Business Ethics:
Practical Proposals
for Organisations*
ABSTRACT. A review of ethical literature demon-
strates that the material presented to date is largely
based upon theoretical and empirical research. While
this information has contributory value, the infor-
mation produced is largely observational rather than
practical. Managers are anxious to receive assistance
with the mechanisms by which ethics can be inte-
grated into their organisations. Utilising the recent
experience of the author with a large utility company
in Asia committed to developing an ethical pro-
gramme to enhance ethical awareness in their organ-
isation, this paper intends to review current systems
and procedures available to managers for integrating
ethics into business. In addition to reviewing mech-
anisms for promoting an ethical climate, where appro-
priate, reference will be made to prior research and
specific organisations where these practices have been
used successfully.
The paper concludes with a set of summary
recommendations for managers embarking on the
introduction of an ethical programme to their organ-
isation.
Gael McDonald is Professor of Business Ethics and Dean
of the Faculty of Business at UNITEC Institute of
Technology, Auckland, New Zealand. She completed
her doctorate at the London School of Economics and
Political Science in the area Cross Cultural Ethics. Dr.
McDonald has published in Journal of Business
Ethics, Journal of Manager of Psychology, Asia
Pacific International Journal of Marketing,
Management Decision, The International Review
of Retailer Distribution and Consumer Research
and is an Associate Editor of Business Ethics – A
European Review.
Journal of Business Ethics 25: 169–184, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Gael McDonald
Introduction
To date the literature in the field of business
ethics appears to have four dominant streams:
normative, meta-ethical, descriptive and pre-
scriptive literature. Normative ethical literature
seeks to uncover and justify the basic structure of
moral systems. This literature concentrates on
teleological and deontological traditions, and also
contains discussions on rights and justice (e.g.,
Rawls, 1971; MacIntyre, 1981). Building on this
foundation, meta-ethical literature investigates
questions of meaning and justification relating
to the corporate and individual decision making
process. The current area of meta-ethical ethics
analyses moral reasoning, the cognitive frame-
works that are involved in the ethical decision
making process (e.g., Forsyth, 1980, 1981, 1985,
1992; Forsyth and Berger, 1982; Laczniak, 1983;
Fleming, 1985; Dahl et al., 1988; Randall, 1989;
Ulrich and Thielemann, 1993; Premeaux and
Mondy, 1993; McIntyre and Capen, 1993;
Galbraith and Stephenson, 1993), and the
development of detailed normative decision
models (e.g., Ferrell and Gresham, 1985; Hunt
and Vitell, 1986; Trevinom 1986; Bommer et al.,
1987; Dubinsky and Loken, 1989; Stead et al.,
1990; Trevino and Youngblood, 1990; Fritzsche,
1991; Jones, 1991; Strong and Myer, 1992;
Wines and Napier, 1992). Alternatively, descrip-
tive literature investigates, among other things,
the ethical beliefs of students (e.g., Peterson et
al., 1991; Glenn and Van Loo, 1993; Tse and Au,
1997), managers with specific functional respon-
sibilities (e.g., Brenner and Molander, 1977;
Vitell and Davis, 1990) and the perceptual beliefs
of individuals and corporations across cultures
(e.g., Dolecheck and Dolecheck, 1987, 1992;
170 Gael McDonald

Izraeli, 1988; Akaah, 1990; Hoffman et al., 1994; information and the sharing of best practices is
McDonald and Pak, 1994; Clarke and Abram, imperative for ethical awareness to expand and
1997; Grunbaum, 1997). Lastly, prescriptive for ethical practices to be integrated further into
literature encourages the business community to the business community.
be more ethical (e.g., Cadbury, 1987) and
instructs business people how this might be
achieved (e.g., Lee, 1986) through ethical codes, Practical proposals: A case example
guidelines for managers as a means of institu-
Drawing on practical experience that may be of
tionalizing ethics in organisations (e.g., Weber,
value to others, the following discussion centres
1981), and also pedagogical suggestions for
on two projects undertaken with a multi-national
ethical training (e.g., Lane et al., 1988;
utilities company employing over 6,000 people.
Schoenfeldt et al., 1991; McDonald and Don-
The first assignment was to advise on strategies
Levy, 1995).
for the effective communication and implemen-
While philosophers have contributed and ben-
tation of the Code of Conduct through the work
efited from the normative literature, and acade-
force. This entailed proposing the framework for
mics from the meta-ethical and descriptive
the programme and the development of a fully
literature, businesses are still hungry for material
scripted training manual and support materials.
of a more pragmatic nature that will assist in
The second and larger project was the imple-
making business ethics operational. Many
mentation of the ethical awareness strategy
managers eager to promote business ethics appear
throughout the organisation. Some of the tasks
to be most receptive to material that can be easily
undertaken in the second project were: assisting
reviewed and from which specific suggestions and
with the construction of an ethics support video,
recommendations can be drawn for implemen-
briefing the senior executive committee of the
tation into their organisations. Managers are
organisation on the programme, introducing the
particularly receptive to strategies for promoting
programme to Heads of Departments, con-
ethics which can be initiated by themselves
ducting train-the-trainer workshops and under-
without requiring the additional expense of
taking a research evaluation of the effectiveness
ethics consultants or the more formalised creation
of the programme.
of ethical officers. However, within the literature
Unlike organisations which have been
there still appears to be an emphasis on empir-
prompted into more active ethics programmes as
ical research and model building. The theoretical
a result of extensive publicity given to a perceived
frameworks, while useful in an academic context
legal or ethical violation, for example, Sundstrand
for hypothesis testing, formulating and replicating
Corporation (Ross and Benson, 1995) or
research and theory building, have not served the
NYNEX Corporation (Driscoll et al., 1996), this
business community well in their efforts to raise
organisation appeared motivated by a genuine
ethical awareness and to establish ethical climates
concern for the ethical environment in which
in business enterprises. This absence of pragma-
they worked and wanted their employees to be
tism in ethical literature could be a contributing
cognisant of the organisation’s desire to be recog-
factor to the lukewarm reception that a discus-
nised as an organisation with integrity. To achieve
sion of business ethics often receives in industry.
this a number of strategies were implemented.
Without adequate guidance and direction it is
little wonder that the pick-up rate of new
practices for promoting ethics has often been Activating the role of senior management
slow. Of particular relevance to the drive for
greater recognition of the importance of ethics Despite a few studies indicating that the actions
in business is the dissemination of existing of top management have minimal, or no, signif-
knowledge of specifically what practices and icant influence on organisational ethical behav-
procedures are available and, more importantly, iour (Murphy et al., 1992; Zey Ferrell et al.,
what has worked successfully in the past. This 1979), the role of management has been studied
 Business Ethics: Practical Proposals for Organisations
extensively with the common and intuitive
conclusion that unethical decisions of business
executives are significantly influenced by the
perceived attitudes and behaviour of immediate
supervisors, and senior management. The
research strongly supports the conclusion that the
ethical philosophies and values of management
have a major impact on the ethical choices and
behaviour of employees (e.g., Stead et al., 1990;
Soutar et al., 1994; Wimbush and Shephard,
1994). In addition to the early support that an
ethical programme can receive from senior man-
agement through a behaviour modelling process,
ethical behaviour is no doubt learnt from others
in conjunction with related motives, rationaliza-
tions and attitudes.
Within this organisation the CEO clearly
established an expectation of integrity for the
company. His commitment to the instillation of
ethical standards was a considerable asset in first
identifying the concern for developing an ethical
climate, securing appropriate resourcing,
approving appointments of ethical specialists,
influencing the senior executive team on the
importance of the programme, and making
himself available for consultation and the prepa-
ration of relevant material (a video of the CEO
was developed to be used in all the train-the-
trainer sessions). He also provided the necessary
impetus to ensure the permeation of the pro-
gramme to all levels in the organisation.
In addition to the strategic input and vision
of the CEO, throughout the programme senior
managers were regularly communicated with and
their support actively solicited. The executive
team received presentations of the material
developed in conjunction with the programme.
Similarly, Heads of Departments in groups of 12
personnel each session, were brought in on the
objectives of the training and material to be used.
Input was sought on the material and the
processes to be used prior to final publication.
Nominations for trainers were also requested. It
was heartening that, rather than delegating the
process to others, some senior managers were
prepared to undertake the train-the-trainer
session themselves and then to conduct the
ethical training sessions themselves.
The support of the senior managers and the
171
CEO were imperative for the success of the
programme and it became apparent that one
statement in particular made by the CEO,
recorded on video and communicated to all staff,
had significant impact. The CEO was adamant
that he was prepared to lose a contract if it meant
that the ethical code of the company would
otherwise be violated. The open admission that
the organisation would be willing to forego
profitability to maintain the integrity of the
company appeared to hit home to a large number
of employees and, as one employee commented,
“the CEO appears to be willing to put his money
where his mouth is”. It appears that what good
ethical behaviour comes down to is the soul of
the organisation and this should be represented
by top management and their hopes, visions and
purpose (Blanchard and Peale, 1988) with many
a senior manager attributing the ethical success
of their organisation to the direct consequence
of their management philosophy and value
system (Light, 1995).
Establishing a Code of Conduct
Weaver and Ferrell (1977) concluded that the
existence of corporate policy is directly linked
with improved ethical beliefs and behaviour of
marketing managers. Examining market
researchers Ferrell and Skinner (1988) asserted
that more formalisation in an organisation is
associated with ethical decisions. For example,
with reference to ethical codes, Singhapakdi and
Vitell (1990) generally found that marketers in
organisations which have codes of ethics that are
enforced, tended to be more sensitive to ethical
problems when they occurred and to choose
ethical alternatives in the decision making
process. To be fair, criticism exists regarding the
likelihood of improving ethical behaviour in
organisations through the use of codes of conduct
(e.g., Cressey and Moore, 1983; Hunt et al.,
1984; Akaah and Riordan, 1989; Buchanan,
1987; Hyman et al., 1990; Bavaria, 1991).
However, given the empirical support of the role
of corporate codes and policy for improving
ethical perceptions and standards in organisations
(e.g., Weaver and Ferrell, 1977; Brenner and
172 Gael McDonald
Molander, 1977; Hegarty and Sims, 1979;
Chonko and Hunt, 1985; Laczniak and
Inderrieden, 1987; Ferrell and Skinner, 1988;
Weller, 1988; Weeks and Nantel, 1992; Murphy
et al., 1992), clearly, some form of normative
structure in the form of policy and codes does
have an impact on ethical attitudes and possibly
behaviour.
The case organisation had become increasingly
aware of the need to document its ethical policies
and procedures and with the arrival of personnel
from Shell, who had prior expertise in operating
within a code of conduct, attention was given
to the development of a Code of Conduct. This
twenty page document, written in both English
and Chinese, was prepared in booklet form and
distributed to all staff and covered established
policies on business ethics. The Code of Conduct
booklet was divided into twelve easy-to-read
sections of a page or two in length.
Following the table of contents the booklet
contained:
01. An introductory message from the
Managing Director.
02. Employment practices. This section
addressed equality of opportunity, open
communication and a commitment to
developing employees. Rather than
starting with a series of “do nots” in this
section, the company first emphasised
their responsibilities to employees.
03. Ethics (in general). This section high-
lighted the importance of ethics over
legality – “Even when the law is permis-
sive, we will choose the course of highest
integrity”. Also addressed was the issue of
different cultural settings – “Honesty is
not subject to criticism in any culture”,
and that “The means as well as the ends”
are important – “We do care how results
are obtained, not just that they are
obtained”.
04. Conflict of interest. This section high-
lighted issues of concurrent employment,
handling confidential information, use of
insider information, unauthorized appro-
priation of company services or property
and the importance of disclosure.
05. Bribery, gifts and entertainment. This
section covered the culturally sensitive
issue of soliciting or accepting any advan-
tage from clients, suppliers or any person
in connection with the company’s
business.
06. Safety/Occupational Health. In what may
appear to be a curious inclusion in a Code
of Conduct, the sections on safety and
occupational health provided the company
with yet another opportunity of stating its
commitment to employees and their
welfare.
07. Customer Relations. The inclusion of
customer satisfaction, albeit a brief
section, also served to give emphasis to the
core values of the organisation.
08. Relations with suppliers and contractors.
This section covered competitive ten-
dering, evaluation, selection and moni-
toring.
09. Environment. This section of the Code
dealt with business conduct in accordance
with respect for the environment.
10. Responsibilities to shareholders and the
financial community. This section
reflected the size and position of the
company and detailed their record
keeping, and information provision
responsibilities.
11. Monitoring of compliance and the means
of enforcement. The final section of the
code reminded employees of their
personal responsibilities in regard to the
Code, avenues for information and disci-
plinary outcomes which result from
violation.
In addition to the more predictable contents, this
Code had five notable features which should be
evident in all codes. These are: (1) upfront
support from senior management, (2) a recogni-
tion of the responsibilities not only of employees
but also of the organisation, (3) the inclusion of
components that reflect the core values of the
organisation, e.g., safety, customer service,
quality, etc., (4) appropriate channels of com-
munication for dealing with ethical dilemmas and
the disciplinary consequences of violation, and
 Business Ethics: Practical Proposals for Organisations
(5) the Code should look at and reflect the
culture of the organisation.
Despite the existence of these standard features
it is imperative, when designing Codes, that
organisations develop their own. It is tempting
to borrow another company’s Code of Conduct
but the more the Code looks at and reflects the
culture of an organisation, the greater the chance
it will be accepted by its employees. In this
organisation there was, by North American stan-
dards surprisingly, no mention made of sexual
harassment. However, true to both the organisa-
tional concerns and cultural location of Asia,
extensive reference was made to gift giving and
bribery.
The benefits a Code of Conduct can provide
include legitimising the discussion of moral
issues, bolstering the ability of individuals to resist
the unethical demands of supervisors and clients,
and providing a guide for employees who want
to do the right thing. In a recent internal review
of the revised ethics programme at NYNEX
Corporation, 90% of those surveyed stated the
NYNEX Code of Business Conduct was of use
in guiding decisions and actions (Driscoll et al
1996). However, do not assume that because the
organisation has developed a formal statement of
values that it is acknowledged or implemented.
In the 1960’s NYNEX was among the first to
issue a corporate code of ethics. However, in
1990 after investigations undertaken by the New
York State Attorney General and the Public
Service Commission, it was shown that NYNEX
was making purchases based on favouritism and
passing the increased cost to ratepayers. Clearly,
there was a need to shore up their ethical foun-
dations.
Regrettably, the value of a code of conduct is
often limited because it is frequently badly
written and not fully integrated by the organi-
sation. Codes, like Mission Statements, are often
ignored. To be effective codes of conduct should
not be introduced in isolation as they will often
precipitate further changes in other organisational
practices including the selection, induction, com-
pensation, training, rewarding, and disciplining
of employees.
173
Conducting ethical training
The establishment of a Code of Conduct should
be seen only as an initial step in the development
of an ethical programme because, without
modifying the internal values to emphasize
ethical conduct, there is no guarantee that trans-
gressions will not occur in the future (Ross and
Benson, 1995). The Code was approved by the
Board and distributed to all employees in
October 1994, however, incidents noted in the
audit reviews seem to indicate that the under-
standing of the Code was far from satisfactory.
It was felt by the CEO and Board Audit
Committees that the organisation needed to do
more than just point employees in the direction
of the booklet and there was a desire to do more
than print up a Code of Ethics and leave it sitting
on the shelf. From experience the organisation
was also very aware that, for many employees in
their daily lives, there are many work related cir-
cumstances that pose potential problems and
these situations are further complicated by such
additional factors as cost considerations, time
constraints, and competitor pressures. They
acknowledged there are potentially many occa-
sions when employees may experience a situa-
tion which presents a dilemma which often
requires a moral choice, and the organisation was
motivated to provide assistance to employees to
ensure that they made appropriate decisions.
Endeavouring to resolve this problem, the organ-
isation wanted to do more than just point
employees in the direction of a booklet and, con-
sequently, attention was given to the conducting
of ethical training for all 6,000 plus employees.
1. Establishing the programme objectives
Initially, the Internal Audit Department with
the Education and Training Division developed
the core messages they wanted assimilated
throughout the company. However, the organi-
sation would have been better served had they
initially considered what were the objectives of
the training. It has been suggested that ethical
training has multiple objectives (Callahan, 1980;
Power and Vogel, 1980). Four objectives (Gandz
and Hayes, 1988, p. 659) which could have been
used are:
174 Gael McDonald
• The fostering of awareness of the ethical
components of managerial decision making.
• The legitimization of ethical components as
an integral part of such managerial decision
making.
• The provision of conceptual frameworks for
analysing the ethical components and to
help individuals become confident in their
use.
• The helping of participants to apply ethical
analysis to day-to-day business activities.
In relation to the current organisation the pro-
gramme was designed to help achieve the
following three objectives:
• To stimulate awareness of standards of
conduct in the workplace.
• To develop a better understanding of the
current Code of Conduct in the organisa-
tion and how it applies to employees.
• To impress upon employees the importance
attached to the Code of Conduct in the
organisation.
2. Designing the programme
A detailed training manual was developed for
the programme, titled “A Step in the Right
Direction”, and was given to all instructors when
they attended a train-the-trainer session. The
manual folder contained all the written and audio
material the instructors needed to conduct an
effective session. More specifically, the instruc-
tors guide provided:
• An overview of the seminar and the five
relevant sections of the workshop with
suggested time allocations. The five sections
were: Introduction – welcome and a brief
statement of what the workshop is about;
Managing Director’s Video – the Managing
Director emphasising the importance of the
Code of Conduct for the organisation;
Standards of Conduct – why are they
important; The Code of Conduct – an
overview of the essential components of the
Code of Conduct and an insightful exami-
nation of specific Company Codes of
Conduct; Close of Workshop – a wrap-up
of the session re-emphasising main points
and indicating directions for help should
an employee be experiencing an ethical
dilemma.
The appendices to the manual contained course
attendance sheets, an item regarding course
evaluation, and related reading material helpful
for instructors becoming acquainted with the
subject area of business ethics.
Each section of the manual contained: (1) A
clear statement of the objectives of each section
at the beginning; (2) A rationale was provided
to give further insight into what it was hoped
would be achieved in that section of the
workshop; (3) The section content containing
the bulk of the training material in the form of
scripted materials, question and answer items and
examples, and (4) Overhead transparencies.
Throughout the training session instructors were
provided with numbered overhead transparencies
and an indication given with bracketed instruc-
tion e.g., [Place transparency three on the
overhead projector] as to when the overhead
should be shown.
Remembering that, for some instructors,
English was a second language and to ensure
consistency in the presentation of the material
in all training sessions, the organisation requested
the provision of an easy to follow script to
support each section. Instructors were requested
to simply look for LEADER in bold type to
locate the script, where they would be given
instructions as to the means of facilitating dis-
cussion as well as supporting discussion for each
overhead. Instructors were also encouraged to
supplement this discussion with examples from
their own experience, or examples gained from
previous sessions, as material is always better
received when it is supplemented with personal
examples and experience.
Alternatively, for trainers who felt more com-
fortable using their own words to present mate-
rials, throughout the training manual bullet
points were placed on the left side of each page
indicating the essential points. These were used
as a guide as instructors became more familiar
with the content of the workshops. For those
who were following the LEADER script, the
bullet points also acted as a reminder of the main
 Business Ethics: Practical Proposals for Organisations
points to be covered. On occasions the material
was supplemented with hints which were
intended to give instructors suggestions for in-
class facilitation. In preparation for the workshop
all workshop instructors were required to be
completely familiar with the company’s Code of
Conduct. They were encouraged to contact
specified personnel in the Audit Department
should they experience any problems in the
transfer of the Code to their work environment,
and were warned that within the workshop
sessions they may be asked to advise on actual
work-related circumstances. Instructors were also
encouraged to try and anticipate what some of
the reactions to the seminar might be and what
questions might be asked of them. Their possible
concerns about teaching ethics were also
addressed. In preparing for the workshop instruc-
tors were asked to reflect on their own experi-
ences, and to become personally committed to
helping others identify and resolve problems they
experienced in relation to standards of conduct
within the company. Practical comments were
also expressed regarding materials required,
timekeeping and the avenues for assistance.
3. Facilitating the programme
To implement the training, approximately 125
instructors were trained in eight sessions in a
variety of locations around the company.
Wherever possible, attempts were made to be on
familiar ground. These instructors then went
back to their respective areas and, over a period
of approximately four months, conducted
training with groups of up to twenty employees.
Each session lasted one to one and a half hours.
Courses were conducted in both English and
Chinese. Completion of attendance sheets was
required and periodic reports on the status of
training (i.e., number of sessions and number of
people) were requested by departments. Trainers
were requested to record any questions raised
during training sessions which they were unable
to answer and to send them to Internal Audit
for resolution. The date by which all ethical
training was to be completed was clearly com-
municated and adhered to.
It is important to note that, unlike this cir-
cumstance, organisations may not necessarily rely
175
extensively on their own code of conduct for the
structure of the programme. Consideration
should also be given to alternative means of
discussing business ethics in a more general
context. When contemplating alternative or
complementary models to the teaching of
business ethics, in many instances these models
provide practical suggestions for different learning
methodologies (McDonald and Don-Levy, 1995).
Alternative methodologies that could be
employed in ethics training are:
a. The use of biographies, plays (e.g., Robert
Bolt’s “A Man for All Seasons”), or
accounts of morally laudable human beings
who reveal in their moral choices some-
thing universal. The distancing of the
ethical discussion away from the organisa-
tion may be helpful in situations where staff
are initially defensive to the ethical
training.
b. The use of video material. Hosmer and
Steneck (1989) provide a detailed bibliog-
raphy of commercially available films and
video tapes in the area of business ethics.
c. The use of role play techniques. Have
students role play ethical dilemmas that
arise out of conflicts of interest. Value
changes are effected by changes in cogni-
tive, emotional and behavioural interven-
tions. The use of role plays helps students
to both act out their intentions and to
utilise the dialogue that accompanied
ethical considerations.
d. The use of current newspaper reports of
real life occurrences and local stories on a
case basis. The advantages of using local
newspaper articles include: their relevance
to existing business problems, an oppor-
tunity to analyze all sides of the situation
and consider the perspectives of each
stakeholder, and the gaining of a clear focus
on one issue or problem.
e. The use of ethical board games where
ethical scenarios are presented and dis-
cussed.
f. The use of a conference format. In an
effort to avoid promulgating a set of rules
to be dictated by management to
176 Gael McDonald
employees, or suggesting that employees
are unethical, in 1983 Polaroid was reluc-
tant to establish a formal ethics programme,
but rather opted for a conference attended
by 250 employees which featured discus-
sions with philosophers, ethicists and
business professors.
g. Polaroid followed up the conference with
Dilemma Workshops which assisted par-
ticipants in applying ethical concepts to
cases drawn from actual events.
From this experience and current literature one
can gain adequate recognition of the means of
enhancing the learning process. Notable features
that will enhance the instructional influence of
corporate directed training programmes are: (1)
The initial defining of what is meant by business
ethics in relation to the firm; (2) A review of
the obligations the firm has to its employees; (3)
A general discussion of the core values of the
firm - these may extend beyond the boundaries
of ethical discussion; (4) An identification of the
rationalisations and reasoning that are frequently
used when evaluating an ethical issue; (5) Utilise
use of an experiential approach that draws on
employees own cases within which value con-
flicts occurred; (6) Care in not presenting cases
that continually show the most difficult choices
and high levels of cognitive strain; (7)
Development of frameworks and strategies for
resolving ethical dilemmas with a realization that
there is not always a pure black or white
outcome; (8) Discussion of internal communi-
cation channels and sources from which assistance
can be gained; (9) Discussion of the likely con-
sequences of an ethical violation.
Preparation of a corporate ethics video or CD Rom
material
As mentioned above, during the introductory
session of each of the ethics workshops all
employees viewed a video where the Managing
Director was interviewed on his ethical philoso-
phies in relation to the company. The benefit of
this video was to ensure that all employees were
aware that the training was being promoted and
fully endorsed by senior management. An addi-
tional benefit was that, following completion of
the training session, the video could be used
within the orientation programme of all new
employees. Statements made by the Managing
Director such as “I would like to remind every
director and employee that no one in the organ-
isation has the authority to make exceptions to
the Code of Conduct” serve to highlight the
importance and lack of flexibility attached to the
ethical values of the organisation. Naturally,
should the training be undertaken on a more
one-to-one approach rather than in a workshop,
the use of training materials on a CD Rom
should be considered.
In the video twelve questions were suggested
for the Managing Director to answer. These were
fleshed out to seventeen questions and, although
not required, possible responses were also
provided. The questions were presented in an
interview format with an orchestrated degree of
scepticism being exhibited by the interviewer.
While this may have put the Managing Director
under more pressure, the sentiments of the
interviewer were attempting to reflect those that
might be found among employees. It was also
important that, for the video to have credibility,
the presentation should not be scripted and that
the Managing Director had the opportunity of
expressing his personal feelings in regard to
ethical conduct. The questions covered five stages
of the interview:
1. General background questions centred on:
What exactly is ethics in relation to
business? Why is it important in the
current business environment (Hong
Kong)? Should the same standards of
conduct apply in different parts of the
world?
2. Ethics questions in relation to the company
centred on: What is the history of the
ethical policy in the company? What is the
difference between the legal requirements
of the organisation and ethics?
3. Ethical policy questions centred on: Within
the organisation what operating behaviours
are of most ethical concern? Clarify what
is meant by an ethical issue? Provide
 Business Ethics: Practical Proposals for Organisations
examples of past problems that have
occurred and what were the consequences?
4. Integrating ethics in the organisation
questions centred on: If ethics involves
personal choice, why should the organisa-
tion get involved? Why do the Managing
Director and fellow Directors feel strongly
about ethical business conduct? How does
one get ethical awareness through the
organisation? How will the Code of
Conduct help? How do you get the organ-
isation’s standards off the page and into
practice? How do employees gain the
ability to handle ethical problems? Gift
giving is covered in the Code and yet this
is considered to be an acceptable dimen-
sion of doing business in Asia? Are there
situations where an employee might be
exempt from the Code? What else can be
done to prevent ethical violations?
5. Close of the interview questions centred
on: Give an example of an ethical dilemma
that has been successfully handled? What
should employees do if they are unsure of
the ethical ramifications of a situation?
Where does an employee go to seek assis-
tance? Is the company prepared to lose
money in order to ensure it maintains its
ethical standards?
Evaluating ethical programmes
Prior research, primarily in an academic context,
has been undertaken to investigate the effective-
ness of ethical courses and, in most incidents, the
research assessed whether significant differences
could be identified in the attitudes of students
toward situations involving ethical decisions
before, and after, taking an ethics course. The
results vary, with a number of studies demon-
strating training having had a positive impact on
ethical awareness and reasoning (e.g., Boyd,
1981–1982; Cohen and Cornwell, 1989; Stead
and Miller, 1988; Kavathatzopoulos, 1991).
Following the significant upgrading of their
ethics programmes, NYNEX has undertaken
corporate research in order to measure their
effectiveness. In a 1993 survey, 83% of the
177
managers labelled the process “moderately effec-
tive”. Interestingly, a positive response was much
higher if the manager had undergone ethics
training or knew first hand of an ethics investi-
gation (Driscoll et al., 1996). In one of the few
studies examining ethical training in the corpo-
rate, as opposed to the academic, environment
Delany and Sockell (1992) recently studied the
potential effectiveness of firms’ ethics training
programmes. The results suggested that such
training can have a positive effect, but relatively
few firms provide such programmes. They con-
cluded, “the few empirical studies of the subject
inspire optimism about the value of ethics
programs” (Delaney and Sockell, 1992, p. 720).
When investing in any programme, whether it
be safety, customer service or ethics, it is appro-
priate that effort is made to assess effectiveness.
Upon completion of the training sessions, a
course evaluation was undertaken in this case
organisation and a questionnaire was sent to all
instructors, with 19 questions addressing four
main areas: (1) the extent to which the train-the-
trainer session provided the instructor with
adequate preparation for administering the
workshop; (2) the extent to which the training
material was sufficient to achieve the objectives
of the programme, i.e., comment on the manual,
overhead transparencies, and video provided; (3)
the extent to which participants were already
familiar with the Code of Conduct, the time
allocation, the degree of adherence to the script,
the level of participation, the appropriateness of
the working examples, the provision of additional
examples of ethical violations by the instructor,
and the receipt of cynical remarks; and (4) the
extent to which participants had become familiar
with the importance attached to business ethics
in the organisation, the receipt of comments,
examples and requests for clarification of situa-
tions which were potential Code of Conduct
violations, and the perceived confidence of
instructors to address most issues that came up
for discussion.
The results were reported back to the
company and, from the quantitative and qualita-
tive data collected, all indications were that the
programme had been successful in achieving its
objectives. Eighty-one useable responses were
178 Gael McDonald
gained from instructors to the three page ques-
tionnaire. Summary Outcomes of the evaluation
are as follows:
• The use of additional training methodolo-
gies was requested with the suggestion of a
short play, role plays and video examples.
• The video of the Managing Director was
perceived by many as providing valuable
support to the workshop and highlighting
the importance of business ethics in the
organisation.
• Over half the respondents indicated they
would have appreciated even more examples
of hypothetical (or real) ethical violations,
with the possibility that they be presented
by video.
• More than half the trainers observed that
participants were not familiar with the
contents of the Code of Conduct.
Suggestions were given for easy access for
replacement of mislaid Code of Conduct
booklets.
• Half the trainers made use of the full script
when presenting their sessions, and nearly
half supplemented the examples with their
own situational experiences.
• Predictably, some cynical remarks were
detected during the training sessions and
they appeared to centre on the company
being willing and able to “walk the talk”.
• A predominant number of trainers (74%)
expressed agreement that, following the
workshop, participants had become familiar
with the importance attached to business
ethics in the organisation.
Future activities
The case organisation is now considering future
activities for generating an ethical climate and, as
such, is considering and investigating a number
of initiatives such as conducting an annual ethical
audit, appointing an ethical officer and ethical
ombudsperson, establishing ethical committees,
and opening channels of communication.
Conducting an ethical audit
It has been suggested that an annual ethics audit
is as important as an annual fiscal audit as it helps
bring the organisation’s core values and ethics
into focus, conveys the importance of sharing
these values and the extent to which the
organisation’s daily performance attains its values
and articulated codes (Gray, 1996; Metzger et al.,
1993). In reality, the audit process appears to be
less of a control mechanism but rather the real
benefits are obtained through renewed and
heightened ethical awareness. To gain the
maximum benefit from the audit process it is
imperative that open discussion and dialogue is
created, possibly promoted by a skilled facilitator.
Those organisations which have had little success
with an ethical audit may wish to reflect on the
inadequacy of assigning one individual to the
project and merely requesting a report. Specific
suggestions for conducting an audit are divided
into the three categories of – preparing for the
audit, the session, and the results (Gray, 1996).
Appointing an ethics officer and/or an ethics
ombudsperson
The term “ethics ombudsperson” is to be
favoured as it has a less emotive and regimental
ring than “ethics officer”. While their roles are
essentially similar – to be the instrumental,
hands-on focus for establishing an ethical culture
through a variety of activities and programmes –
the ethics officer is seen to be a problem solver
with a hands-on focus instrumental in estab-
lishing an ethical culture through a variety of
activities and programmes. In contrast, an ethics
ombudsperson generally acts as a third party
resolver of disputes (Dunfee and Werhane, 1997).
While definitions vary from company to
company, it appears that some characteristics are
common to most ombudsperson positions. The
role is primarily a combination of investigation,
counselling and advice. As a consequence of
being approached, an ombudsperson may be
required to investigate ethical circumstances and
advise on an appropriate resolution or action.
Independence and confidentiality are considered
 Business Ethics: Practical Proposals for Organisations
of key importance and an ombudsperson must
not be seen to be taking sides. A review of
appointments reveals a predominant trend to
utilise older, more experienced personnel who
may have plateaued or are nearing retirement.
In general, the ombudsperson has fully assimi-
lated the corporate value system and is confident
in handling questions that address all dimensions
of the organisation’s corporate policy.
Establishing ethical committees
Favoured by organisations such as Motorola,
ethical committees provide an additional strategy
to focus attention on past and current decisions.
Ethical committee membership should be rotated
among all employees, thereby exposing them to
ethical problems submitted by either employees
or managers. A decision by the committee would
provide firm and clear guidelines for action.
Another organisation that has utilised ethical
committees is Sundstrand Corporation, a U.S.
Fortune 500 Company. Its employee-managed
ethics committees were established at each facility
to stimulate member ownership of ethical
conduct and to distribute accountability
throughout the organisation. A review of ethical
committees in operations suggests that their
function is more orientated to policy making
than handling infractions and/or employee
complaints.
Opening channels of communication
The most common means of opening up com-
munication channels is by the use of ethics
hotlines. On average, the hotline at Sundstrand
Corporation receives 1,500 calls per year.
Interestingly, 400 more calls are placed by
employees simply asking ethics questions to guide
their own conduct. Pacific Bell in the United
States also has an ethics hotline which receives
1,200 calls per year. And Texas Instruments has
an ethics E-mail system that operates interna-
tionally throughout their company enabling a
Hong Kong employee, for example, to contact
ethics officers in the United States. Opening
communication channels provides the means by
179
which ethical violations can be reported and
more importantly the means by which ethical
dilemmas can be reviewed, discussed and
resolved. Should an employee experience an
ethical dilemma, it is particularly comforting for
them to know that they have an avenue through
which they can access sound advice which is
structured by organisational policy. By definition,
ethical dilemmas are not easy to resolve, espe-
cially in isolation, and the more support an
employee receives the greater the likelihood that
a positive resolution is reached.
However, if one were to take a broader per-
spective, opening up communication channels
would not just entail the establishment of ethical
hotlines whereby enquiries are received by one
source. An over reliance on the ethics hotline
could result in a perception of “they are the
experts, ask them” and, as a consequence, this
could result in a general abdication of responsi-
bility by others to provide assistance and advice.
For a programme to be truly effective, managers
at all levels, in addition to their responsibilities
for personnel and the human resources depart-
ment, for example, should also be well versed in
ethical policy, resolution and counselling.
Conclusion
In recent years the field of business ethics has
come under criticism for its lack of practicality
(e.g., Stark, 1993). This has, fortunately, resulted
in a growing recognition of the need for business
ethics as an applied, practical discipline to provide
assistance to the managerial decision maker
(Cavanagh et al., 1995). Through the use of an
actual case example, the above discussion has
attempted to provide practical suggestions of
strategies which could be used in developing an
internal ethical climate. The role of senior
management is considered to be particularly
instrumental to the establishment and strength-
ening of an ethical organisation. Ethical codes
of conduct are also a good start, but a lot more
can be done to cultivate ethical practices. Ethical
audits, for example, can identify factors or
pressures which encourage unethical behaviour,
or which may even act as incentives to unethical
180 Gael McDonald
behaviour, within an organisation. Alternatively,
ethical training and awareness programmes can
make employees more sensitive to what consti-
tutes an ethical dilemma, how to approach it,
how to use ethical decision frameworks to bring
about a resolution, and can train supervisors to
respond to subordinates’ concerns. Companies
can also open up communication channels by
establishing ethics hotlines which facilitate the
expression of ethical concerns. In addition to
ethical hotlines, a company can establish either
an ethical officer and/or an ethical ombudsperson
position(s), to provide proactive approaches to
developing ethical programmes and give
employees a third party to go to in order to
resolve an ethical dilemma. The most important
feature of ombudspersons and open communi-
cations systems is, of course, to encourage whistle
blowing before an issue gets into the public
domain. Corporations can also make changes in
other areas to ensure that shared values are of an
ethical nature. Ethical views and values need to
be stated repeatedly and publicly to bring
morality out of the closet. Compensation systems
may also need to be reviewed. Encouraging
ethical behaviour was behind the change Allied
Chemicals made to its compensation systems. A
percentage of management bonuses is now
derived from environmental compliance, safety,
anti-trust, civil rights, and other non-fiscal goals.
Similarly, often work systems need to be inves-
tigated to establish whether there is greater
concern with results at the expense of the means
by which the results are achieved, which can
unwittingly encourage unethical practices.
Numerous additional suggestions can be made.
These include the use of ethical mentors,
reviewing selection procedures to ensure the
recruitment of ethical individuals, providing
support for ethical decision making, running
periodic dilemma workshops, and enlisting the
support of top management for activities
designed to raise ethical standards.
Having an ethics programme, however, does
not guarantee the prevention of unethical behav-
iour, as General Electric discovered. Despite the
services of an ombudsperson and an extensive
ethics programme that had been in existence for
many years, General Electric was found guilty
of fraud after one of its employees teamed up
with an Israeli general and overcharged the U.S.
government more than U.S.$30 million for jet
engine servicing between 1985 and 1988 (Hager,
1991). While a fully developed ethical pro-
gramme may not necessarily insulate an organi-
sation from ethical failures, it can at least be the
foundation from which a heightening of ethical
awareness can spring.
In summary, from the organisational case, a
number of key elements have been identified for
achieving increased ethical awareness in organi-
sations. Recommended elements for enhancing
successful ethical programmes are as follows: (1)
A commitment by senior management, and
particularly the CEO, that an ethical organisation
is an essential part of their organisational vision.
If they are unable to become passionate about
an ethical organisation, turn back now as
employees will perceive the programme for what
it is – merely lip service. Hopefully, this will be
evident by a strong belief that “if it is not ethical,
it is not profitable” and a communicated will-
ingness to lose a contract or forego profit to
maintain ethical principles. (2) Codes of conduct
that are written in simple terms. Break up the
codes into bite size pieces and, wherever possible,
provide specific examples of how the circum-
stance could arise and, specifically, how it should
be handled. Use situations and circumstances that
will be familiar to employees of the organisation.
(3) Ethical policies that are not one-sided.
Policies should also state the commitment the
organisation has to its employees. Rather than
admonishing employees to be ethical, the organ-
isation should clearly state its role and responsi-
bilities. (4) Clarification of what the objectives
of the ethical training programme are. Essentially,
is the objective merely to communicate the
ethical policies and codes of the organisation, or
is a more pragmatic approach to be taken to assist
employees with actually resolving ethical
dilemmas when they arise. (5) In large organisa-
tions, the use of direct line employees rather than
staff personnel or outside consultants. What you
may lose in professionalism is gained with
realism. Discussion will be a lot more relevant
and effective when conducted by someone who
is familiar with the day-to-day problems experi-
 Business Ethics: Practical Proposals for Organisations
enced by employees. (6) Avoid having the senior
management briefing sessions, the train-the-
trainer workshops, or the actual training sessions
turn into a general organisational gripe session.
(7) In the ethical training sessions, define what
is ethics. Experience has shown that a general
discussion of ethics, followed by a formal
definition of ethics, provides a fundamental
understanding of the concept from which the
group can move on to a specific review of
company requirements. (8) Ensure relevancy,
genuineness and reality. Participants need to see
the situations as relevant to their experiences and
needs. Remind instructors that you do not have
to be an expert in ethics to facilitate a discus-
sion on ethical issues and, if utilising an ethical
video to communicate ethical philosophies or
case examples, make them real. Real people
talking about real problems in an unrehearsed
way come across as more convincing and effec-
tive. (9) Ethical violations of subordinates should
be recognised. The role of the supervisor in
promoting an ethical climate can be further
strengthened by the placing of ethical violations
of subordinates on the performance assessment of
the immediate supervisor, thus reinforcing the
responsibility of the immediate supervisor for
establishing and maintaining ethical standards of
employees. (10) Ethical dimensions should be
incorporated in new employee orientation
programmes. Don’t hesitate to use a jazzy pre-
sentation. Ethics does not have to be boring. Use
colour and movement and a lot of examples. (11)
Be willing to identify and discipline employees
guilty of ethical violations, as well as rewarding
ethical employees. Just as we recognise and
reward employees for such organisational activity
as good customer orientation or safety, so too we
need to consider appropriate disciplinary action
for ethical violations and rewards for the suc-
cessful handling of ethical issues. (12) And finally,
all employees should be cognisant of their role
in developing an ethical climate. This responsi-
bility should not be abdicated to the ethics
officer/ombudsperson, or those at the end of an
ethical hotline. All employees need to be well
versed in the ethical policy of their organisation
and, more importantly, have the practical ability
to handle an ethical dilemma should it arise.
181
Notes
* A prior version of this paper was presented at the
European Business Ethics Network Conference,
Prague, in September 1997.
1
For an excellent corporate case study of the lead
up to and management of an organisation in an ethical
crisis and the external communication strategies used
in an effort to restore its public image see: D. L. Ross,
and J. A. Benson: 1995, ‘Cultural Change in Ethical
Redemption: A Corporate Case Study’, Journal of
Business Communication 32(4), 345–362.
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Faculty of Business,
UNITEC Institute of Technology,
Auckland,
New Zealand.