Corporate Ethics Governance - The Role of Stakeholders in a Framework beyond Codes and Borders

Abstract:     
The purpose of this paper is to investigate the main issues surrounding ethics-focused corporate governance. Insights into how business ethics have emerged is provided and whether firms are attempting to strike the right balance between regulatory and compliance-led processes on the one hand, and improving their ethical governance by embedding the right corporate culture on the other hand. Thus, the paper examines the benefits of implementing appropriate and effective strategies into a firm’s compliance processes which also considers both macro- and micro-economic conditions and changes in current world markets.

The research is primarily based on literature developed since 2000. A range of prior empirical academic findings and existing theories have been compared and contrasted. The findings in the literature show that international organisations face more complex issues than those operating in domestic markets as different standards and values across the different countries need to be considered. A rigid approach adopted across various nations does not appear to work well; instead the implementation of a dynamic and flexible framework is suggested to help in coping with the changing business environments. Effective firm performance furthermore needs to consider the influence that stakeholders have on firms’ strategic decision-making processes. This not only requires the commitment of boards of directors and top level executives, but also every other employee within an organisation.

A survey was conducted to understand the perceptions on the effectiveness of ethics measures among a transnational sample from various academic and professional backgrounds targeting those in legal and economics/business management functions and involving those in banking, accounting and finances, sciences and education, sales and operations and human resources. The findings in this study based on the foregoing combined stakeholder management theory and the theory of planned behaviour show that perceived stakeholder pressure and consciously recognised internal and external benefits have a significant effect on firms to exploit their ethics codes. Codes of business conduct or ethics codes utilisation was significantly correlated to perceived internal benefits when it was concerned with deterring unethical behaviour and creating an ethical firm culture but also when the codes were seen as promoting a positive external image. Of particular note, perceptions on efforts in training on ethics codes principles was not found to be effectively integrated into firms’ decision-making processes.

This study shall be useful to firms seeking to enhance their ability to manage, monitor and evaluate ethical business practices along with regulatory and compliance-led firm strategies. The time and resource constraints did not allow data collection from a larger sample and an in-depth analysis of the entire set of the data available, thus limiting the results. Also, the sensitive nature of the topic limited the study to quantitative research methods only.

Number of Pages in PDF File: 23

Keywords: International Business, Corporate Governance, Ethics, Codes of Conduct, Stakeholders

JEL Classification: M10, M14, K1, K2, K3, K4, L1, L2, L4, L5

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