Business ethics
Thinking about the way people live their lives is a subject almost as old as time itself and can be traced back to the virtues and moral responsibilities described by Plato and Aristotle.
Business ethics may not be quite so old but it deals with the same sort of subject matter - the way organisations conduct their business - how they treat people, interact with communities, impact the environment, do deals and make money.
Our Education Director, Francis Nicholson, has prepared a presentation that explains the nature of ethics and how this translates into business. There is an accompanying interview with Francis on our Podcasts page entitled 'Defining Business Ethics'.
Key principles of ethical behaviour
There is no single set of principles that define ethical behaviour. What we have is a collection of material in the public and private sector that help people decide what is approproriate for their organisation:
In 2008 the Woolf Committee published 23 separate recommendation to BAE Systems Plc on how to conduct ethical business that are relevant to most private sector organisations.
The Financial Services Authority (FSA) has published a simple one page ethical framework that challenges financial service organisation to be open, fair and responsible.
The Committee on Standards in Public Life, the independent body that advises the government on ethical standards in the UK, advocates the Seven Principles of Public Life enunicated by the Nolan Committee
Codes of ethics
Expressing ethical values and embedding these into the organisation is not an easy task. The Institute of Business Ethics has developed a programme that will help you establish, maintain and develop your business ethics.
The programme includes many examples of codes of conduct for comparison.
We have compared a number of codes and found some common principles. While the words may be slightly different the sentiments are the same:
- Operate openly, honestly and fairly
- Fight bribery and corruption
- Avoid conflicts of interest
- Operate with integrity - do what you say
- Comply with applicable laws and regulations
- Treat individual with prejudice and never tolerate harassment
- Provide a clean, health and safe work environment
- Protect the environment and communities
- Protect confidentiality
- Keep accurate books and records
- Provide high standards of service
Business ethics and culture are not necessarily one and the same thing - explore the difference in our open course. The Ethics Resource Centre provide a useful presentation and commentary on Ethics metrics.
Legislation
UK - Bribery Act 2010
This act introduces a new corporate offence of failure by commercial organisations to prevent bribery. Full details are available from the Ministry of Justice archive - Bribery Act 2010 web page. To support implementation of the act the Ministry has also issued guidance to help organisations develop 'adequate procedures' to prevent bribery. While Transparency International have issued an implementation checklist.
We have issued two short pieces of guidance that summarise the aims and key requirements of the Act and introduce the UK Ministry of Justice advice on implementing adequate procedures to prevent bribery. Our gudiance explain what managers and internal auditors should be doing to ensure compliance and prevent risks from happening .
UK Bribery Act 2010 - May 2010
Adequate procedures - July 2011
We have also organised a series of training courses during 2011 where anyone interested in the act can consider and debate the finer points with their peers in more detail. Internal Auditing magazine has monitored progress of bribery issues and we recommend:
Trick or Treat? (June 2011) - the difference between a business gift and a bribe.
Bribery Control (Nov 2010) - UK government advice on 'adequate procedures' and controls to prevent bribery
Controlling Corruption (May 2010) - s summary of 2010 UK Bribery Act
Bribery Abroad (Nov 2009) - first prosceution by the Serious Fraud Squad
UK Corporate Manslaugher Act 2008
Introduced in April 2008 this act makes it possible for organisations to be prosecuted for manslaughter and homicide without the need to identify an individual. To find out more about the act, what organisations need to do and how internal auditors can help read our guidance entitled Corporate Killing.
Assurance and business ethics
Business ethics is something that should be on every internal auditor's agenda. The International Standards regard internal audit work in this area as an important part of improving an organisation's governance process. Performance Standard 2110 Governance, specifically refers to the objective of 'promoting appropriate ethics and values within the organisation'.
Implementation Standard 2110.A1 expands on this stating that 'the internal audit activity must evaluate the design, implementation and effectivnessess of the organisation's ethics related objectives, programmes and activities'.
Knowing how to prepare for audit engagements in this area can be difficult so we have been talking to heads of internal audit about their organisation's expectation and their approach. These case studies are set out on one of our networking and sharing pages. In addition we have published a short piece of guidance entitled 'Providing ethical assurance to boards' (May 2012) to help organisations and internal auditors think about and plan assurance in this area.
Some useful advice is also contained within the following Internal Auditing magazine articles:
'Good money after bad' (April 2011) - the value of ethical behaviour and its relationship to risk management
'Culture clash' (Dec 2010) - business ethics and culture are not necessarily the same thing
'Business behaving badly (Nov 2009) - making business ethics work and how internal auditors can help
'The heart of ethics' (July 2008) - the events at BAE systems
To learn more about our Code of Ethics we have prepared a short open course.