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INFORMATION PAPER

A critique of corporate ethics codes in Hong Kong construction

Christabel M.F.Ho

Department of Building and Real Estate,Hong Kong Polytechnic University,Hung Hom, Kowloon, Hong Kong,China

E-mail: bscrysta@polyu.edu.hk

This critical review examines studies on the use and effectiveness of corporate ethics codes between 1977 and 2008. A

corporate code can be an effective instrument for corporate ethics management, but this depends on the right conditions

being in place. A substantial number of empirical studies have demonstrated that an appropriate organizational culture

and effective communication are the key conditions necessary for the codes to have a positive effect on employees’ ethical

behaviour and decision-making. The major business ethics campaign in Hong Kong, China, is an example of introducing

corporate ethics codes into the construction/property industry to influence the behaviour of construction practitioners.

Gaps in the current knowledge and the obstacles limiting employees’ understanding of corporate codes are identified.

Keywords: construction industry, corporate ethics codes, corporate policy, employee behaviour, ethical behaviour,

ethics management, Hong Kong

Ce bilan critique examine les études portant sur l’utilisation et l’efficacité des codes éthiques d’entreprise entre 1977 et

2008. Un code d’entreprise peut être un instrument efficace de gestion éthique d’entreprise, mais il faut pour cela que les

bonnes conditions aient été mises en place. Un nombre important d’études empiriques a démontré qu’une culture

organisationnelle adaptée et une communication efficace sont les principales conditions nécessaires pour que les codes

aient un effet positif sur le comportement éthique des employés et sur leur prise de décision. La principale campagne

en faveur de l’éthique d’entreprise à Hong-Kong, en Chine, est un exemple d’introduction de codes éthiques

d’entreprise dans l’industrie du bâtiment/le secteur de l’immobilier afin qu’ils influent sur le comportement

des praticiens du bâtiment. Les lacunes dans les connaissances actuelles et les obstacles limitant la compréhension des

codes d’entreprise par les employés sont identifiés.

Mots clés: industrie du bâtiment, codes éthiques d’entreprise, politique d’entreprise, comportement des employés,

comportement éthique, gestion éthique, Hong-Kong

Introduction It is argued that corporate codes exist for altruistic reasons (Kaptein and Schwartz, 2008). Some organiz- ations adopt the code because it is ‘the right thing to do’ (L’Etang, 1992) and some believe it is to fulfil cor- porate social responsibility (Logsdon and Wood, 2005). A culture of high ethical standards in an organ- ization is the best means of curbing unethical behav- iour.1 Unethical behaviour can bring monetary loss and even cause human injury (Transparency Inter- national, 2005). Estes (1996) estimated that employ- ees, customers, communities, and society (including such categories as worker accidents, consumer injuries,

pollution, and crimes) bear social costs caused by US corporations and other business of approximately US$2.5 trillion a year. The construction and property industry, although there are no published estimates or statistics on the social cost of corruption and ethical misconduct, faces a long list of ethical chal- lenges related to behaviour including: substandard construction quality, bid shopping, payment games, lying, unreliable contractors, claims games (e.g. inflated claims, false claims), threats, conflict of interest, collusion, fraud, and professional negligence (Ray et al., 1999; Zarkada-Fraser and Skitmore, 2000; May et al., 2001; Vee and Skitmore, 2003;

BUILDING RESEARCH & INFORMATION (2010) 38(4), 411 – 427

Building Research & Information ISSN 0961-3218 print ⁄ISSN 1466-4321 online # 2010 Taylor & Francis http: ⁄ ⁄www.informaworld.com ⁄journals

DOI: 10.1080/09613211003665125

Fan et al., 2001a, 2001b; FMI and Construction Management Associations of America (CMAA), 2004; Liu et al., 2004; Glass and Simmonds, 2007; Bowen et al., 2007). Awareness is increasing within the industry itself, government, and the general public of unethical practices in construction.

Over the past two decades, continuous efforts have been made to discover those factors that have an impact on an individual’s ethical decision-making/behaviour. Several important descriptive ethical decision-making models in the area of behavioural science (e.g. Rest, 1984, 1986; Trevino, 1986; Ferrell and Gresham, 1985; Bommer et al., 1987; Stead et al., 1990; Jones, 1991; Brass et al., 1998; and Wittmer, 2005) have been developed. These models identify the factors affecting an individual’s ethical decisions in an organizational context. Individual characteristics, situational vari- ables, and environmental forces are considered as influences on the ethical standards and decision-making of employees. Indeed, over the past 30 years, in order to curb unethical behaviour and preserve corporate image, corporate managements have used different instruments to exert control over the ethical behaviour of employees. The instrument (Figure 1) includes:

. the drafting of a corporate codes of ethics/conduct (Mathews, 1988; Manley, 1992)

. policies on corporate ethics, mission statements, and credos (Schlegelmilch and Houston, 1989)

. education and training in ethics (Snell, 1990; Stead et al., 1990)

. establishment of an ethics office

Schwartz (1998) claimed that corporate ethics codes have become widely used as self-regulation instruments among other instruments.

Aims and objectives This research systematically investigated what is known about the content and form of corporate ethics codes and whether such codes are an effective

instrument for influencing behaviour in the organiz- ational context. The objectives of this research were to provide a critical review of the corporate ethics codes research and to describe those applications of codes existing in the Hong Kong construction industry. The findings may assist with the development of a body of knowledge about corporate codes as value to con- struction managers and inform the design of effective ethics management instrument. This critique is aimed at providing a coherent, integrated portrait and identifying directions for future research.

This paper begins with an exploration of the nature of corporate codes, followed by a review of empirical studies into the applications of corporate codes in practice. The industry business ethics campaign (introducing corporate codes in the Hong Kong construction industry) advocated by the Hong Kong Independent Commission Against Corruption (ICAC) and the Hong Kong Housing Authority (HKHA) is then examined. Finally, gaps in the current knowledge of corporate codes are summarized and directions for further research in the construction industry are proposed.

Nature of corporate codes of ethics Classi¢cation of code of ethics What constitutes a corporate code of ethics has attracted endless argument. Codes have been given different names, e.g. code of ethics, code of conduct, code of practice, credo, mission statement, and value statement (Brooks, 1986; Molander, 1987; Rogers and Swales, 1990; Murphy, 1989, 1995; Clarkson and Deck, 1992; Stevens, 1992, 1994, 2008; Driscoll et al., 1995; Schwartz, 1998). The lack of agreement over the names and definitions of these documents, the content of all of which may essentially be under- stood as a code of ethics, creates potential pitfalls in the research because it leads to confusion over the precise nature and purpose of the codes (Kaptein and Schwartz, 2008).

Given this situation, some researchers have attempted to categorize the different types of codes of ethics. Sanderson and Varner (1984, p. 30) stated that codes of ethics are composed of two types: either philosophi- cal statements on corporate ethical values, or specific rules on acceptable and prohibited types of behaviour. The types are sometimes combined. Brooks (1986) distinguished between free-standing statements of social objectives and the cases where social policy sheets are simply added to manuals of corporate procedures. Molander (1987) distinguished between ‘general’ codes, which contain general precepts to guide conduct, and are made up of statements of the ‘thou shalt’ type, and ‘specific’ codes, which consist of ‘thou shalt nots’. Schlegelmilch and HoustonFigure 1 Corporate ethics management strategies

412

(1989, p. 15) identified three different formats that UK corporations use for creating their codes:

. regulatory documents with detailed rules and guidelines giving staff precise advice on behaviour and conduct, and often including sanctions for any breach of the codes

. short and more widely phrased codes providing statements of aims, objectives, philosophy, and values; these documents are often not self-standing but appear as part of policy documents

. elaborate corporate codes of ethics covering social responsibilities and addressed to a set of stakeholders

Often, such codes start with an introduction followed by an articulation of the business principles and objec- tives and the responsibilities of the stakeholders. Rogers and Swales (1990) identified three categories of codes:

. general mission statements or credos

. specific descriptions of corporate policies and procedures

. hybrid codes including both a mission statement and a description of corporate principles and policies

Langlois and Schlegemilch (1990, p. 520) described the code as a:

statement setting down corporate principles, ethics, rules of conduct, codes of practice or company philosophy concerning responsibility to employees, shareholders, consumers, the envi- ronment, or any other aspects of society external to the company.

Kaptein and Schwartz (2008) further defined codes as distinct and formal documents containing a set of pre- scriptions developed by and for a company to guide present and future behaviour on multiple issues for at least its managers and employees toward one another, the company, and external stakeholders and/or society in general.

Stevens (2008, p. 601), Liu et al. (2004, p. 441), and Schwartz (1998, pp. 306 – 308) attempted to summar- ize the criteria for characterizing all these documents. It becomes immediately apparent that there is a lack of agreement over the names and definitions of these documents. Although many researchers have attempted to distinguish between various types of corporate ethics document, most have acknowledged that it is difficult to isolate a corporate code of ethics as a

document that delineates a corporate ethical culture/ ethos. This is because such a code often includes of necessity some or all of the corporate policies found in different corporate documents (e.g. value statement, mission statement, credo, etc.). In general, a code of ethics has been defined by most researchers as a written, distinct, and formal document that consists of moral principles to guide employees’ behaviour in an organization (Stevens, 1996, 2008; Schwartz, 1998; Kaptein and Schwartz, 2008). For these reasons, a corporate ethics code could also be a corpor- ate code of ethics, code of conduct, code of practice, corporate credo, or even a value statement for the pur- poses of this analysis. The most notable exception is that a corporate code is not a professional code devel- oped by a professional association, nor is it merely a corporate mission statement that fails to address the ethical obligations of its employees or the organiz- ation’s ethical obligations towards its various stake- holders (Liu et al., 2004). For the purpose of this study, Schwartz’s (1998) definition of a code of ethics is adopted, which closely reflects the distinctive func- tion of a corporate code in institutionalizing the preferred ethical values of a business organization:

A corporate code of ethics is a distinct, formal document that expresses the organisation’s fun- damental moral values and its commitment to upholding the moral standards with which all employees are required to comply throughout their employment.

(p. 22)

Concept of corporate codes Kuncer (1993) summarized ethics management as having the two key components of:

alerting employees to the ethical dimensions of their decisions and actions; and providing them with broad guidelines for attacking ethical dilemmas.

(p. 38)

Thus, it is important to understand those decisions made by employees that have ethical dimensions. In the last two decades, many researchers (e.g. Trevino, 1986; Ferrell and Gresham, 1985; Bommer et al., 1987; Stead et al., 1990; Jones, 1991; Brass et al., 1998; Liu et al., 2004; and Wittmer, 2005) have discussed those factors that can influence employee ethical decision-making/behaviour in an organiz- ational context. They proposed and captured the ethical decision-making process in their various ethical decision-making models.

Ferrell and Gresham (1985) considered that the factor ‘opportunity’ has a major impact on the process of decision-making. The existence of a corporate code is classified as one of the factors influencing the variable

Critique of corporate ethics codes

413

of ‘opportunity’: ‘corporate policy is a moderating variable in controlling opportunity’ (p. 92). They hypothesized that:

Corporate policy and codes of ethics that are enforced will produce the highest level of compli- ance to established ethical standards.

(p. 93)

Trevino (1986), in a Person-situation model, suggested that employees’ ethical decision-making could be guided through the development of formal codes. Bommer et al. (1987) put the existence of a code of conduct as one of the factors in the professional environment that affected the decision processes of individuals. Stead et al. (1990) stated that only organ- izational variables could be affected by corporate man- agement. They considered that corporate codes present the managerial philosophy and that this is capable of influencing the ethical behaviour of employees in making decisions. Jones (1991) agreed with the argu- ment of Stead et al. (1990). Brass et al. (1998), in a social network theory model, also stated that:

code of ethics can significantly decrease the prevalence of unethical behaviour in organiz- ational contexts.

(p. 15)

They believed the degree of ethical decision-making by individuals is affected by the relationships within an organization. Organization actors learn corporate ethics through socialization in practical organizational settings.

As discussed above, in one form or another, a corpor- ate code is claimed to influence ethical behaviour:

Hypothesis 1: Corporate ethics code is one of the factors influencing employees’ ethical decision when facing ethical dilemmas in an organiz- ational context.

Many empirical studies have tested this hypothesis. The next section reviews the past research in detail. Two perspectives of studying corporate codes of ethics are offered. Firstly, corporate codes research in general is reviewed; and, secondly, applications of corporate codes in the Hong Kong construction industry are dis- cussed. For each perspective there is a summary of general issues; measuring effectiveness; corporate ethics code, corporate ethics culture, ethical behaviour; critiques of the studies; and research questions.

Critical review of general corporate codes of ethics research Somers (2001) conducted a detailed review of pub- lished codes of ethics research and identified three

distinct lines of enquiry. The first focuses on the characteristics of codes of ethics, either normative or empirical, in promoting ethics in organizations. For instance, as normative research, Murphy (1995) studied the guidelines for developing a corporate code of ethics. As empirical research, Montoya and Richard (1994) looked into corporate code properties (e.g. wording, content, value, etc.). The second line of enquiry concentrates on the degree of code preva- lence and content in different countries and economic sectors. In particular, the extent of adoption and usage of corporate codes in specific countries (e.g. White and Montgomery, 1980; Sobszak, 2003) and sectors (e.g. Berenbeim, 1992; Trevino et al., 1999; Chonko et al., 2003). Some studies have compared the code contents across countries and sectors (e.g. Mathews, 1987; Langlois and Schlegemilch, 1990; Kaptein, 2004). The third line of enquiry is on the relationship between corporate codes and ethical behaviour (e.g. McKendall et al., 2002; Snell and Herndon, 2004; Vitell and Encarnacion, 2006). Most research studies on codes of ethics follow either the first or second line of enquiry. The author of the current paper is particularly inter- ested in the third because it provides solid evidence of the use of corporate codes of ethics as an instru- ment in promoting ethical behaviour among employees.

In the third line of enquiry, descriptive theoretical models, e.g. Person – Situation Interactionist Model (Trevino, 1986), Contingency Model (Ferrell and Gresham, 1985), Behaviour Model (Bommer et al., 1987), Integrative Model (Stead et al., 1990), Issue – Contingent Model (Jones, 1991), Social Networking Perspective (Brass et al., 1998), etc., all identify the code of ethics as being one of the organizational variables that influences the ethical standards and, hence, behaviour of employees. This strong degree of consensus on the impact of codes of ethics on behaviour has given rise to the numerous empirical research studies. Empirical research studies on the relationship between codes of ethics and ethical behaviour, however, have given mixed results (Ford and Richardson, 1994; Schwartz, 1998; Loe et al., 2000; O’Fallon and Butterfield, 2005). In view of this, the present author sets out to review this body of empirical research and examine the conditions whereby codes of ethics have influenced the behaviour of employees in organizations and those conditions where they have not. A body of research certainly exists pointing to code ineffectiveness and a failure to effect behaviour. A number of recent studies, however, have shown that codes can be effective when certain parameters are in place (Stevens, 2008). The two sets of studies have been analysed by the author in the following sections in an attempt to dis- cover why some codes have failed to be effective and others have succeeded.

414

General issues from empirical ethical code studies Most management believe that a corporate code is the most beneficial instrument for achieving the organization’s goals of improving social responsibility, employee knowledge of ethical issues, and corporate ethical culture (Robin et al., 1989). Some critics (Stevens, 1994; Cleek and Leonard, 1998; Ho and Ng, 2003) have argued that a code is sometimes simply a public relations tool. There is a body of empirical research (e.g. Cressey and More, 1983; Centre for Business Ethics, 1986; Schlegelmilch and Houston, 1989; Manley, 1992; Schwartz, 1998; Peterson, 2002; O’Fallon and Butterfield, 2005) that supports the hypothesis that the existence of a code of ethics is positively related to ethical decision-making and be- haviour. Corporate codes of ethics set out company policies, guidelines, and rules on employee moral conduct (Ferrell et al., 2002). Without the existence of codes, it is extremely difficult to institutionalize ethics in an organization (Schwartz, 2001). Companies are also prompted by stakeholders or forced by law to develop a code (Waddock et al., 2002). Fifty-three per cent of the 200 largest companies in the world have corporate codes (Kaptein, 2004). Indeed, the discus- sion of the usefulness of codes is a continuing one.

Measure of e¡ectiveness Evidence of the ineffectiveness of corporate code of ethics Scholars of ethics such as Ford and Richardson (1994), Schwartz (1998), Loe et al. (2000), O’Fallon and Butterfield (2005), and Stevens (2008) have examined the extant empirical literature on ethical decision- making from 1977 to 2008 covering various economic sectors. Table 1 presents a summary of all those studies that found that codes of ethics were not successful in influencing the behaviour of employees. These studies (covering the US, the UK, Australia, Norway, and Hong Kong) do not support the hypothesis that a code of ethics is positively associated with ethical decision-making/behaviour. In these studies, the most cited reasons explaining why corporate codes failed to regulate ethical behaviour are that:

. the mere existence of a code does not curb acts of unethical behaviour (Bruce, 1994; Brief et al., 1996)

. the contents of codes do not address the salient ethical issues of the industry (Hunt et al., 1984; Chonko and Hunt, 1985; Callan, 1992)

. most corporate codes were developed by top man- agement without associated communication and enforcement policies (Chonko and Hunt, 1985; Akaah and Riodan, 1989; Allen and Davis, 1993; Kohut and Corriher, 1994; Nwachukwu and Vitell, 1997; Cleek and Leonard, 1998; Hume

et al., 1999; Marnburg, 2000; Snell and Herndon, 2004)

. codes had not become part of the corporate culture (Allen and Davis, 1993; Badaracco and Webb, 1995; Cleek and Leonard, 1998; Douglas et al., 2001; McKendall et al., 2002; Healey and Iles, 2002)

When are codes effective? Table 2 presents a summary of corporate codes studies that support the hypothesis and which yield effective outcomes on the behaviour of employees and it high- lights their findings. The summary presents evidence that shows that codes are effective and also highlights the conditions which lead to their effectiveness.

The studies in both Tables 1 and 2 show that the existence of a widespread culture of ethical values and communication are the two primary drivers of code effectiveness.

Effect ofculturevalues. Casell et al. (1997) observed that formal controls and individual influences such as self-control affected the workability of codes. Simi- larly, Laufer-Robinson (1997) showed that when the behaviour of managers is consistent with the laid down codes, their behaviour can effectively influence other employees in the organization. These two studies have shown that codes when paired with man- agers who value ethics and act accordingly can func- tion as effective ethics management instruments. Trevino et al. (1999) also found that ethical leadership and open discussions of ethics in the organization con- tributed to increased ethical behaviour. Strong leaders who share their values with others positively affect the respect given to code. Adam and Rachman-Moore (2004) noted that the setting of examples by managers was more effective than formal ethics training. All studies (Fisher, 2001; Somers, 2001; Schwartz, 2001; Trevino and Weaver, 2003; Chonko et al., 2003; Adam and Rachman-Moore, 2004; O’Dwyer and Madden, 2006; Vitell and Encarnacion, 2006) reported that codes do affect employee behaviour and their understanding of the correct ethical actions, as long as the codes functioned not as a set of stand- alone rules, but as an integrated, embedded, large part of the organizational culture. As to how a corpor- ate code can become embedded in an organizational culture, it is found that managers who lead by setting clear standards and expecting the best from everyone including themselves are able to create a culture where standards of ethics are high.

Effectofcommunication. Effective communication is pivotal to the effectiveness of a code of ethics. Weeks and Nantel’s (1992) findings provided evidence that a well-communicated code of ethics may be related to

Critique of corporate ethics codes

415

Table 1 Evidence of corporate code ine¡ectiveness

Study Sample Method Finding

Ferrell and Weaver (1978) American Marketing Association (AMA) members

Questionnaire Respondents consider their personal moral standard is higher than corporate ethical standards. Also, the respondents claim that the codes enforcing policy are not appropriate

Ford et al. (1982) Managers Questionnaire No suggestions given

Hunt et al. (1984) AMA member Questionnaire Contents of the code cannot re£ect the ethical issue of the ¢eld

Chonko and Hunt (1985) AMA member Questionnaire Contents of the code cannot re£ect the ethical issue of the ¢eld, but corporate codes are necessary because employees can understand the ethical standards of their companies.However, the respondents consider that if codes are to be e¡ective, some sort of enforcement policy set by top management is needed

Akaah and Riodan (1989) AMA members Scenarios (Crawford,1970)

‘If codes are to enhance ethical standards, they must not only exist, but also be enforced’. Akaah and Riodan’s (1989, p.119) research ¢nding is consistent with previous research (for example,Ferrell and Skinner,1988; Trevino,1986)

Murphy et al. (1992) Managers of motor companies

Questionnaire Cross-companies study that may not re£ect the actual in£uence of codes on sta¡ in an individual organizational situation

Callan (1992) State government employees

Questionnaire Contents of the codes are rather abstract, which provide insu⁄cient information about the actual practices and everyday application

Allen and Davis (1993) National business consultants

Questionnaire Ethical codes will be e¡ective only if they are consistently reinforced with a signi¢cant reward and punishment structure and truly integrated into the business culture.Otherwise, these mechanisms would be of limited value in actually regulating unethical conduct

Kohut and Corriher (1994) MBA students Scenario Ethics codes are not communicated well. Managers seem to be both unaware and una¡ected by the codes

Bruce (1994) Managers Questionnaire Codes of ethics with sanctions are necessary, but they are not as e¡ectiveas role models, leadership, support, and education

Badaracco andWebb(1995) Middle managers Interviews Codes failed to address the issues commonly faced by middle managers.Employees pay no attention to the corporate codes because they found the principles espoused in the codes seemed inconsistent with‘what the company was all about’

Udas et al. (1996, p.730) Management information system professionals

Questionnaire In public-sector MIS organizations, management and employers are likely to possess more in£uence than other organizational stakeholders to make codes of ethics meaningful

Brief et al. (1996) Member of a national professional association

Questionnaire/in- basket exercise

Ethical code is only one of the factors establishing the company climate

Nwachukwu and Vitell (1997)

Marketing practitioners Questionnaire For the corporate code to be e¡ective, it must be properly established, communicated, and enforced to the sta¡. Awareness and understanding to the code is also important

Cleek and Leonard (1998) Business students Questionnaire Existence of a code of ethics cannot create an ethical ethos.Instead, how codes are communicated, enforced, and used as a basis for strengthening the culture of the organization can be e¡ective

Hume et al. (1999) Certi¢cated public accountants and unlicensed tax return preparers

Scenario and survey

Respondents consider the corporate codes are not important because (1) the codes cannot re£ect the organizations’ethical standard, and (2) the codes are not properly enforced

(Table continued)

416

ethical behaviour. Adam and Rachman-Moore (2004) and Etheredge (1996) also recognized the interrelation- ship between codes and communication. They claimed that codes could be effective if communication channels were effective. Somers (2001) discovered that man- agement accountants better understood right and wrong in those organizations with well-communicated corporate codes than those without. It is clear that both awareness and understanding of the code are equally important. Both studies (Wotruba, 1995; Chonko et al., 2003) showed that the usefulness of codes increases with familiarity of the content. Ethical con- cepts in codes cannot be internalized by employees if they are unaware of or unfamiliar with the code. The way an ethical code is communicated contributes directly to its success or failure. Schwartz (2004) found that codes are effective when they have features of readability, relevance, and are written in a positive tone. Formal communication (training sessions, classes, and directives) is less effective than informal communication through the normal social network. Most important are the examples set by man- agers (Bruce, 1994; McKendall et al., 2002). When codes are embedded in an organizational climate and leaders communicate the value of ethics by demonstrat- ing appropriate behaviour, they make an appreciable difference (Trevino et al., 1999; Trevino and Weaver, 2003; Liu et al., 2004). Codes should act as a powerful

instrument assisting and guiding employees and sanctions must be applied when a code is violated. The importance of the role that communication plays in code effectiveness is indisputable. Employees see and hear whether the organization acts ethically.

Corporate ethics code, corporate ethical culture, and ethical behaviour Corporations have been writing corporate ethics codes for decades. According to LRN (2006b), one of the ear- liest corporate ethics code was Johnson & Johnson’s Credo, published in 1943, which urged its fellow industrialists to embrace corporate responsibility to customers, employees, the community, and stock- holders. Worldwide interest in business ethics and cor- porate ethics codes expanded in the 1980s because business ethics was perceived as a way to self-regulate rather than submit to government regulation. LRN (2006b) believed that the corporate ethics management tradition is grounded on a 3P approach, in which the company ‘Print a corporate ethics code, Post it on the wall, and Pray people actually read it’. However, ethics management in corporations is more than the promulgation of rules.

In 1991, the US Sentencing Commission issued the Federal Sentencing Guidelines for Organisations

Table 1 Continued

Study Sample Method Finding

Marnburg (2000) Engineers and economists in Norway

Questionnaire Mere existence of a code was not in£uential, but processes and systems that the code symbolized needed to be in place for the codes to be e¡ective

Douglas et al. (2001) Accountants from two accounting ¢rms

Questionnaire Perceived organizational ethical culture is indirectly related to ethical judgements in the results, as ethical culture a¡ects individual values (i.e. idealism) and idealism a¡ects judgements

McKendall et al. (2002) Key informants in US- based ¢rms

Questionnaire Existence of codes of ethics does not automatically guarantee compliance.Forced code compliance in an organization is ine¡ective.Codes imposed by senior management typically do not work because employees have not accepted them as part of their culture

Paolillo and Vitell (2002) Business managers Scenario None of thepersonal ororganizational factors selected was found to in£uence ethical decision-making intentions.It seems issue/situation-related factors dominated ethical decision-making for these two scenarios

Healey andIles(2002,p.117) Information technology ¢rms employees in London

Questionnaire In general, codes of conduct were found to be ine¡ective in in£uencing end-user behaviour in the organizations surveyed

Snell and Herndon (2004) Employees in Hong Kong Questionnaire Good ethics cannot be ordered by management. Codes attempting to create legal controls are generally ine¡ective.To be e¡ective, codes should be communicate internally and embedded in a company’s culture

Sources: Ford and Richardson (1994),O’Fallon and Butter¢eld (2005), Loe et al. (2000), Schwartz (2001), and Stevens (2008).

Critique of corporate ethics codes

417

Table 2 Evidence of code e¡ectiveness

Study Sample Method Findings

Brenner and Molander (1977)

Harvard Business Review subscribers

Questionnaire Existence of a code (speci¢c or general) can raise the ethical level of business behaviour because it clari¢es what is meant by ‘ethical conduct’

Weaver and Ferrell (1977) American Marketing Association (AMA) members

Questionnaire Codes and enforcement improve ethical behaviour

Hegarty and Sims (1979) Graduate business students Laboratory experiment

Clearly stated and communicated organizational policy can be useful and e¡ective guiding employee ethical behaviour

Laczniak and Inderrieden (1987)

MBA students In-basket experiment

If sanctions are attached to corporate codes, employees’ behaviour becomes more ethical in nature.Thus, codes of ethics may have a greater impact in re¢ning what constitutes socially responsible behaviour than in modifying individual behaviour within the organization

Ferrell and Skinner (1988) Marketing Research Association members

Questionnaire Conditions for code e¡ectiveness are (1) code implementation and (2) understandings about ethical behaviour

Trevino and Youngblood (1990)

MBA students In-basket Formal policies generate an increased level of awareness and subsequent reporting of ethical incident

Rich et al. (1990) Management accountants Questionnaire Respondents consider corporate codesasthe most e¡ective measures for encouraging ethical business behaviour

Singhapaki and Vitell (1990, p.15)

AMA members Questionnaire An individual in an organization with a code of ethics is less likely to allow unethical behaviour to continue, through inaction, than is an individual in an organization without a code of ethics.

Weeks and Nantel (1992) Salespeople of a corporation Questionnaire Respondents claim that companies cannot just rely totally on individual integrity to guide behaviour. Management needs to create, communicate, and enforce a thorough corporate code of ethics

Barnett et al. (1993) Business executives Questionnaire Employees consider that top management with an interest in listening to, investigating, and solving their ethical concerns can help in£uence their ethical decision

McCabe et al. (1996) Alumni from colleges with/ without explicit academic honour code

Questionnaire For a corporate code to be e¡ective depends on management’s commitment to (1) code implementation and (2) the extent of the codes embedding in an organization’s standard operations

Kitson (1996) Managers from the bank industry

Interviews Corporate ethical policy is e¡ective in this regard only in so far as it is supported by e⁄cient, helpful, and e¡ective services provided by the organization

Pierce and Henry (1996) Information technology professionals from di¡erent industries

Questionnaire A corporate code can be an e¡ective instrument for corporate ethics management, but this depends on the right conditions being in place.These conditions are (1) the codes are communicated to all members of the organization; and (2) the commitment of the corporate leadership to the code.

Sims and Keon (1999) Full-time employees in a business programme

Scenario Mixed results.The perceived organizational environment was found to be signi¢cantly related to employees’ethical decisions.However, only one out of ¢ve scenarios where informal/unwritten company policies are related with an employee’s ethical decision-making.But formal/written policies play an important role in guiding an employee’s ethical decision-making

Weaver and Trevino (1999) Financial service company employees

Questionnaire Good knowledge and awareness towards corporate ethical rules and expectations make the decision-making task easier

(Table continued)

418

(FSGO), listing the elements of an effective corporate ethics programme. The FSGO required code educa- tion for employees and other mechanisms for commu- nicating and enforcing organizational value (LRN, 2006b). In recent years, the focus of corporate ethics

management is shifting from writing a comprehensive code of ethics to regulating conduct to leverage a value-based code that inspires ethical behaviour among employees, management, and executives. The most recent step in the evolution of corporate ethics

Table 2 Continued

Study Sample Method Findings

Stohs and Brannick (1999) Managing directors Interviews Interviewees approve the use of corporate codes of ethics and consider the codes can guide managerial thinking about ethical wrongdoing

Adams et al. (2001) Business graduate students Interviews Introducing corporate codes of ethics can increase employees’awareness of ethical issues

Fisher (2001) Financial andhumanresources managers

Interviews Presence of active ethical leadership within an organization may overcome the contradictions that would otherwise emerge in the operation of ethical codes

Somers (2001) Institute of Management Accountant member

Questionnaire Unethical behaviour is less prevalent in an organization with a code of ethics versus organizations that do not

Trevino and Weaver (2001) Employees of companies with formal ethics/compliance programme

Questionnaire Observed unethical conduct was higher when employees perceived less ethics programme follow-through

Schwartz (2001) Employees of four Canadian companies

Semi- constructed interview

Two most compelling pieces of evidence that codes can directly in£uence behaviour were: (1) the examples provided by some of the respondents regarding behaviour which they had modi¢ed; and (2) the number of questions received by ethics o⁄cers from employees regarding the codes

Greenberg (2002) Customer service representatives of a ¢nancial company

Experiment Code of conduct had the greatest e¡ect on employees who reached a stage of cognitive development that sensitized them to the rules and norms that guide behaviour

Peterson (2002) Business professionals Questionnaire Implementing a clear code of ethics may reduce the unethical behaviour in organizations regardless of the ethical climate of an organization

Trevino and Weaver (2003) Alumni members in US Questionnaire Existence of a code and a good understanding of the codes’content bene¢t the employees’ethical decision

Chonko et al. (2003) Managers in US Questionnaire Usefulness of codes as decision-making guides increased with the familiarity of the content

Granitz (2003) Marketing managers Scenario Codes of ethics are more e¡ective when reinforced by management actions

Adam and Rachman-Moore (2004)

Related sta¡ in a Israeli high- technology Subsidiary in the US

Case study In£uence of ‘managers setting examples’or ‘social norms of the organization’ was more e¡ective than formal ethics training

O’Dwyer and Madden (2006)

Employees from the top1000 Irish companies

Questionnaire In general, employees favour the existence of corporate codes.Despite the overwhelming popularity of codes, fewer than one-third of companies with codes have formal channels for reporting violations

Vitell and Encarnacion (2006)

US and Spanish marketing managers

Questionnaire Corporate codes have a positive impact on employees’ethical behaviour.The organization ethical culture/value plays an important role in ethical decision-making

Sources: Ford and Richardson (1994),O’Fallon and Butter¢eld (2005), Loe et al. (2000), Schwartz (2001) and Stevens (2008).

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codes occurred in the Hong Kong construction indus- try and the US in 2001 and 2004,2 respectively. The impact of these government movements is that it effec- tively elevates a corporate ethics code into becoming an integral part of its culture, not just a side note to employee education and communication. Fundamen- tally, it is a matter of creating the right culture in organizations, so that people have the ability and support to make decisions that are not only effective, but also consistent with the values and principles organizations hold dear (Peery, 2008).

The LRN (2006a) ethics study shows that in most organizations the effects of having an inspiring corpor- ate ethics code have been subtle but equally meaning- ful. Corporate ethics codes and code education are slowly permeating many corporate cultures, both helping employees to understand their organization values as well as improving employee attitudes towards management. Peery (2008, p. 827) describes a corporate culture as:

. the employees’ assumptions about operational pragmatics within the organization

. a set of normative, moral, and functional guide- lines or criteria for making decisions, called values

. the corporate practices that follow from its assumptions and values

According to Sinclair (1993), organization culture includes deep-seated and enduring values, at the most inner level, with artefacts and symbols, procedures and arrangements, characterizing the outer and more superficial layers of organizational culture. Therefore, the supposition is that ethical assumptions, values, and practices that comprise a corporate ethical culture are likely to influence the employees’ ethical behaviour.

The LRN (2006a) survey found out that roughly three out of four people who work at an organization with a written corporate ethics code affirm that their corporate codes help them understand the organiz- ation’s values. Nearly three-quarters (73%) say it makes the organization a better place to work and that it alters behaviour and helps direct decisions. Schwartz (2001) even proclaimed that without such a code it is extremely difficult to institutionalize ethics in an organization. According to the Ethics Resource Centre (ERC) (n.d.), in the United States where ethical cultures are strong, it is in part because a formal corporate ethics code is in place. Even further, formal corporate codes are likely to be an essential element in the maintenance of a strong culture. The same survey also revealed that an organiz- ation’s ethical culture greatly influences employees’ ethical conduct.

Although a written corporate ethics code is the core element of an effective corporate ethics management, it is insufficient simply to adopt and distribute it. The success of an ethical culture is not just a corpor- ate ethics code, but that an organization leverages the code to shape its ethical culture. Whether a code will have a positive impact on an organization’s culture depends on how an organization uses the tool. A corporate ethics code indeed details a set of normative, moral, and functional guidelines/criteria of an organization. Sims (1992) claimed that the ethical culture of an organization is the shared set of understandings about what is correct behaviour and how ethical issues will be handled. This culture sets the tone for decision-making at all levels and in all circumstances. Recent literature (e.g. Stead et al., 1990; Harrington, 1997) has suggested several strategies for promoting an ethical culture in organizations:

. top management should encourage ethical consciousness in their organizations from the top down – showing their support and care about ethical practices

. formal processes should be used to support and reinforce ethical behaviour

. institutionalization of ethical norm and practices should be incorporated into all organizational levels

Figure 2 visualizes a conceptual framework of an implementation process of a corporate ethics code in an organization. Within this body of work, the author has focused on only one of the determinants (corporate ethics code). For many organizations, the biggest obstacle to successful corporate ethics manage- ment is the gap between the values they articulate in their codes and their operational values. Pittman and Navran (2003) believed that the key to closing the gap lies in how organizations implement, communi- cate, and enforce the codes to shape their corporate ethical culture and translate written values into operational values.

Critique of the corporate codes of ethics studies Having studied the corporate codes research results set out in Tables 1 and 2, it is found that most of the studies were questionnaire based, and usually cross- sectional. Other than the methodological inadequacies, it is also noted that the reviewed studies often attempted to address the impact of a code, as such, upon employee behaviour without allowing for any effect on behaviour of the process of developing and implementing the code (Cleek and Leonard, 1998; Weeks and Nantel, 1992; Schwartz, 1998) as discussed in the previous section.

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Methodology inadequacies Fifty-one codes of ethics studies are examined in this review. Thirty-four of them chose the question- naire as the research method for collecting data. The remaining 17 studies used the following approaches: adopted the scenario (six samples), the in-basket exercise (three samples), the interview (six samples), or the laboratory experiment (two samples). Scenarios describe some hypothetical occurrences of ethical dilemmas. Scenario studies are useful for testing the influence of hypothesized variables on subjects’ thought and decision processes in hypothetical decision situations. Another experimental method, such as the in-basket exercise, is designed to provide more realism than either the laboratory experiment or the scenario study. At the same time, it provides all the advantages of laboratory experimentation, such as the ability to control variables and test causal relations. Interviews yield rich insights into people’s biographies, experiences, opinions, values, aspirations, attitudes, and feelings (May, 2001). Laboratory experiments seek to measure the causal effects of treatment variables on response variables through random assignment of subjects to experimental groups and through the manipulation of the treatment variables. Questionnaires, compared with these methods, have the advantages of allowing the collection of a large quantity of data within a short time, and the results can potentially provide information on the associations between the variables being explored. However, this method has a limited capacity for providing the insights that lie behind these associations. In addition, Kaptein and Schwartz (2008) concluded that questionnaires generally yield results with more positive correlations than other research methods. This is because a questionnaire can only aggregate the separate evaluations, and this leads to bias. A sub- stantial number of empirical research studies (e.g. Ferrell and Skinner, 1988; Kitson, 1996; and Singhapakdi and Vitell, 1990; Fisher, 2001) drew conclusions based on the respondents’ perceptions of codes of ethics. Bernard et al. (1982) pointed out that researchers who only ask respondents ‘how they feel’ rather that ‘what they do’ about certain things

could lead to problems in the field of social science research.

Schwartz (1998) also identified that the subjects of many empirical corporate codes studies focus on business school students, graduates, middle manage- ment, accountants, and salesmen. Each different subject group can provide useful information for that particular sector of employees in an organization, but this can hardly reflect the general situation of all employees within organizations. Hall (1991) argued that it is important for all employees in an organization to act ethically. Hall explained that top management is of prime importance. The mere existence of codes is less effective in increasing ethical beliefs and decision-making than top management’s use of rewards and sanctions for code adherence and its vio- lations (Ford and Richardson, 1994). Middle-level employees to a certain extent serve as a communication bridge between higher and lower levels of staff. Thus, evaluating the effectiveness of corporate codes for all employees in an organization is crucial because each stratum of employees has a distinct atti- tude towards them. In this sense, the findings of the extant corporate codes research may be giving an incomplete view and thereby obscuring the true value of codes. More explanation is needed into the research methodology (i.e. which are appropriate for research into the effectiveness of corporate codes). Longitudinal studies, case study approach research or a combination of various research methods may be necessary (e.g. Adam and Rachman-Moore, 2004). Thus, further investigation is needed really to understand the con- ditions when codes are effective in influencing ethical behaviour.

Incomplete research findings Another possible reason for the inconclusive and mixed findings in both Tables 1 and 2 is the piecemeal nature of the studies. Schwartz (1998) claimed that a corporate code consists of five phases in its develop- ment process (Ho et al., 2004). But it is noted that a majority of corporate codes studies do not reflect

Figure 2 Conceptual framework of a corporate ethics code implementation process

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the integrity and intact nature of Schwartz’s code development process (Stevens, 2008).

The existence of a corporate code of ethics has been identified as one of the organizational variables built into existing decision-making models that may affect the ethical behaviour of employees in their decision- making. Brass et al. (1998), who proposed a social network theory model, claimed that many studies (e.g. Stead et al., 1990; Bommer et al., 1987) have neg- lected the fact that the ethical behaviour of employees results from a dynamic and interactive social network (in an organizational setting). The ethical standard applied to the decisions of employees are not simply the product of isolated individual, organizational, and issue-related variables, but result from an interac- tive relationship combining these variables in the form of social relationships. With reference to Schwartz’s (1998) code of ethics phase development model, five phases are identified for developing a corporate code of ethics into a corporate ethics management instru- ment: objectives formulation; code creation; content design; implementation; and administration. There is substantial evidence (e.g. Weeks and Nantel, 1992; Bohren, 1992; Schwartz, 1998, 2001; Brass et al., 1998; White and Lam, 2000; Liu et al., 2004; and Ho et al., 2004) showing that a corporate code of ethics is a necessity, but that to be effective it needs to be combined with an implementation/communi- cation process within the organization, as predicted in Schwartz’s (1998) model, which is appropriate to the phase in question. Indeed, Schwartz’s model is in line with the thrust of Brass et al.’s (1998) social network model. Brass et al. argued that employees are embedded within a network of relationships and that they become familiar with the corporate code of ethics in some detail through socialization. The attitude of employees towards such a code is influ- enced by the different types of social relationships. Schwartz (1998) believes this social relationship in an organizational setting can be a communication process which necessarily arises in the context of implementing the corporate code of ethics.

Research questions The corpus of ethical code research has yielded suffi- cient data to show that codes are effective if the right conditions are in place. Weeks and Nantel (1992), Trevino et al. (1999), Schwartz (2001), Liu et al. (2004), and Stevens (2008) and the work of many other scholars reviewed in this paper have answered that question. The focus should now be on communi- cating and implementing codes that promote the values of the corporation and establish connections through strong communication channels. An investi- gation is needed to understand those conditions that must exist (e.g. communication channels, implemen- tation means, etc.) for a corporate code to affect the

ethical behaviour of employees. The reason why those particular conditions must exist is also of central importance and can be formulated to address:

Hypothesis (1a): Corporate ethics codes do affect employees’ behaviour as long as the codes are communicated to employees through organiz- ation communication channels.

Hypothesis (1b): Corporate ethics codes do affect employees’ behaviour as long as the codes function as an integrated, embedded large part of the organization culture.

Application to the HK construction industry Issues of introducing corporate ethical codes Over the past 20 years, the construction industry has contributed an average of 5.6% per annum to Hong Kong’s gross domestic product (Construction Industry Review Committee (CIRC), 2001). The construction industry is also one of the major employers in Hong Kong, with 9.2% of the total local workforce engaged in the industry in 1999 (CIRC, 2001). Given that a number of cases of corrupt and unethical behaviour have arisen (ICAC, 2001, Fan et al., 2001a, 2001b; Liu et al., 2004), in April 2000 the Hong Kong Special Administrative Region government appointed the CIRC to undertake an intensive and extensive study of the current state of the industry. Among the recommen- dations for improvements put forward, ‘Fostering an ethical culture in the industry’ was one of the six key packaged recommendations advocated by CIRC (2001). In response to the CIRC report, the Hong Kong Housing Authority (HKHA), a major client, issued a letter in late 2000 to all general contractors on its registered list. This letter was in fact a mandatory administrative instruction requiring all the Authority’s general contractors to develop a corporate code of ethics/conduct for their organizations with the help of the Hong Kong Ethics Development Centre (HKEDC) (which is under the aegis of the Hong Kong Independent Commission Against Corruption (ICAC)) before April 2001 (Hong Kong Housing Department, 2000). Contractors without corporate codes of ethics before the set date would not to be invited to submit tenders. Corporate ethics management has thus now become a serious concern for the construction industry and for the government of Hong Kong (HKHA, 2000; CIRC, 2001).

Measuring e¡ectiveness However, eight years after the start of a major business ethics campaign in 2001 (introducing the corporate code of ethics to general contractor companies) spear- headed by the Hong Kong ICAC, and the Hong Kong government, the ethical standards of the local con- struction industry were far from satisfactory. ICAC

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(2001), Fan et al. (2001a, 2001b), Ho and Ng (2003), Liu et al. (2004), and Suen and Cheung (2007) have all noted a general decline in the ethical standards of the industry. According to ICAC (2007, p. 11), corruption complaints relating to the building maintenance sector within the construction industry were the most numer- ous amounting to 41% of all private complaints. The general public, industry, and government have all expressed concern at the rising number of corruption cases and ethical scandals in the Hong Kong construc- tion industry (Fan et al., 2001a, 2001b; Liu et al., 2004; Suen and Cheung, 2007).

Hypothesis1a Corporate ethics codes do affect employees’ be- haviour as long as the codes are communicated to employees through organization communi- cation channels.

Following this ethics campaign within the construction industry, Ho et al. (2004) conducted an in-depth con- struction company study that examined the state of corporate ethics management in relation to the implementation of corporate codes in Hong Kong. The study found that corporate managements of the subject organization adopted a laissez-faire approach in implementing its corporate code. In general, there was no formal and unified company policy for commu- nicating the code to employees and in how to implement that code. The channels/methods of com- municating the codes were not clear. The effect of introducing corporate codes of ethics as instruments to influence employees’ behaviour was found to be insignificant. The findings of Ho et al. (2004) maintain the claims of Mathews (1988) and Henry (1995) that the existence of ethical codes in organization does not reduce instances of illegal behaviour and solve ethical dilemmas. Ho et al. supported the argument by Hoffman (1988) that ethical codes must be sup- ported by structures and mechanisms to ensure ade- quate communication. The finding of Ho et al. is surprisingly different from that of Etheredge (1996) who investigated the relationship between the ethical standards of Hong Kong managers and the introduc- tion of corporate codes. Etheredge found that employ- ees in companies that promoted codes of conduct were better able to recognize moral parameters than employees in companies with no such codes. For those respondent companies with codes of ethics, the level of communication of the codes was significantly related to the average approval of the codes, confirming the view that codes must be communicated effectively if they are to influence ethical standards.

Hypothesis1b Corporate ethics codes do affect employees’ behaviour as long as the codes function as an

integrated, embedded large part of the organiz- ation culture.

Another study (Liu et al., 2004) examined the domi- nant and significant different ethical culture types amongst surveyors in private- and public-sector organ- izations in the Hong Kong construction industry and determined the effects of the existence of ethical codes. Liu et al. proposed a theoretical model of organ- izational ethics using a systems approach to modify Hypothesis 1 (proposed by previous ethics scholars such as Rest, 1984, 1986; Trevino, 1986; Ferrell and Gresham, 1985; Bommer et al., 1987; Stead et al., 1990; Jones, 1991; Brass et al., 1998; and Wittmer, 2005) by incorporating an organizational ethical culture, an ethical climate together with a code of ethics as local factors that moderate surveyors’ ethical behaviour. The findings of Liu et al. (2004) support the claim of Ott (1989) that organizational culture provides an emotional sense of involvement and commitment to organizational values and moral codes and strongly affects employee performance. The findings of Liu et al. directly show that organization/ industrial culture has major influences on surveyors’ behaviour.

The empirical findings from both studies (Ho et al., 2004; Liu et al., 2004) came to conclude that for corporate ethics code to be effective, organization ethics culture and organization communication are two major conditions. Since both research studies have limitations (the sample size in Ho et al., 2004, is limited to one sample organization, while the subject of Liu et al., 2004, is limited to surveyors only), the hypotheses proposed in this current paper are still subject to further verification and study.

Challenges Given the fact that the Hong Kong construction indus- try and construction practitioners’ ethical standards continue to be a source of concern (ICAC, 2001; Fan et al., 2001a, 2001b; Liu et al., 2004), the industry and government should take a more proactive and serious attitude towards understanding how to make a code of ethics perform as an effective ethics manage- ment instrument. From the discussion presented above, it is clear that codes must be properly implemented and communicated to employees and become an embedded part of the organization culture. Otherwise, the code just functions as a set of stand-alone rules. Codes have sometimes been criticized as merely ‘window dressing’ (White and Montgomery, 1980) and cost more than they yield (Hess et al., 2006). Embedding the code in a construction organization means defining and prioritizing responsibilities with clear company strategies and policies such that the code is not a separate entity. Managements should continuously discuss the code internally and the meaning behind

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the words. It is also important not to view culture as a separate entity from communication.

Research questions Essential research questions awaiting further investi- gation within the Hong Kong construction industry are:

. Have the ethical standards of construction prac- titioners been influenced by the introduction of corporate codes within their companies? Is it useful to deploy a corporate code as an ethics man- agement instrument to affect employees’ ethical decision/behaviour?

. What channels are needed to communicate corpor- ate codes of ethics to employees? How do the organizational communication channels influence the effectiveness of the corporate code?

. What are the essential conditions which must exist in a construction industry company if the ethical behaviour of employees is to be affected by a formal code of ethics?

. What are the social costs caused by poor ethical standards caused to the wider society/community?

Conclusions The debate continues about whether a corporate code of ethics is an effective instrument influencing employees’ ethical behaviour/decisions. Although past studies have reached different conclusions, a review of these studies suggests that when corporate codes are integrated within the culture of an organization and effectively communicated, they do promote ethical be- haviour by guiding employees to make decisions about good ethical standards.

However, in the case of the Hong Kong construction industry, when codes are written by management and presented as a mandate to employees, they are ineffective unless certain conditions exist. The right conditions include: (1) good and effective communi- cation within the organization, (2) a clear understand- ing of the contents of the code and its meaning, and (3) embeddedness in the corporate culture. Future research is needed on the communication and implementation processes of codes in order to understand how and why effective communication and implementation processes lead to high ethical standards within organiz- ational culture. Lessons learnt from the body of codes of ethics research, case studies or longitudinal research methods should be heeded for research within the construction industry.

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Endnotes 1In 2001, the Construction Industry Review Committee (CIRC) reviewed the state of the Hong Kong construction industry’s ethical situation. In its report, the CIRC put forward six key pack- aged recommendations to improve the ethical standards of the industry. It concluded that ‘Fostering an ethical culture in the industry’ is a useful means of curbing unethical behaviour (CIRC, 2001).

2The US Sentencing Commission revised the Federal Sentencing Guidelines for Organisation (FSGO) in 2004. Among other things, the amendments: (1) expand the purpose of an effective programme to include promoting ‘an organisational culture that encourages ethical conduct and a commitment to compliance with the law’; (2) require organizations to assess ethics and compliance risk areas; and (3) require organizations periodically to measure the effectiveness of their ethics management programmes.

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