6th Issue (Jan 1997)

Editorial

Following the course, Mrs Lee visited 12 ethics promotion institutes and top corporations on the East Coast to study their ethics programmes. "While the basics of ethics-promotion activities are pretty much the same everywhere in the world, the ways they are implemented can be very versatile and creative," Mrs Lee said.

At Digital Equipment Corporation, a leading computer firm in the world, Mrs Lee was introduced to a creative card game comprising 65 questions on ethics. The cards are used to trigger candid discussions among participants in ethics training. A guide was also produced to facilitate exchanges on corporate decisions based on values.

At Lockheed Martin, a leading aerospace corporation in the world, Mrs Lee found the ethics programme stunningly innovative. Apart from using conventional media like pamphlets, videos and posters to disseminate its messages, Lockheed Martin also employs high-technology interactive devices like CD-ROMs to increase exposure of its ethics programme. To top it all, Lockheed Martin produced an ethics chess game called Gray Matters.

"There is no doubt Hong Kong companies can be more creative to make their ethics programmes lively and more interesting," Mrs Lee concluded.

Meanwhile, the Hong Kong Ethics Development Centre (HKEDC) is delighted to report that over 1,500 people have used its services since its opening in May 1995. The Hong Kong Ethics Development Advisory Committee completed its term with a final meeting on December 6, 1996. All members of the committee agreed to serve two more years, following support from the territory's six leading chambers of commerce.

Mr Herbert Liang, President of The Chinese Manufacturers' Association of Hong Kong also continues as committee chairman. Other members of the advisory committee are:
Mr Frank Martin, President of The American Chamber of Commerce in Hong Kong;
Mr Henry Wu, Vice-chairman of The Chinese General Chamber of Commerce;
Mr Donald Chia, Deputy Chairman of the Federation of Hong Kong Industries;
Mr An Ji Tao, Vice-chairman and Chief Executive of the Hong Kong Chinese Enterprises Association;
Miss Lily Chiang, General Committee Member of the Hong Kong General Chamber of Commerce; and
Ms Janet Wong, Director of Community Relations of the ICAC.

As of January 1, 1997, the HKEDC Executive Secretary and her deputy assumed new titles of Executive Director and Deputy Executive Director respectively.

How To Build Up An Ethical Corporate Culture

Building an ethical corporate culture is essentially imbibing an organisation with a strong sense of purpose, responsibility and ideals. Ethical corporate culture will lead to good business practices. Building ethical corporate culture must be seen as a function of management. The chief executive must personally make a commitment, and managers must reinforce it with a programme which should initially include:

• Formulating a code of conduct, preferably with broad-based staff consultations;
• Conferences and seminars to create greater awareness about ethics; and
• Conducting an ethical audit.

An underlying question is how ethical standards and values can be maintained and perpetuated over time and changes in personnel. The far-sighted approach is to institutionalise the organisation's structure and work process that emphasise ethical considerations. This approach should cover :

Setting Up An Ethical Framework

An ethical framework usually outlines the company's code of conduct, vision or declared goals. It is an ethical compass for planning and decision-making and gauging performance. The framework can delineate and define the ethical obligations of stakeholders, investors, business partners and employees.

Aligning The Organisation

Aligning the organisation refers to closing gaps or loopholes that result from introducing an ethical framework into the existing systems and processes that drive the organisation. Attention should therefore be given to designing a structure that will not only yield corporate values but also build and sustain integrity. The systems in a company that reflect values most are planning, budgeting, allocation of resources, information and communications, and performance evaluation and rewards.

Forming An Ethics Committee

Companies would certainly give integrity a boost by setting up a committee or department dedicated to ethics. An efficient step in this direction is to recruit an ethics officer. The appointee will report directly to the board of directors, advise employees, organise and conduct training courses and regularly review the company's performance. Some American companies have also established "helplines" for staff to deal with ethical dilemmas. Considering the size of employment and Asian culture, it might not be advisable to introduce independent full-time ethics officers into Hong Kong companies but with some creativity, it could definitely be assumed by suitable persons in a company.

Organising Value-based Communication Programmes

Training is an indispensable element for nourishing corporate integrity. An ethics programme should be part and parcel of the overall corporate training scheme. At present most companies only appraise new employees on values during induction courses. This, however, should be regarded as the first of a continuous process in ethics training.

Staff should be constantly reminded to give paramount importance to corporate values in making decisions for the company. In-depth training should be given to disseminate, clarify and even appraise the company's code of conduct. At these sessions staff should be encouraged to be open about how they handled ethical dilemmas, and the extent corporate values affected their decision-making. Such training will reinforce ethical thinking, making it a corporate asset.

Conducting An Ethical Audit

Managers should also consider introducing ethical audit in their corporate programmes. Just as financial and marketing audits are required in a company's operations, an ethical audit of sourcing, manufacturing practices, personnel policies, dealings with suppliers, and sales techniques would find out if there were abuses and loopholes. Among questions that could be raised are:

• Have there been occasions when the company lost out to competitors because it refused to offer gifts or other favours?
• Does any of the employees own or has financial interests in any of the company's distributors?
• Have employees noticed unethical practices in the company and would they consider blowing the whistle?

Leaders Set The Standard And The Tone

The information age and global marketplace puts the spotlight on the role of leaders with even greater intensity. How do businesses create an ethical culture that respects local values and customs in the face of rather significant cultural differences and standards?

A value-based ethics and business conduct strategy driven by senior management is the best way to meet this tall order. Not based on rules alone, this strategy focuses attention on the role of principled leadership in the process that defines corporate culture. Business executive and psychologist Richard Farson writes, "In both parenthood and management, it's not so much what we do as what we are that counts ....." Some key elements that employees use to conclude that leaders are credible include :

• Operational vision and values
• Ethical leadership
• Two-way communication
• Long term commitment

The importance of vision and values cannot be overemphasized. A concise description of what the company aspires to be (vision) and the guiding principles (values) for success are the foundation for ethical corporate culture. In the past this was solely defined by senior leaders in the company. Today stakeholders, especially employees, want to and should participate in the process. A model based on core ethical principles and shared values is, not only essential to ethical decision making but also to the success of the process.

Embracing the vision and values for all to see is a significant step! From that point forward the leadership will be judged both externally and internally on how they are living these values. This signals the beginning of the journey. Now resources and attention must focus on leadership development on how to live the company's stated values. Systems, procedures, organizational structures and education should be examined to ensure they are congruent with the description of what the company wants to be.

Ethical Leadership

How do core values move from a paper document to the daily actions of thousands of employees? They do so in two ways. The first is to get very specific about actions that exemplify the company's values. The second is to implement a method by which all leaders can receive feedback on how their actions and behaviors are perceived as reinforcing or contradicting the values. It all begins at the top with the CEO and senior leaders walking the talk.

One of the most powerful tools for translating values to action is a leadership inventory which is sometimes called a 360 feedback instrument. All managers participate. The leader/manager who is receiving the feedback, along with his/her direct reports and peers completes a confidential inventory on how he or she is perceived to be living the values. An external firm complies data and every manager is provided a personal, confidential summary booklet. An external coach assists with interpretation of results. Next the individual leader determines two or three areas for improvement and a plan of how to improve. In other words, they ask, learn, thank, follow-up, and grow!

Here are examples of leadership inventory items from an 80 item instrument related to company values of quality, customer satisfaction, leadership, integrity, people and suppliers.

• Listens to other people's ideas
• Avoids acting arrogant or superior to others
• Consistently does what is "right" as opposed to what is expedient
• Asks people what they need to do their job
• Avoids both the perception and the reality of fraud, waste, or abuse

Managers at all levels were perceived to be getting better. Why? Primarily, because they were openly and honestly asking people for input on how to improve. Then going back thanking individuals who completed Leadership Inventories providing the information and most importantly they continued to return on a regular, periodic basis, inquiring on whether they were getting better and asking for help to get better! They were demonstrating humility and a desire to learn and grow. At the same time this tends to build trust from the employee viewpoint. Yes, my boss is listening! Yes, my opinion counts! These individual efforts create collective culture change toward living the company's vision and values.

Two-Way Communication

Improving or getting better can only happen when an individual or an organization listens and responds to employees, customers, and peers. Max De Pree, former CEO of Herman Miller, Inc. states that "Good communication means respect for individuals. Good communication is an ethical question."

The leadership development process I have described surfaced a concern about open, honest communication. It became apparent more should be done to improve interpersonal communication skills ..... especially the willingness of managers and employees to talk openly and honestly with one another. When and under what circumstance should you challenge the boss? Once a decision is made, what support actions are expected?

In response, we developed guidelines we termed, "When to Challenge, When to Support." This was a direct attempt to meet the shoot the messenger syndrome head on. You all know this syndrome. It's fear of telling someone at a higher organizational level something they may not want to hear. It reminds me of the story of movie mogul, Sam Goldwyn, who once told his staff, "I want you to tell me exactly what's wrong around here, even if it means losing your job!"

Our guidelines don't use Goldwyn's quote. Orientation and self-help guides, on "When to Challenge, When to Support" were provided for all employees. They counsel employees on when they should speak up and what the response should be from management. Not only do they encourage this type of responsibility on every employee's part but advise them on how to make their input most effective. In addition, to support two-way communication, all 3,200 managers attended coaching and feedback skill seminars. They role played and studied how to dialog and improve two-way communication. Likewise, employees receive coaching on how to raise issues and express concerns as well as how to support the boss after their concerns are expressed.

These initiatives require ongoing efforts to take root and grow. It is culture change at its best.

Long Term Commitment

Like everything worthwhile, creating and maintaining an ethical corporate culture will not happen by chance. It needs leaders who are learning oriented, who champion change and have the mental agility to deal with it and yet are committed over the long term to the organization's core values. This has never been truer than it is now when the pace of change continues to escalate.

The core values are an anchor or a constant in the midst of this unrelenting change. They are a guide to decision making especially when faced with decisions for which there may be no precedent. There will, however be a serious disconnect if the values are not also reflected in the formal business systems. Do they inform strategic decision making? Are people evaluated, promoted and rewarded because they model the values in their behavior and decisions?

The credibility of the effort will depend on the commitment of the leaders, not simply, to espouse the values but to integrate them in all aspects of business life. If what you embrace verbally is not put in action, it will be seen as an empty shell. The values must be enduring and operational to be accepted as credible and a key ingredient of shared business success.

Shirley V. Peterson heads Peterson and Associates, assisting organizations with ethics and values strategies. She is a founding board member of the Ethics Officer Association (USA) and former Vice President of Ethics, Northrop Grumman Corporation, a US based aerospace firm. She is regarded as one of the ten most influential women in the business ethics field in the States.

Seminars

"Business Ethics - The Competitive Edge" aims to propagate the merits of upholding high ethical standards in sales and marketing, and equip participants with legal and professional knowledge to prevent corruption and other malpractices.

Key experts from the marketing industry, the ICAC Operations Department and the anti-corruption agency in China have been invited to speak at the seminar. In addition, participants will be encouraged to actively exchange their views on ethics at the seminar's "Dialogue Sessions". Interested parties can contact the HKEDC for details.

Tel. : 2587 9812.

Video

Training