Organisations are evolving in a world of constant change, what is acceptable practice in organisations today would have been less than acceptable a mere 50 years ago. Managers and Executive teams need to establish a more open, ethical and transparent style of leadership. Some organisations have become larger and more powerful than the governments that regulate their activities. This Hack seeks to consider two topics, Corporate Social Responsibility through Ethical Leadership, along with Globalisation and the Emerging Corporate Powerbase
Organisations need to be more sensitive to their responsibilities in the global marketplace and the impact of their decisions on the markets that they operate in not only their own.
Ethical Professional Leadership must form the basis of organisations and their direction, strategies and interactions. Leaders must inspire change through their actions not just rhetoric in order to move the world towards a more socially responsible and ethical future.
There appears to be limited controls or regulations regarding the cross border trading. No single organisation has any power to regulate or control the process of global trade in the short to medium term.
Governments must develop robust guidelines, regulations and laws that help to control and regulate organisations that are in many cases larger than the governments themselves. Such legislation should assist in maintaining transparency for all interested parties.
CORPORATE SOCIAL RESPONSIBILITY THROUGH ETHICAL LEADERSHIP
Historically Corporate governance has implied that governing boards act for the shareholders only, however as described by Sandra Waddock, companies have public as well as private responsibilities (Waddock, 2006).
While CSR is an issue that every organisation faces, it is less clear how CSR policies are going to be implemented or factored into organisations strategic plans. As Anita Roddick the founder of the Body Shop states “if it gets into the way of profit, businesses are not going to do anything about it. When we are measured by a financial bottom line that does include human rights, social justice and workers’ justice, then something will change”. (Werther Jr & Chandler, 2011)
One of the primary questions arising from the seemingly endless parade of ethical lapses is: where have all of the leaders gone? Within organizations, leaders at multiple levels play an important role in developing and sustaining ethical cultures and ethical conduct (Avey, Palanski, & Walumbwa, 2011)
GLOBALISATION & THE EMERGING CORPORATE POWERBASE
Organisations are increasing their reach and power by developing global identities. This increase in available markets has resulted in some powerful corporate organisations.
Globalisation is problematic in that no one governing organisation has the ability to regulate its growth or governmental control through legislation. Each country has its own sovereign authority to regulate or control the penetration of its boarders by other countries. (Mitchell, 2001)
“Will corporations rule the World?”, is a question asked by (Robbins, 2005) in his book Global Problems and the Culture of Capitalism. Corporations were once entities that operated with limited power, however the global economy is facing a time where some Corporations have become more powerful than some of the Governments that regulate the markets that they operate in.
In 2009 Wal-Mart turned over $421849 Million("The Worlds Largest Corporations," 2011). In the same year Wal-Mart employed 2.1 Million people worldwide. If Wall-Mart were a country it could be the 145th country, just ahead of Macedonia, Slovenia and Botswana according to the United Nations population estimates. (UN, 2010)
The evolution of organisations and the change in the power that they wield must be accounted for by Governments, and in particular the regulations and laws that provide protection to the markets that these organisations operate within. Corporate strategies do influence governments, for example in developing countries governmental influence is more personal and secret than in developed countries. (Pearce, De Castro, & Guillen, 2008). Would a robust transparent global system reduce the ability of such influence occurring?
There is a need for organisations to develop robust Codes of Business Conduct. These Codes of Conduct should be designed to outline acceptable behaviours and expected levels of conduct expected throughout any organisation. These guidelines should reflect best practice along as well as clarifying consequences for failing to comply with the Code of Conduct, this should include dismissal.
Codes of Business Conduct should include the following;
1. A policy outlining the expectations of the organisation of employee’s behaviour towards others within the organisation.
2. Levels of Behaviour accepted with business partners, officials, politically exposed persons and competitors.
3. Expectations regarding General Business Conduct, Quality Statement, Financial Integrity, Intellectual Property Protection, Security of Personal Information, Apparent Conflicts of Interest, Care of Corporate Assets, Media Communications and Health and Safety.
4. The document should also cover how the code is to be implemented and administered, how violations are to be treated along with possible sanctions for any violations. How to report violations and confidentiality of those that report violations to limit or eliminate any workplace bullying that may occur.
5. Any Code of Conduct should become a part of the employee’s employment contract, with infractions punishable through either internal disciplinary procedures to dismissal.
6. Investment rules regarding managed funds, hedge funds should be strengthened where these funds can only invest in organisations which have implemented Corporate Codes of Conduct.
There is a need for an independent global organisation, it could be called the Global Trade Governing Body (GTGB), which has the ability to develop and administer international legislation regarding global trade. This could be a sister organisation to the WTO or the United Nations (UN), however there is a need for transparency, it should be run independently from either of these organisations.
The GTGB should consist of elected representatives from each of the member countries of the WTO or UN. The legislation should be congruent with improving ethics and behaviour of organisations and the way they operate on a global platform. Any breaches of the global legislation could see prosecution through the International Court of Justice in The Hague, Netherlands.
In the long term to address individual organisations, it should be mandatory for organisations to submit their Code of Conduct (as discussed earlier in these recommendations) to the GTGB if they are engaged in cross border trade. Organisations should be held to their codes. Any breaches could be dealt with by way of fines or in extreme cases prosecution.
By implementing a Corporate Code of Conduct (CCC) organisations are outlining the acceptable behaviours required from Socially Responsible Organisations. This allows all staff to benchmark their actions to what has been defined as acceptable by the organisations themselves. If this CCC is developed in an inclusive way there is a greater chance of acceptance by all parties concerned.
A world governing body will allow better enforcement of anti-bribery laws and regulations that exist, it would also allow for new legislation to be introduced that could have global reach. There would be an increased protection from those nations that would otherwise be open to corrupt practices and bullying by much larger corporations and countries. It will be difficult to gain consensus from nations as this approach could be seen as an impediment to trade.
1. Identify Organisations expectations and requirements regarding Corporate Code of Conduct at Board and Senior Management Level.
2. Establish Focus groups to develop CCC.
3. Draft initial document with staff consensus to content, obtain staff buy-in.
4. Release CCC to all staff and provide adequate training.
5. Implement adequate reporting system for breaches or continuous improvements.
6. WTO Initiate feasibility study into GTGB type organisation to oversee global trade, gauge interest of member countries
Credit must be given to the Business Leaders and Executives, who through their lack of Corporate Social Responsibility and Ethical Behaviours have lead the world into what is arguably the most volatile environment for business since the great depression in the 1930’s.
Special thanks to Dr Bernie Frey and the Executive team from the Massey Executive MBA Program. For challenging us all to step out of our comfort zone and consider the world from a different perspective.
Avey, James, Palanski, Michael, & Walumbwa, Fred. (2011). When Leadership Goes Unnoticed: The Moderating Role of Follower Self-Esteem on the Relationship Between Ethical Leadership and Follower Behavior. [Article]. Journal of Business Ethics, 98(4), 573-582. doi: 10.1007/s10551-010-0610-2
Mitchell, Lawrence E. (2001). Corporate Irresponsibility: Americas Newest Export. New Haven: Yale University Press.
Pearce, Jone L, De Castro, Julio O, & Guillen, Mauro F. (2008). INFLUENCING POLITICS AND POLITICAL SYSTEMS: POLITICAL SYSTEMS AND CORPORATE STRATEGIES. [Journal]. Academy of Management Review, 33(2), 493-495.
Robbins, Richard H. (2005). Global problems and the culture of capitalism (3rd ed.). Boston, New York, San Francisco, Mexico City, Montreal, Toronto, London, Madrid, Munich, Paris, Hong Kong, Singapore, Tokyo, Cape Town, Sydney: Pearson.
UN. (2010, 28/06/2011). World Population Prospects, the 2010 Revision Retrieved 8 April, 2012, from http://esa.un.org/unpd/wpp/Excel-Data/population.htm
Waddock, Sandra. (2006). Leading Corporate Citizens: vision,values, value-added (2nd ed.). New York: McGraw-Hill/Irwin.
Werther Jr, Wiliam B, & Chandler, David. (2011). Strategic Corporate Responsibility: Stakehlders in a Global Environment. (2nd ed.). Thousand Oaks, New Delhi, London, Singapore: Sage Publications.
The Worlds Largest Corporations. (2011). 164(2), 1-6. Retrieved from http://ehis.ebscohost.com.ezproxy.massey.ac.nz/eds/detail?sid=2d1b7335-7...