaptein (1998) states that a code may have a correcting function within an organization. Ms.Nilsson who adds that the employees or an individual questioning the code must believe in thecode or else it would feel awkward to be questioned about it validates this.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
According to Hosmer (1987), the senior executives of a company should develop the ethicalcode. This is in accordance with what is being stated by Ms. Nilsson who further stated thatthe management should develop the code, together with the different departments in order tocover all the different aspects that these departments may add on a specific issue.
Ms. Tornberg did however state that it would be ideal if employees from the differentsubsidiaries as well as from the different departments along with both white- and blue- collarworkers could have their say when developing an ethical code. According to Ms. Tornbergsuch a group should be seen as a cross section of all the employees within the organization.This is somewhat in accordance with what is being discussed by Drummond and Bain (1994)who state that when developing an ethical code as many employees as possible should beinvolved in the process.
♦ THE CONTENT OF A CODE
According to Ms. Nilsson, it would be appropriate for Volvo to establish one very detaileddocument that deals with ethics. This document would cover all the details such as conflicts ofinterest, bribes and “whistle blowing”. Furthermore according to Ms. Nilsson such adocument would not be suitable for distribution. Regarding the subtopics, Ms. Nilsson’s
67
statement is in accordance with what is being discussed by Weaver (1993) and McDonald(2000), who state that the details mentioned above should be included in a code of ethics.
Regarding the levels of a code, which is discussed by Kaptein (1998), Ms. Nilsson stated thatdue to the fact that Volvo is a global company the code should be exhaustive rather than beingdetailed on each of the different markets. This contradicts what Kaptein (1998) suggests whenshe is stating that a code should be developed for each level: international, supranational,national, sectoral and individual.
Weaver (1993) and McDonald (2000) bring up the importance of including the relations withcustomers, suppliers and contractors in a code. This fits well with what is being stated by Ms.Nilsson when she is saying that ethical behavior does not end by the “company borders”.According to Ms. Nilsson Volvo asks its suppliers to live up to certain standards that Volvoconsider to be of importance, and if they do not live up to these standards training is,according to Ms. Nilsson, offered to the affected suppliers.
According to Weaver (1993) and McDonald (2000), a code should include generalinformation regarding both the code and the organization. Ms. Nilsson stated that in heropinion such information should be a part of an ethical code.
Further, Ms. Nilsson, stated that issues such as safety and environment are important topicswhen discussing the content of a code of ethics. This fits fairly well with what is beingdiscussed by Weaver (1993) and McDonald (2000) who bring up the importance of includingresponsibilities to shareholders, investors and social responsibility in a code.
6.2.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A
♦ THE PURPOSE OF A CODE
There are according to Mr. Wood two reasons for VCE North America to have a code ofethics. The first reason is to comply with the law. The second reason is to avoid conflicts ofinterest between employees and the company, and between the company and its customersand suppliers. These two purposes are not discussed or brought up by Weaver (1993), Kaptein(1998) or Weaver, Trevino and Cochran (1999) when discussing the purposes of a code.
Weaver (1993) and Kaptein (1998) state that the purpose of a code is that it clarifies theminimum expectations of employees. According to Mr. Wood VCE North America does nothave minimum and maximum standards, just standards, which contradicts what is beingsuggested by Weaver (1993) and Kaptein (1998).
Mr. Wood stated he was not aware of whether or not particular ethical values arecommunicated externally. Mr. Wood did however state that certain core values within Volvoare communicated externally, such as safety, environment and teamwork. This is in partialaccordance with what is being suggested by Kaptein (1998) who states that one purpose of acode is to have a distinguishing function externally. Mr. Wood concluded that if the companyis know for being ethical it is more apt to attract good people and certainly more apt to havingreliable customers and suppliers.
♦ WHO IS INVOLVED IN THE DEVELOPMENT OF A CODE
Drummond and Bain (1994) state that as many people as possible should be involved in thedevelopment of a code. According to Mr. Wood it is hard to have a democratic process but it
68
all depends how far down the chain one wants to go. Mr. Wood further stated thatmanagement typically develops these kinds of policies, which contradicts what is beingsuggested by Drummond and Bain (1994), but they are so standard in the U.S. that thecompany would probably not see the need to get all the employees involved. Mr. Wood didhowever conclude by stating that in the past these kinds of policies have been circulatedamong employees in order to receive input. This statement is on the other hand in accordancewith what is being put forth by Drummond and Bain (1994).
♦ THE CONTENT OF A CODE OF ETHICS
According to Mr. Wood, there is within VCE North America a document that covers a videvariety of issues. This document is divided up into different sections and one section is calledPerformance, Management and Conduct. Mr. Wood stated that this section could be lookedupon as a code of ethics. Within this section policies regarding anti trust compliance, legalmatters, ethics and business transactions, employee conduct, harassment, parents, smokingand safety are brought up. This statement by Mr. Wood validates part of what is beingdiscussed by Weaver (1993) and McDonald (2000), who are discussing the importance ofincluding issues such as conflict of interest, the handling of confidential information, bribesand whistle blowing in an ethical code.
Regarding the different levels of a code of ethics Mr. Wood stated that VCE North Americarecently has developed a Human Resource (HR) agenda. According to Mr. Wood this is not apolicy, but more guidelines for the development of HR policies locally. In this policy, issuessuch as the use of child and slave labor are brought up. By stating this Mr. Wood validatesKaptein (1998) who states than an organization may develop a code of ethics for each of itslevels. Furthermore, on the issue of different levels of a code Mr. Wood concluded that it isimpossible to force a code upon different countries; one can supply guidelines but not force acode upon different cultures.
6.2.3 WITHIN-CASE ANALYSIS OF CASE 3: VOLVO CHINA
♦ THE PURPOSE OF A CODE
According to Mr. Adolfsson the purpose of a code is that the employees know how they areexpected to behave. This is in accordance with what is being stated by Weaver (1993) andKaptein (1998) who state that the purpose of a code is to make roles and expectations withinan organization clear. Another purpose of a code is according to Mr. Adolfsson that it createsclarity and it creates a situation where all the employees within the company are working inthe same direction.
♦ WHO IS INVOLVED IN DEVELOPING A CODE
According to Mr. Adolfsson, it would in his opinion be hard to develop a code through somesort of democratic process; it has to be done by the management. A written document couldpossibly be circulated among employees but according to Mr. Adolfsson this would bedifficult to handle on a broad basis due to practical difficulties. These thoughts by Mr.Adolfsson are in accordance with what is being stated by Hosmer (1987) who states thatsenior executives should develop the code. On the other hand it contradicts Drummond andBain’s thoughts that as many employees as possible should be involved in developing a codeof ethics.
Mr. Adolfsson concluded that it is furthermore important to consider that the averageemployee on a daily basis does not consider explicit ethical issues. There are according to Mr.
69
Adolfsson certain amounts of people who come into contact with these issues and think aboutthem frequently. These are also the ones that are most likely to be able to work intelligentlywith a code of ethics.
♦ THE CONTENT OF A CODE
On the issue of the content of a code Mr. Adolfsson stated that he feels that regarding thesekinds of issues one should not overdo the writing of policies. If a company has too much ofrules and regulations written down the management cannot expect the employees to know allof it. Therefore, it is according to Mr. Adolfsson, better to keep the written policies to aminimum, which makes it possible for management to demand that the employees are awareof the rules. These statements contradicts, to some extent, what is being discussed by Kaptein(1998), Weaver (1993), and McDonald (2000) who all discuss the importance of includingdifferent areas in a code of ethics. Mr. Adolfsson did however state that it is important to havea clear view of certain core values. In the case of Volvo these are product safety, environment,and quality. Mr. Adolfsson was however not certain whether it all should be written down in acode or not
Regarding the level of a code Mr. Adolfsson stated that he felt that a code should be globalwithin the company. This due to the fact that it is, according to Mr. Adolfsson, nearlyimpossible to deal with issues that include values if the company has different values indifferent countries. This contradicts Kaptein’s statement that a code can be divided up intodifferent levels such as international, supranational, national, sectoral and individual level.
6.2.4 CROSS-CASE ANALYSIS OF RESEARCH QUESTION TWO
Table 6.2 displays the respondents’ opinions on the variables that were investigated regardingthe issue of a code of ethics. In the table the respondents’ answers have been, as discussedabove, coded. As a reminder the coding system is once again explained below:
0 0 : Indicates that the respondent did not express an opinion regarding this variable.- - : Indicates that the respondent disagreed with previous research.- + : Indicates that the respondent interpreted the variable differently and gave his/her ownview on the matter.+ - : Indicates that the respondent partly agrees with previous research.++ : Indicates that the respondent agreed with previous research.
In table 6.2 the three broad topics of the research question have been listed to the left of thetable. The table furthermore includes a column where the different variables have been listedwhile the three other columns include the findings of the three cases. After the table the readerwill be provided with a short discussion, on each variable, regarding the differences andsimilarities found in the different cases of this research question.
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Table 6.2: A code of ethics
VARIABLE CASE 1Ms. Nilsson
Mr. Tornberg
CASE 2Mr. Wood
CASE 3Mr. Adolfsson
Minimum expectations ofemployees
+ ++ +
– – + +
Making roles and expectationsclear
+ –0 0
– + + +
Assist employees by includingethics in decision making
+ –0 0
0 0 – +
A distinguishing functionexternally
– +0 0
0 0 0 0
TH
EPU
RPO
SEO
FA
CO
DE
A correcting function + +0 0
0 0 0 0
Senior executives+ +0 0
– + – +
WH
OIS
INV
OL
VE
D
As many employees as possible – –– +
– + – –
Different levels of the code – –0 0
+ + – –
General information + +0 0
0 0 – –
Conflicts of interest + +0 0
– + – –
Relations with customers,suppliers and contractors
+ +0 0
0 0 – –
Social responsibility – +0 0
– + – –
TH
EC
ON
TE
NT
OF
AC
OD
E
Responsibilities to shareholders and investors
– +0 0
– + – –
Source: Authors’ own construction
♦ THE PURPOSE OF A CODE
On the topic of the purpose of a code Ms. Nilsson stated that a code expresses some kind ofminimum standard that the company stands for while Ms. Tornberg stated that a code definesthe minimum expectations of the employees. On this issue Mr. Wood stated that VCE NorthAmerica does not have minimum and maximum standards, just standards. Mr. Adolfsson feltthat the main purpose of a code is that it clarifies for the employees how they are expected tobehave. According to Mr. Wood there are two different reasons for having a code of ethics.The first is to comply with the law and the second reason is to avoid conflicts of interestbetween employees and the company, and between the company and its customers andsuppliers
Regarding the issue of a code working as a tool that assists employees by including ethicalvalues in decision-making Ms. Nilsson stated that a code acts as a guideline for the company.Mr. Adolfsson stated that a code creates clarity and a situation where all the employees withinthe company are working in the same direction.
71
Another purpose of a code is, according to Ms. Nilsson, that it creates an internal Volvofeeling and through this it has as a distinguishing function externally. A code doesfurthermore according to Ms. Nilsson have a correcting function. Ms. Nilsson concluded bystating that a company is not more ethical or socially responsible than its “weakest link”, andthis link is defined by a code of ethics.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
Ms. Nilsson stated that the management should be responsible for developing a code of ethics;this was also the opinion of Mr. Adolfsson who stated that it would be tough to develop acode through some sort of democratic process. Mr. Adolfsson further added that it isimportant to note that the average employee on a daily basis does not consider explicit ethicalissues. Further, according to Mr. Adolfsson, there are certain people who are likely to comeinto contact with these types of issues and these are the ones most suitable for working with acode of ethics.
On the topic of who is involved in developing a code Ms. Tornberg had a slightly differentview than the other respondents. Ms. Tornberg stated that in her opinion it would be ideal if a“cross section” of all the employees within the company were involved in developing thecode. Mr. Wood stated that he felt that it would be difficult to establish a democratic processwhen developing a code, however this depends on how far down the chain one want to go.Mr. Wood did conclude by stating that in the past these kinds of policies have been circulatedamong employees in order to receive input.
♦ THE CONTENT OF A CODE
Regarding having different levels of a code Ms. Nilsson stated that due to the fact that Volvois a global company the code should be exhaustive rather than being detailed on each of thedifferent markets. Mr. Adolfsson agreed with Ms. Nilsson and added that a code should beglobal due to the fact that it is nearly impossible to deal with issues that include values if thecompany has different values in different countries. Mr. Wood stated that VCE NorthAmerica recently has developed a HR agenda, which includes guidelines for the developmentof HR policies on a local level.
According to Mr. Wood, the HR agenda mentioned previously covers topics such as the useof child labor and slavery. Within VCE America there is also another document that coversethical issues. This document is called Performance, Management and Conduct and coversissues such as anti trust compliance, legal matters, ethics and business transactions, employeeconduct, harassment, parents, smoking and safety. According to Ms. Nilsson it would beappropriate for Volvo head quarters to establish one very detailed document that deals withethics. This document would cover all the details such as conflicts of interest, bribes andwhistle blowing. On the issue of the content of a code Mr. Adolfsson stated that in his opinionone should not overdo the writing of policies. If a company has too much of rules andregulations written down the management cannot expect the employees to know all of it.Therefore it is better, according to Mr. Adolfsson, to keep the written policies to a minimum,which makes it possible for management to demand that the employees are aware of the rules.These statements do also explain why Mr. Adolfsson’s column shows only the code for“disagrees with previous research”.
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6.3. RESEARCH QUESTION THREE: ETHICS TRAININGAs stated before, Kaptein (1998); McNamara (2000) and Jackson (1997) have all carried outresearch in the field of ethical training and ethical training programs. This section willprovide the reader with a analysis of the empirical data gathered for this thesis and the resultsfrom previously mentioned authors.
6.3.1 WITHIN-CASE ANALYSIS OF CASE ONE: VOLVO, SWEDEN
Kaptein (1998) and McNamara (2000) state that ethical training, among other things, aims tocreate, discuss and resolve moral issues and apply them to real-life ethical dilemmas. Ms.Tornberg verifies this by stating that within Volvo first time group managers are trained inethical dilemmas by working with a number of real life cases that have taken place withinVolvo. According to Ms. Tornberg, these cases make everyone think critically about what isright and wrong in a specific situation. These statements made by Ms. Tornberg are also inaccordance with Kaptein (1998) and McNamara (2000), who have stated that ethical trainingalso aims to teach the employees to identify the moral components in their work.
Kaptein (2000) states that an external consultant could carry out ethical training; according toMs. Nilsson this is not recommendable. Ms. Nilsson stated that this could be quite risky forthe company. The reason for this is according to Ms. Nilsson, that Volvo needs to believe inthe ethical issues themselves and therefore the training must come from within the company.Ms. Nilsson did however mention that it might be wise to use a consultant in order to knowhow the entire process of developing codes, training employees, and setting up ethics officersworks.
Regarding an external consultant carrying out the ethical training Ms. Tornberg stated thatthis depends on the material one has to begin with. If a consultant is brought in he or shemust, according to Ms. Tornberg, be extremely knowledgeable about the company. Ms.Tornberg did however also state that it sounded a bit dangerous to give the wholeresponsibility to a single person and that managers from inside the company should probablyhandle these types of issues. These statements partly falsify Kaptein’s (2000) statement thatan external consultant could handle ethical training.
McNamara (2000) has suggested that ethical performance could be included as a dimensionin performing appraisals. On this topic Ms. Nilsson stated that this would be awkward,mainly due to the fact that it would be difficult to imagine how it would be implemented. Ms.Tornberg stated that it is necessary to measure the individual employee’s behavior in order tobe able to reward him or her. Volvo has such a measurement system when it comes tocustomer satisfaction and maybe this system could offer hints on how to make ethicalbehavior a part of appraisals. Another way of measuring this type of performance is to letmanagers grade how satisfied they are with their input at work and compare that to whatdemands that they have on themselves. According to Ms. Tornberg, such a system is notimpossible to implement.
6.3.2 WITHIN-CASE ANALYSIS OF CASE TWO: VOLVO, U.S.A.
When discussing ethical training Mr. Wood stated that this kind of training is only provided tomanagement. Mr. Wood furthermore stated that ethics training is provided within certainareas and topics, for example harassment. When this type of training is conductedunderstanding the particular issue and how to deal with it is highlighted. According to Kaptein(1998) and McNamara (2000), one of the aims of ethical training is to teach the employees to
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identify the moral components in their work; this is also in accordance with what is beingstated by Mr. Wood.
According to Mr. Wood, ethics an external consultant handles training within VCE NorthAmerica. Although Volvo has an internal policy regarding ethics the company uses anexternal consultant that goes, according to Mr. Wood, more into detail than what the internalpolicy does. On the topic of using an external consultant Mr. Wood’s statements above are inperfect accordance with what is being stated Kaptein (2000).
Regarding rewarding ethical behavior Mr. Wood stated that certain things are included in thecondition of the employment. Behaving ethically, just like arriving in time to work, areincluded in these conditions. If an employee has a problem with the ethical policy of thecompany, then this person should, according to Mr. Wood, feel free to look for a jobelsewhere. These statements by Mr. Wood falsify the argument put forth by McNamara(2000) that ethical performance should be included as a dimension in appraisals.
6.3.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA
When asked about ethical training, Mr. Adolfsson stated that he was not sure whether it wouldbe meaningful to mix all the different issues that are affected by ethics, and then put the label“ethics training” on top of it. This statement is quite the opposite of what is being suggestedby Kaptein (1998), McNamara (2000) and Jackson (1997), who are stating that ethics trainingshould be seen as one area and not divided up into different pieces. Kaptein (1998),McNamara (2000) and Jackson (1997) statements are further falsified when considering thatMr. Adolfsson also stated that in his opinion it was necessary to develop each and every oneof these areas, and although one is guided by certain core values, the training should becarried out separately.
Mr. Adolfsson did however agree with Kaptein (1998), McNamara (2000) and Jackson (1997)by stating that within management teams and marketing departments, that are liable to comeinto contact with ethical issues, in a narrow sense, there should be an awareness regardingthese issues. According to Mr. Adolfsson, there should furthermore be an ongoing discussionon the ethical topics that are dealt with.
Kaptein (2000) suggests the use of an external consultant when carrying out ethical training.According to Mr. Adolfsson, this depends on the size of the company and how these types ofissues have been handled traditionally. If for example Volvo were to carry out training withinproduct safety the company would hardly need an external consultant. If however Volvo wereto carry out training within the HR area the company could possibly, according to Mr.Adolfsson, make use of an external consultant. Mr. Adolfsson concluded that the issue ofbringing in an external consultant much depends on what particular area, of the broad topic ofethics, that is being focused on.
6.3.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION THREE
Table 6.3 displays the respondents’ opinions on the variables that were investigated regardingthe issue of ethics training. In the table the respondents’ answers have been coded. Thecoding system is explained below:
0 0 : Indicates that the respondent did not express an opinion regarding this variable.- - : Indicates that the respondent disagreed with previous research.
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- + : Indicates that the respondent interpreted the variable differently and gave his/her ownview on the matter.+ - : Indicates that the respondent partly agrees with previous research.++ : Indicates that the respondent agreed with previous research.
Table 6.3: Ethical training
VARIABLE CASE 1Ms. Nilsson
Ms. Tornberg
CASE 2Mr. Wood
CASE 3Mr. Adolfsson
Teach theemployees toidentify moralcomponents
0 0+ +
+ + 0 0
Create, discuss andresolve moralissues and applythem to real life
0 0+ +
0 0 0 0
Communicate,reinforce, clarifydevelop andreview the ethicalcode
0 00 0
0 0 0 0
Avoid or reduceuncertainty aboutwho is responsiblefor what, and towhat degree
0 00 0 0 0 0 0
Training is carriedout by an externalconsultant
– –+ – + + – +
Include ethicalperformance inappraisals
– –– + – – 0 0
Source: Authors’ own construction
According to Ms. Tornberg, Volvo Trucks provide their first-time group managers withtraining concerning ethical dilemmas. This training makes, according to Ms. Tornberg,everyone think critically about what is right and wrong in a specific situation. On the topic ofethical training Mr. Adolfsson stated that in his opinion it would not meaningful to mix all thedifferent issues covered by the term ethics, and then carry out training under that particulartopic. Mr. Adolfsson stated that it would be better if each and every one of the sub areascovered by the term ethics were divided up and training carried out within the different issues.Mr. Wood stated that ethics training is only provided to management. Mr. Wood further statedthat training is carried out in small chunks, covering different sub topics such as, for exampleharassment.
According to Mr. Wood, an external consultant handles ethical training within VCE NorthAmerica. According to Ms. Nilsson this is not recommendable, this due to the fact that Volvoas a company needs to believe in the ethical issues themselves and therefore the training mustcome from within the company. Ms. Nilsson did however mention that it might be wise to usean external consultant in order to know how the entire process of developing codes, trainingemployees, and setting up ethics offices works. The use of an external consultant depends,according to Mr. Adolfsson, on the issue that is being handled. If for example Volvo were to
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carry out training within the field of product safety the company would hardly need anexternal consultant.
On the issue of rewarding ethical behavior Mr. Wood stated that certain things are includedin the condition of employment. Behaving ethically, just like arriving in time for work, areincluded in these conditions and therefore rewarding employees for behaving ethically is notconsidered to be an important issue. Ms. Nilsson stated that it would be awkward to rewardsomeone for behaving ethically while Ms. Tornberg stated that in order to reward someone hisor her performance must be measured against something. According to Ms. Tornberg it isprobably possible to create a system where ethical behavior is measured, and rewarded. VolvoTrucks has such a system for measuring customer satisfaction.
6.4. RESEARCH QUESTION FOUR: ADVANTAGES VERSUSRISKS WITH FORMALIZING ETHICSAccording to Nijhof et al (2000), Brytting (1997), Drummond and Bain (1994), Boje &Winsor (1993), and Willmott, (1993), there are both advantages and risks with formalizingethics within an organization. These advantages and risks will be analyzed in the followingsection of this thesis.
6.4.1 WITHIN-CASE ANALYSIS OF CASE 1: VOLVO, SWEDEN
♦ ADVANTAGES
According to Ms. Nilsson, it is important to be looked upon as an ethical company, comparedto other companies within the same industry, in order to gain and keep customers. Ms.Nilsson further stated that ethics is seen as a resource within Volvo and as a resource it is alsoused as one compared to other companies. Further, according to Ms. Nilsson, the market forgood employees is highly competitive and Volvo must work on attracting them as well askeeping them, and in that process ethics is an important tool. These advantages are howevernot brought up by Nijhof et al (2000), Brytting (1997), Drummond and Bain (1994), Boje &Winsor (1993), and Willmott (1993). Ms. Nilsson concluded by stating that a final positiveside of a formalized ethics program within an organization is that it forces the organization tobe ethical. This statement is however in accordance with what is being stated by Brytting(1997) and Drummond and Bain (1994) who state that one of the advantages with formalizingethics within an organization is that it motivates employees to consider ethical values in theirdecision making
According to Ms. Tornberg, one of the advantages of formalizing ethics within anorganization is that it clarifies management’s opinion of what it is that makes behaviorethical/unethical and it further motivates employees to consider ethical values in decisionmaking. These statements are in perfect accordance with what is being suggested by Nijhof etal (2000), Brytting (1997), and Drummond and Bain (1994). Another positive aspect offormalizing ethics is according to Ms. Tornberg that ethics is important to stakeholders in thecompany. This statement is in partial accordance with Nijhof’s et al (2000) discussion that anethical code makes clear what external parties may expect from an organization.
♦ RISKS
According to Ms. Nilsson, a formalized ethics program might become rigid if it is toocomplicated and detailed. This risk is not brought up by Nijhof et al (2000), Drummond andBain (1994), Boje & Winsor, (1993) and Willmott, (1993). These authors do on the other
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hand mention the risk of indoctrinating employees with an ethical code. On the risk ofindoctrinating employees Ms. Nilsson stated that if an organization indoctrinates itsemployees the organization has not lived up to its ethical code. According to Ms. Tornberg,indoctrination is a strong word and that in her opinion Volvo does not enforce ethics in a waythat it would threaten to indoctrinate employees.
6.4.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO, U.S.A.
♦ ADVANTAGES
An advantage that is not brought up by Nijhof et al (2000), Brytting (1997), Drummond andBain (1994), Boje & Winsor, (1993) and Willmott, (1993) but discussed by Mr. Wood is thatby formalizing ethics within an organization it this prevents the organization from breakingthe law. Mr. Wood did however verify Nijhof et. al. (2000), Brytting (1997) and Drummondand Bain (1994) statement that one of the positive aspects of formalizing ethics within anorganization is that it clarifies management’s opinion of what it is that makes behavior ethicalversus unethical.
Mr. Wood further verified Nijhof’s et al (2000) suggestion that by formalizing ethics theorganization makes clear what external parties may expect from the organization. Mr. Woodfurther stated that investors are considering ethics, as an important issue, to a greater degreethan before. Brytting (1997) and Drummond and Bain (1994) state that another positiveaspect is that by formalizing ethics an organization motivates employees to consider ethicalcomponents in their decision making. On this topic Mr. Wood stated that motivate is thewrong word. According to Mr. Wood, motivate is a word that causes an employee to dosomething good as opposed to a word that prohibits him or her from doing something bad.
♦ RISKS
Regarding the risk of indoctrination of employees when formalizing ethics within anorganization Mr. Wood stated that this depends on the rules and regulations that the companyis trying to force upon its employees. According to Mr. Wood, it would be hazardous for acompany if it tried to force its employees to attend a Buddhist temple every day. Thisdiscussion by Mr. Wood sheds some new light on the discussion carried on by Boje andWinsor (1993) and Willmott (1993) that there is a risk of indoctrinating employees with acode of ethics.
Regarding the risks Mr. Wood also brought up that the risk with any policy is that it is notenforced or that the company makes exceptions form the established policy. This is notbrought up by Nijhof et al. (2000), Brytting (1997), Drummond and Bain (1994), Boje &Winsor (1993), and Willmott, (1993).
6.4.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA
♦ ADVANTAGES
According to Mr. Adolfsson, one of the positive aspects of formalizing ethics within anorganization is that it makes clear what external parties may expect from the organization.This is in perfect accordance with what is being suggested by Nijhof et al (2000). Accordingto Mr. Adolfsson, it should be known that when one buys a Volvo product it should stand forcertain things, such as certain values that can be looked upon as ethical.
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♦ RISKS
On the issue of indoctrination of employees, as suggested by Boje & Winsor (1993), andWillmott, (1993), Mr. Adolfsson stated that this was an interesting topic. According to Mr.Adolfsson, values are something that lies very close to the core of a human being and oneshould generally put a question mark whether a company at all should claim to formulatevalues. Mr. Adolfsson further stated that the risk of indoctrinating employees depends onwhat sort of values that the company wants their employees to adapt to. If the values of thecompany could be seen as offensive or as something that is opposite of what certainemployees tend to feel this might be a sensitive issue. By these statements Mr. Adolfssonneither verifies nor falsifies what is being suggested by Nijhof et. al. (2000), Brytting (1997),Drummond and Bain (1994), Boje & Winsor (1993), and Willmott, (1993).
6.4.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION FOUR
Table 6.4 displays the respondents’ opinions on the variables that were investigated regardingthe issue of benefits versus risks with formalizing ethics within an organization. In the tablethe respondents’ answers have been coded. The coding system is explained below:
0 0 : Indicates that the respondent did not express an opinion regarding this variable.- - : Indicates that the respondent disagreed with previous research.- + : Indicates that the respondent interpreted the variable differently and gave his/her ownview on the matter.+ - : Indicates that the respondent partly agrees with previous research.++ : Indicates that the respondent agreed with previous research.
Table 6.4: Advantages versus Risks with formalizing ethics within an organization
VARIABLE CASE 1Ms. Nilsson
Ms. Tornberg
CASE 2Mr. Wood
CASE 3Mr. Adolfsson
Clarifies management’sopinion of what it is thatmakes behavior ethical vs.unethical
0 0+ +
+ + 0 0
Motivates employees toconsider ethical values indecision making
+ –+ + – + 0 0
AD
VA
NT
AG
ES
Makes clear what externalparties may expect
0 0+ – + + + +
Resistance to coercion, acode is forced upon theemployees
0 00 0 0 0 0 0
Employees areindoctrinated
– +– –
+ – + –
RIS
KS
Danger of moral inversion 0 00 0
0 0 0 0
Source: Authors’ own construction
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♦ ADVANTAGES
Ms. Nilsson stated that one advantage of formalizing ethics within an organization is that itforces the organization to be ethical while Mr. Wood stated that an advantage of this is that itprevents the organization from breaking the law. Both Mr. Adolfsson and Mr. Wood statedthat another positive aspect of formalizing ethics within an organization is that it makes clearfor external parties what to expect. Ms. Tornberg also touched upon this by stating that ethicsis becoming important to stakeholders while Mr. Wood further stated that investors areconsidering ethics, as an important issue, to a greater degree than before.
Mr. Wood agreed with Ms. Tornberg who stated that one of the positive aspects offormalizing ethics is that it clarifies the management’s opinion of what is ethical versusunethical behavior. Ms. Tornberg further stated that another positive aspect is that it motivatesemployees to consider ethical values in their decision making. On this issue Mr. Wood statedthat he felt that motivate was the wrong word. Motivate is, in Mr. Wood’s opinion, a wordthat causes an employee to do something good as opposed to something that prohibitssomeone from doing something bad.
♦ RISKS
According to Ms. Nilsson, one of the risks with formalizing ethics is that the program mightbecome rigid if it is too complicated and detailed. Mr. Wood discussed that there is a riskinvolved in formalizing ethics if the company does not enforce the policy or if the companymakes exceptions from the established policy.
Mr. Adolfsson stated that one may actually question whether a company should at all claim toformulate values, however, regarding the risk of indoctrinating employees, Mr. Adolfssonstated that this depends on the values that the company wants their employees to adapt to. Mr.Wood also stated that there is a risk of indoctrination, but this risk depends on the values thatare formulated by the company. Ms. Nilsson concluded by stating that if an organizationindoctrinates its employees it has not lived up to its ethical code.
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7. CONCLUSIONS AND IMPLICATIONSIn this chapter an attempt will be made to answer the four research questions. This chapterwill further provide the reader with the conclusions drawn based on the theory and theanalyzed data. At the end of the chapter implications for management, theory and futureresearch will be presented.
7.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENTKaptein (1998) and the Center for Business Ethics (1992) state that there is a need for anethics committee within an organization. The empirical data gathered for this thesis showedthat none of the respondents felt that this was important, this, according to two of therespondents, mainly due to the fact that the organization was not big enough to justify the useof an ethics committee.
The empirical data did however point to the fact that the functions of an ethics committee, assuggested by Kaptein (1998) and the Center for Business Ethics (1992), were viewed to beimportant. The functions were however perceived differently between the respondents; oneexample of this is the channeling function. Regarding this function Mr. Wood pointed out thefact that an internal document filled this function while Mr. Adolfsson stated that three “corevalue” managers were responsible for this particular function. Ms. Nilsson stated that a singleombudsperson could fill all the functions and among them the channeling function. Thisexample points to the fact that although certain variables, suggested by previous research, areviewed to be of interest the interpretation of how they are best used is differs significantlybetween the respondents.
The issue of who should be involved in an ethics committee was not thoroughly discussed dueto the fact that none of the respondents felt that an ethics committee was an important issue toconsider. The respondents did however discuss the involvement of other persons, in the workof ethics, more extensively. Mr. Adolfsson stated that ethics was not something that belongsto certain people; it is something that concerns all of the employees. Two of the respondents,Mr. Wood and Ms. Tornberg pointed out that the HR departments, to a certain extent, handledethical issues. One explanation of this could be that the two work within the HR departmentsthat are responsible for the development of internal ethical codes of the working conditionsfor the employees. Wood further stated that within the HR steering committee VCE NorthAmerica used both someone from the HR department as well as one person from the topmanagement. It is interesting to note that Mr. Wood, who is the only American in the sample,was also the only one who pointed to the use of an attorney when working with ethical issues.
Regarding the use of a single ethics ombudsperson Ms. Nilsson stated that managementshould appoint a person that really felt for these kinds of issues. This was quite contradictoryto what was stated by Mr. Wood who felt that ethics, as everything else, is a team effort.
In the sample selection we stated that this research covered three different regions: The FarEast, Northern Europe and North America. On the Chinese market, ethics is not somethingthat belongs to certain people while in Sweden it is viewed to be desirable that one singleperson is responsible for ethical issues. In North America, ethics was an issue that belonged tosomething called an HRM steering committee. We can see that the further east one moves, theless formalized is the organization of people working with ethics. This is due to the differentdemands of the judicial systems in the different regions.
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The most significant conclusions that may be drawn regarding the people involved in ethicsmanagement are listed below.
! This research indicates that the use of an ethics committee is highly related to the sizeof the company.
! The evidence of this research points to the fact that the different functions (theinitiating, the coordinating, the channeling, the facilitating, the mediating and the roleof a devils advocate) of an ethics committee are important to consider when workingwith ethics within an organization.
! This study revealed that the Human Resource department is important for anorganization’s ethical capability.
! The findings of this research indicates that although an organization does not have aformalized ethics institution the organization may still be working quite actively withethical issues.
7.2 A CODE OF ETHICSRegarding the purpose of a code, three out of four respondents stated that one of the purposeswith a code is that it defines the minimum expectations of the employees. Mr. Wood, whowas the only one who expressed a different view, stated that within VCE North America nosuch thing as minimum and maximum standards exist, just standards. According to Mr. Woodthere are two different reasons for having a code of ethics, to comply with the law and toavoid conflicts between the company and the employees and between the company and itscustomers and suppliers. It should be noted that once again does Mr. Wood refer to legalincitements regarding the internal use of ethics.
On the issue of who is involved in the development of a code of ethics both Ms. Nilsson andMr. Adolfsson stated that the management should be responsible for developing a code ofethics. Mr. Wood agreed upon this and further added that a draft could be circulated amongthe employees prior to finalizing the policy. Ms. Tornberg had a different view and stated thatit would be ideal if a cross-section of the employees were involved in developing the code.
According to Mr. Wood, who is working for VCE North America, the company uses anumber of documents that cover ethical issues. These documents cover a wide range ofsubjects and are quite extensive. Mr. Adolfsson, who is involved in Volvo Buses in China, didon the other hand state that he tended to think that one should not overdo the writing ofpolicies. Ms. Nilsson felt that there is a need for Volvo head quarters to establish a detaileddocument covering the field of ethics. Although the evidence are to weak to draw anyconclusions it is interesting to note the differences, between the three cases, regarding the useof written documents. The evidence regarding this particular topic do however point to thefact that written policies are of more importance in VCE North America than what they are inChina and Sweden. This might partly be due to the fact that as Mr. Wood put it, Sweden is amore ethical society and therefore the need for written policies are not as great as in the U.S.
Regarding the different levels of a code both Ms. Nilsson and Mr. Adolfsson stated that Volvoshould have one code as opposed to having different codes on each of the individual markets.Mr. Wood stated that VCE North America recently has developed a HR agenda, whichincludes guidelines for the development of HR policies on a local level. It is interesting to
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note that the only case that shows on a willingness to leave certain issues to a more localdecision level deal is the U.S. case. This proves that any suspicions regarding American“imperialistic views” were ungrounded.
Finally, all respondents stated the importance on developing ethical codes as a competitivetool, especially in attracting the most qualified people. Ethics is also viewed to be animportant issue for competing on these three markets.
The most significant conclusions that may be drawn regarding a code of ethics are listedbelow.
! This study has revealed that one of the main purposes of a code is that it defines theminimum expectations of the employees.
! The empirical data gathered and analyzed for this research suggest that themanagement should develop a code of ethics.
! Evidence of this research has showed that code of ethics is important for therecruitment of qualified people.
7.3 ETHICS TRAININGAccording to Ms. Tornberg, only first-time group managers are provided with ethical trainingby reviewing realistic ethical dilemmas. Mr. Wood also stated that ethical training is onlyprovided for management but that the training is handled piece by piece. Mr. Adolfsson statedthat it is not meaningful to carry out ethics training, this due to the fact there are too manydifferent areas included in the concept of ethics and all of these areas require special attention.One may conclude that it is evident that the further east one moves, less importance is placedon ethics training.
The opinions expressed regarding the use of an external consultant were quite inconclusive.Ms. Nilsson stated that it was not recommendable to use an external consultant, this due to thefact that the ethical values must come from within the company. Mr. Adolfsson stated that theuse of an external consultant much depends on the particular issue that is being trained. Mr.Wood stated that within VCE North America an external consultant handles the ethicaltraining, which is based on internal documents.
On the issue of rewarding ethical behavior Mr. Wood claimed that the terms of employmentincluded that an employee should behave ethically. Ms. Nilsson stated that she could notvisualize how such a reward system would work while Ms. Tornberg stated that it in order toreward someone the company must have a system for measuring ethical performance. Ms.Tornberg further pointed out the fact that such a system would not be impossible toimplement. Finally, Ms. Tornberg works closely with employee issues on a daily basis.Therefore, she has a greater understanding on how to reward the staff.
! The evidence of this thesis suggests that ethics is such a big area that it is difficult tocover all the different topics in a training program.
! The empirical data gathered and analyzed for this research suggest that it might bewise to use an external consultant within certain areas of ethical training.
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! This study has revealed that although a rewarding system for ethical behavior is notconsidered to be important it is possible to implement.
7.4 ADVANTAGES VERSUS RISKS WITH FORMALIZINGETHICS
Regarding the advantages of formalizing ethics within an organization, Mr. Wood once againreturned to the legal incitements and stated that one of the advantages is that it prevents theorganization from breaking the law. Both Mr. Wood and Mr. Adolfsson stated that anotherpositive aspect of formalizing ethics within an organization is that it makes clear for externalparties what to expect. Ms. Tornberg added that ethics is becoming more and more importantfor stakeholders and Mr. Wood concluded by stating that investors are starting to considerethics as an important variable in their work. Both Mr. Wood and Ms. Tornberg agreed uponthe fact that another positive aspect of formalizing ethics is that it clarifies the management’sopinion of what is ethical versus unethical behavior. Mr. Adolfsson concluded by stating thatthe advantages far outweigh the risks of formalizing ethics within an organization.
On the issue of potential risks with formalizing ethics within an organization Mr. Adolfssonhad the interesting view that it is questionable whether a company should at all claim toformulate values. Mr. Adolfsson did however agree with Mr. Wood and Ms. Nilsson whostated that there might be a risk of indoctrinating employees but this risk depends totally onthe values that the organization wishes to express.
! The evidence from this research strongly suggest that one of the positive aspects offormalizing ethics within an organization is that it makes clear for external partieswhat they can expect.
! The empirical data gathered and analyzed for this research suggest that there is a riskof indoctrinating employees when formalizing ethics within an organization, this riskcould however be minimized if the organization is careful with the values that itformulates.
7.5 IMPLICATIONSIn the final section of this thesis, recommendations, which are based on the findings of thisresearch, to managers of organizations who one day may need to, consider how the issue ofusing ethical capability as a competitive advantage. The reader will also be provided withimplications for theory and future research.
7.5.1 IMPLICATIONS FOR MANAGEMENT
This study has investigated how ethical capability can be used as a competitive advantage.The implications for management concern both the cases that were investigated for this thesisas well as other organizations interested in this particular topic.
The findings of this thesis indicate that there are a number of different functions involved inethics management. Among these functions are the initializing, coordinating, channeling,facilitating and the mediating function. These different functions are important to considerincluding when developing an organization’s ethical capability. This research also pointed tothe fact that it is not necessary to institutionalize ethics by appointing one or a number ofemployees to ethical positions, but the HR department may very well handle ethics.
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On the issue of a code of ethics this study has pointed out the facts that a code is probably bestdeveloped by the management, if it is possible a draft could however be circulated amongemployees in order to gain a better acceptance for the values of the organization. Although theevidence of this research showed that one of the main purposes of a code is that it defines theminimum expectations of the employees a code may still serve a number of other purposes,such as providing the organization with a distinguishing function externally.
One of the conclusions of this thesis was that ethics is too big of an area for carrying outtraining in. It is important to remember that ethical training covers a wide span of issues andthese issues need to be divided up in order to carry out training effectively. Regarding the useof an external consultant it is important to consider whether an external consultant canprovide the company with knowledge that cannot be collected from within the organizationitself.
In this thesis it was stated that the advantages far outweigh the risks of formalizing ethics andthat one of the most important advantages of formalizing ethics within an organization is thatit makes clear for external parties what they can expect. A manager does however need toconsider that there are possible pitfalls when formalizing ethics. These can however beavoided if care is taken when formulating the policies.
7.5.2 IMPLICATIONS FOR THEORY
The overall purpose of this thesis was to gain a better understanding of how ethical capabilitymay be used as a competitive advantage. In order to fulfill this purpose it has been exploredhow ethical capability may be used as a competitive advantage. In order to explore this, theissues of the actors involved in ethics management, an ethical code, ethics training and theadvantages versus the risks of formalizing ethics within an organization have been described.When the empirical data was analyzed and the conclusions were drawn these issues wereexplained to the reader and by doing so this thesis has reached its purpose.
7.5.3 IMPLICATIONS FOR FUTURE RESEARCH
This thesis has not covered all the aspects regarding using ethical capability as a competitiveadvantage. The topics that would be of interest for further research include:
! Evidence of this research pointed to the fact that it is difficult anchor a code of ethicsamong a majority of the employees prior to distributing the final version. Due to this itwould be of interest to see research carried out in the field of “establishing a code ofethics among white- and blue-collar workers”.
! The findings of this thesis have highlighted the problems of carrying out ethicaltraining in an effective and concise way. Due to this further research within the area of“effective ways of carrying out meaningful ethical training” would be of interest.
! One piece of empirical data suggested that it is questionable whether an organizationcan at all claim to formulate values. This comment has triggered an interest of seeingfuture research carried out in the field of “organizational advantages and risksinvolved in formulating values”.
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Internet
www.volvo.com
Interviews
Chuck Wood, Vice President, Human Resources, Volvo Construction Equipment, Ashville,North Carolina, USA 2000-12-14
Finn Adolfsson, Joint Venture Manager,Volvo Bus Corporation, Xian, China. 2000-12-13
Malin Nilsson, Manager Public Affairs, The Volvo Group, Gothenburg, Sweden 2000-12-13
Paula Tornberg, Human Resource Dept., Volvo Trucks, Gothenburg, Sweden 2000-12-15
Other Sources
Internal Documents from the Volvo Group
APPENDICES
INTERVIEW GUIDE (ENGLISH VERSION)
1. BACKGROUND
! Corporation Background
! Position of the interviewee
2. THE PEOPLE INVOLVED IN ETHICS MANAGEMENT
♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
! The Initiator.# Stimulates the organization of ethics, the driving force.
! The Coordinator.# Answers questions regarding the organization’s ethics policy.
! The Channeler.# Creates communication channels between the corporation and its
surrounding, between employees and management, and among departments.
! The “Devils Advocate”.
! The Facilitator.# Offers instruments, which departments can use for their ethics programs.
! The Mediator.# Mediates in both internal and external conflicts.
♦ WHO IS INVOLVED IN AN ETHICS COMMITTEE
! Someone from top management.
! Members in the committee are rotated among the employees.
! Someone from the Human Resource Department.
! Someone who is non-managerial.# A shop or clerical worker.
♦ ETHICAL OMBUDSPERSON
! Has experience from within the company and is fully integrated into the corporatevalue system.
! Independent, reporting directly to the CEO or to the board.
! An investigative, counseling and advisory role.
! If selected by top management there is a risk of impairing the trustworthiness.
! Resolves ethical conflict.
! Is responsible for ongoing ethical work and updating of the code.
♦ ANYTHING TO ADD
3. A CODE OF ETHICS
♦ THE PURPOSE OF A CODE
! Minimum expectations of employees.
! Making roles and expectations within an organization clear.
! Assist employees by including ethical values in decision making.
! A distinguishing function externally.
! A correcting function, the code creates checks and balances in that employees cancheck each other in living up to the code.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
! Senior executives.
! As many employees as possible
♦ THE CONTENT OF A CODE
! One code or one for each level: international, supranational, national, sectoral,individual.
! General information regarding the code and the organization.
! Conflicts of interest, e.g. handling confidential information, bribes, “whistle blowing”.
! Relations with customers, suppliers and contractors.
! Social responsibility.
! Responsibilities to shareholders and investors.
4. ETHICS TRAINING PROGRAMS
♦ ETHICS TRAINING
! Teach the employees to identify the moral components in their work.
! Create, discuss and resolve moral issues and apply them to real-life ethical dilemmas.
! Communicate, reinforce, clarify, develop and review the ethical code with the staff.
! Avoid or reduce uncertainty about who is responsible for what and to what degree.
! An external consultant carries out the training.
! Include ethical performance as a dimension in performing appraisals.
♦ ANYTHING TO ADD
5. ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS WITHIN ANORGANIZATION
♦ ADVANTAGES
! Clarifies management’s opinions of what it is that makes behavior ethical/unethical.
! Motivates employees to consider ethical values in decision-making.
! The code makes clear what external parties may expect from the organization.
♦ RISKS
! Resistance to coercion. Employees do not truly believe in the code, therefore the codeis force upon them.
! The code is forced upon employees, who are being indoctrinated into something theydo not believe in.
! Danger of moral inversion. The emphasis on fixed ethical rules removes the necessityfor employees to ethically reflect on their behavior.
♦ ANYTHING TO ADD
INTERVJUGUIDE (SWEDISH VERSION)
1. BAKGRUND
! Företagsbakgrund
! Position inom företaget
2. PERSONER INVOLVERADE I ETIK MANAGEMENT
♦ FUNKTIONEN AV EN ETISK KOMMITE / ETISK OMBUDSMAN
! Initiator# Stimulerar organisationen av etik, den drivande kraften
! Koordinator# Svarar på frågor angående organisationens etiska policy.
! Samordnare# Skapar kommunikations kanaler mellan företaget och dess omgivning,
mellan anställda och management samt mellan avdelningar.
! Djävulens Advokat
! Hjälpredan# Erbjuder verktyg som olika avdelningar kan använda i deras etiska arbete.
! Medlaren# Medlar i både interna och externa konflikter.
♦ MEDLEMMAR I EN ETISK KOMMITE
! Någon från top management
! Medlemskap i kommittén roteras bland anställda inom företaget
! Någon från Human Resource Department
! Någon som inte innehar en chefsposition# En medarbetare från ”golvet”
♦ ETISK OMBUDSMAN
! Har erfarenhet inom företaget och är fullständigt integrerad i företagets värde system.
! Självständig person som rapporterar direkt till VDn eller styrelsen.
! En undersökande, rådgivande och stödjande roll.
! Om den etiska ombudsmannen väljs av lednings gruppen så föreligger en risk av attdetta hämmar dennes trovärdighet.
! Löser etiska konflikter.
! Är ansvarig för det fortlöpande etiska arbetet och uppdateringar av den etiska koden.
♦ NÅGOT ATT TILLÄGGA
3. EN ETISK KOD
♦ SYFTET MED EN KOD
! Vad man minst kan förvänta sig av de anställda.
! Klargör roller och förväntningar inom en organisation.
! Hjälper anställda genom att inkludera etiska värden i deras beslutsprocesser.
! En, externt, särskiljande funktion.
! En korrigerande funktion, koden skapar ett medel för anställda att kolla upp varandra ietiska avseenden.
♦ VILKA ÄR INVOLVERADE MED ATT TA FRAM EN KOD
! Lednings gruppen.
! Så många anställda som möjligt.
♦ INNEHÅLLET I EN ETISK KOD
! En kod för varje nivå: internationell, supranationell, national, sektoral, individuell.
! Generell information angående koden och organisationen.
! Intresse konflikter, t.ex. handhavande av konfidentiell information, mutor och ”interntskvaller (whistle blowing)”.
! Relationer med kunder, leverantörer och entreprenörer.
! Socialt ansvarstagande.
! Ansvar gentemot aktieägare och investerare.
♦ NÅGOT ATT TILLÄGGA
4. ETISKA TRÄNINGS PROGRAM
♦ ETISK TRÄNING
! Undervisa de anställda angående de etiska och moraliska komponenterna i derasarbete.
! Skapa, diskutera och lös moraliska frågor och problem och applicera dem på verkligaetiska dilemman
! Kommunicera, förstärk, klargör, utveckla och utvärdera den etiska koden med deanställda.
! Undvik eller reducera osäkerhet angående vem som är ansvarig för vad och till vilkengrad.
! Den etiska träningen utförs av en extern konsult.
! Inkludera etisk prestation som en dimension i löneförhöjning
♦ NÅGOT ATT TILLÄGGA
5. FÖRDELAR RESPEKTIVE RISKER MED ATT FORMALISERA ETIK INOM ENORGANISATION
♦ FÖRDELAR
! Tydliggör ledningsgruppens åsikter om vad som är etiskt respektive oetiskt beteende.
! Motiverar anställda att inkludera etiska värden i sin beslutsfattning.
! Koden klargör vad externa intressenter kan förvänta sig av organisationen
♦ RISKER
! Motstånd mot tvång. Anställda tror inte helhjärtat på koden och den blir därförpåtvingad på dem.
! Koden är påtvingad de anställda vilka i sin tur blir indoktrinerade I något som de intetror på.
! Fara med moralisk omvändhet. Betoningen läggs på fasta etiska regler vilket tar bortnödvändigheten för anställda att ta hänsyn till det etiska i sitt eget beteende.
♦ NÅGOT ATT TILLÄGGA
