European Corporates Step up Investment in Ethics Programmes

Europe’s corporate management has increased its investment in ethics programmes over the past three years, according to the UK-based Institute of Business Ethics (IBE) in its latest triennial survey.

The IBE survey is its seventh to explore the mechanisms used by large companies to embed ethical values within business practice and provide guidance to staff. The survey tracks changes that have occurred in the UK FTSE350 since 1995 in the way business organisations develop and implement their ethics policy and programmes. Four other European countries, France, Germany, Spain and Italy, have been included since the previous survey in 2010.

Seven out of 10 respondents in the latest survey said they had stepped up their investment into ethics programmes over the past three years, compared to five out of 10 in 2010 (68% of UK and 82% of Continental European respondents).

Eighty-seven per cent of UK respondents confirmed that a member of the board of directors takes ultimate responsibility for the ethics programme, indicating that the embedding of ethical values is being given a higher priority at this level. However, ethics is only a regular board agenda item for 65% of UK respondents and 70% of other European companies.

“When you consider the cost of ethical failures to a company’s reputation, it is a cause for concern that more boards are not assessing their company’s ethical performance,” said the IBE’s research director, Simon Webley.

Sixty-three per cent of respondent companies state that ethics plays a part in their company’s recruitment processes, against only 38% in 2010), while two out of three include ethics in some way in staff appraisals, and three out of four say that a breach of their company’s code of ethics has led to a disciplinary procedure during the past three years.

The number of UK companies monitoring the effectiveness of their ethics programmes has increased to 79%. For instance, ‘Help Line’ data is now used by nine out of 10 companies compared with seven out of 10 in 2010. “Monitoring and reporting is essential for companies,” said Webley. “This has been a ‘Cinderella’ subject for too long but the refinement and increased use of relevant tools has made it more practical.”

Cause for Concern

Despite the increased investment in ethics programmes, one in five companies apparently offers training only once to general employees and managers. Only a third routinely train staff and managers once a year, while 24% of FTSE 350 respondents offer ethics training to the board only once.

“For training to be effective and the information retained by employees, it needs to be repeated,” said Webley. “Without regular refresher sessions it is unlikely that employees will gain the necessary acumen and sensitivity. As a result, the risk of an ethical lapse occurring in their business conduct is more likely.”

As in the 2010 survey, bribery, corruption and facilitation payments continues to be viewed as the most significant ethical issue for respondent companies with nearly 80% selecting it. Webley adds: “This reflects growing international political attention on the topic and its appearance in the ‘Leader’s Declaration’ following the G20 summit in September 2013. Media reports of western companies being investigated for bribery, particularly in Asia, have also alerted companies to this risk.”

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