Paper Example. Factors Affecting the Effectiveness of Corporate Code of Ethics

Corporate Code of Ethics (CCE) is essential as it provides a framework that regulates behavior within an organization. In this regard, CCE consists of a set of rules aimed at promoting ethical decision-making and also addressing moral issues. Research has indicated that almost all big corporations in the world have a code of ethics, with a growing prevalence among small companies (Singh, 2011). In the United States, CCE is a mandatory requirement for businesses that wish to issue financial securities in the stock exchange (Webley & Werner, 2008).

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Research Area

The research paper aims at examining key factors that affect the effectiveness of CCE. It is important to study this topic because previous studies have indicated that having CCE is not sufficient to change employee behavior and attitudes (Webley & Werner, 2008). Since this research moves beyond examining the mere existence of CCE, its findings help understand how companies can strengthen their codes of conduct.

Research Questions

The study has a primary Research Question (RH) and a secondary RQ that helps achieve the goals and objectives of the paper.

1. Primary RQ: What are the major determinants of CCE’s effectiveness in shaping employee behaviors and attitudes?
2. Secondary RQ: How should companies embed their ethics and values to establish more consistent ethical conduct?

Research Objectives

The paper aims at achieving three research objectives

1. To identify key factors that determine the effectiveness of CCE.
2. To understand how codes of conduct influence attitudes and behaviors among the employees.
3. To determine how companies can use their ethics and values to embed their corporate code of ethics.

Research Hypothesis (RH)

1. H1: Establishing sustained ethical leadership and well-designed ethical policies have a positive impact on the effectiveness of CCE.
2. H0: The implementation of ethical leadership and proper ethical policies does not affect the effectiveness of CCE.

Literature Review

Several researchers in social science literature have moved beyond a mere study of CCE implementation to examining the role and the content of codes of conduct (Schwartz, 2014). Such studies investigated how CCE implementation, administration, and even its creation process influence the effectiveness of CCE in changing behaviors. A study by Schwartz (2014) identified the presence of training programs, management support, and reinforcement of ethics as the main determinants of CCE’s effectiveness. The literature has also shown that code quality as well as the content, are the major determinants of CCE potency (Erwin, 2011)

Webley and Werner (2008) argued that there is a gap between practice and ethics policy, with many organizations having infective CCEs’. Despite ethics policy being a norm in the industry, research has shown that most corporations are less ethical in their behavior (Webley & Werner, 2008). Two factors, namely, deficiencies in corporate culture and infective ethics programs, explain the gap mentioned above (Webley & Werner, 2008).

Leadership is one of the factors that influence the efficacy of CCE. A study by Webley and Werner (2008) found a positive correlation between ethical leadership and the effectiveness of CCE. Accordingly, the existence of sustained leadership in an organization can help administer a corporate code of ethics that can shape employees’ behaviors. The incorporation of ethics in organizational strategy and processes can also be used as another method to shape CCE and make it an essential tool for regulating conduct. With the presence of a proper and reliable CCE in place, organizational managers are in a better position to promote ethical decision making. Such an environment fosters adherence to moral principles, which enables employees to analyze their decisions. This situation, in turn, leaders to ethical business decisions that can enhance operational efficiency and even the performance of a company.

Lack of embedment of CEE besides ineffective ethics programs contributes to weak corporate codes that cannot foster ethical decision making. In the social science literature, it is generally accepted that a written code of ethics is the foundation of CCE (Webley & Werner, 2008). Effective ethics programs translate into positive behaviors and attitudes expected of the employees in different hierarchies of an organization. Research has also demonstrated that a company can have CCE that follows good practices, but a gap between policy and practice can still emerge (Webley & Werner, 2008). Failure to communicate the code and its ineffective embedment contribute to the gap.

Unethical corporate culture negatively affects the effectiveness of CCE and its use to enhance ethical decision making and positive behaviors (Erwin, 2011). Companies that nurture a culture of promoting adherence to moral values, principles, and beliefs create an environment that supports CCE in place. The literature has recommended three factors, namely, the implementation of well-designed business ethics policy, promoting an ethical culture, and seeking feedback and assurance as to the core considerations that can help breach the ethics policy-practice gap (Webley & Werner, 2008).

The Social-Cognitive theory is one of the frameworks that can be applied to understand the subject. It states that people’s knowledge acquisition is related to past experiences, observations, and interactions in social contexts (Singh, 2011). A study that applied this theory to examine the influences of business ethics standards and organizational behavior identified both personal and organizational determinants of CCE effectiveness (Singh, 2011). Ethics programs and moral development were the main factors that shaped CCEs within business settings (Singh, 2011).

Research Methodology

The study will use both primary and secondary data to test the hypothesis and answer RQs. Regarding secondary date collection, key sources on the topic will be retrieved from 'Google Scholar,' 'EBSCOW,' and ‘JSTOR’ among other reputable online databases. Five journal articles published within the last five years will be reviewed and analyzed to have an in-depth understanding of the subject. For the primary research, online questionnaires will be designed administered on the managers of four corporations to know the efficacy of their CCE. Data from secondary and primary sources will be analyzed critically and a logical conclusion drawn on the subject.

References

Erwin, P. M. (2011). Corporate codes of conduct: The effects of code content and quality on ethical performance. Journal of Business Ethics, 99(4), 535-548. Available from: https://doi.org/10.1007/s10551-010-0667-y (Accessed 14 July 2020)

Schwartz, M. S. (2014). Effective corporate codes of ethics: Perceptions of code users. Journal of Business Ethics, 55(4), 321-341. Available from: https://doi.org/10.1007/s10551-010-0667-yhttps://doi.org/10.1007/s10551-004-2169-2 (Accessed 14 July 2020)

Singh, J. B. (2011). Determinants of the effectiveness of corporate codes of ethics: An empirical study. Journal of Business Ethics, 101(3), 385-395. Available from: https://doi.org/10.1007/s10551-010-0727-3 (Accessed 14 July 2020).

Webley, S., & Werner, A. (2008). Corporate codes of ethics: Necessary but not sufficient. Business Ethics: A European Review, 17(4), 405-415. Available from: https://doi.org/10.1111/j.1467-8608.2008.00543.x (Accessed 14 July 2020).