Expert answer:Article Review
Expert answer:Read the article A Global Leader’s Guide to Managing
Business Conduct (attached) Explain how and why
the compliance and ethics programs of most companies fall short of addressing
global business ethical responsibilities. Explain how companies
can manage conduct and ethics with performance tools and decision-making
processes to optimize business sustainability. In other words, explain how
organizational leaders could apply and use data for implementing best practices
in corporate culture and social responsibility.Describe how the use
of data affects global brand development.
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of J.2011
Brady, 2017.
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A Global Leader’s
Guide to Managing
Business Conduct
An extensive global survey finds that employees
agree on core standards and see room for
multinationals to improve their behavior.
by Lynn S. Paine, Rohit Deshpandé, and
Joshua D. Margolis
This document is authorized for use only by Jason Brady in MBA-635 Corporate Culture and Social Responsibility 17TW2 taught by Lindsay Conole, Southern New Hampshire
University from October 2017 to February 2018.
For the exclusive use of J. Brady, 2017.
Web Exclusive
For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
A Global Leader’s Guide
To Managing Business
Conduct
An extensive global survey
finds that employees agree
on core standards and see
room for multinationals to
improve their behavior.
by Lynn S. Paine,
Rohit Deshpandé, and
Joshua D. Margolis
Managers working outside their home
environments often find that their companies’ norms are inconsistent with practices
followed by other businesses in the area. In
response, many follow the time-honored
advice given in the fourth century by the
bishop of Milan to Augustine of Hippo:
When in Rome, do as the Romans do.
But that’s a perilous approach. Consider
the outrage in the United States when the
media reported that BP oil rigs in the Gulf
of Mexico lacked safeguards required on
similar machinery in Norway and Brazil—
even though the failed equipment in the
Gulf met U.S. legal requirements. Or the
worldwide outcry over working conditions
at Foxconn in China after some employees
committed suicide, although the company’s factories were arguably no worse than
thousands of others nearby. Or consider
the hot water that Siemens, Lucent, and
DaimlerChrysler landed in after paying
bribes and making various types of side
payments that were common in the countries where the companies were operating.
These and other incidents show that
conformance with local law and practice
does not guarantee stakeholder or public
approval of a corporation’s behavior. But
does that mean companies should automatically default to their home-country
practices?
Our research suggests that the answer is
no. In surveys of more than 6,200 employees from the top ranks to the front lines of
four leading multinationals based in the
U.S., Europe, and Japan, we found a strong
consensus on basic standards of conduct
that companies should follow worldwide.
Our findings indicate, further, that meeting those standards will require new approaches to managing business conduct.
The compliance and ethics programs of
most companies today fall short of addressing multinationals’ basic responsibilities—
such as developing their people or delivering high-quality products—let alone such
vexing issues as how to stay competitive in
markets where rivals follow different rules.
Instead of intensifying their focus on compliance, companies must bring to the management of business conduct the same performance tools and concepts that they use
to manage quality, innovation, and financial results. Leaders need an approach that
is guided by global standards, informed by
systematic data, grounded in the business
context, and focused on positive goals.
This need is particularly acute right
now. Despite the widespread adoption of
ethics programs by companies around the
world in recent decades, failures of corporate responsibility are all too frequent and
public trust in business remains distressingly low. At the same time, expectations
continue to rise. The UK created a new
antibribery law that took effect July 1, 2011,
and broadens the range of companies—
both domestic and foreign—that can
be prosecuted in the UK for bribery or
This document is authorized for use only by Jason Brady in MBA-635 Corporate Culture and Social Responsibility 17TW2 taught
by Lindsay
Hampshire
September
2011Conole,
HarvardSouthern
BusinessNew
Review
2
University from October 2017 to February 2018.
For the exclusive use of J. Brady, 2017.
A Global Leader’s Guide to Managing Business Conduct
The Conduct Gap
Surveys we conducted at leading multi
national corporations show that employees
tend to agree on what companies should
do, but many believe their employers don’t
fully live up to those standards; we also
found greater consensus among employees
on what companies should do as compared
with what their own companies actually do.
7
IMPORTANCE (MEAN VALUE OF RESPONSES FOR EACH CODEX STANDARD)
6.5
6
5.5
5
VARIATION (STANDARD DEVIATION AMONG RESPONSES FOR EACH CODEX STANDARD)
4.5
0.4
0.6
Should
Actual
0.8
1.2
1.4
1.6
1.8
DISTRIBUTION OF MEAN RESPONSES FOR ALL 62 STANDARDS IN THE GLOBAL BUSINESS
STANDARDS CODEX ASSESSMENT TOOL. RESPONDENTS WERE 6,263 EMPLOYEES OF FOUR
MULTINATIONALS BASED IN EUROPE, THE U.S., AND JAPAN.
for failure to prevent bribery by an associated
person or entity, regardless of where the offending
act took place.
In this article, we offer guidelines for navigating
the increasingly rugged ethical terrain that multinationals face every day.
Identify Your Conduct Gaps
1
Government officials and members of the public
aren’t the only ones calling for better business conduct. Employees, too, see a need for improvement in
corporate behavior. Surveys we conducted in 2006
and 2007 at some of the world’s leading global corporations reveal that while there is a strong consensus
on the standards that should be met, many employees feel that their companies don’t fully live up to
those standards. (See the exhibit “The Conduct Gap.”)
The surveys, whose findings have been supported by a companion study of global executives
that has 880 respondents to date, show that employees from every level in those organizations strongly
support adherence to the 62 standards in the Global
Business Standards Codex, which we developed
some years ago on the basis of leading codes of corporate conduct. These standards, described in our
2005 HBR article “Up to Code,” cover all of a company’s responsibilities, from respecting employees’
dignity to refraining from bribery to creating innovative products and technologies.
Despite wide differences in cultural origins and
business environments, the employees, when asked
the extent to which they thought companies should
adhere to each of the standards, responded with an
average value of 6.44 on a scale of 1 to 7. Even on
items that we thought would be controversial—such
as respecting dignity and human rights—we found
strong support. These surveys bolster our earlier
research, in which we hypothesized an emerging
consensus on widely accepted standards of conduct
for global companies, and they belie the assumption
that relativism should guide cross-border business
practices.
But the gap between “should” and “do” was troubling: The average score on adherence to the standards was just 5.68 on the same seven-point scale.
Moreover, we found a greater range of responses
on the actuals than on the shoulds, which means
employee perceptions of what their companies do
are more varied than their perceptions of what the
companies should do. Although every company
will have a different profile of gaps between its conduct and what employees feel that conduct should
be, we observed three patterns that we suspect are
widespread.
This document
authorized
for use
only by Jason
3 HarvardisBusiness
Review
Sember
2011Brady in MBA-635 Corporate Culture and Social Responsibility 17TW2 taught by Lindsay Conole, Southern New Hampshire
University from October 2017 to February 2018.
For the exclusive use of J. Brady, 2017.
For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
The Global Business Standards Project
In response to a lack of clear, comprehensive guidelines for the conduct of global
companies, we set out in 2004 to create
a business-ethics index that companies
could use to benchmark their behavior
over time.
As a first step, we systematically analyzed a select group of codes of corporate conduct. Distilling precepts from 23
sources, including 14 of the world’s largest
companies and institutions—among them
the United Nations, the OECD, the Global
Reporting Initiative, and the Caux Round
Table—we created the Global Business
Standards Codex, a compilation of widely
endorsed standards.
We then conducted multilanguage
field surveys to determine the extent to
which businesspeople around the world
believe that companies should—and do—
adhere to these standards. Two data sets
emerged from this work, which drew on
respondents from some 23 countries and
regions: findings from 880 executives in
The altitude effect. Those at the top of the
corporate hierarchy generally have a more positive
view of their companies’ conduct. For the bulk of the
standards, respondents who identified themselves
as corporate or division-level executives reported
smaller gaps between “should” and “do” than those
who identified themselves as middle management,
junior management, or nonmanagement employees. The altitude effect was most pronounced for
employee-related issues, but it was also strongly in
evidence for basic standards of business integrity
such as fair dealing and promise keeping and for basic standards of human welfare such as protecting
health and safety. Whether the rosier view from the
top indicates that executives are better informed or
that they are merely out of touch, the discrepancy
between their assessments and those offered by
other employees is cause for some concern. At the
very least, it indicates that executives need to rely on
more than their own views to assess their companies’
ethical performance.
Basics matter. We found that gaps for standards of business integrity were among the widest.
Although environmental issues emerged, somewhat
predictably, with wide gaps, we also found largerthan-average gaps for fair dealing, promise keeping,
and conflict-of-interest disclosure. These findings
are a reminder that business leaders must remain
vigilant about basic business integrity even as they
strive to meet emerging standards of corporate
citizenship concerning the environment, human
rights, and supplier practices.
Employees are an early-alert system. Gaps
relating to fair compensation, responsiveness to employees’ concerns, communication with employees,
and developing employees’ skills topped the list. In
the next tier, not far below, were gaps relating to free
association, employee dignity, equal employment
opportunity, and employment dislocations. Employees may well be most sensitive to practices that af-
Harvard Business School’s Advanced Management Program (2006 to the present),
and survey results from more than 6,200
employees of four leading global companies (2006 and 2007).
fect them, but that shouldn’t provide much solace to
executives. A large body of research has consistently
shown that employees who feel mistreated exact a
cost from the company, and many companies espouse the importance of treating employees the way
they want employees to treat customers. The sizable
gaps we found on employee standards may be an
early warning of brewing trouble.
Develop Data-Driven Tools
With governments, the public, and employees expressing a desire to see better corporate behavior,
how can companies take measurable steps to improve their conduct?
While many executives say that their companies
adhere to the highest ethical standards, very few
have data to assess the stringency of those standards
or even a way to determine what standards their
companies actually follow. Instead they typically
point with pride to the company’s written code, the
excellent people the company hires, or how some
particular misdeed was handled.
Such unsubstantiated claims would be unacceptable in any other aspect of business. An executive
who claimed that his company’s sales were among
the best in the industry but whose only evidence
was the company’s written sales plan, its great
salespeople, or last week’s big sale would quickly
be shown the door and perhaps even sued for fraud
or negligence. The lack of data and rigor in assessing and managing business conduct is tolerated
because many assume that ethics and conduct
are “soft” topics not amenable to measurement or
evaluation.
To be sure, many companies do track the use
of their hotlines and collect data on alleged codeof-conduct violations. And some companies do
survey employees on their perceptions of company
values or adherence to espoused standards. What is
largely lacking, however, is a systematic approach to
This document is authorized for use only by Jason Brady in MBA-635 Corporate Culture and Social Responsibility 17TW2 taught
by Lindsay
Hampshire
September
2011Conole,
HarvardSouthern
BusinessNew
Review
4
University from October 2017 to February 2018.
For the exclusive use of J. Brady, 2017.
A Global Leader’s Guide to Managing Business Conduct
up anonymous hotlines, and install monitoring and
assessing company performance on the standards
auditing processes to ferret out code violations and
of conduct that are expected of leading companies
risks. They are quick to respond to violations by gotoday.
ing after the causes and the offenders.
To address this problem and help leaders more
These programs are predicated on a wellaccurately gauge their companies’ ethical perforfunctioning legal system, and their approach to
mance, we developed an assessment tool based
influencing behavior relies heavily on the lawyer’s
on the Global Business Standards Codex to survey
the four global companies. Compared with more- tool kit of rules and penalties. Violations are presumed to originate with individuals acting against
common assessment tools, this one has several
otherwise prevailing norms, so the idea is to deimportant features. First, it is based on objective
tect and deter breaches by fostering transparency
rather than subjective standards (those that the
and strengthening disincentives. The apparatus is
company has chosen) that we have found to be
widely accepted by diverse business, government, focused on activities inside the organization and is
largely indifferent to the economic and societal conand multisector groups. Second, it generates data
text in which the organization operates. Moreover, it
from throughout the company—up and down the
is much the same whatever the business and whathierarchy and across multiple units—and covers
multiple dimensions of performance. Third, it fo- ever the content of the code.
But this approach seems markedly out of step
cuses not just on negative standards and the prevawith other areas of business practice. Our research
lence of misconduct but on positive standards and
suggests the need for richer tools and a more conthe company’s performance against affirmative
textual approach to improving ethical performance.
benchmarks.
The codex assessment tool allows business lead- When we delved more deeply into the gaps between
ers to construct an organization-wide picture of “should” and “do,” we found that aspects of the
broader context in which respondents were working
the company’s ethical strengths, weaknesses, and
related to the size of the gaps they reported. In parperformance. Admittedly, it captures perceptions
and beliefs rather than actual behavior, and per- ticular, we found that employees in the emerging
ceptions can be mistaken. (An independent third- markets of China, India, Brazil, and Southeast Asia
reported larger gaps than those in the United States,
party assessment would be useful additional input.)
the UK, Western Europe, and Japan. More generBut perceptions from a broad and diverse group of
employees are a useful first approximation of ac- ally, those in low-income countries reported larger
gaps than those in middle- and high-income ones.
tual conduct—and perceptions are crucial in and
The discrepancy between emerging and developed
of themselves, because they drive attitudes and
markets was in evidence across a wide range of aropinions within the company. They are also useful
eas—from competitive practices and employee defor helping managers take three necessary steps:
identifying issues that need further inquiry, pin- velopment to community relations and anticorruppointing potential risks to the company and its repu- tion efforts. In only one area—providing customers
tation, and finding areas of strength and opportuni- with accurate information about products and services—did developed-market respondents report
ties for learning.
significantly larger gaps than emerging-market
respondents.
Go Beyond Compliance-as-Usual
Gaps associated with broad contextual factors
Over the past two decades, many executives have
such as the economic and legal environments are difappointed chief compliance officers and established
programs to foster adherence to their companies’ ficult to address with a compliance program focused
on detecting and deterring individual violators. For
codes of conduct. A typical compliance program
such factors, low adherence to the codex standards
comprises best-practice elements—from a defined
set of conduct standards and policies to an imple- may have more to do with the environment in which
people are working than with deficiencies in the
mentation and oversight structure that goes all the
character or motivation of particular individuals, so
way up to the board of directors, often via the board’s
audit committee or a compliance committee. Com- replacing one set of employees with another is unlikely to make much of a difference. What’s needed
panies that follow such programs communicate their
is a multifaceted response that takes account of how
standards to employees, appoint ombudspeople, set
This document
authorized
for useSember
only by Jason
5 HarvardisBusiness
Review
2011Brady in MBA-635 Corporate Culture and Social Responsibility 17TW2 taught by Lindsay Conole, Southern New Hampshire
University from October 2017 to February 2018.
For the exclusive use of J. Brady, 2017.
For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
legal or economic differences shape behavior and
support (or discourage) adherence to the standards
in question.
Consider the large gaps for workplace health and
safety that we found in some regions. As many companies have learned, an effective program for improving workplace safety may include investment
in equipment and infrastructure, redesign of facilities, changes in work processes, education and training of employees, and modification of performance
measures. Engagement with external parties—to
establish standards, improve enforcement practices,
and focus public attention on safety—may also be
required. None of these elements is included in the
typical compliance tool kit.
Similarly, efforts to combat bribery in an environment where corruption is widespread must be multifaceted. Instructing employees to “just say no” and
punishing violators may work, but it carries a risk to
the business and may drive corruption further underground. A more promising approach recognizes
that the best protection against corruption is a superior product that adds value for the customer and is
not readily available elsewhere. Excellent sales and
marketing skills are also important, because without
them sales personnel are much more dependent on
supplying personal favors, gifts, and entertainment.
As in the case of workplace safety, changes in internal processes may be required—for example, approvals for certain marketing expenses—and it may
be essential to engage with external parties such as
standard setters, regulatory officials, and anticorruption groups.
The usual compliance tool kit is useful for reinforcing certain standards in certain operating
environments, but as these examples show, business leaders will need a much more extensive set
of tools to imp …
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