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A conceptual framework ofcorporate and business ethics

across organizationsStructures, processes and performance

Goran SvenssonOslo School of Management, Oslo, Norway, and

Greg Wood Deakin University, Warrnambool, Australia

AbstractPurpose The objective of this paper is to introduce and describe a conceptual framework of corporate and business ethics across organizations in terms of ethical structures, ethical processes andethical performance.Design/methodology/approach A framework is outlined and positioned incorporating an ethicalframe of reference in the eld of organizational chain management.Findings A number of areas and sub-areas of corporate and business ethics are framed in thecontext across organizations.Research limitations/implications The introduced framework should be seen as a seed forfurther development and renement. It provides opportunities for further research of ethical concernsacross organizations.Practical implications Organizations may benet from the ndings and insights presented andthey may be used to enhance their ability to manage, monitor and evaluate ethical business practicesacross organizations.Social implications Changing societal and market patterns may enforce organizations to addressethical concerns across organizations. A myopic approach restricted to the judicial system maybecome insufcient and unsatisfactory from the perspective of other stakeholders of the organization.Originality/value The framework makes a contribution bringing in ethical concerns acrossorganizations, providing a basis for their ethical values and culture, as well as asymmetricrelationships in terms of power and dependence. The authors believe that a true learning organizationneeds to realise the importance of an extended view of its endeavors of corporate and business ethics interms of ethical structures, ethical processes and ethical performance across organizations.

Keywords Organizations, Business ethics, Organizational structures, Performance managementPaper type Conceptual paper

IntroductionEthical concerns are an important area in business practices and research endeavoursin the eld of organizational chain management. In particular, ethical concerns becomeevident in situations of asymmetric relationships across organizations (e.g. in terms of power and dependence). There is a need to establish ethical structures, processes andperformance measures in organizations. In previous research restricted parts of thisidea across organizations have been addressed from an ethical perspective but not thewhole process (e.g. Moberg, 2003; Geraint, 2003; Kidd, 2003; Carter, 2000; Cooper et al.,1997; Stainer, 1997). nevertheless, there have been a few recent research endeavours

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The Learning OrganizationVol. 18 No. 1, 2011

pp. 21-35q Emerald Group Publishing Limited

0969-6474DOI 10.1108/09696471111095975


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dedicated to the ethical concerns in organizational chain management as a whole. Forexample, Svensson and Ba ath (2008) introduce and describe a conceptual framework of organizational chain management ethics based upon the automotive industry.Svensson (2009) focuses on the transparency of organizational chain managementethics based upon case illustrations across organizations in the fashion and telecomindustries. The dilemma is that these ethical frameworks in the eld of organizationalchain management are still on a general level, where specic details are not providedon how to manage, monitor and evaluate ethical concerns across organizations.

There are multiple research topics that may be linked implicitly or explicitly toethical concerns in across organizations, such as: chain management ethics (Svenssonand Ba ath, 2008; Svensson, 2009), corporate social responsibility (e.g. Dyllick andHockerts, 2002), sustainable supply network management (e.g. Young andKielkiewicz-Young, 2001), supply chain environmental management (e.g. Lippman,1999), green purchasing strategies (e.g. Min and Galle, 1997), environmentalpurchasing (e.g. Zsidisin and Siferd, 2001), green marketing (e.g. Crane, 2000),environmental marketing (e.g. Sheth and Parvatiyar, 1995), environmental marketingmanagement (e.g. Peattie, 1995) and environmental product differentiation (e.g.Reinhardt, 1999), reverse logistics (Zikmund and Stanton, 1971), sustainability labelingschemes (e.g. De Boer, 2003), environmental management (Hoffman, 2000), life-cycleassessment (Welford, 1999), sustainable supply chain management (Svensson, 2007),and ISO-14000-certications (ISO, 2007).

This paper addresses explicitly different areas of how to manage, monitor andevaluate ethical concerns across organizations. An organizations ethical values andculture are fundamental to its persona. The bottom line is that there is a need for aconceptual framework in the eld of organizational chain management that describesorganizations corporate and business ethics across organizations in terms of ethicalstructures, ethical processes and ethical performance. To our knowledge, this is an

under-investigated and appreciated area in contemporary research of organizationalchain management, if not overlooked or even ignored. From a managerial perspective,it may be neglect that can cause serious damage in business practices to the corporateidentity, proling efforts and image in the marketplace and society. Furthermore, theorganizations trustworthiness, and at worst corporate survival, may be at stake (e.g.Enron and Arthur Andersen), therefore, the objective of this paper is to introduce anddescribe a conceptual framework of organizations corporate and business ethicsacross organizations in terms of ethical structures, ethical processes and ethicalperformance. It is a basis for organizations to implement proper ethical values andculture. Furthermore, it supports the proper actions of organizations in asymmetricrelationships of power and dependence.

There are various areas of ethical concerns across organizations. For example, on anoverall level there are both internal and external areas. Robin and Reidenbach (1987)develop a multidimensional scale for improving evaluations of business ethics, whileHunt et al. (1989) develop a corporate ethics scale. On the one hand, business ethicshas an external emphasis considering the gap between organizations ethical actionsand behaviour in ongoing business practices and the marketplaces or societysperceptions of the organizations ethical actions and behaviour in their businesspractices (Svensson and Wood, 2004). Corporate ethics, on the other hand, has aninternal emphasis considering the gap between the managements ethical actions and

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behaviour and the staffs perception of the managements ethical actions and behaviourin ongoing business practices (Svensson and Wood, 2004). The conceptual frameworkdescribed and illustrated in the next section comprises a combination of both theinternal and external approaches of corporate and business ethics in the context acrossorganizations.

A conceptual framework of organizations corporate and business ethicsacross organizationsA conceptual framework of organizations corporate and business ethics acrossorganizations may be divided into four separate but at the same time interconnectedprincipal areas (see also Figure 1):

(1) across organizations;(2) ethical structures;(3) ethical processes; and

(4) ethical performance.

This conceptual framework relates in part to the work by Wood et al. (2004), Singh et al.(2005) and Svensson and Wood (2008). The inherent structures, processes andperformance require ongoing monitoring and revision of the business practices acrossorganizations in order to determine whether the current relationships, businessoperations and behaviors in and between organizations are ethical or unethical. On anoverall level, the conceptual framework should be seen as a continuous and iterativeprocess.

The conceptual framework is continuous as it contains a series of consecutiveorganizations that are seen as mutually interdependent that is, one depends upon theother, and vice versa. It goes beyond corporate judicial boundaries and refers to the

ongoing attention to ethical concerns across organizations. We suggest in ourconceptual framework that incorporating corporate and business ethics acrossorganizations should be supported by the area of structures that underpin andnurture ethical business practices in and between organizations. These structures laythe groundwork to develop, manage and monitor ethical business practices acrossorganizations as a whole. Furthermore, it provides support for the area of processesthat demands organizations to perform sound current and future ethical businesspractices. The last area of performance serves the purpose of evaluation andmaintenance of ethical business practices across organizations, and decides whetherthey are ethical or not. This area enables the monitoring and control of the ethicalstructures and processes of the conceptual framework.

The conceptual framework of organizations corporate and business ethics acrossorganizations is iterative as it asks for the ongoing and forthcoming revision betweenstructures, processes and performance. Each area is in turn linked and evaluated inrelation to the corporate and business ethics of each organization. The ethicalstructures, ethical processes and ethical performance of the conceptual framework aredescribed and substantiated in the following paragraphs of this section. It should bestressed that we do not contend that this conceptual framework is complete, but itshould be seen as a basis for further development and renement in incorporatingethical structures, ethical processes and ethical performance across organizations,


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Figure 1.A conceptual frameworkof corporate and businessethics acrossorganizations: structures,processes andperformance

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which to our knowledge has not been raised before in organizational chainmanagement.

Across organizationsIt is not an easy task to determine what may be classied as ethical or unethicalbusiness practices across organizations as a whole. An essential factor is that there areexpectations and perceptions that vary between organizations. These expectations andperceptions also vary in the marketplace and societies that surround organizations,and that inuence the predominant belief or conviction of what may, or may not, beseen as ethical business practices.

There are several areas that contribute to this variable situation. For example,government legislation may frame and dene the criteria of ethical business practicesacross organizations. Developed western style democracies have laws that govern theexpected and perceived actions and behaviours in business practices as they tend notto be self-regulatory (Carson, 2003; Davies, 2001; Piety, 2004; Rondinelli, 2003).Historically, they have been able to impact societies and their citizenrys expectationsand perceptions of organizations business practices (Grit, 2004; Whawell, 1998).Organizations are also confronted with societal expectations and perceptions beyondpurely economic issues, such as environmental and social change responsibilities(Handelman, 2000; Handelman and Arnold, 1999).

With the awakening of globalization has come a realization in rst world economiesthat there are organizations who appear to have diverse sets of actions and behaviouralstandards depending upon the country in which they nd themselves at the time(McMurtry, 2002; Srensen, 2002).

Ethical structuresThe area of ethical structures consists of the following sub-areas:

.

a code of ethics;. ethical audits;. ethics ombudsman;. ethics committee;. ethics training committee; and. support to whistle-blowers.

The area of ethical structures is intended to support organizations ethical concernsacross organizations. There is a need for ethical structures that surround the modes inwhich organizations strive to inculcate corporate and business ethics. Without themthere are no supports in place to create ethical processes and evaluate ethicalperformance. This area serves as a support that the organization and its staff should beable to relate to at the strategic, tactical and operational levels of business practices. Itis a point of reference to other stakeholders in the marketplace and society.

Code of ethics. A crucial sub-area of ethical structures in the conceptual frameworkof organizations corporate and business ethics across organizations is a code of ethics.Since the early 1980s, a number of studies in the area of corporate codes of ethics havebeen conducted in the USA (e.g. Cressey and Moore, 1983; Chonko et al., 2003), in theUK (e.g. Le Jeune and Webley, 1998), in Canada (LeFebvre and Singh, 1992; Schwartz,


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2002; Singh, 2006) in Sweden (Svensson et al., 2004), in Australia (Kaye, 1992; Farrelland Cobbin, 1996; Wood, 2000; Wood and Callaghan, 2003). Code studies have beenalso conducted on the largest multinational corporations operating across a range of jurisdictions in the world (Bethoux et al., 2007; Singh et al., 2005; Wood et al., 2004).

Studies have found that having an ethical code does have a positive impact on theethical actions and behaviours of organizations (Adams et al., 2001; Schwartz, 2001;Wotruba et al., 2001). Other studies have found this causal relationship not to beconclusively the case (Ford et al., 1982; Clark and Leonard, 1998; McKendall et al.,2002).

Stajkovic and Luthans (1997) see codes of ethics as one of the crucial parametersthat interact together to inuence the ethical standards of organizations and theirindividuals. Berenbeim (2000) sees codes of ethics as having a pivotal importance inmaking a organization more ethical. Nijhof et al. (2003) suggest that a code once writtenis not enough by itself to ensure a responsible ethical organization.

Ethical audits . Another sub-area of ethical structures in the conceptual framework of organizations corporate and business ethics across organizations is the conduct of ethical audits. A number of authors have suggested the need to incorporate ethicalaudits into a organizations processes (Crotts et al., 2005; Laczniak and Murphy, 1991;Murphy, 1988). Garcia-Marza (2005) views the ethical audits as an integral part of theprocess of developing trust, with the other factors in developing trust being theexistence of ethics codes, ethics ombudsman, ethics committees and ethics trainingcommittees in organizations. Within this integrated system of ethics management inthe organization, ethics auditing can respond to the basic objective of ethicsmanagement, which is simply to integrate economic benet with social andenvironmental benet (Garcia-Marza, 2005, p. 211).

Ethics ombudsman . A third sub-area of ethical structures in the conceptualframework of organizations corporate and business ethics across organizations is the

presence of an ethics ombudsman. It is an area that has a relationship with anothersub-area of ethical structures, namely whistle blowing. Organizations need individualswho are designated in this position, in order that individuals within the organizationwho have genuine concerns can feel free to voice these concerns to an independentarbiter (Crotts et al., 2005; Laczniak and Murphy, 1991; Murphy, 1988).

Ethics committee. A fourth sub-area of ethical structures in the conceptualframework of corporate and business ethics across organizations is the development of an ethics committee. The development of ethics committes is an essential structurerecommended by a number of authors (Center for Business Ethics, 1986; Wood, 2002),and as such they have been incorporated by organizations in many countries (Woodet al., 2004) and it is believed that they may support the development, management andmonitoring of ethical business practices across organizations.

Ethics education committee . A fth sub-area of ethical structures in the conceptualframework of organizations corporate and business ethics across organizations is theestablishment of an ethics training committee. Such a committee can provide a fruitfulenvironment in which staff can engage in discussion and have education in ethics insituations that they might face whilst in the organizations employ (Laczniak andMurphy, 1991; Rampersad, 2003; Schwartz, 2002; Trevino and Brown, 2004).

Support of whistle-blowers. A sixth sub-area of ethical structures in the conceptualframework of organizations corporate and business ethics across organizations is the

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support given to whistle blowers. If organizations are to evolve into ethical entitieswith ethical business practices, individuals must take both individual and collectiveaction to change the business practices that they see may be an antithesis to the ethicalhealth of the organization. Someone must make the move to expose violations of theorganizations ethical principles. Formal guidelines to support whistle blowers shouldbe considered, because if standards are to be set then one needs ways to ensure thateither violations or breaches will be reported, reviewed and corrected (Wood, 2002).

Ethical processesThe area of ethical processes consists of the following sub-areas:

. ethical performance appraisal;

. staff education;

. aid in strategic planning;

. consequences for a breach;

. communication of the code to organization workers;

. dissemination of the code to new staff;

. dissemination of the code to customers;

. dissemination of the code to suppliers;

. communiation of the code to other stakeholders; and

. revision of the code.

There is a need to support the staff of the organization in different ways, otherwisethey will not know the corporate standpoint on ethical business practices. In particular,staff may not know how to act and behave in situations requiring ethical

considerations. Organizations need to be aware that ethical values and principleschange over time and vary across contexts. It is therefore crucial to create processesthat contribute to regulating organizations ethical business practices, but also theremust be structures in place to support staff in their ethical actions and behaviors.

Ethical performance appraisal . A sub-area of ethical processes in the conceptualframework of organizations corporate and business ethics across organizations isethical performance appraisal. The need for organizations to implement an evaluationof the ethical performance of staff through the staff appraisal system is supported byFraedrich (1992). Ethical performance appraisal should contribute to strengthencorporate efforts to manage and monitor ethical business practices acrossorganizations.

Staff education . Another sub-area of ethical processes in the conceptual frameworkof organizations corporate and business ethics across organizations is staff education.An organization cannot just expect staff to be ethical to the level of the organizationsexpectations without having some involvement with training. A number of writershave proposed the use of training programs as a means of institutionalizing ethicswithin corporate business practices (Laczniak and Murphy, 1991; Maclagan, 1992;Rampersad, 2003; Schwartz, 2002; Trevino and Brown, 2004). Staff education may alsoinuence the development and performance of ethical business practices acrossorganizations.


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Aid in strategic planning . A third sub-area of ethical processes in the conceptualframework of organizations corporate and business ethics across organizations is asan aid in strategic planning. Thomas et al. (2004) contend that leaders must thinkstrategically about how they ensure that they engender an ethical culture within theorganization. Leaders must have a vision to move their organization towards a bettercorporate culture of ethical business practices. They must empower their staff to act inethical ways. Organizations should consider and review their plans in light of theethical principles that the organization believes that it should apply and upon which ithas predicated its decisions in respect to its participation in the marketplace andsociety.

Consequences for a breach . A fourth sub-area of ethical processes in the conceptualframework of organizations corporate and business ethics across organizations is thatthere should be consequences for a breach of the corporate code of ethics. A number of writers contend that within a code one should outline enforcement provisions for thoseindividuals who do not uphold the code (Lere and Gaumnitz, 2003; Schwartz, 2002).The concern here is that consequences for a breach, should not be just placed in thecode as a public relations exercise, but they should be implemented in all good faith asa measure of commitment to developing the ethos of the code for the betterment of theorganization. The organization, by having procedures for a breach of the code, signalsto staff the signicance of the need to abide by the code for both themselves and theorganization and effected stakeholders.

Communication of the code to the organizations workers . A fth sub-area of ethicalprocesses in the conceptual framework of organizations corporate and business ethicsacross organizations is the communication of the code to the organizations workers.The code has to be communicated to staff effectively and provide good examples of what is required. Rushton (2002) suggests that progress towards an ethicalorganization that is meaningful and real can only be achieved when the corporate

leaders bring about these changes. Leaders must be seen to make choices that supportthe organizations values regardless of the difculty of that choice (Thomas et al.,2004).

Dissemination of the code to new staff . A sixth sub-area of ethical processes in theconceptual framework of organizations corporate and business ethics acrossorganizations is the dissemination of information on the code to new staff. New staff are not to be forgotten. If new staff feel connected to their organization they willsubsume the ethos of the code of ethics. New staff members need to be activeparticipants in the organization (Crane et al., 2004) and staff should not have tocompromise their ethical standards to full the organizations requirements (Lovell,2002). Satised staff members do not feel the need to become whistle blowers.

Dissemination of the code to customers . A seventh sub-area of ethical processes inthe conceptual framework of organizations corporate and business ethics acrossorganizations is that customers should be informed about the organizations code.Customers and other stakeholders should be seen as partners in the process of developing organizational wealth, not as the means by which one develops it (Metcalfe,1998).

Dissemination of the code to suppliers . An eighth sub-area of ethical processes in theconceptual framework of organizations corporate and business ethics acrossorganizations is that suppliers should be informed about the organizations code.

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Many suppliers rely extensively on the continued goodwill of the organization. Thepower in the relationship usually resides with the organization. In most industries, arange of alternate suppliers can be sourced. This organizational exibility placespressure upon the incumbent supplier to abide by the rules of the employingorganization (Crane et al., 2004). They should be seen as partners in a mutuallyinclusive mission to create value for everyone across organizations. It is advisable toget suppliers to embrace and contribute to the organizations values and ethicalviewpoints in extension, ethical business practices.

Communication of the code to other stakeholders . A ninth sub-area of ethicalprocesses in the conceptual framework of organizations corporate and business ethicsacross organizations is to keep other stakeholders informed (Svensson and Wood,2008). The sentiments and views of other stakeholders are important to anyorganization as they may be affected by the success and/or failure of the organization(Heath and Norman, 2004). Good organizations do not differentiate betweeninstitutional stakeholders and other stakeholders in the marketplace and society.The welfare of all stakeholders should be treated equally regardless of the monetaryvalue that they represent to the organization. In sum, all stakeholders of theorganization are important to consider when one is to develop, manage and monitorethical business practices.

Revision of the code. A tenth sub-area of ethical processes in the conceptualframework of organizations corporate and business ethics across organizations is thatorganizations should revise their code regularly. It is important that the corporate codeis not a static structure, but a exible and living document. The marketplace andsociety where organizations run their business operations evolve and adaptations maybe required across contexts and over time. In fact, research shows that codes tend toevolve (Singh, 2006).

Ethical performanceThe area of ethical performance consists of the following sub-areas:

. resolving ethical dilemmas;

. assist the bottom line; and

. effectiveness of the code.

Theorists such as Levitt (1958) and Friedman (1962) would contend that the onlybusiness performance worthy of examination is whether the organization made a protor a loss and how its business practices in the marketplace have impacted upon itsshareholders. Today, business practices require a different focus, and in particular inrespect to the ethical aspects of the organizations business practices. Terms such astriple bottom line, corporate governance, corporate social responsibility, and balancedscorecard (Carroll, 1979; Heath and Norman, 2004; Joyner and Payne, 2002; Lovell,2002) indicate a major change from the belief in previous eras that organizations areonly in existence to make prots.

Different stakeholders in the marketplace and society examine the economicperformance of organizations. Prot should be the natural performance measure of their business practices (Lea, 1999). As Le Menestrel (2002, p. 158) says there is nocontradiction between ethical concerns and prots. Governments establish taxationregimes that in essence are designed to ensure that businesses practices contribute to


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the maintenance of the society of which they are a part (Solomon and Martin, 2004).Yet, prot does not guarantee that the business practices undertaken by organizationsto achieve this prot are in the best interests of the society, such that they are ethical.Society goes through a set of checks and balances to ensure that the prot declared bythe organizations has been earned in ways that do not compromise the integrity of theorganization, the shareholders, the stakeholders and the society in general.

Resolving ethical problems. A sub-area of ethical performance in the conceptualframework of organizations corporate and business ethics across organizations iswhether the ethical structures and processes resolve ethical dilemmas acrossorganizations, and in extension the marketplace and society. Society and marketplacestakeholders no longer judge an organizations performance on prot alone.Consideration of the ethical and socially responsible actions underlying protability,in conjunction with the other areas of the conceptual framework, should leadorganizations to aspire to being better corporate citizens in order to achieve ethicallylong term prot. As the social conscience of many in the developed world became moreacute in the latter years of the twentieth century, then so too was there a correspondingrise in the expectations of organizations to be better corporate citizens and to invest inmaking the society a better place (Campbell et al., 2002; Rondinelli, 2003).

Assist the bottom line. Another sub-area of ethical performance in the conceptualframework of organizations corporate and business ethics across organizations iswhether the ethical structures and processes in place assist the bottom line of theorganization. Today it would appear that the stakeholders of rst world economieslook more deeply at such prot declarations. The declaration of a prot or a loss is onlythe rst of a set of criteria upon which the marketplace and society evaluates theperformance of the organization. This is where ethical business practices becomecrucial and may benet the organization in both the short and the long term.

Effectiveness of the code. A third sub-area of ethical performance in the conceptual

framework of organizations corporate and business ethics across organizations isregarding the effectiveness of the corporate code of ethics. International research hasshown that codes may have a certain impact on organizations performance in themarketplace and society, though it is not easily quantied (Wood et al., 2004). Codeeffectiveness is difcult to quantify because in the organization that is committed to anethical culture it should be one of many initiatives that act in concert to lift the ethicalperspectives and actions of the organization. For an organization not to have a code isan automatic abrogation of their ethical responsibilities as a code should be a part of anelaborate ethics tapestry that showcases the organization to the world.

Concluding thoughts and proposals for future researchA few concluding thoughts may be drawn from the introduced and describedconceptual framework of organizations corporate and business ethics acrossorganizations. The framework aspires to be dynamic as it has to be adapted to eachorganizations cultural context. The framework also argues that organizationscorporate and business ethics across organizations should be seen as continuous anditerative. There is no actual end of it, but a constant ethical attention and revision of organizations business practices across organizations is needed. The areas andsub-areas of the framework underpin the dynamics of this complexity as they provide

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support on how to develop, manage and evaluate organizations ethical businesspractices across organizations.

We contend that the introduced conceptual framework of organizations corporateand business ethics across organizations makes a contribution to the creation andexamination of ethical structures, ethical processes and ethical performance in the eldof organizational chain management The proposed framework rests upon thechallenge of combining the ethical concerns in business practices taking place betweenorganizations with the ethical concerns in the marketplace and across the societiesinvolved.

Expectations and perceptions in the marketplace and across societies initiate ortrigger the underpinnings of the framework by determining what concerns should beaddressed to achieve ethical business practices across organizations. Theorganizations values, norms and beliefs considered in strategic, tactical andoperational business practices should match these expectations and perceptions. Theywill be the fundament of internal and external perceptions that will be connected to anorganizations achieved ethical performances. In turn, these perceptions underpin theevaluations that societies will subsequently undertake. It is important to recognise thatethical business practices across organizations are dependent upon the actions of staff and their behaviours and they therefore need supporting structures and processes.

Consequently, organizations corporate and business ethics across organizations isdependent upon existing ethical structures, ethical processes and ethical performancemeasures. Organizations are interdependent and implicitly responsible together for theethical performance across organizations as perceived in the marketplace and acrosssocieties. The globalization of business practices has led to organizations extendingtheir spheres of inuence across countries and different continents where the ethicalvalues and principles tend to some extent to be different or variable to theorganizations country of origin. This is a major challenge to be managed in

organizations aspirations to act and behave ethically in the marketplace and acrosssocieties as all societies and marketplaces have their own culturally acceptablepractices and societal expectations.

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About the authorsGoran Svensson is a Professor at the Oslo School of Management, Norway. He holds a PhD at theSchool of Economics and Commercial Law, Go teborg University, Sweden. Furthermore, he is acommitted member of the worldwide community of marketing/management research andnumerous international research and scholarly networks and associations worldwide. He hasbeen an industrialist and entrepreneur in South America. Go ran Svensson is the corresponding

author and can be contacted at: [email protected] Wood is an Associate Professor in the School of Management and Marketing at Deakin

University, Australia. He holds a PhD from Deakin University. As well as nearly 20 years of academic experience, he spent from 1981-1990 working for a multinational energy and resourcescompany and/or its afliates. In his career, he has had a distinctive blend of commercial andacademic experience.


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