CODES OF ETHICS FOR MODERN CORPORATIONS “When nuclear plants blow up, planes crash and firms fail, we tend to blame human error. The world is a safer place if we can locate the source of a disaster in an individual’s mistake, poor judgment, or even wicked human nature. While our recent business scandals have produced the usual rogues’ gallery of despicable individuals, our deepest fear is that our economic institutions are flawed in some fundamental way. If so, all seems lost.” James P. Walsh, Professor of Organizational Behavior and Corporate Strategy (Crisis in Corporate America, 2005) Introduction The latest five or six years can be called a dot.com era, when traditional values tend to rapid change and diverge from their habitual perception. At the same time, recent events have clear-cut the vulnerability of post-modern value-system when plenty of what we have already accustomed just rushes in collapse without any visible reason for estranged observers. At first glance it can look almost incredible and impossible, but what we consider standards of stability flummoxes, depriving as sometimes from our abiding faith in future. Nowadays we are witnessing rapid demands for corporations that are now in the vanguard of social progress. Recently we have all become the “hostages” of business whether we like it or not. We are employed by corporations and companies and our welfare depends on private business as we receive salaries from business, invest in business, and consume the goods created by business. We are literally surrounded by corporate business in our everyday life. As far as modern corporations seem to be the pillars of modern society, people are eligible to insist for certain accountability of business (Callahan, 1988). In this essay I will argument the needs for strict codes of ethics for modern corporations. CODES OF ETHICS FOR MODENR CORPORATIONS PAGE 2 11.08.05 The need for codes of ethics in modern business Growing value of modern business increasingly requires development of clear standards of ethic codes and responsibility principles that would be declared and shared by corporations. These ethic codes which serve “constitutions” for businesses are probably the most important demands of society to corporations. The ultimate function of ethic is to produce greatest good for greatest number of people (Callahan, 1988) The same way as society demands ethics and morality in political sphere (constitutions and checks and balances systems are obviously the best examples of governments’ accountability for society) it determines design of corresponding ethic codes in business environment. Ethic codes are first of all associated with the issues of corporate compliance, corporate governance, corporate sustainability and corporate social responsibility (Hurst, 2004). Corporate ethics is a complex issue and is usually defined as overall relationship of corporation with all of its stakeholders, including customers, employees, communities, owners/investors, government, suppliers and competitors (Hurst, 2004). In a wider extent, business ethic involves moral obligation of CEOs and chief officers, their concern of organizational and social problems that extend the boarders of a single company. To my mind, ethic codes are nothing else than CEOs’ obligations to provide transparent and frank business policy with concern of not only direct shareholders but of a society as a whole. As a matter of fact, ethic codes are first of all moral responsibilities of companies (Cowe, 2001). Callahan (1988) subdivides three general perspectives of ethics, i.e.: metaethics (or the ethics as an ultimate good in philosophical meaning), theoretical normative ethics (what is generally good or bad) and applied ethic (specific ethic norms and principles applicable to different spheres). CODES OF ETHICS FOR MODENR CORPORATIONS PAGE 3 11.08.05 For a long time business ethics had been considered a contestable issue (Callahan, 1988). Though it is widely recognized nowadays, we are still witnessing now the most daring financial frauds. This thesis seems to challenge the practical need for codes of ethics. Indeed what is the reason for ethics if it is not followed by CEOs and senior officers? This issue needs more detailed analysis. Until the last quarter of XX century business hardly implied excessive humanity. Ethics and morality were the possible reasons for defeat in a war for clients and market. However, as the role of private business increased globally, the issue of ethic codes became one of the central in relationships between business and society. Growing importance of business ethics is strongly associated with globalization and forming of transnational corporations. On the one hand globalization created incredible perspectives for corporations. On the other hand, however, it provided an ever-greatest challenge for business. Without clear code of ethics all modern
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