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Master’s Thesis

Ethical Capability as a
Competitive Advantage
- Three Case Studies within the Volvo
Corporation

Mårten Fuchs
Cecilia Hanning

INTERNATIONAL BUSINESS AND ECONOMICS PROGRAMME

Department of Business Administration and Social Sciences


Division of Industrial Marketing
2001-01-04
ACKNOWLEDGEMENTS
First of all we would like to thank our supervisor Tim Foster. It was a pleasure working with
you. We would furthermore like to thank Ms. Tornberg, Ms. Nilsson, Mr. Adolfsson, and Mr.
Wood for taking their time with our questions regarding topics that only a couple of thesis
writing students would be able come up with.

Mårten would like to thank his family for putting up with him this last Christmas. The same
goes for you Mr. Backert… He would also like to take this opportunity to address Mr.
Sångberg, call me when you have your script ready. Mårten would further like to thank the
University in Luleå for providing him with this once in a lifetime opportunity of referring to
himself in third person singular. He would finally like to quote Bruce Springsteen who sang
that “poor man wanna be rich, rich man wanna be king and the king ain’t satisfied ‘till he
rules everything”.

Cecilia would like to thank her family and friends for the support and engagement while
writing this thesis. Several people took a great interest in the work and have encouraged me
enormously. My husband Jan took the responsibility for the laundry and the cooking. You can
continue with the laundry, however I’d like to eat a broader variety of dinners than meatsauce
and spaghetti and leftovers from that. Then, I’d like to thank my mother Maria who babysat
my son Filip when needed; and my friend Kajsa for the empathy shown and expressed. My
apologies to those whom I have forgotten to mention.
SAMMANFATTNING
Syftet med denna uppsats är att skapa ökad förståelse för hur etisk förmåga kan användas som
en konkurrens fördel. Uppsatsen beskriver, utforskar och försöker förklara vem som är
involverad i etisk ledning, en etisk kod, etisk träning och fördelarna respektive riskerna med
att formalisera etik inom en organisation. Tre olika fallstudier inom Volvo har genomförts och
resultaten visar bland annat att användandet av en etisk kommitté är starkt beroende av
företagets storlek samt att ett av huvudskälen till att ha en etisk kod är att den definierar vad
som minst kan förväntas av de anställda. Denna undersökning visar vidare att etik är ett så
stort område att det blir svårt att genomföra meningsfull etisk träning samt att en positiv effekt
av att formalisera etik är att det klargör för externa intressenter vad som kan förväntas av
organisationen.
ABSTRACT
The aim of this thesis is to provide a better understanding of how ethical capability can be
used as a competitive advantage. This thesis describes, explores and tries to explain who is
involved in ethics management, a code of ethics, ethics training, and the advantages versus
risks with formalizing ethics within an organization. Three different case studies within the
Volvo Corporation have been conducted. The findings of this study suggest that the use of an
ethics committee is highly related to the size of the company and that one of the main
purposes of a code is that it defines the minimum expectations of the employees. This study
does furthermore show that ethics is such a big area that it is difficult to cover all the different
topics in a training program and that a positive effect of formalizing ethics is that it makes
clear for external parties what to expect.
TABLE OF CONTENTS
1. INTRODUCTION ................................................................................................................. 1
1.1 BACKGROUND ............................................................................................................. 1
1.2 PROBLEM DISCUSSION .............................................................................................. 3
1.2.1 BUSINESS ETHICS .................................................................................................. 3
1.2.2 INTERNATIONAL BUSINESS ETHICS ................................................................... 4
1.2.3 ETHICAL BEHAVIOR AS A COMPETITIVE ADVANTAGE .................................. 4
1.3 PURPOSE AND RESEARCH QUESTIONS ................................................................. 7
1.4 DEMARCATIONS.......................................................................................................... 8
1.5 DISPOSITION OF THE THESIS ................................................................................... 8
2. THEORETICAL FRAMEWORK ....................................................................................... 10
2.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT......................................... 10
2.1.1 ETHICS COMMITTEES ......................................................................................... 10
2.1.2 ETHICAL OMBUDSPERSON ................................................................................ 12
2.2 A CODE OF ETHICS.................................................................................................... 13
2.2.1 CODES OF ETHICS OUTSIDE THE U.S.............................................................. 14
2.2.2 THE PURPOSE WITH CODES OF ETHICS ......................................................... 15
2.2.3 THE CONTENT OF A CODE OF ETHICS............................................................ 16
2.2.4 INTERNATIONAL CODE OF ETHICS.................................................................. 19
2.2.5 CODES OF ETHICS, WHO AND WHY? ............................................................... 21
2.3 ETHICS TRAINING ..................................................................................................... 22
2.3.1 INTERNATIONAL ETHICS TRAINING ................................................................. 24
2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 25
2.4.1 ADVANTAGES........................................................................................................ 25
2.4.2 RISKS ...................................................................................................................... 26
3. CONCEPTUAL FRAMEWORK AND EMERGED FRAME OF REFERENCE ............. 27
3.1 CONCEPTUALIZATION ............................................................................................. 27
3.1.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICS
MANAGEMENT............................................................................................................... 27
3.1.2 RESEARCH QUESTION TWO: A CODE OF ETHICS ......................................... 28
3.1.3 RESEARCH QUESTION THREE: ETHICS TRAINING ........................................ 29
3.1.4 RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITH
FORMALIZING ETHICS................................................................................................. 30
3.2 EMERGED FRAME OF REFERENCE ....................................................................... 30
4. METHODOLOGY .............................................................................................................. 32
4.1 RESEARCH PURPOSE ................................................................................................ 32
4.2 RESEARCH APPROACH ............................................................................................ 32
4.3 RESEARCH STRATEGY............................................................................................. 33
4.4 DATA COLLECTION .................................................................................................. 35
4.5 SAMPLE SELECTION ................................................................................................. 38
4.6 DATA ANALYSIS........................................................................................................ 40
4.7 QUALITY STANDARDS: VALIDITY AND RELIABILITY .................................... 41
4.8 METHODOLOGY FIGURE ......................................................................................... 43
5 DATA PRESENTATION..................................................................................................... 44
5.1 CASE 1:VOLVO, SWEDEN......................................................................................... 44
5.1.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT .............................................. 44
5.1.2 A CODE OF ETHICS ............................................................................................. 46
5.1.3 ETHICS TRAINING ................................................................................................ 49
5.1.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 50
5.2 CASE 2: VOLVO U.S.A. .............................................................................................. 51
5.2.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT .............................................. 51
5.2.2 A CODE OF ETHICS ............................................................................................. 52
5.2.3 ETHICS TRAINING ................................................................................................ 53
5.2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 54
5.3 CASE 3: VOLVO IN CHINA ....................................................................................... 55
5.3.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT .............................................. 55
5.3.2 A CODE OF ETHICS ............................................................................................. 56
5.3.3 ETHICS TRAINING ................................................................................................ 59
5.3.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 59
6.ANALYSIS........................................................................................................................... 61
6.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICS
MANAGEMENT................................................................................................................. 61
6.1.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN................................. 61
6.1.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A. ....................................... 62
6.1.3 WITHIN-CASE ANALYSIS OF CASE 3; VOLVO CHINA...................................... 63
6.1.4 CROSS-CASE ANALYSIS OF RESARCH QUESTION ONE ................................. 63
6.2. RESEARCH QUESTION TWO: A CODE OF ETHICS............................................. 65
6.2.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN................................. 66
6.2.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A ........................................ 67
6.2.3 WITHIN-CASE ANALYSIS OF CASE 3: VOLVO CHINA...................................... 68
6.2.4 CROSS-CASE ANALYSIS OF RESEARCH QUESTION TWO............................... 69
6.3. RESEARCH QUESTION THREE: ETHICS TRAINING .......................................... 72
6.3.1 WITHIN-CASE ANALYSIS OF CASE ONE: VOLVO, SWEDEN........................... 72
6.3.2 WITHIN-CASE ANALYSIS OF CASE TWO: VOLVO, U.S.A................................. 72
6.3.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA .......................... 73
6.3.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION THREE........................... 73
6.4. RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITH
FORMALIZING ETHICS ................................................................................................... 75
6.4.1 WITHIN-CASE ANALYSIS OF CASE 1: VOLVO, SWEDEN................................. 75
6.4.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO, U.S.A. ...................................... 76
6.4.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA .......................... 76
6.4.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION FOUR............................. 77
7. CONCLUSIONS AND IMPLICATIONS........................................................................... 79
7.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT ........................................ 79
7.2 A CODE OF ETHICS.................................................................................................... 80
7.3 ETHICS TRAINING ..................................................................................................... 81
7.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS......................... 82
7.5 IMPLICATIONS ........................................................................................................... 82
7.5.1 IMPLICATIONS FOR MANAGEMENT ................................................................. 82
7.5.2 IMPLICATIONS FOR THEORY............................................................................. 83
7.5.3 IMPLICATIONS FOR FUTURE RESEARCH........................................................ 83
LIST OF REFERENCE ........................................................................................................... 84

APPENDICES

APPENDIX 1: INTERVIEW GUIDE (ENGLISH VERSION)


APPENDIX 2: INTERVJU GUIDE (SWEDISH VERSION)
1. INTRODUCTION
This chapter will start out by providing the reader with a background to what a competitive
advantage may be. It will then move on and discuss the various theoretical frameworks that
have tried to explain competitive advantage. Of these frameworks the resource-based view of
the firm is highlighted and discussed further. The emphasis that is put on the resource based
view leads the reader into the problem discussion. This section of the chapter focuses on tools
available for enhancing ethical capability within an organization. At the end of the chapter
the reader will be provided with the purpose and research questions of this thesis.

1.1 BACKGROUND
According to Ma (1999) competitive advantage is defined as the asymmetry or differential in
any firm-attribute or factor that allows one firm to better serve the customers than its
competitors and hence create better customer value and achieve superior performance. Such
attributes could be a superior location (e.g. Wal-Mart’s often monopolized location in rural
areas in the USA); domination of shelf-space in retail (e.g. Coca-Cola’s or Pepsi’s dominance
in super markets); exclusive or favorable access to supply (e.g. De Beers in the diamond
market); a well-known brand name (e.g. Cartier) or efficiency in business operations (e.g.
Toyota’s just-in-time manufacturing and inventory system). (Ma, 1999)

Ma (1999) further states that strategic management practitioners and researchers have long
been preoccupied with the phenomenon of persistent superior performance demonstrated by
highly successful firms. Due to this, a great deal of attention has been focused on the nature
and causes of competitive advantage. To date, various theoretical frameworks have attempted
to explain competitive advantage. (Ma, 1999)

Schumpeter (cf. Ma, 1999) stated that time honored theory of creative destruction forces us to
rethink the importance of innovation, competing against time and destroying the old
equilibrium as well as established convention. Recently, the knowledge-based view articulates
that creating a learning organization and fostering knowledge generation and exploitation
should be the fundamental basis for competitive advantage in an increasingly information-
based economy. (Senge, 1990; Nonaka, 1991)

The neo-classical economic tradition has made important contributions to our understanding
of competitive conduct (Litz, 1996). Porter (1980) emphasized, through the traditional
industry analysis approach, the importance of industry structure and market position.

In the past ten years a number of strategic management scholars, (Wernerfelt, 1984; Grant,
1991; Barney, 1991; Prahalad and Hamel, 1990; Teece, Pisano and Shuen, 1997) have
breathed new conceptual life into a framework that has been dormant for over two decades.
The concept, currently referred to as the resource-based view of the firm (Barney, 1991),
seeks to understand inter-firm performance differentials as a reflection of the different
underlying resource endowments enjoyed by competing firms.

Barney (1991) states that if a firm possesses resources that are valuable, rare, inimitable, and
the firm has the organizational capability to exploit these resources, it possesses a sustainable
competitive advantage.

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Webster’s Third International Dictionary (1986) defines a resource as a “capability or skill in
meeting a situation” (p. 1934). Building from this definition, the resource-based view of the
firm essentially proposes that a firm is defined by the resources it controls (Teece, 1996).

The concept of the resource-based view of the firm has as stated before recently made a
significant comeback. However, the concept’s origins trace back several decades. (Litz, 1996)
Beginning with Schumpeter’s (1934) insights on the firm-specific advantages resulting from
entrepreneurial skills, and continuing with Selznick’s (1957) emphasis on “distinctive
competence” and Penrose’s (1959) view of the firm as “a collection of resources”, a
theoretical perspective focusing on the intra-organizational sources of competitive advantage
evolved.

In 1984 Wernerfelt defined resources as “those (tangible and intangible) assets which are tied
semi-permanently to the firm” (p.172). Prahalad and Hamel (1990) re-framed resources as
core competencies. According to Prahalad and Hamel (1990) core competencies are the
collective learning in the organization and these competencies have three distinguishable
features:

! It provides potential access to a wide variety of markets.


! It makes a significant contribution to the perceived customers benefits of the end
products.
! It is difficult for competitors to imitate.

In 1991 Grant explored linkages between a firm’s resources and its profitability and Barney
(1991) proposed that resources could be characterized as simultaneously valuable, rare, non-
substitutable and inimitable. To the extent that an organization’s physical assets, infrastructure
and workforce satisfy these criteria, they qualify as resources. Barney (1991) further states
that a firm is defined by the resources that it controls and that these resource-based differences
explain differences in performance across firms.

According to Barney (1991) three general types of resources can be sources of competitive
advantage:

! Physical capitol (e.g., plant, equipment, finances)


! Organizational capitol (e.g., structure, planning, systems)
! Human capitol (e.g., skills, judgment, adaptability)

Barney (1991) concludes by stating that it should be noted that sources of competitive
advantage include both tangible and intangible resources. Barney (1991) and others (Senge,
1990; Brenneman, Keys & Fulmer, 1998) have argued that certain firm specific, intangible
sources of advantage (such as organizational history, culture and learning) can be particularly
important to sustaining competitive advantage precisely because these resources are
extremely difficult to imitate.

Litz (1996) has pointed out that strategic management literature has to a great deal overlooked
social responsibility and ethical response capabilities as potential sources of competitive
advantage. He argued that “to the extent that the firm is able to recognize its interdependence,
reflect on the ethical standards appropriate to the situation, and react in a timely and
responsive manner, it possesses valuable, rare, inimitable and non-substitutable assets, that is,
it possesses strategic resources.” (p.1360)

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Considering the above statement by Litz this thesis intends to lift out and further study the
field that is concerned with organizations ethical capability. Ethical capability has been
defined by Buller and McEvoy (1999) as an organization’s ability to identify and respond
effectively to ethical issues in a global context, as a potential source of competitive advantage.
The problem discussion below will focus upon business ethics and how this particular issue
may be used as a competitive advantage.

1.2 PROBLEM DISCUSSION


The word ethics is derived from the Greek word ethos, which refers specifically to the
“character and “sentiment of the community” (Carroll & Gannon, 1997, p. 4). According to
the Longman Dictionary of Contemporary English (1995), ethics is defined as “moral rules or
principles of behavior for deciding what is right and wrong” (p. 466).

Deresky (1998) states that we believe that there are right and wrong ways to behave towards
others, proper and improper actions, fair and unfair decisions. No one can say with certainty
that a given standard is correct or incorrect provided it can be shown that the standard truly
does express an obligation to others, and not just a benefit to ourselves. (Hosmer, 1987;
Deresky, 1998).

What is right, proper and fair? According to Hosmer (1987) these are all ethical terms and that
these terms are all going to become more important in the future than in the past as our
society becomes more crowded, our economy more competitive and our technology more
complex. The terms and what they imply will according to Hosmer (1987) be particularly
important for the business executive, whose decisions can affect many people in ways that are
outside their own control.

1.2.1 BUSINESS ETHICS


In the world of business the term “business ethics” is often used when referring to an
organization’s ethical conduct. Business ethics is defined by Drummond and Bain (1994) as
“the study of how personal moral norms apply to the activities and goals of commercial
enterprise. It is not a separate moral standard, but the study of how the business context poses
its own unique problems for the moral person who acts as an agent of this system” (p. 11).
Drummond and Bain (1994) further state that there are many different aspects of business
ethics and that these generally fall into three basic areas of managerial decision-making:

! Choices about the law – what it should be and whether or not to, obey it.

! Choices about the economic and social issues that are beyond the law’s domain -
usually called the “gray areas” or “people values”. These concern the tangible and
intangible ways one treats others, and include not only the moral notions of honesty,
promise keeping and fairness, but also the avoidance of injury and the voluntary
reparation for harm done.

! Choices about the pre-eminence of one’s own self-interest – the degree to which one’s
own well being comes before the interests of the company or of other people inside
and outside the company. Included are decisions concerning rights of ownership and
how much money is to be retained or distributed elsewhere.

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Drummond and Bain (1994) conclude that the ways the choices regarding the above listed
issues are framed, analyzed and either maintained or abandoned form the basis of business
ethics. The validation of business ethics is simply a way of acknowledging that, indeed, there
are choices to be made concerning the means and ends of business that have an essentially
moral ingredient (Drummond & Bain, 1994).

1.2.2 INTERNATIONAL BUSINESS ETHICS


The term international business ethics refers to the business conduct or morals of
organizations in their relationship with individual and entities (Ashegian & Ebrahimi, 1990).
These norms, in turn, are based on broadly accepted guidelines from religion, philosophy, the
professions and the legal systems (Deresky, 1998).

The biggest single problem for organizations in their attempt to define a corporate wide
ethical posture is the great variation of ethical standards around the world. Many practices that
are considered unethical or even illegal in some countries are accepted ways of doing business
in others. Many western organizations are being placed at a disadvantage by refusing to go
along with a country’s accepted practices, such as bribery, or being criticized at home for
using unethical tactics for getting the job done. (Deresky, 1998)

1.2.3 ETHICAL BEHAVIOR AS A COMPETITIVE ADVANTAGE


Corporate social responsibility theorists argue that management should incorporate ethics into
strategic goals because it is the “right” thing to do. (Wood, 1991) Current research is
indicating that integrating ethics into the strategic management process is not only right, but
also the profitable thing to do (Key & Popkin, 1998).

Litz (1996) identified three crucial resources for competitive advantage based on ethical
capability:

! Perceiving interdependence
! Thinking ethically
! Responding ethically.

Perceiving interdependence specifically acknowledges the stakeholder perspective of the


firm. According to stakeholder theory, a firm that recognizes and effectively satisfies the
diverse needs of its various stakeholders will be able to sustain its institutional legitimacy
(Freeman, 1984). Waddock and Graves (1997) have tied corporate social performance to
increased financial performance and Frooman (1994) found that unethical behavior leads to
decreases in stock price. Arthur (1984) analyzed corporate failures and disasters and found
that the evidence strongly suggested that incorporating ethics in before-profit decision-making
could improve strategy development and implementation and ultimately maximize corporate
profits.

Thinking ethically involves the resource of ethical awareness. This implies an understanding
of the various ethical frameworks as well as sensitivity to the differences among ethical
perspectives across cultures. (Buller & McEvoy, 1999)

Responding effectively involves the resource contribution of effective issues management that
is, taking the appropriate ethical action in a timely manner. Discerning the appropriate ethical
response is complex and the ability to apply relevant ethics models is critical to the decision-

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making process. This capability assumes that the first two capabilities, perceiving
interdependence and thinking ethically, are in place. (Buller & McEvoy, 1999)

Buller and McEvoy (1999) concludes that to the extent an organization can develop the
capability to perceive, deliberate about, and respond effectively to ethical issues, it can
enhance their competitive advantage. These advantages may be developed through effective
dialogue with stakeholders and through organizational practices. Litz (1996) states that to the
extent the firm is able to recognize its interdependence, reflect upon the ethical standards
appropriate to the situation, and react in a timely and responsive manner, it possesses
valuable, rare, inimitable and non-substitutable assets, that is, it possesses strategic resources.

In box 1, presented below, a short description of the Exxon Valdez accident is provided. This
real-life case is useful to explain the importance of including ethics in decision-making. The
information in the box will be commented below.

Box 1: THE EXXON VALDEZ OIL SPILL

When the Exxon Valdez left the Alaska Pipeline Terminal at 9:12 p.m., on March 23, 1989.
The 987 foot ship, second newest in Exxon Shipping Company’s 20-tanker fleet, was loaded
with 1 264 155 barrels of crude oil bound for Long Beach, California. Tankers carrying
North Slope crude oil had safely transited Prince William Sound more that 8 700 times in
the 12 years since oil began flowing through the trans-Alaska, with no major disasters and
few serious incidents. This experience gave little reason to suspect impending disaster. Yet
less than three hours later, the Exxon Valdez grounded at Bligh Reef, rupturing eight of its
eleven cargo tanks and spewing almost 11 million gallons of crude oil into Prince William
Sound.

No human lives were lost as a direct result of the disaster, though four deaths were
associated with the cleanup effort. Indirectly, however, the human and natural losses were
immense to fisheries, subsistence livelihoods, tourism and wildlife. (Alaska Oil Spill
Commission, 1990)

An investigation into the Exxon Valdez oil spill in Prince William Sound in US coastal waters
revealed a chain of strategic planning and corporate decision making that had ignored
fundamental ethical aspects of decisions. Cost efficiency goals resulted in decisions that
reduced key personnel on tanker ships and limited available clean-up equipment. A personnel
decision to overlook driving while intoxicated charges involving Captain Hazelwood was
made so that existing personnel could continue to be utilized. The results of these decisions
contributed to the disaster. (Bowen & Power, 1993)

Key and Popkin (1998) state that in the case of Exxon Valdez the events that occurred were
results of poor decision making, not “accidental” occurrences. Exxon failed to identify and
evaluate the ethical components of their decisions. This failure led to poor financial outcome
as well as poor ethical outcome. (Key & Popkin, 1998)

According to Asforth and Gibbs (1990), Greening and Gray (1994) and Wartick (1992)
negative media attention, such as in the case of the Exxon Valdez, may prompt organizations
to respond in ways that will preserve or restore their legitimacy. These authors further state

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that corporations may respond to media scrutiny of their ethical failings by adopting one or
more elements of a formal ethics program in order to demonstrate their intentions for future
good behavior. (Drummond & Bain, 1994)

According to Weaver, Trevino and Cochran (1999) theory suggests that ethics programs can
enhance company performance, usually by bringing an organization’s decisions and actions
more into conformity with societal ethical expectations. Weaver, Trevino and Cochran (1999)
further states that ethics programs can also contribute to legitimacy by signaling that the
company conforms to societal expectation in its internal organizational processes and
structures.

What tools, within a formal ethics program, are then available for an organization in order to
enhance its ethical awareness, which helps it avoid disasters such as the Exxon Valdez
incident or to gain a competitive advantage? Kaptein (1998) states that there are all kinds of
measures available for the development of the ethical content of a corporation. Drummond
and Bain (1994) argue that it has now become widely accepted that the ethical behavior of
employees can be influenced by specific organizational strategies. It should however be noted
that Nijhof, Fisher and Louise (2000), Brytting (1997) and Drummond and Bain (1994) argue
that there are also risks associated with formalizing ethics within an organization. First, it is
impossible to cover all potential unethical exercises. Secondly, the codes are often too
generalized. Thirdly, the code will not work unless employees truly believe in it. The three
most discussed instruments for formalizing ethics within an organization are however, a code
of ethics, a training program, and an ombudsperson (Kaptein 1998).

Singhapakdi and Vitell (1991) found that marketers in organizations which have codes of
ethics that are enforced, tended to be more sensitive to ethical problems when they occurred
and to choose ethical alternatives in the decision making process. A considerable number of
organizations have developed their own code of conduct; some have gone further, joining
with others around the world to establish standards to improve the quality of life for workers.
Companies such as Avon and Toys R Us have joined the Council on Economic Priorities
(CEP) to establish a system called SA8000. (Business Week, October 20, 1997)

Moreover, there are four international codes of conduct that provide some consistent
guidelines for multinational enterprises (MNEs). These codes were developed by the
International Chamber of Commerce, the Organization for Economic Cooperation and
Development, the International labor Organization, and the United Nations Commission on
Transnational Corporations (Deresky, 1998).

At this stage it is important to notice the differences in the use of the different terms. Deck
(1994) states that the terms “Codes of Ethics” and “Codes of Conduct” are often used
interchangeably.

According to Deck (1994) Codes of Ethics are statements of values and principles that define
the purpose of the company. These codes seek to clarify the ethics of the corporation and to
define its responsibilities to different groups of stakeholders as well as defining the
responsibilities of its employees. These codes are expressed in terms of credos or guiding
principles. Such a code says: “This is who we are and this is what we stand for,” with the
word “we” including the company and all its employees, whose behavior and actions are
expected to conform the ethics and the principles stated in the code. (Deck, 1994)

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Codes of Conduct are according to Deck (1994) statements of rules: “This is what you must
(or must not) do,” as distinct from the code of ethics, which is stating: “This is how we expect
you to behave.” Codes of Conduct are typically comprised of a list of rules, stated either
affirmatively or as prohibitions1. (Deck, 1994)

Other ways of enhancing ethical awareness within an organization is ethical training and the
use of an ethical ombudsperson (Kaptein, 1998; Drummond & Bain, 1994). The simplest
training program consists of an external expert conducting a lecture followed by a question
and answer session. A rather interactive form of training is a workshop in which, in addition
to a lecture, time is set aside to discuss cases. A strong point of a training program is that
participants distance themselves from the day-to-day course of business and systematically
exchange concrete experiences. (Kaptein, 1998)

An increasing number of organizations are investigating the position of a corporate


ombudsperson. Although doubts are sometimes expressed that the position of ethical
ombudsperson does not really work, a small but increasing number of companies are
experimenting with this position. (Drummond & Bain 1994)

Related to the position of a corporate ombudsman is the use of an ethics office. The Center for
Business Ethics2 (1992) (Cf. Journal of Business Ethics p.863-867, 1992) has investigated the
use of ethical offices. Brytting (1998) states that very few studies have been made on the use
of ethics offices, however he does refer to studies made by the Center for Business Ethics and
Perry. Perry (cf., Brytting, 1998) found that 6% of the companies have ethics offices, 9% have
a board of directors ethics committee. Of the largest corporations, employing more than
50000 people, 15% have ethics offices and 23% have a board of directors ethics committee
(Brytting, 1998).

1.3 PURPOSE AND RESEARCH QUESTIONS


Hartman (1998) states that an organization that desires to act with integrity it must first
articulate its values, its priorities. Among the most prevalent forms of values articulation is a
code of ethics. Once the firm has defined its individual value structure, individual decision
makers within the firm have guidance in connection with difficult dilemmas. Hartman (1998)
further states that other strategies (e.g. the use of a corporate ethics ombudsperson) exist to
communicate corporate values as well as to continually update corporate programs and make
them more effective. (Drummond & Bain, 1994) Litz (1996) stated that sound ethical practice
is an overlooked potential source of competitive advantage while Buller and McEvoy (1999)
proposed that ethical capability is a sustainable source of competitive advantage.

Considering these statements by Hartman (1998) we arrive at the purpose of this thesis, which
is to gain a better understanding of how ethical capability can be used as a competitive
advantage.

1
The terms codes of conduct and codes of ethics are used interchangeably by both previous researchers and the
interviewees for this thesis. The authors of this thesis have however limited themselves by using the term codes
of ethics in the analysis chapter.
2
The Center for Business Ethics at Bentley College was established in 1976. The center is dedicated to
providing a nonpartisan forum for the exchange of ideas on business ethics in an industrial society. This
particular report was prepared by: Joan Whitman Hoff, Project Director and Research Fellow; Robert E.
Frederick, Research Scholar; W. Michael Hoffman, Director; Judith B. Kamm, Associate Director; and Peter
Rubican, Graduate Assistant.

7
In order to reach the purpose of this thesis, four research questions have been stated:

! How can the people involved in ethics-management within an organization be described?

! How can an ethical code be described?

! How can ethics training be described?

! How can the benefits versus risks with formalizing ethics within an organization be
described?

1.4 DEMARCATIONS
It is beyond the scope of our study to cover all aspects of our research purpose. As stated in
the problem discussion there is a wide range of tools available for a company that wishes to
enhance its ethical capability. We have therefore demarcated our research to look at the above
stated research questions from an organizational point of view.

1.5 DISPOSITION OF THE THESIS


The figure below presents an overlook of the disposition of the following chapters. Thereafter
a brief explanation of the contents in each chapter is provided to the reader.

CHAPTER 2
LITERATURE
REVIEW

CHAPTER 3
FRAME OF
REFERENCE

CHAPTER 4
METHODOLOGY

CHAPTER 5
EMPIRICAL
FINDINGS

CHAPTER 6
ANALYSIS

CHAPTER 7
CONCLUSIONS

Figure 1.1: Thesis Disposition

! Chapter two consists of a literature review.

8
! Chapter three provides the reader with a conceptualization and a frame of reference based
on the literature review.

! Chapter four states the method of the investigation used in our study.

! Chapter five consists of the empirical data collected.

! Chapter six provides the reader with an analysis of the conceptualized literature review
and the empirical data.

! Chapter seven contains conclusions as well as implications for management, theory and
further research.

9
2. THEORETICAL FRAMEWORK
In this chapter we will introduce the reader to the previous research that form the foundation
and scientific background for the research questions investigated in this thesis. The previous
research will be presented in the same order as the research questions, that is, the first part of
the theory chapter will cover the previous research carried out regarding that particular area
and so on.

2.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT


2.1.1 ETHICS COMMITTEES
In a study carried out by the Center for Business Ethics in 1992 it was found that ethics
committees were used by 25% of the companies on the Fortune 1000 list.3 It was also found
that the function of the ethics committee seemed more oriented to policy-making than dealing
with specific violations or complaints.

According to the Center for Business Ethics (1992) the functions of an ethics committee may
be listed as follows:

! To review and update ethics policies


! To handle infractions of the code
! To answer questions on ethics policy
! To develop corporate policy

To review and update ethics policies was considered to be the primary function by an ethics
office with the other functions following as seen in the list above.

An ethics platform, ethics committee, ethics project group, or integrity group, or integrity
coordinating committee are different names for a structural relationship of one or more people
who are responsible for making policy for the development, perpetuation and protection of the
morally relevant aspects of the corporation. The ethics office is a general term for these
institutions. (Kaptein 1998)

How the ethics office takes form depends on the roles it is assigned (Center for Business
Ethics, 1992). According to Kaptein (1998) an ethics office may take the following roles:

Initiator: The ethics office stimulates the organization of ethics. The ethics office is the
driving force and motivation behind keeping the process of ethical development and
safeguarding going.

Coordinator: The office coordinates activities relating to ethics management and with other
management activities taking place within the organization. The ethics office creates synergy
and cohesion in the measures and activities to be undertaken.

Channeler: The office creates communication channels between the corporation and its
surrounding, between employees and management, and among departments. The office can
serve as a point of contact for complaints, problems, solutions, and ideas, both for employees

3
Fortune Magazine publishes the 1000 top performing companies each year.

10
as for other stakeholders. In this sense, the office is an intermediary, a Janus-head, or a
problem-and-solution broker.

Advocate: The ethics office follows corporate policy critically and positively. The ethical
advocate is someone whose job is to think of and raise the right ethical question. In this role,
the ethics office acts as the devil’s advocate.

Facilitator: The ethics office realizes the pre-conditions in which the ethical development
may take place. For example, the ethics office can offer instruments which departments can
use for their ethics programs.

Mediator: Finally, the ethics office mediates in both internal and external conflicts.

It is generally preferable to assign the ethics portfolio to someone in the top of the corporation
so as to guarantee the support and establishment at the highest levels. In this way, the
communication lines from upper management to the ethics office are kept as short as possible.
It is, however, undesirable that someone from upper management becomes part of the ethics
office if this would impair the trustworthiness of the office. The office’s credibility is
especially important in situations where the office serves as a reporting point for unethical
conduct. In relation to the position of the ombudsman there is a specific requirement that
employees may in no way be dependent upon the ombudsman, in terms of compensation,
promotion, or otherwise. In this case, it is preferable to have a staff official rather than a line
manager to fill this position. In addition, a well-functioning ombudsman must be able to
guarantee complete anonymity to employees if they insist on it. It is crucial for the
ombudsman that his position is not combined with another staff position, which could
possibly turn against the interest of the employees. The position of the ombudsman loses
credibility if the same person is also responsibility for internal investigations into corruption,
fraud and criminality. (Kaptein 1998)

Drummond and Bain (1994) are also discussing ethics committees. They state that an effort to
focus attention on past and current decision could take the form of an ethics committee. The
committee membership should be rotated among all employees, thereby exposing them to
ethical problems submitted by either employees or managers. A decision by the committee
would provide firm, clear guidelines for action. Drummond and Bain (1994) mention the case
of Motorola, who has experimented successfully with the concept of ethics committees.
McDonald (2000) concludes that a review of ethical committees in operations suggests that
their function is more orientated towards policy making than handling infractions and/or
employee complaints.

Benson and Ross (1998) found in their study that the ethics committee meets at least every
month. An ethics committee was found to include:

! Someone from management, usually the plant manager.


! Someone from Human Resources
! Someone who is non-managerial, usually a shop or clerical worker.

In studying business ethics among the Fortune 500 industrials and 500 service corporations,
as listed in 1994, Weaver, Trevino and Cochran (1999) found that the majority of ethics
offices serve in largely coordinating or supporting roles. They further found that in most
cases, the person in charge of the ethics office reports to a very high level of administration

11
with 72% of ethics office heads reported to persons at the level of executive vice president or
higher (including 18% who reported directly to the CEO).

2.1.2 ETHICAL OMBUDSPERSON


On the topic of establishing an ethics officer and/or ethics ombudsperson McDonald (2000)
states that the term “ethics ombudsperson” is to be favored as it has a less emotive and
regimental ring than “ethics officer”. McDonald (2000) further state that while their roles are
essentially similar – to be the instrumental, hands-on focus for establishing an ethical culture
through a variety of activities and programs. The ethics officer is seen to be a problem solver
with a hands-on focus instrumental in establishing an ethical culture through a variety of
activities and programs while an ethics ombudsperson generally acts as a third party resolver
of disputes (Dunfee & Werhane, 1997).

McDonald (2000) states that while definitions vary from company to company, it appears that
some characteristics are common to most ombudsperson positions. Further, McDonald
mentions that the role is primarily a combination of investigation, counseling and advice. As a
consequence of being approached, an ombudsperson may be required to investigate ethical
circumstances and advise on an appropriate resolution or action writes McDonald. Also,
independence and confidentiality are considered of key importance and an ombudsperson
must not be seen to be taking sides according to the author. McDondald (2000) concludes that
an ombudsperson generally has fully assimilated the corporate value system and is confident
in handling questions that address all dimensions of the organization’s corporate policy.

Drummond and Bain (1994) state that an increasing number of organizations are investigating
the position of corporate ombudsperson. They further state that while the formal definition
may vary from company to company, it appears that some characteristics are common to most
ombudsperson positions:

! An investigative, counseling and advisory role – as a consequence of being


approached or on his/her own initiative, an ombudsperson could investigate ethical
circumstances and advice on potential problem areas. He/she may on occasion attempt
to resolve ethical conflicts.

! Independent – the ombudsperson must not be seen to be taking sides in any discussion
and must have the trust of both management and employees. A prerequisite for
independence is confidentiality if the position is to be effective.

! Experience within the company – the position is suitable for an older respected
employee who has, with experience, assimilated the corporate value system.
Specifically, the position is appropriate for an individual nearing retirement or a
“plateau employee”.

Drummond and Bain (1994) conclude their reasoning regarding an ethical ombudsperson by
stating that an important issue is who the responsibility for choosing the ombudsperson falls
upon. If top management unilaterally nominates the titleholder, there is a risk that the position
may not have the confidence of lower-level employees (Drummond & Bain, 1994).

According to Kamm (1993) the Ethics Officer is a person that has, as one of her formal
responsibilities, to work with ethical issues related to the activities of her organization. Kamm

12
(1993) furthermore states that the Ethics Officer is usually an insider with 10 or more years of
experience in the company. According to Kamm (1993) the Ethics officer is:

! Mostly placed at the very top of the hierarchy, reporting directly to the CEO or the
board.

! In a position where they are able to give advice, in open discussions or confidentially.

! Active in the work of disseminating the code of conduct.

! In a position where he investigates and takes actions on code violations.

! Reviewing and modifying the code of conduct and monitor adherence to it.

! Responsible for creating a code of ethics.

Weaver, Trevino and Cochran (1999) found that the assignment of ethics activities within an
organization to a single individual may look like it offers a higher degree of firm commitment
to ethics, but that need not be the case, as such individuals actually may devote only a small
portion of their time to ethics-related tasks, even when their titles include the terms “ethics” or
“compliance”. In their research, Weaver, Trevino and Cochran (1999) found that 54% of the
firms reported having a single officer specifically assigned to deal with ethics and conduct
issues, in keeping with the United States Sentencing Commission’s recommendations for an
effective ethics program. They further found that firms with a single officer assigned
responsibility for ethics indicated a wide disparity in the proportion of time that the person
devotes to ethics activities, ranging from as little as 1% to as much as 100%. Of the firms
reporting a single officer responsible for ethics, 54% indicated that this officer spends not
more than 10% of his or her time in ethics related activities. At the other extreme, 14%
reported 91% to 100% of the officer’s time spent in ethics-related functions. (Weaver,
Trevino & Cochran, 1999) The authors conclude that formally assigning ethics to someone
does not in itself guarantee that ethics-related issues receive much executive attention.

2.2 A CODE OF ETHICS


With reference to ethical codes, Singhapakti and Vitell (1990) generally found that marketers
in organizations which have codes of ethics that are enforced tend to be more sensitive to
ethical problems when they occurred and to choose ethical alternatives in the decision making
process. Deck (1994) states that there are two types of codes with different intents and
purposes: codes of ethics and codes of conduct.

Codes of ethics are statements of values and principles that determine the purpose of the
company. They aim to clarify the ethics of the company and to define its responsibilities to
the different groups of stakeholders as well as determining the responsibilities of its
employees. The meaning with codes of ethics is to say, “This is how we expect you to
behave”, whereas the purpose with codes of conduct is to state the rules determining what
must or must not be done. The rules are stated either affirmatively or as prohibitions. Penalties
for violating the rules can be identified and systems for how to appeal defined. (Ibid) Some
authors do not separate these from each other and instead they look at them with their context
as two words for the same thing (Drummond and Bain, 1994).

13
The most visible sign of a company’s ethical philosophy are probably the codes of ethics. In
order for a code of ethics to be meaningful, it must realistically focus on the potential ethical
dilemmas, which may be faced by employees; it must be communicated to all employees; and
it must be enforced. Further, a meaningful code of ethics cannot rely on blind obedience. It
must be accepted and internalized by the employees who are required to implement it. Thus,
managers must attend not only to the content of the code but also to the process of
determining that content. To be most effective, a code should be developed and disseminated
in an open, participate environment involving as many employees as possible. (Drummond
and Bain, 1994)

The beliefs and norms of an organization can be turned into an ethical code. This code is
generally proposed, discussed and defined by the senior executive in the firm and then
published and distributed to the employees and shareholders. The norms in this code are
standards of behavior, the way the managers want the other people in the organization to act
when confronted with a given situation. The norms are usually stated as a series of negative
statements, what the employees should not do. The beliefs in the code are standards of
thought, the ways that the managers in the organization want the others to think. The beliefs
are generally stated in a positive way. (Hosmer, 1987)

A corporate code of ethics is defined by Deresky (1998), as “a statement setting down


corporate principles, ethics, rules of conduct, codes of practice or company philosophy
concerning responsibility to employees, shareholders, consumers, the environment or any
other aspect of society, external to the company” (p. 69). This code of ethics is usually written
in general terms, noting obligations to these different groups (Hosmer, 1987).

According to Ferrell (1999), a code of ethics should clarify “the underlying professional
values and principles” (p.225). These values should define the overall conditions for
organizational decisions, and are usually coming from accepted customs as well as the desired
corporate behavior. The values should be explained in the code with examples of how
professionals can implement this vision. (Ferrell, 1999).

Brytting (1997) explains a code of ethics as documents with principles of how a specific
company should conduct business ethically and how they should act in ethically sensitive
situations. The shapes of these codes of ethics vary significantly. They can be extensive in
brief, public or secret (Brytting, 1997).

2.2.1 CODES OF ETHICS OUTSIDE THE U.S.


One trend that is being increasingly documented is that ethical codes are being found more
frequently in businesses outside the United States (Langlois and Schlegelmilch, 1990). In a
study of large European firms, conducted in the late 1980s, Langlois and Schlegelmilch
(1990) reported that 51% of the German firms, 41% of the British firms, and 30% of the
French firms had ethical codes in place. Schlegelmilch and Houston (1989) surveyed 200
large companies in the United Kingdom to determine the extent to which they had codes of
ethics in place. They found that 42% of the companies had codes, with the majority of the
firms being in the consumer and industrial sectors.

In 1997 Brytting studied ethical support structures in the private sector in Sweden.
Specifically, the research focused on whether or not companies had formal codes of ethics,
ethics committees, ethics officers, and ethics training. The author mentions that some 19% of
the respondents indicated that they had codes of ethics, with written codes being the most

14
common in capital management of farming sectors and least prevalent in the business industry
and communications firms. Overall, Brytting (1997) concluded that moral support structures,
primarily in the form of codes of ethics and ethics officer positions, are becoming more
common in Sweden as well as in other countries.

2.2.2 THE PURPOSE WITH CODES OF ETHICS


There are several reasons for why a company has a code of ethics. One of them is to manage
or respond to internal organizational activity (Weaver, 1993). A code can help to encourage
employees to include particular values in their own decision-making, or to offer help and
assistance to employees struggling with ethical questions in business (Weaver, Trevino and
Cochran, 1999). A code may be used as a symbolic management tool and provide a language
for conceptualizing the events of organizational activity, and thereby redefine some behavior
as problematic and other as preferred. A code may also be used as a mean for making roles
and expectations within the organization clear. (Weaver, 1993)

Within the firm a code of ethics can provide a legitimate reason for control and supervision,
control for the sake of ethics may prove to be more acceptable in the organization than control
for the sake of profit (Weaver, 1993). Weaver (1993) does however note that codes of ethics
can be a dishonest way of gaining legitimacy in the eyes of shareholders. The goal of the code
can also be to control or regulate the behavior of employees in order to follow legal
requirements (Weaver et. al., 1999). Another reason for having a code of ethics might be a
wish to manage or respond to specific stakeholders’ demands or expectations in order to
achieve benefits, or to avoid harm to the firm (Weaver, 1993).

According to Kaptein (1998) a written corporate code of conduct fulfills a number of


communicative functions. Internally, the code may have an orientation function: it increases
awareness in relation to the moral aspects of activities. The code may further have an
explanatory function: a code gives clarity in regard to responsibilities. A third aspect of
having an ethical code is that it has a committing function: a code imposes a minimum number
of expectations that apply to everyone. A code may also create checks and balances in that
employees can call each other to account in living up to the code’s requirements, this means
that the code has a correcting function. Externally the code may have a distinguishing
function: a code increases the recognizability of the corporation for the stakeholders to
participate in the corporation and provides thereby grounds for the stakeholders to participate
in the corporation. (Kaptein, 1998)

15
2.2.3 THE CONTENT OF A CODE OF ETHICS
Weaver (1993) presents a summary of issues that are often part of a company’s code of ethics.
These are shown below in table 2.1.
Table: 2.1
! General matters pertaining to the code:
# Purpose of the code
# Context of the code, code history and development; supporting programs
# Firm history and traditions, market/societal conditions
# Administration of the code; Compliance measures; sanctions
# Authority of code (Firm or individual self-interest; firm traditions; ethical principles; legal
requirements)

! Nature of the company


# Company goals, missions, philosophy, management style
# Responsibility to shareholders
# Organizational structure (e.g., decentralization as a goal)
# Character of organizational communications
# Record keeping practices
# Technological innovation

! Employee issues
# Employee/company responsibilities to each other
# Expectations for employee self-development
# Substance abuse; employee health
# Harassment, intimidation, etc
# Rights of employees (e.g., privacy, termination issues)
# Employee political activities
# Workplace safety, quality (e.g., smoking policies)
# Conflicts of interest, nepotism
# Standards for judging salary & benefits
# “Moonlighting,” other external activities
# Contact with media
# Whistle blowing
# Use of company equipment, supplies, good name, etc
# Use of proprietary information (e.g., intellectual property)
# Use of confidential information (e.g., insider trading)
# Use of computer information systems
# Security and espionage
# Relationships with government agencies and officials
# Policies on gifts, entertainment, travel, etc
# Bribes, kickbacks, etc (domestic or foreign)

! Legal matters
# Compliance with law (e.g., antitrust, non discrimination, OSHA, etc)
# Avoid regulation

! Firm’s status and actions in the market


# Firm reputation and Integrity
# Competition, treatment of competitors
# Purchasing, sales and negotiating policies
# Product safety and quality
# Marketing practices, advertising (e.g., honesty)

! Responsibilities to society
# Community and charitable activities
# Environmental protection, hazardous waste, energy use
# Public safety and education
# Support for a political/economic system (e.g., free markets)

Source: Weaver, 1993, p. 54.

16
Weaver’s (1993) summary is divided into six areas. These are general matters pertaining to
the code, Nature of the Company, Employee issues, Legal matters, Firm’s status and actions
in the market and Responsibilities to the society. According to Weaver (1993), the internal
issues of the company, such as employee rights and responsibilities are getting more frequent
attention compared to the company’s relation to external parties. Internal issues seem to have
more immediate consequences and are easier to control then the company’s external relation.
When issues regarding society or community are brought up the policies seem to focus on for
example contributions to charity, and environmental concern. (Weaver, 1993)

Kaptein (1998) states that there are multiple types of codes of behavior, which may apply to
corporations. Codes can be divided by the level they apply to. There are codes at
international, supranational, national, sectoral, company, professional, and individual level. A
corporate code of ethics is distinguished from the other codes that the company itself
determines the content and the use of the code. (Kaptein, 1998)

Furthermore, Kaptein (1998) mentions that both the substance of an explicit code and the
process of compiling, writing, communicating, safeguarding and enforcing it are important in
achieving an effective code of ethics.

McDonald (2000) found in her case study that there was a need to document ethical policies.
In her article on practical proposals for organizations she lists them as follows:

! An introductory message from the Managing Director.

! Employment practices. The section addresses equality of opportunity, open


communication and commitment to developing employees. Rather than starting with a
series of “ do nots” in this section, the company first emphasized their responsibilities
to employees.

! Ethics in general: This section highlights the importance of ethics over legality –
“Even when the law is permissive, companies should use the course of highest
integrity”. Also addressed is the issue of different cultural settings – “ Honesty is not
subject to criticism in any culture”, and that “The means as well as the ends” are
important – “We do not care how results are obtained, not just that they are obtained”.

! Conflict of interest. This Section highlighted issues of concurrent employment,


handling confidential information, use of insider information, unauthorized
appropriation of company services or property and the importance of disclosure.

! Bribery, gifts and entertainment. This section covered the culturally sensitive issue of
soliciting or accepting any advantage from clients, suppliers or any person in
connection with the company’s business.

! Safety/Occupational Health. In what may appear to be curious inclusion in a code of


conduct, the sections on safety and occupational health provide the company with yet
another opportunity of stating its commitment to employees and their welfare.

! Customer relations. The inclusion of customer satisfaction also serves to give


emphasis to the core values of the organization.

17
! Relations with suppliers and contractors. This section covered competitive tendering,
evaluation, selection and monitoring.

! Environment. This section of the code dealt with business conduct in accordance with
respect to the environment.

! Responsibilities to shareholders and the financial community. This section reflects the
size and position of the company and details their record keeping, and information
provision responsibilities.

! Monitoring of compliance and the means of enforcement. The final section of the code
reminds employees of their personal responsibilities in regard to the code, avenues for
information and disciplinary outcomes which result from violation.

McNamara (2000) states in his “A Complete Guide to Ethics Management” that if your
organization is quite large, e.g., includes several large programs or departments, a corporation
may want to develop an overall code of ethics and then a separate code to guide each of your
programs or departments. McNamara (2000) also mentions that codes should not be
developed out of the Human Resource or Legal departments alone, as is too often done.
McNamara (2000) suggested the following guidelines for a company’s ethical code:

! Review any values need to adhere to relevant laws and regulations.


! Review which values produce the top three or four traits of a highly ethical and
successful product or service in your area.
! Identify values needed to address current issues in your workplace.
! Consider any top ethical values that might be prized by stakeholders.
! The “Six Pillars of Character”.
! Associate examples of behavior to the ethical codes.
! Indicate that all employees are expected to conform to the code of ethics.
! Obtain review from key members of the organization.

By reviewing any values need to adhere to relevant laws and regulations the organization is
according McNamara (2000) ensured that it is not (or is not near) breaking any of them. If
you are breaking any of them, you may be far better off to report this violation than to try to
hide the problem. Often, a reported violation generates more leniency than outside detection
of an unreported violation, particularly per the new Federal Sentencing Guidelines. Increase
priority on values that will help your organization operate to avoid breaking these laws and to
follow necessary regulations. (McNamara, 2000)

Reviewing which values that produce the top three or four traits of a highly ethical and
successful product or service in “your” area is according to McNamara (2000) important. This
could be for example for accountants: objectivity confidentiality, accuracy, etc. Identify
which values produce behaviors that exhibit these traits. (McNamara, 2000)

McNamara (2000) states that it is important to identify values needed to address current
issues in your workplace. Appoint one or two key people to interview staff to collect
descriptions of major issues in the workplace. Collect descriptions of behaviors that produce
these issues. Identify which values would generate those preferred behaviors. There may be
values included here that some people would not deem as moral or ethical values, e.g., team-

18
building and promptness, but for managers, these practical values may add more relevance
and utility to a code of ethics. (McNamara, 2000)

To take ethical values that might be prized by stakeholders into consideration is according to
McNamara (2000) important. For example, consider expectations of employees,
clients/customers, suppliers, funders, members of the local community, etc. (McNamara,
2000)

According to McNamara (2000), the following list that is referred to as the “Six Pillars of
Character” developed by The Josephson Institute of Ethics is important to consider when
setting up an ethical code:

# Trustworthiness: honesty, integrity, promise-keeping, loyalty


# Respect: autonomy, privacy, dignity, courtesy, tolerance, acceptance
# Responsibility: accountability, pursuit of excellence
# Caring: compassion, consideration, giving, sharing, kindness, loving
# Justice and fairness: procedural fairness, impartiality, consistency, equity, equality,
due process
# Civic virtue and citizenship: law abiding, community service, protection of
environment

Compose your code of ethics; attempt to associate with each value, two example behaviors
which reflect each value. Critics of codes of ethics assert that they seem vacuous because
many list ethical values and do not clarify these values by associating examples of behaviors.
(McNamara, 2000)

McNamara (2000) states that it is important to include wording that indicates all employees
are expected to conform to the values stated in the code of ethics. Add wording that indicates
where employees can go if they have any questions (McNamara, 2000).

Obtain review from key members of the organization. Get input from as many members as
possible. (McNamara, 2000)

2.2.4 INTERNATIONAL CODE OF ETHICS


Jackson (1997) states that if the organization is carrying out business abroad it should be
careful not to let its code of ethics remain in national mores. Instead the organization should
embrace recently evolved standards, many of which have been promulgated especially for
international business (Frederick, 1991).

According to Rallapalli (1999) many companies have developed their own ethical codes of
conduct while business ethics has not yet become global. Unethical behavior on the
international market creates an urgent need for a shared global code of ethics (Rallapalli,
1999).

The Caux principles are considered to be the first international code of ethics for international
business (Hartman, 1998). Carlson and Blodgett (1997) stated that the aim of the code is to set
a world standard against which business behavior may be measured. The Caux principles
were developed when international business managers from Europe, Japan and the USA
gathered in Caux, Switzerland. The common goal for the meeting was the belief that business
organizations can be a strong force and push for a positive change in the quality of life for the

19
world. According to Hartman (1998) the foundation for the formulated guidelines at Caux
where the Minnesota principles, created in 1992 by the Minnesota Center for Corporate
Responsibility.

Hartman (1998) further states that from a societal point of view the Caux principles show that
correct action is important. To make immoral choices regarding employment, trade,
intellectual property or environmental protection might lead to undesired consequences such
as child labor, unfair trade practices, copyrights pirating and environmental pollution. Apart
from the Caux principles there are a number of other international ethical codes. Among these
are codes developed by the United Nations Commission on Transnational Corporations, the
International Chamber of Commerce, the Organization for Economic Cooperation and
Development and the International Labor Organization. (Deresky, 1997)

According to Jackson (1997) the United Nations Commission on Transnational Corporations


has established a set of obligations towards host countries that transnational organizations
ought to follow. According to the United Nations Commission, Transnational Corporations
should:

! Respect national sovereignty.

! Be adherent to economic goals and development objectives of host countries.

! Contribute to host countries economic development and develop mutually beneficial


relations with them.

! Respect social and cultural objectives, values and traditions of host countries.

! Respect human rights and fundamental freedoms.

! Not discriminate on the basis of race, color, sex, religion, language, national and
ethnic origin or political or other opinion.

! Provide equality of opportunity.

! Oppose apartheid.

! Not interfere in internal affairs of host countries or in intergovernmental relations.

! Stay away from corrupt practices, such as payments to public officials as


compensation for performing or refraining from performing duties in connection with
the Trans National Corporation’s transactions.

! Contribute to the social development of host countries.

! Co-operate with host governments in accomplishing national objectives for local


equity participation.

! Be contributing to managerial and technical training of nationals in host countries, and


facilitate their employment at all levels of management.

20
2.2.5 CODES OF ETHICS, WHO AND WHY?
Formally identified codes of ethics have been introduced in most US firms in the last twenty
years. A high degree of companies introduced codes of ethics during 1993-94 and one reason
for this might have been the implementation of the United States Sentencing Commission
guidelines in 1991. (Weaver, Trevino & Cochran, 1999)

According to the study of 1000 US corporations carried out by Weaver et al. (1999), 98%
claimed to have some kind of formal document on ethics and conduct issues. Of those 98%,
67% dealt with these issues through regular policy manuals, 78% had also separate codes of
ethics. This indicates that the majority of American organizations use more than one way to
set forth their standards of appropriate conduct. 22% noted the use of other means to specify
ethics policies of the company, including for example occasional letters, bulletins,
memoranda, video documents, posters, mission statements and top executive speeches. (Ibid)
In Sweden Brytting (1997) found that 46% of the investigated companies used formal
structural measures within the field of business ethics. By formal structural measures Brytting
(1997) refers to organizational structures created to support or influence employees when they
have to make choices in work situations that involves moral conflicts.

Firm size is one factor of many that affects a company’s usage of code of ethics. The size of
the firm may be positively correlated with the usage of codes of ethics according to Weaver
(1993). Ethics codes probably consume capital and other resources that smaller firms can not
afford. Larger firms may have greater public visibility, and are therefore exposed to greater
external pressure to manage their ethics. Larger firms may also operate over a greater
diversity of markets with greater variations of local customs. They have therefore stronger
needs to guarantee a common set of behavior assumptions for the members of the
organization. (Ibid)

A second factor that influences the company to have a code or not is the industrial
environment in which the firm operates (Weaver, 1993). Some industries, for example, law,
medicine, engineering, and accounting, have found it necessary to develop codes that
encourage acceptable behavior, to develop public trust, reliability and consistency in services
(Ferrell, 1999).

In Brytting’s (1997) study over Swedish private companies, he found that capital managing
was the industry where codes of ethics were most common. Industries such as private
education, research and medical service were excluded from the study, due to the fact that in
these areas there were other forms of ethics established that played a more significant role
than business ethics (Brytting, 1997).

Only because a company does not have a distinct code of ethics, it can not be taken for
granted that the company does not give attention to ethics in its formal policies. It is for
example possible that firms address their ethical issues in the context of regular employee
policy manuals instead of in a separate code of ethics. One should not assume that firms
reporting little in the way of formal ethics program thereby are unethical firms. (Weaver et al.,
1999) On the other hand it cannot be taken for granted that companies with the best code of
ethics never behave unethically (Schaefer & Zaller, 1999).

21
2.3 ETHICS TRAINING
West, Berman, Bonczek & Kellar (1998) state that ethics training has become more important
as organizations have attempted to ensure that their managers and employees act in ways
which avoid legal wrongdoing and promote a positive climate for employee relations. Ethics
training is furthermore according to West et al (1998) an approach meant to promote ethical
behavior to managers and employees and ethics training increases attention to ethical issues
and behavior.

Kaptein (1998) states that ethics training has a significant influence on the perceptions of
conduct among employees. Ethics training also provides circulation of information among the
employees and discussion of new laws and standards of ethics (West, et al 1998). It often
takes years of experience and training to know what is acceptable in an organization (Ferrell,
1999).

As early as 1984-85, 44 percent of the companies in a survey conducted by the Center of


Business Ethics in America had ethics training for its employees (Nakano, 1999). More recent
studies have found that 44 percent of the largest US corporations provide their employees
with some kind of ethics training (Clark and Leonard, 1998).

Weaver et al (1999) state that in the companies in their survey, depending on employee rank,
one-fifth to one-third of employees receive no ethics training or education of any kind. Only
one-fifth to one-fourth of employees in the study receive some ethics education or training at
least once a year. For most of the employees, ethics training and education occurs
approximately every five years (Ibid).

Callahan (1998) and Powers and Vogel (1980) have suggested that ethical training has
multiple objectives. Gandz and Hayes (1998) state that there are four objectives with an
ethical training program. The first goal is the fostering of awareness of the ethical components
of managerial decision-making. The second goal is the legitimization of ethical components
as an integral part of such managerial decision-making. A third goal is the provision of
conceptual frameworks for analyzing the ethical components and to help individuals become
confident in their use. The final goal of an ethics training program is according to Gandz and
Hayes (1998) the helping of participants to apply ethical analysis to day-to-day business
activities.

During a training program there are many issues that are important to discuss, for example
how ethics can be managed and interpreted in the day-to-day activity of the organization. A
training program in ethics is a way to improve the ethics of an organization (Kaptein, 1998).
Kaptein (1998) suggests that the following issues should be included in an ethics-training
program:

! Teach the employees to identify the moral components in their performance.

! Clarify the importance of ethics for stakeholders and the organization.

! Provide methods of outlining, analyzing, resolving and implementing moral issues.

! Avoid or reduce uncertainty about who is responsible for what and to what degree.

! Create, discuss and resolve actual moral issues.

22
! Communicate, reinforce, clarify and develop the code of conduct and other ethic
measures.

! Explain and test the use of tools that can be applied during the development process.

According to Kaptein (1998) the easiest way of conducting a training program is to have an
external expert lecturing about the subject followed by a seminar with questions and answers.
Another way of conducting the training is to have workshop and discuss fictional or actual
cases to which the employees should find solutions. These workshops are most efficient if the
manager leads them and when the manager has been trained by external leaders in order to
lead such a workshop. (Kaptein, 1998)

This method brings advantages as well as drawbacks. The advantages are that the manager
shows that ethical issues are important and when the managers have to teach others, they learn
more. The drawback with this is that it takes a lot of time for the managers to prepare and
conduct the training program. Another disadvantage is that the participants might be afraid to
be honest, which might lead to that the desired discussion will not be achieved, because they
are worried that what they say might later be used against them. An alternative for the
managers to lead this training is to have an external trainer who is experienced in this kind of
training. This brings the advantage that these persons can become ombudsmen within the area
of business ethics. (Kaptein, 1998)

A dilemma discussion is also a tool to conduct ethical training. This method takes form in the
way that one employee introduces an ethical problem to two other participants. These two
help their colleague to find options and to evaluate the pros and cons with these options. The
rest of the group participating in the training observes the discussion and give feedback.
(Kaptein, 1998)

According to McNamara (2000) the ethics program is essentially useless unless all staff
members are trained about what it is, how it works and their roles in it. The nature of the
system may invite suspicion if not handled openly and honestly. In addition, no matter how
fair and up-to-date is a set of policies; the legal system will often interpret employee behavior
(rather than written policies) as de facto policy. Therefore, all staff must be aware of and act
in full accordance with policies and procedures (this is true, whether policies and procedures
are for ethics programs or for personnel management). This full accordance requires training
about policies and procedures writes McNamara (Ibid). Below is his “Training Basics for
Supervisors and Learners”:

! Orient new employees to the organization’s ethics program during new-employee


orientation.

! Review the ethics management program in management training experiences.

! Involving staff in review of codes is strong ethics training.

! Involving staff in review of policies (ethics and personnel policies) is strong ethics
training.

23
! One of the strongest forms of ethics training is practice in resolving complex ethical
dilemmas. Have staff use any of the three ethical-dilemma-solution methods in this
guidebook and apply them to any of the real-to-life ethical dilemmas also listed in this
guidebook.

! Include ethical performance as a dimension in performing appraisals.

! The best ethics trainer: Bill Goodman, Chief Human Resource Officer at Aveda,
describes, “We start our training even in our job ads,” then adds, “but the best trainer
is the behavior of our leaders.”

2.3.1 INTERNATIONAL ETHICS TRAINING


Judgements in ethical questions differ between cultures due to the different ethical values
people carry. The emphasis on international business training is to learn how other cultures do
business and adapt to their way of business. This might lead to that companies have to
compromise on their ethical standards. (Smeltzer and Jennings, 1998)

International ethics training should entail a great deal more than one-day “ethics awareness”
workshops and seminars (Jackson, 1997). Jackson (1997) further presents several key
elements that should be considered when formulating a global ethics-training program:

The first key element is to stress the importance of “verstehen” i.e. to understand (Gadamer,
1979): the idea of understanding traditions and social norms from the “inside” instead of as a
detached external observer. Learning the foreign language itself helps. (Jackson, 1997)

It is furthermore important to stress the moral importance of the individual person, not
cultural stereotyping, which usually leads to prejudice (Jackson, 1997). Further, Jackson
(1997) states that it is important to remember Kant: people (and this means “foreign” people
too) should not be treated merely as a means to generating more business, but as an end.

According to Jackson (1997) an organization should create a cosmopolitan ethical culture


within the firm, founded on the developed moral norms for international business, such as the
UN code for TNCs. The ethics-training program can be used to deal with managerial causes
of ethical misconduct to which international companies are especially vulnerable. Examples
of this can be; inadequate supervision; psychological distance existing at far off geographical
locations; lack of legal and regulatory checks in underdeveloped host counties. (Jackson,
1997)

Put emphasis on the components of cosmopolitan ethical awareness in ethics training: Use
morally sensitive cultural-education to prevent prejudice. Intend to look at the host country’s
laws, customs and people from the “inside” instead of being an external detached observer.
Focus on understanding human rights and challenges of respecting them in international
business activities. (Jackson, 1997)

Jackson (1997) also states that it is important to find good ways to communicate international
ethics matters to the workforce, use communication tools such as newsletters and e-mails.
These are good mediums for supplying special guidance needed in locating ethical issues
when doing business abroad. To have an ethics hotline hocked up to electronic mail, and keep
the line confidential, is an excellent tool for international communications. It can be used as a

24
forum for questions about the meaning of the code and also for swapping reports on ethical
situations the colleagues are confronting in different legal and cultural environments through
out the world. (Jackson, 1997)

2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING


ETHICS
2.4.1 ADVANTAGES
According to Brytting (1997) a code of ethics has certain advantages. One can be that the
code motivates the people in the organization by using peer pressure. The code can provide a
permanent guide to what is right and wrong; hence give guidance to the employees. It can also
be an independent ground for appeal. For business itself it can specify the social
responsibilities, and at last it works against unethical behavior that may be a threat to free
enterprising in general. A condition for the advantages to be valid is some form of existing
tool of enforcement. Another requirement is the need for a proper interpretation of the code. It
needs to be worded in a universal language and has to be interpreted and changed to actual
working situations throughout the whole organization. A way to encourage employees is to
involve them in an activity of writing and updating the code. (Brytting, 1997)

According to Drummond and Bain (1994) the benefits of a code of ethics includes the
following: Firstly it is a mean of clarifying the management’s opinions of what it is that
makes behavior unethical. Secondly it helps the employees to consider ethical issues before
being actually confronted with the real situation. It also gives the employees an opportunity to
refuse to go along with an unethical action. The code of ethics is a tool to define the limits of
what makes behavior acceptable or unacceptable. It is a tool in providing a mechanism for
communicating the managerial philosophy in the area of ethical behavior. Finally it assists in
the introduction and training of employees. (Drummond & Bain, 1994)

Nijhof et al. (2000) state that one of the positive aspects of a formal code of ethics clearly
states what employees should do to act in a responsible way, that is, the code provides the
employees with a clear guidance for decision-making. Another positive aspect is that an
ethical code makes clear what external parties can expect from the company or in other
words, the code states what the organization stands for. A final positive aspect of a corporate
ethical code is according to Nijhof et al. (2000) that fulfillment is measurable.

Total Quality Management includes high priority on certain operating values, e.g., trust
among stakeholders, performance, reliability, measurement, and feedback. Eastman and
Polaroid use ethics tools in their quality programs to ensure integrity in their relationships
with stakeholders. Ethics management techniques are highly useful for managing strategic
values, e.g., expand market share, reduce costs, etc. McDonnell Douglas integrates their ethics
programs to into their strategic planning process. Ethics programs promote a strong public
image. Attention to ethics is also strong public relations-admittedly; managing ethics should
not be done primarily for reasons of public relations. But, frankly, the fact that an
organization regularly gives attention to its ethics can portray a strong positive to the public.
People see those organizations as valuing people more than profit, as striving to operate with
the utmost of integrity and honor. Aligning behavior with values is critical to effective
marketing and public relations programs. Consider how Johnson and Johnson handled the
Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and

25
CEO of San Francisco-based Business for Social Responsibility, puts it best: “Ethical values,
consistently applied, are the cornerstones in building a commercially successful and socially
responsible business.” (McNamara, 2000)

2.4.2 RISKS
The arguments against ethical codes are according to Drummond and Bain (1994) the
following: Even if the guidelines are detailed it is impossible to cover all the potential
unethical exercises. Secondly, codes of ethics are often too generalized. It is seldom that the
code of ethics gets prioritized. Finally, ethical behavior that has been brought on by an ethical
code will only work if the code has been internalized and the employees truly believe in it.

There are according to Nijhof et al (2000) basically three disadvantages with a formal code of
ethics; resistance to coercion, indoctrination of employees and danger of moral inversion.
These three disadvantages will be further discussed below.

In a formal approach to an ethical code certain rules are written down. Through monitoring
and assessment systems the compliance to these rules are forced upon the employees. Due to
this it is a natural reaction to resist these rules to a certain extent. (Beer, 1988) According to
Nijhof et al (2000) this resistance can only be overcome when compliance with certain norms
is felt from within. Resistance to coercive organizational norms is encouraged because a
formal approach does not appeal to any feeling of care or compassion. Because procedures are
fixed in a managerial environment there is a distinction between those who design the rules
and those who have to carry them out. This results in the disappearance of a feeling of
compassion that is essential for notions of care. (Jagger, 1995) According to Nijhof et al
(2000) one of the preconditions for positive reactions from others is that they have to be
convinced that decision makers actually care for them. It will be hard to convince others of
this with only an abstract reference to organizational norms. (Nijhof et al, 2000)

Formal codes of conduct are based on the assumption that an organization should provide the
norms and values needed to distinguish between right and wrong. From a change perspective,
in formal approach to ethical codes, the traditional way of dealing with ethical issues is first to
“unfreeze” the employees, then move them through several training and communication
sessions and thereafter “refreeze” the participants on the basis of the organizational way of
dealing with ethical issues. In this process the personal values of the employees are replaced
by the organizational norms that come out of the ethics training. In this process people in
organizations are indoctrinated with external values, which, in itself from a normative
perspective, can be criticized. (Boje and Winsor, 1993; Willmott, 1993)

Nijhof et al (2000) state that the indoctrination of employees can partly be overcome by
formulating a code of conduct in a “bottom up way”. Through dialogue within an organization
all employees have the opportunity to influence and co-determine the organizational norms. In
this way, employees set the organizational norms that are then written down in a formal
document, i.e. the ethics code. This does not halt the indoctrination of employees but, at least,
the employees are indoctrinated by values that are a compromise or, in the ideal situation, a
consensus of the views of all employees. (Nijhof et al, 2000)

26
3. CONCEPTUAL FRAMEWORK AND EMERGED
FRAME OF REFERENCE
The first chapter provided an introduction to the subject and ended with four research
questions, which were covered by a literature overview in the second chapter. The purpose of
this chapter is to display the conceptualization that will allow us to answer this thesis’
research questions. The reader will also be provided with a frame of reference, which has
emerged from the conceptualization and will be presented in the end of the chapter.

3.1 CONCEPTUALIZATION
According to Miles and Hubermann (1994) a conceptual framework “explains, either
graphically or in a narrative form, the main things to be studied” (p. 18). The authors add that
this is most easily done after a list of research questions has been constructed, which has been
done in chapter one of this thesis.

The first research question revolves around how the people involved in ethics management
can be described. The second question centers on how an ethical code can be described. The
third question focuses on how an ethical training program can be described. The final
research deals with how the benefits versus risks with formalizing ethics within an
organization can be described.

For all the four research questions, the lists presented under each question may be considered
to be eclectic (i.e. composed of elements drawn from various sources), these sources have, as
stated before, been covered in chapter two.

The conceptualization has served as the basis for the interview guide that has been designed in
order to collect data for this thesis. The interview guide may be found in Appendix A and
follows the same structure as the conceptualization does.

3.1.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED IN ETHICS


MANAGEMENT
In chapter two studies by Kaptein (1998), the Center for Business Ethics (1992), Benson and
Ross, (1998) and Drummond and Bain, (1994) were presented. These studies revolved around
who should be involved in ethics management within an organization. The studies focused
upon two main areas, the use of an ethics office or committee and the use of a single ethical
ombudsperson.

♦ THE FUNCTION OF AN ETHICS COMMITTEE

! The Initiator.
# Stimulates the organization of ethics, the driving force (Center for Business
Ethics, 1992; Kaptein, 1998).

! The Coordinator.
# Answers questions regarding the organization’s ethics policy (Center for
Business Ethics, 1992; Kaptein, 1998).

! The Channeler.

27
# Creates communication channels between the corporation and its
surrounding, between employees and management, and among departments
(Kaptein, 1998).

! The “Devils Advocate”. (Kaptein, 1998).

! The Facilitator.
# Offers instruments, which departments can use for their ethics programs
(Kaptein, 1998).

! The Mediator.
# Mediates in both internal and external conflicts. (Kaptein, 1998)

♦ WHO IS INVOLVED IN AN ETHICS COMMITTEE

! Someone from top management (Kaptein, 1998; Benson and Ross, 1998).

! Members in the committee are rotated among the employees (Drummond and Bain,
1994).

! Someone from the Human Resource Department (Benson and Ross, 1998).

! Someone who is non-managerial.


# A shop or clerical worker (Benson and Ross, 1998).

♦ ETHICAL OMBUDSPERSON

! Has experience from within the company and is fully integrated into the corporate
value system (McDonald, 2000; Drummond and Bain, 1994; Kamm, 1993).

! Independent, reporting directly to the CEO or to the board (Drummond and Bain 1994;
Kamm, 1993).

! An investigative, counseling and advisory role (McDonald, 2000; Drummond and


Bain, 1994; Kamm, 1993).

! If selected by top management there is a risk of impairing the trustworthiness


(Drummond and Bain, 1994).

! Resolves ethical conflict (Dunfee and Werhane, 1997; Drummond and Bain, 1994).

! Is responsible for ongoing ethical work and updating of the code (Kamm, 1993).

3.1.2 RESEARCH QUESTION TWO: A CODE OF ETHICS


A number of authors have studied the wide area of a code of ethics, among them are Weaver,
(1993); Kaptein, (1998); Weaver, Trevino, Cochran, (1999); Hosmer, (1987); Drummond &
Bain, (1994) Deresky, (1997) and McDonald (2000). The different areas regarding a code of
ethics were covered in chapter two. However, these areas interacted and mixed with each
other. In this thesis three main areas were found to be of particular interest since these three

28
covered most of the other areas involved. These areas were; the purpose of a code, who is
involved in developing the code and the content of a code of ethics.

♦ THE PURPOSE OF A CODE

! Minimum expectations of employees (Kaptein, 1998; Weaver, 1993).

! Making roles and expectations within an organization clear (Weaver, 1993; Kaptein,
1998).

! Assist employees by including ethical values in decision making (Weaver et al., 1999).

! A distinguishing function externally (Kaptein, 1998).

! A correcting function, the code corrects checks and balances in that employees can
check each other in living up to the code (Kaptein, 1998).

♦ WHO IS INVOLVED IN DEVELOPING THE CODE

! Senior executives (Hosmer, 1987).

! As many employees as possible (Drummond & Bain, 1994).

♦ THE CONTENT OF A CODE

! One code or one for each level: international, supranational, national, sectoral,
individual (Kaptein, 1998).

! General information regarding the code and the organization (Weaver, 1993;
McDonald, 2000).

! Conflicts of interest, e.g. handling confidential information, bribes, “whistle blowing”


(Weaver, 1993; McDonald, 2000).

! Relations with customers, suppliers and contractors (Weaver, 1993; McDonald, 2000).

! Social responsibility (Weaver, 1993; McDonald, 2000).

! Responsibilities to shareholders and investors (Weaver, 1993; McDonald, 2000).

3.1.3 RESEARCH QUESTION THREE: ETHICS TRAINING


Kaptein, (1998); McNamara, (2000) and Jackson, (1997) have carried out research in the field
of ethical training programs. These authors’ previous research efforts were covered in chapter
two.

♦ ETHICS TRAINING

! Teach the employees to identify the moral components in their work. (Kaptein, 1998;
McNamara, 2000).

29
! Create, discuss and resolve moral issues and apply them to real-life ethical dilemmas
(Kaptein, 1998; McNamara, 2000).

! Communicate, reinforce, clarify, develop and review the ethical code with the staff
(Kaptein, 1998; McNamara, 2000).

! Avoid or reduce uncertainty about who is responsible for what and to what degree
(Kaptein, 1998).
.
! The training is carried out by an external consultant (Kaptein, 2000).

! Include ethical performance as a dimension in performing appraisals (McNamara,


2000).

3.1.4 RESEARCH QUESTION FOUR: ADVANTAGES VERSUS RISKS WITH


FORMALIZING ETHICS
As stated earlier there are both advantages and risks with formalizing ethics within an
organization. Nijhof et al. (2000); Brytting, (1997); Drummond and Bain, (1994) Boje &
Winsor, (1993) and Willmott, (1993) have carried out research within this particular area.

♦ ADVANTAGES

! Clarifies management’s opinions of what it is that makes behavior ethical/unethical


(Nijhof et al, 2000; Brytting, 1997; Drummond & Bain, 1994).

! Motivates employees to consider ethical values in decision-making (Brytting, 1997;


Drummond & Bain, 1994).

! The code makes clear what external parties may expect from the organization (Nijhof
et al, 2000).

♦ RISKS

! Resistance to coercion. Employees do not truly believe in the code, therefore the code
is force upon them (Drummond & Bain, 1994; Nijhof et al, 2000).

! The code is forced upon employees, who are being indoctrinated into something they
do not believe in (Boje & Winsor, 1993; Willmott, 1993).

! Danger of moral inversion. The emphasis on fixed ethical rules removes the necessity
for employees to ethically reflect on their behavior (Nijhof et al, 2000).

3.2 EMERGED FRAME OF REFERENCE


As stated earlier, the conceptualization above is what will allow us to answer this thesis’
research questions. The frame of reference, which results from this conceptualization, is what
will guide the data collection for this thesis. The emerged frame of reference is presented
graphically below (see Figure 3.1)

30
PEOPLE INVOLVED IN ETHICS
MANAGEMENT

ETHICS TRAINING ETHICAL CODES

ADVANTAGES VERSUS RISKS WITH


FORMALIZING ETHICS

FIGURE 3.1. Authors’ own construction.

The frame of reference presented above shows that an organization that wishes to enhance its
ethical capability needs to consider establishing ethical training programs as well as ethical
codes, or in other words, formalizing the organization’s ethical efforts. In order to formalize
the ethical efforts the organization needs to involve people who are to be involved in the
ethics management within the organization. During these efforts towards enhancing the
ethical capability the organization needs to consider the advantages versus risks with
formalizing the ethical efforts.

31
4. METHODOLOGY
In this chapter the purpose, approach and strategy of the research in this thesis will be
described. Furthermore the data collection method, sample selection as well as validity and
reliability issues will be presented. At the end of the chapter an overview of the methodology
is provided.

4.1 RESEARCH PURPOSE


Wiedersheim-Paul and Eriksson (1991) agree with Yin (1994) who states that there are three
general purposes of carrying out research.

! Exploratory
! Descriptive
! Explanatory

Exploratory studies aim for basic knowledge within the problem area (Wallén, 1996). These
studies are suitable when a problem is difficult to demarcate and when relevant theory is
unclear. They are further appropriate when important characteristics and relations are hard to
determine. (Eriksson &Wiedersheim-Paul, 1997)

Descriptive research is appropriate when a problem is clearly structured but the intention is
not to conduct research about connections between causes and symptoms. The researcher
knows what her or she wants to investigate but not the answers. (Eriksson &Wiedersheim-
Paul, 1997)

Explanatory research is useful for studying relations between causes and symptoms (Eriksson
&Wiedersheim-Paul, 1997). The researcher tries to identify the factors, which together cause
a certain phenomena (Eriksson &Wiedersheim-Paul, 1997).

Which category a study belongs to depends on ambitions and knowledge within the research
area (Wallén, 1996). The research purpose of this thesis is mainly descriptive. This due to the
fact that it was stated in the research purpose that this thesis wanted to gain a better
understanding of how ethical capability may be used as a competitive advantage. In this thesis
a number of variables connected to the issue of how ethical capability can be used as a
competitive advantage will therefore be described. However, this thesis is also somewhat
exploratory. This due to the fact that we have not been able to find studies that focus on the
exact same problem as we have chosen to do in this thesis. Towards the end of the thesis the
authors’ own conclusions are presented by answering the research questions, this thesis is
beginning to explain the issues that have been described. This makes our study mainly
descriptive but with explanatory and exploratory influences.

4.2 RESEARCH APPROACH


There are two methods to choose from when conducting research in social science: qualitative
or quantitative method (Yin, 1993; Holme & Solvang, 1991). The most important difference
between these two approaches is the use of numbers and statistics in the quantitative approach
while the qualitative approach focuses on words. The choice of approach depends on the
problem definition as well as on what kind of information that is needed. However, these two
approaches can also be combined. (Holme & Solvang, 1991)

32
Quantitative research is often formalized and structured. It treats the research problem in a
broad perspective and aims to make generalizations. The results from quantitative research are
assumed to be measurable and presentable in figures. Quantitative research is very much
controlled by the researcher and statistical methods have a central role in the analysis of
quantitative information. In a quantitative approach, few variables are studied but on a large
number of entities. (Holme & Solvang, 1991)

Qualitative research is used when the purpose of the study is to reach a deeper understanding
of the research problem. Qualitative research means gathering, analyzing and interpreting data
that cannot be quantified. Central in qualitative research is to reach a deeper and more
complete understanding of the data collected and the problem studied. (Holme & Solvang,
1991) In qualitative research the conclusions are based on data, which are not quantified, such
as attitudes and values (Lundahl & Skärvad, 1992). Qualitative research is furthermore
characterized by a great closeness to the respondents or to the source that the data is being
collected from (Holme & Solvang, 1991). According to Denzin and Lincoln (1994)
qualitative researchers stress the socially constructed nature of reality, the intimate
relationship between the researcher and what is being studied, and the situational constraints
that shape inquiry. Lincoln (1994) concludes that in qualitative research the answers to
questions that stress how social experience is created and given meaning are sought after.

Our study has a qualitative approach since our research purpose requires that we study the
phenomenon in depth. This approach is suitable due to the fact that we wanted to gain a better
(i.e. deeper) understanding of how an organization may use ethical capability as a competitive
advantage. Our research also demanded detailed answers regarding the interviewed
organizations’ feelings, values and attitudes about issues involving how to use ethical
capability as a competitive advantage. As we now are focused on a qualitative research
approach, the research strategy will be presented in the next section.

4.3 RESEARCH STRATEGY


There are a number of different ways in which one may conduct social science research. Yin
(1994) lists five primary research strategies: Experiments, surveys, histories, analysis of
archival information and case studies. Each of these strategies has certain advantages and
disadvantages. However, these advantages and disadvantages depend upon three conditions:

! the type of research questions asked


! the control an investigator has over actual behavioral events
! the focus on contemporary as opposed to historical phenomena

Table 4.1 displays these three conditions, in each of three columns, and shows how each
condition is related to five major research strategies within the social sciences. Below the
table the different research strategies will be further explained.

33
Table 4.1. Conditions for Research Strategies
RESEARCH Form of Requires Focuses on
STRATEGY Research Control Over Contemporary
Question Behavioral Events
Events?
Experiment How, why YES YES

Survey Who, what, NO YES


where, how
many,
How much

Archival Who, what, NO YES/NO


analysis where, how
(e.g., many,
economic How much
study)

History How, why NO NO


Case Study How, why NO YES
Source: Yin, 1994, p. 6

The purpose of this thesis is to investigate how organizations can use ethical capability as a
competitive advantage. Due to this we do not require the control over behavioral events,
which rules out experiments as a research strategy. Furthermore we want to focus on recent
developments within the chosen area, which rules out the historical strategy. This strategy is
also ruled out due to the fact that Yin (1994) states that this method is suitable only when no
relevant persons are alive to report. Yin (1994) writes that surveys or the analysis of archival
records are quantitative in nature, they are furthermore advantageous when the research goal
is to describe the incidence or prevalence of a phenomenon or when it is to be predictive
about certain outcomes. This leaves us with only one research strategy, the case study.

In general, case studies are the preferred strategy when “how” or “why” questions are being
posed, when the investigator has little control over events, and when the focus is on a
contemporary phenomenon within some real-life context says Yin (1994). Further, Yin (1994)
states that the characteristics of a case study is that it provides a realistic description and it
makes it possible to investigate many different variables. Yin (1994) further states that the
case study is used when investigating contemporary events and the relevant behaviors cannot
be manipulated. Using a case study as the selected research strategy means that the
researchers investigate a few numbers of objects, like industries and companies, in many
dimensions (Eriksson & Wiedersheim-Paul, 1997).

Yin (1994) adds that case study research may be carried out as either single- or multiple case
studies. Multiple case studies give the researchers the opportunity to compare, however, less
time can be spent on each case. Holme and Solvang (1997) state that case studies provide
detailed knowledge about the problem but it might be difficult to generalize from the
conclusions that are drawn.

34
According to Miles and Huberman (1994) the use of multiple case sampling will add to the
confidence of the findings. From investigating similar and contrasting cases the researchers
are able to understand the findings from a single case and specify how and where and maybe
also why it has this behavior. Multiple case sampling also adds to the validity, precision and
the stability of the findings. (Miles & Huberman, 1994)

For this thesis it was found that that the most suitable research strategy was the multiple,
contrasting, case study strategy. This due to the fact that the research questions posed in the
end of chapter one were of “how” character and that the research questions provided the
researchers with relatively many variables. A multiple case study was conducted since this
would make the findings more robust and it would also make it possible to detect possible
similarities and/or differences. In addition, the intention was to investigate a limited number
of cases in different dimensions, this in order to receive as detailed and in-depth information
as possible from each case regarding our area of research. It has now been stated that this
research is a multiple case study, which takes this thesis to the next step, the data collection.

4.4 DATA COLLECTION


The data collection process for case studies is more complex than those used in other research
strategies. If the researcher chooses to conduct a case study he or she needs to maintain, what
Yin (1994) refers to as, a methodological versatility. This versatility is not necessarily
required when using other strategies. The researcher further needs to follow certain formal
procedures to assure quality control during the data collection process. Data for case studies
may be collected through six different sources. Yin (1994) proposes that no single source of
evidence has a complete advantage over the others. Instead the sources displayed in table 4.2
complement each other with its individual strengths and weaknesses. Yin (1994) further states
that “ a major strength of case study data collection is the opportunity to use many different
sources of evidence” (p. 91). The six different sources that are suggested by Yin (1994) will
be presented below in table 4.2 along with the strengths and weaknesses of the respective
sources. (Yin, 1994)

35
Table 4.2: Six Sources of Evidence: Strengths and Weaknesses
SOURCE OF STRENGTHS WEAKNESSES
EVIDENCE
DOCUMENTATION ♦Stable: can be reviewed ♣ Retrievability: can be
repeatedly low
♦ Unobtrusive: not ♣ Biased selectivity: if
created as a result of the collection is incomplete
case ♣ Reporting bias: reflects
♦ Exact: contains exact (unknown) bias of author
names, references and ♣ Access: may be
details of an event deliberately blocked
♦ Broad coverage: long
span of time, many events
and many settings

ARCHIVAL RECORDS ♦ (Same as above for ♣ (Same as above for


documentation) documentation)
♦ Precise and quantitative ♣ Accessibility due to
privacy reasons
INTERVIEWS ♦ Targeted: focuses ♣ Bias due to poorly
directly on case study constructed questionnaires
topic ♣ Response bias
♦ Insightful: provides ♣ Inaccuracies due to
perceived causal poor recall
inferences ♣ Reflexivity: interviewee
gives what interviewer
wants to hear
DIRECT ♦ Reality: covers events ♣ Time consuming
OBSERVATIONS in real time ♣ Selectivity: unless broad
♦ Contextual: covers coverage
context of event ♣ Reflexivity: event may
proceed differently
because it is being
observed
♣ Cost: hours needed by
human observers
PARTICIPANT ♦ (Same as for direct ♣ (Same as for direct
OBSERVATIONS observations) observations)
♦ Insightful into inter- ♣ Bias due to
personal behavior and investigator’s
motives manipulation of events
PHYSICAL ♦ Insightful into cultural ♣ Selectivity
ARTIFACTS features ♣ Availability
♦Insightful into technical
operations

Source: Yin, 1994, p. 80

36
Due to the fact that this thesis is a qualitative and not a quantitative case study the researchers
have not been able to utilize archival records as a source of evidence. Direct observations and
participant observations are also ruled out as possible sources of evidence for this case study,
due to limitations regarding time and financial resources. Furthermore the researchers do not
need insights into cultural features and technical operations, which rules out physical artifacts
as a source of evidence. This leaves this thesis with two sources of evidence, interviews and
documentation.

Data may also be divided up into primary and secondary data. Primary data consists of data
collected by the researcher and is collected especially to address the specific research
objective (Lundahl & Skärvad, 1992). Secondary data is already available since it was
collected for another purpose than the present problem (Aaker & Day, 1990) by someone else
(Holme & Solvang, 1991). For this research secondary data in the form of documentation and
primary data in the form of interviews have been used.

According to Yin (1989) one of the most important sources of case study information is the
interview. Holme and Solvang (1991) state that interviews allow flexibility and closeness to
the respondent, which is important in qualitative studies. An interview also allows for in depth
information (ibid) and for the interviewer to follow up the questions (Eriksson &
Wiedersheim-Paul, 1991). According to Yin (1994) there are three different types of
interviews, these are:

! Open-ended
! Focused
! Survey

Most commonly, case study interviews are of an open-ended nature, in which an investigator
can ask key respondents for the facts of a matter as well as for the respondents’ opinions
about events. In some situations, the investigator may even ask the respondent to propose his
or her own insights into certain occurrences and may use such propositions as the basis for
further inquiry. (Yin, 1994)

In a focused interview the respondent is interviewed for a short period of time. In such cases,
the interviews may still remain open-ended and assume a conversational manner, but the
interviewer is more likely to be following a certain set of questions derived from the case
study protocol. (Yin, 1994)

The third type of interview entails more structured questions, along the lines of a formal
survey. Such a survey can be designed as a part of a case study. (Yin, 1989)

Yin (1994) concludes that overall, interviews are an essential source of case study evidence,
because most case studies are about human affairs. These human affairs should be reported
and interpreted through the eyes of specific interviewees, and well-informed respondents can
provide important insights into a certain issue. Eriksson and Wiedersheim-Paul (1997) state
that interviews can be conducted either in person or by telephone.

For this thesis interviews were chosen as the main source of evidence. The type of interview
that was found to be the most appropriate was a focused interview. This due to the fact that
only limited amount of time with the interviewees were allowed and that the researchers
wanted to carry out the interview with questions that had been derived from already existing

37
research on the topics that were found to be of interest. For the interviews an interview guide
which had been derived from the conceptual framework was used. The questions that were
asked were of an open-ended nature. For the cases of this thesis this meant that before asking
for details, the researchers wanted to know what the respondents felt regarding the main
topics. More specifically the research questions were asked primarily and then the researchers
moved on by asking about the subtopics.

According to Yin (1994) documentary information is likely to be relevant to every case study
topic. This type of information can take many forms and should be the object of explicit data
collection plans. The different types of documentation are:

! Letters, memoranda
! Agendas, announcements and other written reports of events
! Administrative documents
! Formal studies
! News-clippings and other articles appearing in the media

For case studies, the most important use of documents is to confirm and augment evidence
from other sources. (Yin, 1994) As mentioned above Yin (1994) discusses the importance of
maintaining a methodological versatility in order to gain a better quality of the case study. Yin
(1994) further states that one of the major strengths of the case study is that it enables the
researchers to use multiple sources. Yin (1994) writes that an important clue is to ask the
same question to different sources of evidence; if all sources point to the same answer the
researcher has successfully triangulated his data. Consequently Yin (1994) calls the use of
multiple sources, when conducting a case study, for triangulation.

In order to, as suggested by Yin (1994), triangulate evidence for this thesis; documentation
was used along side with interviews. The documentation used has been in the form of
agendas and announcements.

4.5 SAMPLE SELECTION


Johansson-Lindfors (1993) argues that selective sampling is used in qualitative case studies
and that it involves purposive sampling. Purposive sampling implicates that the information
units should be selected based on theoretical purpose and relevance. This implies that it must
be assumed that the phenomenon or problem exists within the sample of information units.
The sample is dependent on the purpose of the study rather than on whether the sample is
representative or not. (Ibid)

On multiple-case sampling, Miles and Huberman (1994) state that by looking at a range of
similar and contrasting cases, one can understand a single-case finding, grounding it by
specifying how and where and, if possible, why it carries on as it does. Miles and Huberman
(1994) further state that by using multiple cases the researcher can strengthen the precision,
the validity, and the stability of the “finding”.

Regarding generalization Miles and Huberman (1994) state that the researcher is generalizing
from one case to the next on the basis of a match to the underlying theory, not to a larger
universe. However if a finding holds in one setting and, given its profile, also holds in a
comparable setting but does not in a contrasting case, the finding are more robust.

38
Miles and Huberman (1994) state that how many cases a multiple case study should consist of
depends how rich and complex the within case sampling is. For this thesis the research
questions and conceptualization provided the researchers with a rather high complexity for
each case. In order to focus effectively and to fulfil the exploratory, descriptive and, the
somewhat, explanatory purpose of the research, it was decided that three cases were to be
included in the sample.

The sampling of these three case studies involved four phases. These were:

! The selection of region(s)


! The selection of industry
! The selection of company
! The selection of appropriate persons to interview

For this thesis it was found to be suitable to carry out research in three different regions, this
in order to find out whether the same views applied to the research question across borders
and regions. The three regions that were singled out and investigated were the Far East
(China), Northern Europe (Sweden), and North America (United States). Of these three
regions two may be clustered together into the Western Hemisphere region, while the Chinese
case may also be denominated as the Eastern Hemisphere case.

The automotive industry was chosen mainly due to the fact that the industry deals with certain
ethical dilemmas such as environmental problems and product safety. Within this industry the
Volvo Company was found to be appropriate, this due to the fact that the company is active
within all three regions previously singled out. Furthermore it was found out during a pre-
interview (i.e. the setting up of an interview) that the company was currently reviewing its
ethical capability on a global basis.

According to Holme and Solvang (1991), selecting respondents with the right knowledge
about the research area is crucial for qualitative research. Regarding finding suitable people to
interview, for this thesis, access to the Public Affairs manager of Volvo head quarters in
Sweden, Ms. Malin Nilsson, was gained through Ms. Karin Ekberg, who is currently working
for Öhrlings/Pricewaterhouse Coopers. The contact with Ms. Ekberg was established through
the company presentation of Öhrlings/Pricewaterhouse Coopers during a career fair at Luleå
University of Technology. Ms. Ekberg, who works as a consultant regarding issues that are
closely related to the field of this thesis, helped the researchers to identify Ms. Nilsson as the
proper person to interview within the Volvo Corporation in Sweden.

Contact with Mr. Finn Adolfsson, who works for Volvo Buses in China, was established by
phone. For the Chinese case Mr. Adolfsson was found to be the only one who were able to
talk to the researchers regarding ethics within Volvo in China.

Regarding identifying the person to interview in the U.S.A a telephone call was made to the
head quarters of Volvo Construction Equipment in the U.S.A. There our call was directed to
the Vice President of Human Resources and Administration, Mr. Chuck Wood. Mr. Wood
stated that he was the most knowledgeable person to talk to within in Volvo Construction
Equipment North America regarding the issues that we wanted to discuss. Considering this
statement, we did not proceed with another interview. It has now been clarified how the
sample of this study was selected and this thesis will therefore move on to discussing the data
analysis in the next section.

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4.6 DATA ANALYSIS
Yin (1994) writes that the ultimate goal of analyzing data is to treat the evidence fairly, to
produce compelling analytic conclusions and to rule out alternative interpretations. Yin
(1994) writes that before data may actually be analyzed, a researcher using case studies may
choose from two general analytical strategies, relying on theoretical propositions and
developing a case description. These will be further described below.

Relying on theoretical propositions is according to Yin (1994) the most common strategy.
This means that the researcher derives his research questions from previous studies. The data
collected is then compared to the findings of previous studies. This strategy helps the
researcher to focus on relevant data and to ignore other, not relevant, data.

Developing a case description is according to Yin (1994) less preferable than the use of
theoretical propositions. This strategy may serve as an alternative to theoretical propositions
when little previous research has been done. (Yin, 1994)

This thesis relies on theoretical propositions. This due to the fact that it was desirable, and it
was possible, to derive research questions from previous research and studies. Furthermore it
was desirable to compare the data that was found to the findings of previous studies.

When writing about qualitative data analysis, Miles and Huberman (1994) state that the focus
is on data in the form of words. These words require, according to the authors, some sort of
processing. This processing is itself a form of analysis. Miles and Huberman (1994) have
defined data analysis “as consisting of three concurrent flows of activity” (p.10). Miles and
Huberman (1994) explain these three stages as follows:

1. Data reduction: This should not be considered to be separate from analysis, but as a part
of it. This reduction of the data is analysis that helps to sharpen, sort, focus, discard and
organize the data in a way that allows for “final” conclusions to be drawn and verified.
The two authors add that data can be reduced and transformed though such means as
selection, summary, paraphrasing or through being subsumed in a larger pattern.

2. Data display: This stage includes taking the reduced data and displaying it in an organized
and compressed way so that conclusion can be more easily drawn. Miles and Huberman
(1994) state that good displays are a major avenue to valid qualitative analysis.

3. Conclusion drawing and verification: In this stage the researcher starts to decide what the
different findings means. Noting regularities, patterns, explanations, possible
configurations, causal flows and propositions does this. However, Miles and Huberman
(1994) also add that the competent researcher should hold such conclusions lightly, while
maintaining both openness and a degree of skepticism.

When analyzing data gathered for this thesis the three steps suggested by Miles and
Huberman (1994) have been followed. For each research question data was reduced via a
within-case analysis. The within-case analysis was conducted by comparing empirical
findings to the existing theories that were displayed in the conceptualization. Thereafter data
was further reduced and displayed in a cross case analysis. The cross case analysis was done
by comparing the findings, and detecting possible similarities and differences, of the different
cases to each other. In chapter seven, where we start to draw conclusions we have, as Miles
and Huberman (1994) suggests, started to decide what the different findings of our research

40
mean. This was done by restating each research question and then answer that question, based
on the findings of this study. As it now has been explained how the data was analyzed, the
following section will present the quality standards of this study.

4.7 QUALITY STANDARDS: VALIDITY AND RELIABILITY


Due to the fact that a research design is supposed to represent a logical set of statements, one
can also judge the quality of any given design according to certain logical tests. (Yin, 1994)
According to Yin (1994) four tests exist when judging the quality of the design of a research.
These four tests are:

! Construct validity
! Internal validity
! External validity
! Reliability

Construct validity includes the establishment of correct operational measures for the concepts
being studied. Yin (1994) writes that there are three tactics available in order to increase
construct validity. The first is to use multiple sources of evidence during the data collection.
The second tactic is to establish a chain of evidence. This should also be done during the data
collection. The third and final tactic is, according to Yin (1994), to construct a case study
report, which is reviewed by the key-informants.

For this thesis, documents and interviews have been used as sources of evidence. The
documentation has however only been used complementary to the interviews and it has not
been included in the analysis. To establish a chain of evidence is, according to Yin “to allow
an external observer-the reader of the case study, for example- to follow the derivation of any
evidence from initial research questions to ultimate case study conclusions” (p.98).
Throughout this research, citations, to all the sources that have been used, have been made.
The draft report has furthermore been reviewed by a supervisor as well as by fellow academic
students.

Regarding the most suitable and knowledgeable persons to interview efforts were made to
find these within each case, this has been described under the section that discusses sample
selection. By using a tape recorder during the interviews, it was possible to double-check the
answers after the interviews and the risk of wrongly interpreting the answers was reduced.
Three out of four interviews were conducted in Swedish, this due to the fact that the
respondents were of Swedish heritage. These interviews were later translated into English,
which includes the risk of translating errors. However, if the interviews had been conducted in
English, that might have led to misunderstandings and a less free conversation. One of the
four interviews was carried out in English, this due to the fact that the native language of the
respondent was English. Regarding this interview the conversation was held in a foreign
language to the researcher, which might have led to misunderstandings during the
conversation. On the other hand this conversation did not need to be translated.

Internal validity is used for establishing a causal relationship, whereby certain conditions are
shown to lead to other conditions, as distinguished from false relationships. It should be noted
that internal validity is a concern only for causal or explanatory studies, where an investigator
is trying to determine whether event x led to event y. (Yin, 1994) Due to the fact that this
thesis is mainly descriptive, no further consideration has been taken to internal validity.

41
To increase external validity, Yin (1994) emphasizes the importance of using replication logic
in multiple-case studies. He further states that a theory must be tested through replication of
the findings in similar surroundings, where the theory has specified that the same results
should occur. Once such replication has been made, the findings can be generalized to a
greater number of surroundings. In this research the findings have been reached by testing the
relevant theory in three different cases.

To conclude the discussion regarding validity it should be noted that Wiedersheim-Paul and
Eriksson (1997) state that validity is defined as a measurement instrument’s ability to measure
what it is intended to measure. They further state that a good methodology affects the validity
in a positive direction.

Yin (1994) states that reliability demonstrates that the operations of a study - such as the data
collection procedures - can be repeated. Yin (1994) further states that the objective should be
to make sure that, if a later investigator followed exactly the same procedures as described by
an earlier investigator and conducted the same case study all over again, the later investigator
should arrive at the same findings and conclusions. It is concluded by Yin (1994) that the goal
of reliability is to minimize the errors and biases in a study.

In this thesis the researchers have tried to carefully explain the procedures of the research, in
this, as well as in every other chapter. An interview guide, which shows how the research
questions were conceptualized, has also been designed. The same interview guide has been
used for all of the interviews. The data collected for each of the cases as well as the structure
of the thesis has been made in a way so that following researchers or readers can retrieve any
desired material. However, when conducting interviews, personal biases may to some extent
have been present although an effort was made to formulate relevant questions that would
neither lead nor influence the respondent in any way.

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4.8 METHODOLOGY FIGURE

1. Choice of
Research Exploratory Descriptive Explanatory
Purpose

2. Choice of
Research Quantitative Qualitative
Approach

3. Choice of
Research Survey History Case Experiment Archival
Strategy Studies Analysis

Participant Direct
Observation Interviews Observations
4. Data (Primary source)
Collection
Method Archival Physical
Records Artefacts
Documentation
(Secondary source)

Open- Focused Survey


Ended

5. Sample
Selection Volvo U.S.A Volvo Sweden Volvo China

Within Case
Analysis
6. Data
Analysis
Cross-Case
Analysis

7. Quality
Standards Validity Reliability

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5 DATA PRESENTATION
In this section the empirical data that has been gathered in the three cases of this thesis will
be presented. As discussed in chapter four this thesis focuses on three cases within the Volvo
Corporation. These cases have merely been called the cases of Sweden, U.S.A and China and
they will be presented below in that order. Each section in this chapter will start out by
providing the reader with a short description of the interviewee and his/her responsibilities.
Along with a description of the interviewee, a short description of the company that he/she his
working for will be provided.

5.1 CASE 1:VOLVO, SWEDEN


This section will provide the gathered data on the Swedish case. The data presented is based
on the interviews conducted with Ms. Malin Nilsson, who is President of Public Affairs
within the Volvo Group, and Ms. Paula Tornberg who is responsible for employee questions
within staffs and Volvo Trucks. Within staffs Ms. Tornberg handles issues such as law,
information, strategies, planning and personnel issues.

The Volvo Group is one of the world’s largest producers of trucks, buses and construction
equipment and hold a leading position in the fields of marine and industrial power systems
and aircraft engine components. From 1999, the Volvo Group focuses exclusively on
transport equipment for commercial use. Founded in 1927, Volvo today has 55, 600
employees, production in almost 30 countries and a worldwide marketing organization. The
Volvo Group’s total sales amounted to 125 billion SEK in 1999. (Www.volvo.com)

Volvo Trucks develops, manufactures and markets medium heavy and heavy trucks for all
types of transports, from construction to city distribution to long-distance hauling. In order to
offer customers a complete transport system, Volvo Trucks has developed a comprehensive
supplementary support services are financing, leasing and service agreements. Volvo Trucks
are sold in more than 100 countries worldwide. The most important markets are Western
Europe as well as North and South America. Volvo plans on strengthening its long-term
presence in Asia and Eastern Europe. (www.volvo.com)

5.1.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT


According to Ms. Nilsson someone has to be responsible for ethics overall. The management
within the Volvo Group should be responsible for this and as Ms. Nilsson put it “own the
issue”. However, the people on this level do not have the time to thoroughly work with ethics.
One person should be responsible for it and that is according to Ms. Nilsson how Volvo
started with their environmental program. Today, Volvo has three to four people working full
time with the environmental concerns Volvo has: the environmental accountant, the
environmental coordinator and the environmental manager and the environmental
communicator.

Ms. Tornberg stated that although Volvo does not have a formalized ethics forum, ethics is
part of many departments within the organization. Ms. Tornberg further stated that ethical
issues are something that affects everyone within the company. Many of Volvo’s ethical
issues are focused on the HR department and how this department handles certain questions.

According to Ms. Tornberg ethics is something that reaches managers at different levels and
in different departments. These managers often have different degrees of awareness regarding
specific ethical subjects. Ms. Tornberg further mentioned that managers need to motivate and

44
work closely with employees and hence, handle sensitive employee questions that may arise.
Ethics is furthermore something that goes all the way down to blue-collar worker level and an
issue everyone within an organization is affected by. One example of this is according to Ms.
Tornberg if it is okay to take an eraser home or not.

According to Ms. Nilsson the people working with ethics within a company may further have
a network of people working with the same issues. Nike is according to Ms. Nilsson a good
example. They claim to have over 100 people working with ethics and social responsibility
whereas many only work part time and belong to such a network mentioned earlier.
♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
Ms. Nilsson stated that one person working and being responsible for ethics within an
organization is sufficient. She thought that a whole committee seemed to be a bit over the top.
However, the lonely person needs help from others. There is too much work with information
spreading, training etc. for one person to control.

Regarding the background of such a person it is not necessary for him/her to have a long
experience within the company. According to Ms. Nilsson one requirement was that this
person had a great interest in the subject of ethics and that this person was not afraid to raise
“uncomfortable” ethical issues within the organization. Ms. Tornberg concluded that someone
should be the driving force for what the company stands for regarding ethics.

Although that Ms. Nilsson felt that there was no need for a whole ethics office she stated that
the single person working with ethics could work as the initiator of ethical issues as well as
the coordinator of these types of questions. On this issue Ms. Tornberg stated that if the need
for an ethics committee existed, there had been one. Ms. Tornberg further stated that no
certain person exists within Volvo who is in charge of ethics and it is therefore hard to
pinpoint any specific roles on to someone. Ms. Nilsson further added that the person working
as the initiator and coordinator might also work as the devils advocate, meaning that this
person raises the ethical issues of certain decisions. Ms. Nilsson also stated that the person
might also take on the role of a channeler, meaning a person who opens up communication
channels around the organization. Finally Ms. Nilsson stated that the person responsible for
ethical issues is suitable for a mediating role, both internally and externally as well as a
facilitating role, supporting the different departments within ethical areas.

Even though no ethics committee or single ethical ombudsperson exists within Volvo, the HR
department does according to Ms. Tornberg however deal with many issues within ethics.
This could be for example the issue of letting employees go. Regarding this issue the HR
department is probably, according to Ms. Tornberg, the most knowledgeable. The HR
department does also work closely with the employees and can often see what ethical
dilemmas that may arise, which then are discussed and hopefully avoided. According to Ms.
Tornberg there is however no specific coordinator or a specific structure for this. Ms.
Tornberg further stated the Americans have made more progress within this area due to the
judicial system, which punishes all who do not obey the ethical codes and policies that a
company has written down

Regarding to whom the ethical ombudsperson should report to Ms. Nilsson thought that the
person responsible for the strategic questions or the Vice President of the company would
probably be those most suitable for receiving these reports.

45
On the issue of whether the ethical ombudsperson should be selected by the top management
or not, Ms. Nilsson felt that top management should be responsible appointing the person who
is to work with ethics. The reason for this is that a company is not a country or a democracy.
No position is staffed by a democratic election of who is to be appointed. Neither should it be
possible for the workforce to nominate someone within the company

5.1.2 A CODE OF ETHICS


According to Ms. Nilsson Volvo has an empathic feeling for its employees and for society at
large and to have a code is highly important from a competitive perspective. The company
sees itself as an organism and the code states that “this is what we stand for” as opposed to
someone who just sells trucks. Furthermore according to Ms. Nilsson Volvo acts like a large
family where everyone tries to work towards the best goal possible. Ms. Tornberg stated that
“The Volvo Way” is somewhat a code of ethics. The document talks about the importance of
teamwork, leadership and respect for the individual. The Volvo Way further describes ethical
codes and values, which apply to all within the company all over the world. According to Ms.
Tornberg “The Volvo Way” could perhaps be adapted to the different markets around the
world.
♦THE PURPOSE OF A CODE
According to Ms. Nilsson a code should express some kind of minimum standard that the
company stands for. It is difficult to express to others (stakeholders) that “this is how we
think” without having values and norms written down. Management can conduct a nice
speech on a subject, however one does not know if this is something that comes from a
management perspective only or if it actually is a feeling that everybody within the company
has. If ethics is to be a key resource of the company, it has to come from within all employees
within the Volvo Group. Ms. Nilsson concluded that a company is not more ethical or socially
responsible than its “weakest link”, the weakest link should according to Ms. Nilsson be
defined by an ethical code. Ms. Tornberg stated that a code defines the minimum expectations
of the employees. A code could furthermore be of help when guiding employees to acceptable
behavior.

Ms. Nilsson stated that if Volvo wants to be ethical, the company has to find these ethical
values and norms within the individual himself to be transferred to the management who then
communicate these values and norms through a communication process internally and
externally.

Regarding the purpose of a code Ms. Nilsson further stated a code should be part of the
strategy and an issue that should belong to the management. It will cost the company money
to follow a code in the short run, however it will emit profits in the long run. Ms. Nilsson also
stated that a code acts as a guideline (“styrdokument”) and the company is able to use it for
projects. Furthermore the management must be dedicated to having a code to rely on in the
strategy process or else the code will end up last in the list of priorities.

According to Ms. Nilsson a code does not only act as a distinguishing function, externally. To
gain and to comprehend the “internal” Volvo feeling among employees is highly important in
order to receive external trust i.e., trust from stakeholders and especially politicians. Ms.
Nilsson did however feel that the customers are more distant to this issue. This aspect of a
code as a distinguishing function has more to do with business-to-business relations rather
than seller to buyer. The Volvo feeling and these codes of ethics or codes of conduct must

46
come from the inside of each person working at Volvo and the company does not use codes of
ethics as a PR tool.

Volvo does not intend to disperse a report (as they do within the financial and environmental
areas), on their ethical conduct at the moment. The reason for this is that there is not enough
internal strength and support for such a public stand within the company. The risks involved
by giving out a report that is not sufficiently based within the organization could cause
conflicts among employees and between employees and management, rather than having a
positive effect. When a company hands out such a report, it is expected to follow it.
Therefore, the internal understanding and support for a report must be strong prior to making
such a public stand.

According to Ms. Nilsson a code of ethics and/or a code of conduct does have a correcting
function. The employees or an individual questioning the code must believe in the code or
else it would feel awkward to be questioned about it. Furthermore, the production workers
may question the management on the codes on working conditions. An example on such a
question could be; “ Do we really have the best working conditions?” It is important then to
have the right channels for such a question to be delivered to the management. If one single
worker is opposed to the working conditions, he or she may be harassed by the fellow workers
if the question is not channeled correctly or handled well by management.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
On the issue of who is involved in developing the code Ms. Nilsson stated that there are
53,000 employees within the Volvo Corporation today and that it is impossible to be
completely democratic but the management must be open for suggestions. According to Ms.
Nilsson the management develops the code together with the different departments in order to
cover all the different aspects that these departments may add on a specific issue. By doing
this, the organization is able to construct an extensive code. When working on similar issues
Volvo has tried to ask themselves what they have accomplished so far within the specific area
and what falls within the frame of that area. After this is done a developing process begins.

On the issue of who is involved in developing a code Ms. Tornberg stated that regarding “The
Volvo Way” the initiative came from the company’s executive officer Mr. Leif Johansson.
Ms. Tornberg further stated that it would be ideal if employees from the different companies
as well as from the different departments and both white- and blue- collar workers could have
their say when developing a code. This group could be seen as a cross section of the
employees within the company. Such a group would however, according to Ms. Tornberg,
need certain guidelines given to them by management.

According to Ms. Nilsson the management should control the initiating process in order to
start up the project of developing the codes of ethics and the codes of conduct to later involve
others. For example, when developing codes within the area of social responsibility, where
Volvo has three core values: environment, safety and quality, the company must take these
three values into account when developing the codes. All departments responsible for these
three values including people working with strategy, trademark, communication, and human
resources (HR) have to be involved in the developing process. The developing process should
be lead by the top management, however it is also important for management to look at other
companies in order to find out how they have developed their codes and to do research
internally among employees and among external stakeholders.

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♦ THE CONTENT OF A CODE
According to Ms. Nilsson it would be appropriate for Volvo to establish one very detailed
document, an ethical code, which covers all the small details such as conflicts of interest,
bribes, and “whistle blowing”. This document would probably be very extensive and it would
not be suitable for distribution. However, Ms. Nilsson stated that this document should be
used as a guidebook that is available to all the members of the organization and if employees
find themselves in a sensitive ethical situation they could turn to this document for guidance.
Furthermore Ms. Nilsson stated that the guidebook could serve as a foundation for a smaller
document that could be distributed internally within the organization, preferably on the
organization’s intranet. She also stated that it would be good to include general information
regarding the code and the organization.

Ms. Nilsson stated that within Volvo they are perfectly aware of that their responsibility for
the products does not end when the customers have purchased them. According to Ms.
Nilsson the employees at Volvo are aware of that their products have a great impact on the
environment and that there is a need to follow up on this aspect. Safety is also important for
Volvo to focus on and develop codes for. These aspects need to be considered when
discussing the content of a code.

“The Volvo Way” could according to Ms. Nilsson, be a good example of what would be
considered to be important to include in a code of ethics. Ms. Nilsson felt that she personally
would like to include many more aspects in a company’s code of ethics or code of conduct.
However, it is important to find out if it is necessary.

Ms. Nilsson further stated that it should be noted that ethical behavior does not end at
“company borders”. Volvo asks their suppliers to live up to certain standards they believe are
important. The company also checks their suppliers regularly to make sure they live up to
Volvo’s expectations in regards to for example, the products. Training is offered by Volvo to
those suppliers that do not live up to the codes or requirements that Volvo has. Due to this it is
important to make sure ones own company lives by the rules before questioning others and
that an ethical code could be of help in this particular issue.

According to Ms. Nilsson Volvo only buys transport services from ISO certified companies.
These are not standardized around the world and it is frustrating to work with hundreds of
standards. It is impossible to cover all areas and find codes of ethics for all, says Ms. Nilsson.
The codes should preferably be on a global basis, however national laws and regulations
cannot be ignored. In Brazil for example, Volvo works a lot with “The Volvo Way”. Ms.
Nilsson ended this discussion by saying that she would like to find out how the corporation
wants to do business and how the company prefers to work with employment issues, then
develop the codes from there.

According to Ms. Nilsson, Volvo should find the minimum standard on each of its different
foreign markets due to the great difference in culture and thereby the difference in values on
what behaviors (and i.e. codes) are important and which are not.

According to Ms. Nilsson, Volvo’s Swedish code of ethics and code of conduct should remain
valid across borders for Volvo if they are non-existent on international or national basis.
However, the company does not follow up on how these codes are conducted on foreign
markets. For example, in case of a fire emergency, different countries have different ways and
standards of controlling the safety and to prevent such an emergency.

48
When asked if she had anything to add Ms. Nilsson stated that it is important for an
organization to “walk the talk” from a management perspective. “The Volvo Way”, focuses
on energy, passion and respect for the individual. This booklet came out at a bad time when
Volvo tried to acquire Scania and nothing happened. The employees felt that they did not get
any information on what was going on with the acquisition.

The third aspect of “The Volvo Way”, respect for the individual, was repudiated. Passion did
not work either. Passion is not something you can request from someone, it is something you
gain. “The Volvo Way” has not been received very positively due to these factors. The
company had a vision on how “The Volvo Way” should be practiced and a communication
plan came at the same time on how this should be dispersed to the different Volvo plants
around the world. However, there were no formal ways on how they were going to implement
this. One question that was asked by the management was: “ How do we work with this to be
able to live up to this vision?” This indicates that you cannot just have a code, you must know
how to apply it strategically so that everyone works by it. One part of implementing such a
strategy would be to “Walk the Talk” by managers.

An example within the Volvo group on one who walks the talk is the Chief Executive Officer,
Mr. Leif Johansson. According to Ms. Nilsson, Mr. Johansson buys green line products and
recycled items when shopping. These actions by Leif make the media, for example, believe
that Volvo actually is socially responsible and environmentally concerned. Ms. Nilsson
concluded by stating that actions have a greater impact than words.

5.1.3 ETHICS TRAINING


On this topic Ms. Tornberg stated that first time group managers are trained in ethical
dilemmas. This is done by working with a number of real cases that have taken place within
Volvo. According to Ms. Tornberg these cases are good to work with in groups of only
employees or together with managers. These cases further make everyone think critically
about what is right and wrong in a specific situation. Ms. Tornberg has furthermore been in
charge of organizing a network of managers from various departments where it was discussed
whether or not ethical dilemmas should be brought up as a subject to make the managers work
with real dilemmas among each other.

Ms. Nilsson felt that ethics training is important but she did not know exactly how it would be
carried out. Volvo had training for its employees regarding their social responsibility
program. Ms. Nilsson did however not know if that is the best way to educate employees and
management about other ethical issues. To provide the employees with a “toolbox” for how
ethics should be used may be enough to guide the personnel and to do random sample
controls among employees on how they have understood the ethics within the company.

Regarding an independent consultant that would carry out the training Ms. Nilsson felt that
this was not recommendable. She felt that this might be quite risky for the company. Volvo
needs to believe in the ethical issues themselves and therefore the training must come from
within the company, not from the outside. However, Ms. Nilsson added, it might be wise to
use a consultant in order to know how the entire process of developing codes, training
employees and setting up ethics officers works. On the issue of using an external consultant
Ms. Tornberg stated that this depends on the material one has to begin with. If a consultant is
brought in, he or she must according to Ms. Tornberg be extremely knowledgeable about the
company. Ms. Tornberg concluded that it is probably easier that someone who has worked

49
with the company for a while and, hence, knows the company well handles the ethical
training. It furthermore sounds a bit dangerous to give the whole responsibility to a single
person and that these types of issues should be handled by managers within a company.

According to Ms. Nilsson the internal dialogue, during the educational process regarding
ethical issues, is of high importance. It is furthermore important not to make the ethical
training too complicated.

Regarding awarding employees for performing ethically Ms. Nilsson felt that this would be
awkward. She stated that she could not imagine how this would work. On this topic Ms.
Tornberg stated that it is necessary to measure the individual’s behavior in order to reward
him or her. Volvo does measure customer satisfaction and maybe that could be a way of
determining whether that individual should have a raise or not. Another way of measuring this
type of performance is to let managers grade how satisfied they are with their input at work
and compare that to what demands that they have had on themselves. According to Ms.
Tornberg such as system is not impossible to implement, but Volvo does not have one today.

5.1.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS

♦ADVANTAGES
According to Ms. Nilsson Volvo is a big global company and must take responsibility in
regards to environmental concerns. If Volvo did not care about society or the environment,
stakeholders would question the company. Further according to Ms. Nilsson, Volvo gains a
competitive advantage if the company uses well-formulated ethical codes for the employees.
The market for good employees is highly competitive and Volvo must work on attracting
them as well as keeping them.

It is also important to be looked upon as an ethical company compared to other companies in


the same industry in order to gain and keep customers. Ms. Nilsson further added that
investors are interested in companies who engage in social responsibility programs and good
business ethics. Investors check the companies accounting procedures and the companies
potential in the long run. According to Ms. Nilsson ethics is seen as a resource for the Volvo
Company and is used as one compared to other companies. A final positive side of a
formalized ethics program within an organization is according to Ms. Nilsson that a code
forces the organization to be ethical.

According to Ms. Tornberg an ethical code will prevent employees from being confused. A
code would provide them with clear guideline on what Volvo wants. An ethical code
furthermore clarifies management’s opinions of what it is that makes behavior
ethical/unethical and it also motivates employees to consider ethical values in decision-
making. According to Ms. Tornberg ethics is furthermore important for external parties, i.e.
stakeholders. It is according to Ms. Tornberg never good for a company’s profits to use for
example child labor. There are a number of examples of this. One example is IKEA that were
caught using child labor and another example is the case of ethical funds that were criticized
for not being so ethical after a thorough analysis of the companies in the portfolios had been
done.
♦ RISKS
A formalized ethics system could according to Ms. Nilsson become rigid if it is too
complicated and detailed. It is important to handle the code correctly and come around

50
obstacles if they exist. On the risk of indoctrinating employees through a formalized ethics
program Ms. Nilsson stated that if employees are indoctrinated by the code, the organization
has not lived up to it. Ms. Tornberg stated that she felt that indoctrination is a strong word and
that Volvo does not have such ethics that would threaten to do this. Maybe if the CEO Mr.
Lennart Johansson made the employees pray each morning the situation would have been
different.

5.2 CASE 2: VOLVO U.S.A.


In this section the interview with Mr. Chuck Wood, who is the Vice President of Human
Resource Management and Administration within Volvo Construction Equipment (VCE)
North America, Inc, will be presented. Mr. Wood further serves on the AB Volvo Council on
Compensation & Working Conditions. Members of this council are directly responsible for
drafting ethics guidelines and principles. Mr. Wood is further responsible, along with local
management, for drafting and developing country/industry specific policies for the local
company.

Volvo Construction Equipment is one of the world largest manufacturers of construction


equipment with a very competitive and broad product program. Within this particular business
area, a total of more than 150 different models are produced. Production plants are located in
Sweden, Germany, France, the U.S., Canada, Brazil and Korea. Volvo Construction
Equipment is a global company with sales in more than 100 countries, and offers qualified
worldwide service and prompt global supply of spare parts. The majority of sales are in North
America and Western Europe.

5.2.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT


Regarding an ethics committee within VCE in North America Mr. Wood stated that the
company does not have a formal ethics committee, however the company is moving towards
having a HRM steering committee. This committee involves the President of the company,
the Vice president and the General Plant Manager as well. Mr. Wood further stated that
ethics would be initiated in the process of creating this committee.

Regarding the roles within the HRM steering committee Mr. Wood stated that the role of the
coordinator would fall upon the Vice President of Human Resources and Administration, that
is, Mr. Wood himself. The role of a coordinator would furthermore include an attorney, this
due to the fact that ethical issues also involve legal issues.

Ethical issues within VCE are communicated through something that internally is called the
people’s manual, which is a thick book covering a number of various aspects. Each employee
within the company receives an issue of this book. According to Mr. Wood this manual may
be seen as the instrument that works as the channeling function.

The role of the Devils Advocate would not fall upon a single person, instead this kind of work
would occur when drafting the policy within the HRM steering committee. Furthermore Mr.
Wood stated that this kind of work occurs every time the committee works on a policy.
Regarding the role of the facilitator this responsibility would probably fall on the chairman of
the committee, while an “inside” attorney would assume the role of the mediator.

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♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
On this issue Mr. Wood stated that Volvo is not the size of IBM and can therefore not justify
having a whole ethics committee. What the company does is that they use the HRM
committee. The HRM committee is involved in all human resource issues, including ethics,
and this committee develops all policies involving human resources, including the ethical
policies.

Mr. Wood stated that every company should have an ethics committee, however it is just a
matter of if it should be combined with another committee or if it should be a freestanding
entity. Within Volvo, the ethics committee is combined with the human resource steering
committee. Consequently, according to Mr. Wood, who is involved in the committee
therefore depends on what the ethics committee is combined with.

According to Mr. Wood, VCE North America does not have a single ethical ombudsperson.
Instead, as with all other issues within VCE, the efforts within ethical issues are a team effort.
Furthermore, VCE cannot justify having a person working full-time with ethics, this due to
the fact that such a position is not justifiable financially considering the size of the company.
On the hypothetical question whether a person working full time with ethics within VCE
North America should be recruited from within the organization or not Mr. Wood stated that
he felt that that particular issue was not important from his point of view.

5.2.2 A CODE OF ETHICS

♦ THE PURPOSE OF A CODE


According to Mr. Wood there are mainly two reasons for a company, such as VCE North
America, to have a code of ethics. The number one reason according to Mr. Wood is to
comply with the law. The second reason is to avoid conflicts of interest between employees
and the company and the customers and the suppliers. Mr. Wood further added that in the U.S
employees need a constant reminder, in the form of a formal code, since the business
environment is so competitive.

Regarding the issue of a code setting the minimum standards for employees Mr. Wood
responded that VCE does not have minimum and maximum standards, just standards. Mr.
Wood further stated that one cannot write standards really strictly; they have to be broad and a
bit loose in order so that employees can interpret other things into the code.

On the issue of a code helps the company to have a distinguishing function externally Mr.
Wood stated that he was not aware of whether ethical policies were communicated externally
or not. Mr. Wood did however state that certain Volvo core issues, such as safety,
environment and teamwork, are communicated. Mr. Wood further stated that these may be
looked upon as broad issues and that they are communicated externally.

Mr. Wood further stated that if you are known as an ethical company your company is more
stable and that through this the company gains a better reputation and is more apt to attracting
better people and certainly more apt to having reliable suppliers and customers.

On the issue of a code having a distinguishing function externally Mr. Wood concluded that
this is becoming more and more important since investors are starting to look up these issues
nowadays. According to Mr. Wood investors are checking up if the company uses child labor
etc.

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♦ WHO IS INVOLVED IN THE DEVELOPMENT OF A CODE
Mr. Wood stated that in the case of VCE North America, the policies that are used today were
“leftovers” from the Clark area, that is the company used to be Clark, before they were
acquired by Volvo and became VCE. According to Mr. Wood these policies were then
reviewed and updated by the lawyers according to the latest within the law. Furthermore, a
small group of senior people checked up on the policies to make sure they covered the
business aspects and the business environment adequately.

Regarding on who should be involved the development of a code Mr. Wood stated that if one
is talking about a democratic process it all depends on how far down the chain one want to go.
In the U.S it is according to Mr. Wood impossible to have a group of employees setting
policies and wages, this due to the fact that they would then violate the National Relations
Labor Act.

According to Mr. Wood, management typically develops these kinds of policies, but they are
so standard in the U.S that the company would probably not see the need to get all the
employees involved. However, in the past policies have, according to Mr. Wood, been
circulated among the employees in order to get input from them.
♦ THE CONTENT OF A CODE OF ETHICS
According to Mr. Wood, VCE North America has a document that covers a wide variety of
different issues. This document is divided up into different sections, one section is called
Performance, Management, and Conduct, this section may be, according to Mr. Wood, looked
upon as a sort of code of ethics. Within this section the following policies are included:

! Anti trust compliance policy


! Legal matters policy
! Ethics and business transactions
! Employee conduct
! Harassment
! Parents
! Smoking
! Safety

According to Mr. Wood these are different policies that are separately drafted. As a
conclusion on this issue Mr. Wood stated that the U.S are great at having policies, whether
these are followed or not is a different matter.

Regarding the different levels of a code of ethics Mr. Wood stated that VCE North America
recently has developed a Human Resource (HR) agenda. According to Mr. Wood this is not a
policy, but more guidelines for the development of HR policies locally. In this policy issues
such as the use of child and slave labor are brought up. Furthermore, on the issue of different
levels of a code Mr. Wood concluded that it is impossible to force a code upon different
countries, one can supply guidelines but not force a code upon different cultures.

5.2.3 ETHICS TRAINING


Ethics training is according to Mr. Wood provided, within certain areas and topics, to
management, for example harassment. When this training is conducted understanding the
particular issue and how to deal with it is highlighted. Regarding the length of the training
sessions Mr. Wood stated that it is not possible to send people away for one to two day

53
workshops since this would be impossible to fit into people’s schedules. Furthermore Mr.
Wood stated that it is not an effective way for people to learn. According to Mr. Wood,
managers like it in itty bitty chunks and said that the attention span would not be tip top in a
two-day workshop for example. Mr. Wood concluded that a one-hour video here or there is
sufficient.

Within VCE North America, an external consultant handles the ethics training. Volvo has, as
stated above, an internal policy regarding ethics, however the external consultant goes,
according to Mr. Wood, more into detail than what the internal policy does.

Regarding rewarding ethical behavior Mr. Wood stated that certain things are included in the
condition of the employment. Behaving ethically, just like arriving in time to work, are
included in these conditions. If an employee has a problem with the ethical policy of the
company, Mr. Wood stated that this person should feel free to look for a job elsewhere. Mr.
Wood concluded the discussion on this issue by stating that one cannot tell a person that you
are sliding down ethically, you need to shape up. Furthermore Volvo does not provide new
employees with a crash-course in ethics, that is what back up checks such as
recommendations and CVs are for. According to Mr. Wood it should be ethical people that
are hired.

As stated above ethics training is, according to Mr. Wood, only provided to the management.
However, the other employees are expected to behave ethically and in accordance to the
manuals. Mr. Wood concluded that in his opinion ignorance is no excuse for breaking the law.

5.2.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS

♦ ADVANTAGES
According to Mr. Wood one advantage of formalizing ethics is that if ethics are formalized it
prohibits the company from breaking the law. As an example Mr. Wood stated that if the
company decides to terminate the employment of an employee for doing something unethical,
that is not illegal, an ethical policy might be of use. This due to the fact that when the
employee’s lawyer state that he wants to know why the employee was terminated the
company may point to the ethical policy and explicitly show that the employee violated the
policy.

Mr. Wood further stated that the advantages of having a policy far outrank the negative
aspects of having one. Regarding the issue of formalizing ethics within an organization
clarifies management’s opinions of what it is that makes behavior ethical versus unethical Mr.
Wood stated that he felt that this was one of the positive aspects of having formalized ethics.
Furthermore Mr. Wood stated that another positive aspect of having formalized ethics within
an organization is that an ethical code makes clear what external parties may expect from an
organization. This mainly due to the fact that investors are more and more interested in how
ethical companies are.

On the issue of whether formalizing ethics within an organization motivates employees to


consider ethical components in their decision-making Mr. Wood stated that he felt that the
word motivate was not the proper word to use. According to Mr. Wood motivate is a word
that causes an employee to do something good as opposed to a word that prohibits him or her
from doing something bad.

54
Another advantage of having formalized ethics in an organization is that it reduces the risk of
the company. As an example Mr. Wood stated that when it comes to harassment the company
has a duty to communicate to employees that the company does not tolerate harassment. If no
such policy exists, and a situation occurs where someone is harassed the company may be
hurt if they cannot show that they have a harassment policy. According to Mr. Wood this
would imply that the company is not sensitive to this particular issue. Furthermore, by not
having a formalized policy the company could get hurt legally.
♦ RISKS
According to Mr. Wood the risk with any policy is that the policy is not enforced or that the
company make exceptions from the established policy. However the advantages, as stated
before, outweighs the risks.

Regarding the risk of indoctrination of employees when formalizing ethics within an


organization Mr. Wood stated that this depends on what rule the company is trying to force
upon the employees. As an example Mr. Wood stated that if you force people that are
stationed in the Far East, to go to a Buddhist temple everyday this could probably be seen as
indoctrination of employees. The policies at VCE North America are however not designed
that way, the policies within VCE comply with the law and they do promote respect for the
individual. According to Mr. Wood the policies are pretty much just common decency. As a
conclusion on the risks of formalizing ethics within an organization Mr. Wood could not
recall that VCE had ever received any complaints that the policies had been forced upon the
employees.

At the very end of the interview Mr. Wood stated that he felt that since Sweden is a more
ethical society it is probably less of a need to formalize ethics, and write down ethical codes
on paper, than what it is in the U.S.A, which is a less ethical society.

5.3 CASE 3: VOLVO IN CHINA


In this section the interview with Mr. Finn Adolfsson will be presented. Mr. Adolfsson is the
manager of the Asian markets within the Volvo Bus Corporation he is further responsible for
Volvo Bus’ Joint Ventures in China, Xian Silver Bus Corporation and Shanghai Sunwing Bus
Corporation.

Volvo Buses is the world’s second largest manufacturer of heavy buses and coaches. The
range compromises complete vehicles, chassis and bus bodies. Volvo also offers transport
solutions for public transport, leasing, financing and service contract maintenance. Production
is carried out in Europe, North America, South America and Asia for more than 60 markets.
During the last five years, the production of vehicles has increased by 50%. Volvo Buses
employs approximately 8.900 persons, about 90% of whom work outside of Sweden.

5.3.1 PEOPLE INVOLVED IN ETHICS MANAGEMENT


Mr. Adolfsson does not feel that ethics management is something that is the responsibility of
certain people, according to Mr. Adolfsson ethics needs to be the responsibility of those who
have the business responsibility. Mr. Adolfsson did however add that there are exceptions and
that within a big corporation, such as Volvo AB, there might be a cause for having something
along the lines of an ethical code. This code would then preferably be known within the
corporation and the corporation would further try to live by the set standard. Mr. Adolfsson
concluded that, in his opinion the person carrying out some sort of business activity, and is
responsible for this activity, is also responsible for the ethical issues within this area.

55
♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON
Mr. Adolfsson stated that he felt that the thought of ethical committees and/or ombudspersons
was a bit foreign. When it comes to issues regarding business ethics and manners Mr.
Adolfsson felt that in these issues the employees are formed by the company and by the
groups in which one is a part of. For example, ethics is a frequently recurrent issue in
management teams of different kinds where business is discussed. The ethical aspects that are
being discussed might be for example how the company views its employees or the products
that are being developed. Mr. Adolfsson stated that he found it hard to see that there was a
need for a special ethical organ within the Volvo Bus Corporation, Mr. Adolfsson did
however add that this might be due to the fact that he was not used to this idea.

If one however chooses to open up the discussion regarding ethics one may, according to Mr.
Adolfsson, look upon the three core values that Volvo has; product safety, environment and
quality. If these core values are looked upon as also being ethical values Volvo works quite
explicitly with ethics. For each of these three areas there is a manager who is responsible for
that particular area. These three people are found in different kinds of staff positions.
According to Mr. Adolfsson these three managers are responsible for the different
development aspects and for their particular areas of responsibility in the ongoing business
activities of the Volvo Bus Corporation. These three managers are furthermore responsible for
advocating that Volvo Bus Corporation meets the goals that are set up within these three
particular areas. The three managers are according to Mr. Adolfsson placed at the Head
Quarters of Volvo Bus Corporation and they are in immediate connection with the
management team.

According to Mr. Adolfsson one may actually say that these three persons, that are
responsible for the areas of quality, safety and environment are functioning as the initiators,
coordinators, channelers, facilitators and the mediators. Mr. Adolfsson further stated that
when it comes to safety issues, that are important from many perspectives, not the least
considering the image of Volvo within this particular area and the more and more far reaching
product liability laws that are being established. Due to the fact that this area is of such
importance to Volvo a special committee has been established within this field.

5.3.2 A CODE OF ETHICS

♦ THE PURPOSE OF A CODE


Mr. Adolfsson stated that he had a very concrete view of the purpose of a code. If the
company has a code this means that the employees know how they are expected to behave and
how they are expected to act in this issues. By having a code the managers of the company
also know how to handle the employees’ questions within this particular area. According to
Mr. Adolfsson a code further creates clarity and it creates a situation where all the employees
within the company are working in the same direction.

Regarding the ethical rules within Volvo Mr. Adolfsson stated that these revolve mostly
around bribes, commissions and agents. Mr. Adolfsson further stated that within these areas
the rules are pretty straightforward and clear. What could be added is according to Mr.
Adolfsson that there have been a number of years since these rules were established and that
one might want to add a few areas to the already existing rules. These are areas that might not
have been considered to be ethical issues in the past but have now become ethically sensitive
issues such as exhaust emission and product safety. According to Mr. Adolfsson these types

56
of issues could probably be described as ethical areas. Mr. Adolfsson did however admit that
within Volvo Bus Corporation this broadened view of ethics is not used.

Mr. Adolfsson stated that he felt that these issues are actually closely related to the core
values of Volvo, these values are however not linked to business ethics on a daily basis.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
Mr. Adolfsson stated that he had not given this a lot of thought. Mr. Adolfsson did however
state that the rules regarding business ethics, seen in a narrow perspective, has come as
product from the management, which has probably, according to Mr. Adolfsson, worked out
certain staff functions and organs considering the laws and regulations that the company
needs to consider.

Mr. Adolfsson stated that he finds it hard to believe that this would be possible to deal with in
another way. A written document could possibly be circulated among employees but
according to Mr. Adolfsson this would be difficult to handle, due to practical reasons, on a
broad basis.

According to Mr. Adolfsson, it is furthermore important to consider that the average


employee on an everyday basis does not consider explicit ethical issues. There are certain
amounts of people who come into contact with these issues and think about them frequently.
These people are also the ones that are most likely to be able to work intelligently with a code.

When it comes to issues regarding safety, emissions and quality there are a number of people
within the automotive industry who are in contact with these particular issues. When it comes
to these types of more implicit ethical areas there is a broad discussion and for example all the
product developers feel a intimate relationship with the core values of Volvo.
♦ THE CONTENT OF A CODE
According to Mr. Adolfsson, there are ethical rules within Volvo, along with certain ways of
working and attacking problems that are in relation with the three core values. Mr. Adolfsson
further stated that theoretically it would be desirable to reflect upon business ethics within the
areas where the company’s operations “connect” with society at large. A lot of the issues that
are included in the concept of business ethics are according to Mr. Adolfsson plain and
simple, for example to follow rules and regulations. One may of course, according to Mr.
Adolfsson, have the ethical rules written down or one may leave it at being something that
goes without saying.

Mr. Adolfsson further stated that there is a need for a company to create a profile and to create
competitive power in a certain way and in this work the core values are very important.
Regarding this work Volvo has a heritage when it comes to for example developing safe
products. This heritage makes it natural and it also brings with it a certain way of going about
problems. Regarding business ethics it might be, according to Mr. Adolfsson, beneficial if the
company performs a “search” and singles out the areas where it might be appropriate to have
a written code or policy.

The risk with such a policy is however that it becomes too bureaucratic and it is questionable
whether this is desirable or not. It is however important according to Mr. Adolfsson that
certain values and styles are a natural part of a company, this should further be a natural part
of management communication and it is also something that the employees grow with within

57
the company. If such a heritage exists, it eventually becomes natural what the decision should
be in a particular issue. Mr. Adolfsson further stated that although Volvo is a fairly old and
large company there is a living contact between how things are handled today and how the
founders of the company, Assar Gabrielsson and Gustav Larsson, handled things back in the
1920’s.

Regarding the extent of a written code Mr. Adolfsson stated that he usually tends to feel that
one should not overdo the writing of policies. If a company has too many written down rules
and regulations the management cannot expect the employees to master all of it. If one on the
other hand keep the written material to a minimum it is possible to demand that the employees
are aware it. Mr. Adolfsson further stated that it might be appropriate, but probably not
necessary, with a document that belongs to the management and that extracts from this
document is being distributed among the employees.

It is however important according to Mr. Adolfsson, to have a clear view of the central areas.
It is furthermore important to have a clear view of globalization and the development that
occurs in society and in the business environment. Within these areas it is important for
managers to keep in mind what Volvo symbolizes.

Regarding the level of the code Mr. Adolfsson stated that he felt that a code should be global
within the company. It is according to Mr. Adolfsson nearly impossible to deal with issues
that include values if the company has different values in different countries. It is important to
remember that Volvo comes from somewhere and it stands for something and from this
certain values evolve.

When it comes to adapting behavior to different markets Mr. Adolfsson brings up a tangible
example; the regulations regarding emissions from buses. The rules and regulations within
this area are very strict in Europe and in certain other areas of the world. This has prompted
the automotive industry to go to great lengths within for example engine development. The
question one may ask oneself is whether it is reasonable for a company to self inflict the
demand that the company should not market products that are not the most advanced product
on any of its markets. This could be according to Mr. Adolfsson seen as an ethical issue.

The fact is that on certain markets in Asia no rules and regulations regarding emissions exist
while on other markets a very high degree of emission is allowed. If one then reviews what
kind of buses and to what prices they are being sold in these particular markets one finds that
Volvo by far outperforms these competitors regarding emission. The fact is that Volvo may,
by selling slightly older buses, gain a foothold on a particular market and by doing so the
company actually contributes to a better environment. In this case it is not a matter of a clear-
cut ethical dilemma it is more an issue of selling to best possible price and still contribute to a
better environmental situation.

It should however be noted that, according to Mr. Adolfsson, Volvo Bus Corporation tries to
maintain only two technical levels of their products at the same time, one extremely advanced
level and one slightly less developed that might be referred to as the prior generation. It
should further be noted that this is in a market where new generations are replacing the prior
generation of vehicles in a very rapid pace.

The result of the example above is according to Mr. Adolfsson that Volvo is doing business in
a way that they may be very proud of regardless of what markets that are being discussed. The

58
example further shows that one should not try to express in all to simple words and general
rules when it comes to ethics. Ethics becomes meaningful when one looks at the certain
conditions within the particular areas.

5.3.3 ETHICS TRAINING


Mr. Adolfsson states that he is not sure whether the heading should be ethics or not. In order
for training to be meaningful it needs to involve a number of different issues such as attitude
towards customers, product quality, the view of employees and emissions etc. Mr. Adolfsson
felt that he was not sure whether if it is meaningful to mix all of these areas, put the headline
of ethics on top of them, and then carry out training. Mr. Adolfsson did on the other hand feel
that it was necessary to develop each and every one of these areas and although one is guided
by certain core values the training is being carried out within these separate areas.

Whether an external consultant should be brought in to carry out the training depends
according to Mr. Adolfsson on the size of company and on how these issues have been
handled traditionally. If Volvo were to carry out a training program within the ethical area of
safety it would hardly require an external consultant since Volvo feels that they are market
leaders within this particular area. Mr. Adolfsson did however state that if training were to be
carried out within Human Resources it might be meaningful to bring in an external consultant.
Mr. Adolfsson concluded this discussion by stating that the issue of bringing in an external
consultant much depends on what particular area of the broad topic of ethics that is being
focused on.

On the issue of ethics training Mr. Adolfsson concluded that within the management teams
and marketing departments that may come into contact with ethical issues, in a narrow sense,
it should exist an awareness regarding these issues. Furthermore there should be an ongoing
discussion on the ethical topics that are dealt with.

5.3.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS

♦ ADVANTAGES
Mr. Adolfsson once again pointed out the fact that within Volvo Buses there is not a formal
function named ethics. Mr. Adolfsson does however feel that it is important for an
organization to have ethics, or in other word to have clear values that are reflected in the
products and in the behavior, especially in the core values. This is however according to Mr.
Adolfsson something that is totally different from having a formal ethics department. Mr.
Adolfsson views ethics as something very broad and he believes that it would be difficult to
assign this issue to a single department. Mr. Adolfsson would want to work with ethics in a
slightly different way, where a certain style of working with the issue is worked with and then
this style is worked into the different sub areas like safety, quality, environment and treatment
of the employees etc.

According to Mr. Adolfsson one of the positive aspects of formalizing ethics within an
organization is that it makes clear what external parties may expect from the organization.
According to Mr. Adolfsson it should be known that when one buys a Volvo product it should
stand for certain things. This could for example be that although the product does not have the
latest in emission control it still goes to great lengths compared to other products on the
market. This is also true for the other core values within Volvo, it is important for a company
to be able to communicate to the customers the core values and what the company stands for.
If a company communicates this it also needs to make sure that what is being communicated

59
is also the truth internally. For this to be true the company must according to Mr. Adolfsson
work with its core values intensively.

Mr. Adolfsson concluded this discussion by stating that we need to remember that 20 years
ago when Volvo added environment, to quality and product safety, as one of their core values
this was seen upon as something strange and not on the same level as the other two values.
However 20 years later, considering the development of the world, environment is looked
upon as something completely natural. This points out according to Mr. Adolfsson the
importance of working with these issues intensively and thoroughly.
♦ RISKS
There are of course according to Mr. Adolfsson a number of risks involved in formalizing
ethics within an organization. Regarding the core values of Volvo one obvious risk would be
if something happened that pointed to the fact that Volvo products were not as safe as the
company stated they were. It is always a risk if slip-ups occur in an area where the company
claims to be very good. This means according to Mr. Adolfsson that there is always a risk
associated with having a certain profile of the company

Regarding the risk of indoctrinating employees Mr. Adolfsson felt that this was an interesting
issue due to the fact that one is more than just an employee at Volvo. Values are something
that lies very close to the core of a human being and one should generally put a question mark
whether a company should at all claim to formulate values. However Mr. Adolfsson likes to
think of this issue from a different perspective. When it comes to issues such as business
ethics, the obedience of rules and regulations, putting emphasis on quality, product safety,
environment and emission control it would make it harder for Mr. Adolfsson to work for
Volvo if the company did not have the values that it actually has.

The risk of indoctrinating employees does, in other words, depend on what sort of values that
the company wants their employees to adapt to. If the values of the company could be seen as
offensive or as something that is opposite of what certain employees tend to feel this might be
a sensitive issue.

Mr. Adolfsson concluded the whole interview by stating that if one reasons in terms of
creating a competitive advantage, rules and regulations are a little bit weak. If one on the
other hand, consider values such as products, behavior and Volvo’s core values, it becomes
more interesting. Then one also comes very close to the title of this thesis, which is “Ethics as
a Competitive Advantage”.

60
6.ANALYSIS
In the following chapter the material gathered for this thesis will be analyzed. As suggested
by Miles and Huberman (1994) the data will first be reduced, for this thesis this will be done
by a within-case analysis. Miles and Huberman (1994 further suggest that the data should be
displayed. The data will be further reduced and displayed in this thesis in a cross-case
analysis. The cross-case analysis will be presented at the end of the analyses of each research
question.

6.1 RESEARCH QUESTION ONE: THE PEOPLE INVOLVED


IN ETHICS MANAGEMENT.
Studies conducted by Kaptein (1998), the Center for Business Ethics (1992), Benson and Ross
(1998), and Drummond and Bain (1994) bring up the issue of ethics management within an
organization. The studies revolve mainly around the function of an ethics committee, who is
involved in an ethics committee and the function and role of an ethical ombudsperson. At the
end of the section a table, which summarizes the analysis, will be presented.

6.1.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN


Kaptein (1998) and the Center for Business Ethics (1992) state that there is a need for an
ethics committee within an organization. According to Ms. Nilsson it would be hard to justify
the use of a whole committee working with just ethics. On this issue Ms. Tornberg stated that
Volvo does not have a special committee for ethical issues but the HR department deals with
a lot of issues that are of ethical nature. Ms. Tornberg further stated that ethical issues are
something that affect everyone within a company. Although Ms. Nilsson felt that there was no
need for an ethics committee she stated that, in her opinion, there is a need for a single
ombudsperson working with ethics within the Volvo Group. This statement is in accordance
with what is suggested by McDonald (2000), Drummond and Bain (1994), Kamm (1993) and
Dunfee and Werhane (1997) who mentions the use of an ethical ombudsperson. Ms. Nilsson
further added that this person does not have to have been within the company for a long time,
but rather more important that he or she is “burning” for ethical issues. This statement
contradicts McDonald (2000), Drummond and Bain (1994) and Kamm (1993), who have all
stated that a single ombudsperson needs to have experience from within the company and is
fully integrated into the corporate value system.

According to Ms. Nilsson the top management team should, as she put it, “own the question”
of ethics. However, the people on this level of an organization does not have the time to work
thoroughly with these types of questions and therefore the top management team needs to
appoint a person, who is not afraid to raise ethical issues, to do the work. Ms. Nilsson further
stated that it is fully legitimate that such a position is appointed by the top management and
not by some sort of democratic process, this due to the fact that Volvo is a company and not
some sort of democratic institution. This contradicts what Kaptein (1998), and Drummond
and Bain (1994) stated when they said that if the top management appointed an ethical
ombudsperson this would impair the trustworthiness of the position. Ms. Tornberg stated that
the company needs someone who is the driving force of ethics within the organization. This is
also in accordance with what is being stated by the Center for Business Ethics (1992) and
Kaptein (1998) when discussing the initiating function of an ethics committee.

61
Kamm (1993) and Drummond and Bain (1994), state that a single ethical ombudsperson
should report to directly to the CEO or to the board. According to Ms. Nilsson, the ethical
ombudsperson should report to the person responsible for strategic questions or the Vice
President of the company. Although, Ms. Nilsson felt that there was no need for a whole
ethics office, she stated that a single person working with ethics could work both as a
coordinator and the initiator, as suggested roles for a committee by the Center for Business
Ethics (1992) and Kaptein (1998). Kaptein (1998) further mentions the roles of a channeler, a
devils advocate, a facilitator and a mediator as parts of an ethics committee. According to Ms.
Nilsson, all these roles could be assigned to one single ombudsperson. It is however important
to notice that, according to Ms. Nilsson, a person working with ethics within an organization
needs a network of people that he or she may turn to.

6.1.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A.


Mr. Wood stated that in his opinion it was not justifiable to have an ethics committee within a
company the size of VCE North America. Mr. Wood did however state that every company
should have an ethics committee, which is in accordance with what is being suggested by
Kaptein (1998) and the Center for Business Ethics (1992). According to Mr. Wood it is just a
matter of whether the ethics committee should be combined with another committee or if it
should be a freestanding entity.

Regarding having a single ethical ombudsperson, as discussed by McDonald (2000),


Drummond and Bain (1994), Kamm (1993) and Dunfee and Werhane (1997), Mr. Wood
stated that as with everything else within VCE North America ethics is a team effort. Mr.
Wood could furthermore not see that it would be financially justifiable to have a person
working full time with ethics within VCE North America.

On the topic of an ethics committee, as suggested by Kaptein (1998) and the Center for
Business Ethics (1992), Mr. Wood stated that VCE North America does not have a formal
committee. Mr. Wood did however state that the company is moving towards an HRM
steering committee, which will deal with issues within the area of ethics. Kaptein (1998) and
Benson and Ross (1998) state that someone from top management as well as someone from
the Human Resource department should be involved in an ethics committee. This is in
accordance with what was stated by Mr. Wood, who said that the people involved in VCE’s
HRM steering committee included the President of the company, the Vice President, the
General Plant Manager as well as the Vice President of Human Resources and
Administration.

According to the Center for Business Ethics (1992) and Kaptein (1998), one of the functions
of an ethics committee is to work as an initiator of ethical issues. According to Mr. Wood,
ethics as a topic will be initiated in the process when the HRM steering committee is put
together. Regarding the role of a coordinator, as discussed by the Center for Business Ethics
(1992) and Kaptein (1998), Mr. Wood stated that this would partly fall upon the Vice
President of Human Resources and Administration. The coordinating role would furthermore
fall upon an attorney, this due to the fact that ethical issues also involve legal issues.

According to Kaptein (1998), one of the functions of an ethics committee is to create


communication channels between the corporation and its surrounding and between employees
and the management. According to Mr. Wood, ethical issues within VCE are communicated
through something that internally is called the people’s manual, which is a thick book

62
covering a number of various aspects. Mr. Wood stated that this document could be seen as
having the channeling function, regarding ethics, within VCE North America.

Kaptein (1998) discusses that one of the functions of an ethics committee is to work as a
devils advocate in ethical issues. According to Mr. Wood, this kind of work would occur
when drafting an ethical policy within the HRM steering committee. Kaptein (1998) further
discusses that a committee works as a mediator in both external and internal ethical conflicts.
According to Mr. Wood, such work would fall upon an “inside” attorney. Mr. Wood further
stated that the chairman of the HRM steering committee would work the facilitator, as
discussed by Kaptein (1998).

6.1.3 WITHIN-CASE ANALYSIS OF CASE 3; VOLVO CHINA.


According to Mr. Adolfsson, ethics management is not something that is the responsibility of
certain people. This contradicts what is being stated by the Center for Business Ethics (1992),
Kaptein (1998), Benson and Ross (1998) and Drummond and Bain (1994), who suggest that
an ethics committee should be responsible for ethics within an organization. It also contradicts
what is being stated by Drummond and Bain (1994), McDonald (2000), Kamm (1993) and
Dunfee and Werhane (1997), who all suggest the use of an ethical ombudsperson within an
organization.

Mr. Adolfsson did however state that Volvo works, in a way, quite explicitly with ethics. This
due to the fact that Volvo’s three core values are ethical in nature. The three core values are;
product safety, environment, and quality. For each of these three areas a special manager is
assigned. According to Mr. Adolfsson these three managers may be seen as the initiators,
coordinators, channelers, facilitators and the mediators within their respective fields of
responsibility. This is in accordance with what is being discussed by the Center for Business
Ethics (1992) and Kaptein (1998).

Mr. Adolfsson did furthermore states that Volvo has a special committee within the field of
product safety, this due to the fact that this field is of vital importance of Volvo as well as
there are a number of far reaching product liability laws that need special attention. The use of
a committee within a field that is related to business ethics partially agrees with what is being
discussed by the Center for Business Ethics (1992) and Kaptein (1998).

6.1.4 CROSS-CASE ANALYSIS OF RESARCH QUESTION ONE


Miles and Huberman (1994) state that coding is analysis. To review and meaningfully dissect
a set of field notes, while still keeping the relations between the parts intact is according to
Miles and Huberman (1994), the “stuff of analysis” (p. 56). According to Miles and
Huberman (1994), how one differentiates and combine the data one has retrieved is all part of
analysis. Regarding coding, Miles and Huberman (1994) state that it is an option to divide
codes into a number of different schemes. One of these schemes is according to Miles and
Huberman (1994) called perspectives, which involves ways of thinking about the setting
shared by informants (“how things are done here”).

For this thesis the research questions have revolved mainly around topics that fit under the
“how things are done here” category. It has furthermore been possible to detect certain
patterns that have made it possible to use a, for all the four research questions, standardized
coding system. This coding system will be further explained below.

0 0 : Indicates that the respondent did not express an opinion regarding this variable.

63
- - : Indicates that the respondent disagreed with previous research.
- + : Indicates that the respondent interpreted the variable differently and gave his/her own
view on the matter.
+ - : Indicates that the respondent partly agrees with previous research.
++ : Indicates that the respondent agreed with previous research.

In table 6.1 the three broad topics of research question three, the people involved in ethics
management, have been listed to the left of the table. The table includes a column where the
different variables have been listed while the three other columns include the findings of the
three cases. After the table the reader will be provided with a short discussion concerning the
differences and similarities found in the different cases of this research question.

Table 6.1: The people involved in ethics management.


VARIABLE CASE 1 CASE 2 CASE 3
Ms. Nilsson Mr. Wood Mr. Adolfsson
Ms. Tornberg
The Initiator –+ –+ –+
AN

00
The Coordinator –+ –+ –+
THE FUNCTION OF

00
ETHICS COMMITTEE

The Channeler –+ –+ –+
00
A Devils Advocate –+ –+ 00
00
The Facilitator –+ –+ –+
00
The Mediator –+ –+ –+
00
Someone from top 00 ++ 00
WHO IS INVOLVED

management 00
IN AN ETHICS
COMMITTEE

Membership in the 00 00 00
committee is rotated 00
Someone from the 00 ++
HR-department 00 00
Someone who is 00 00 00
non-managerial 00
Experience from –– 00 00
AN ETHICAL OMBUDSPERSON

within the company 00


Independent reports ++ 00 00
to the C.E.O. 00
Counseling and 00 00 00
advisory role 00
Impaired –– 00 00
trustworthiness if 00
selected by
management
Resolves ethical 00 00 00
conflict 00
Responsible for 00 00 00
ongoing ethical work 00
Source: Authors’ own construction.

64
Regarding the function of an ethics committee the three cases show a conformity in the sense
that they all show that the respondents felt that the functions were useful, however, in a
different setting than through a committee. Ms. Nilsson stated that she thought it would be
hard to justify having a committee working with just ethics, this is also what Mr. Wood felt
while Mr. Adolfsson stated that ethics management was not something that belonged to
certain people. Ms. Nilsson interpreted the functions of an ethics committee as suitable for a
single person while Ms. Tornberg stated that although Volvo does not have an ethics
committee these types of issues are quite commonly handled by the HR department. Mr.
Wood did also point out that the HR department was used in issues regarding ethics.

Mr. Wood had his own interpretation of an initiating function. According to Mr. Wood, ethics
was initiated in the process of starting up a HRM steering committee. Mr. Adolfsson stated
that Volvo Buses had three managers responsible for the three areas of product safety,
environment and quality. These three managers are also the ones responsible for initiating,
coordinating, channeling, facilitating and mediating within their respective, ethical, areas.
Mr. Wood stated that a coordinating role would fall upon the Vice President of HR and
Administration while the coordinating role would fall upon an attorney, due to the fact that
ethical issues also involve legal issues. Regarding the channeling function Mr. Wood felt that
something that is internally referred to as the people’s manual would fill this function. As
stated before Ms. Nilsson felt that a single person could fill all the functions that have been
discussed above.

On the issue of who is involved in an ethics committee the table shows mostly “no opinion”.
This was due to the fact that, as explained above, none of the respondents felt that it was
necessary to have a committee working with ethics. VCE North America is however using,
what is being referred to as a, HR steering committee. In this committee Mr. Wood pointed
out that someone from top management as well as someone from the HR department is a part
of this committee.

As seen table 6.1 the area of an ethical ombudsperson is, with a few exceptions, filled with the
code for “no opinion”. According to Ms. Nilsson, the management should appoint a person
who is not afraid to raise ethical issues and this person should also report directly to the
C.E.O. Ms. Nilsson further added that a single person working with ethics could need a
network of people who can help out when the work becomes to overwhelming. On this issue
Mr. Wood stated that ethics, as everything else within Volvo, is a team effort. Mr. Adolfsson
did, as mentioned above refer to the use of three managers within the three core values of
Volvo, product safety, environment and quality. These three areas are according to Mr. Wood
ethical in nature and the three managers therefore become responsible for ethical values
within the organization. Mr. Adolfsson did however not express any more opinions on the
topics suggested by the conceptual framework.

6.2. RESEARCH QUESTION TWO: A CODE OF ETHICS


A number of authors have studied the wide area of a code of ethics, among them are Weaver,
(1993); Kaptein, (1998); Weaver, Trevino, Cochran, (1999); Hosmer, (1987); Drummond &
Bain, (1994) Deresky, (1997) and McDonald (2000). Mainly three areas are discussed; the
purpose of a code, who is involved in developing the code and the content of a code. In the
following sections these three areas will be analyzed by comparing the findings of the three
cases of this thesis with the previous research conducted by the researchers mentioned above.

65
6.2.1 WITHIN-CASE ANALYSIS OF CASE 1; VOLVO, SWEDEN

♦THE PURPOSE OF A CODE


Ms. Nilsson stated that a code should express some kind of minimum standard that the
company stands for while Ms. Tornberg stated that a code defines the minimum expectations
of the employees. Ms. Nilsson further added that a company is not more ethical or socially
responsible than its “weakest link”, and this link should be defined by the ethical code. These
statements are in perfect accordance with what is being stated by Weaver (1993) and Kaptein
(1998), who are saying that the purpose of a code is to define the minimum expectations of
employees.

Weaver, Trevino and Cochran (1999) have stated that the purpose of a code is to assist
employees by including ethical values in decision making. This is partially validated by what
Ms. Nilsson is saying when she states that a code acts as a guideline for the company. Ms.
Nilsson did further state that the management must be dedicated to having a code to rely on in
the strategy process, or else the code will end up last in the list of priorities.

According to Ms. Nilsson, a code does not only act as a distinguishing function externally, the
code is further important to gain and to comprehend the “internal” Volvo feeling among
employees, and this is highly important in order to receive external trust i.e., trust from
stakeholders and especially politicians. This statement adds to what is being discussed by
Kaptein (1998), who states that one of the purposes of a code is to provide an organization
with a distinguishing function externally. Ms. Nilsson further added that she felt that this
function of a code has more to do with business-to-business relations rather than seller to
buyer.

Kaptein (1998) states that a code may have a correcting function within an organization. Ms.
Nilsson who adds that the employees or an individual questioning the code must believe in the
code or else it would feel awkward to be questioned about it validates this.
♦ WHO IS INVOLVED IN DEVELOPING THE CODE
According to Hosmer (1987), the senior executives of a company should develop the ethical
code. This is in accordance with what is being stated by Ms. Nilsson who further stated that
the management should develop the code, together with the different departments in order to
cover all the different aspects that these departments may add on a specific issue.

Ms. Tornberg did however state that it would be ideal if employees from the different
subsidiaries as well as from the different departments along with both white- and blue- collar
workers could have their say when developing an ethical code. According to Ms. Tornberg
such a group should be seen as a cross section of all the employees within the organization.
This is somewhat in accordance with what is being discussed by Drummond and Bain (1994)
who state that when developing an ethical code as many employees as possible should be
involved in the process.
♦ THE CONTENT OF A CODE
According to Ms. Nilsson, it would be appropriate for Volvo to establish one very detailed
document that deals with ethics. This document would cover all the details such as conflicts of
interest, bribes and “whistle blowing”. Furthermore according to Ms. Nilsson such a
document would not be suitable for distribution. Regarding the subtopics, Ms. Nilsson’s

66
statement is in accordance with what is being discussed by Weaver (1993) and McDonald
(2000), who state that the details mentioned above should be included in a code of ethics.

Regarding the levels of a code, which is discussed by Kaptein (1998), Ms. Nilsson stated that
due to the fact that Volvo is a global company the code should be exhaustive rather than being
detailed on each of the different markets. This contradicts what Kaptein (1998) suggests when
she is stating that a code should be developed for each level: international, supranational,
national, sectoral and individual.

Weaver (1993) and McDonald (2000) bring up the importance of including the relations with
customers, suppliers and contractors in a code. This fits well with what is being stated by Ms.
Nilsson when she is saying that ethical behavior does not end by the “company borders”.
According to Ms. Nilsson Volvo asks its suppliers to live up to certain standards that Volvo
consider to be of importance, and if they do not live up to these standards training is,
according to Ms. Nilsson, offered to the affected suppliers.

According to Weaver (1993) and McDonald (2000), a code should include general
information regarding both the code and the organization. Ms. Nilsson stated that in her
opinion such information should be a part of an ethical code.

Further, Ms. Nilsson, stated that issues such as safety and environment are important topics
when discussing the content of a code of ethics. This fits fairly well with what is being
discussed by Weaver (1993) and McDonald (2000) who bring up the importance of including
responsibilities to shareholders, investors and social responsibility in a code.

6.2.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO U.S.A

♦THE PURPOSE OF A CODE


There are according to Mr. Wood two reasons for VCE North America to have a code of
ethics. The first reason is to comply with the law. The second reason is to avoid conflicts of
interest between employees and the company, and between the company and its customers
and suppliers. These two purposes are not discussed or brought up by Weaver (1993), Kaptein
(1998) or Weaver, Trevino and Cochran (1999) when discussing the purposes of a code.

Weaver (1993) and Kaptein (1998) state that the purpose of a code is that it clarifies the
minimum expectations of employees. According to Mr. Wood VCE North America does not
have minimum and maximum standards, just standards, which contradicts what is being
suggested by Weaver (1993) and Kaptein (1998).

Mr. Wood stated he was not aware of whether or not particular ethical values are
communicated externally. Mr. Wood did however state that certain core values within Volvo
are communicated externally, such as safety, environment and teamwork. This is in partial
accordance with what is being suggested by Kaptein (1998) who states that one purpose of a
code is to have a distinguishing function externally. Mr. Wood concluded that if the company
is know for being ethical it is more apt to attract good people and certainly more apt to having
reliable customers and suppliers.
♦ WHO IS INVOLVED IN THE DEVELOPMENT OF A CODE
Drummond and Bain (1994) state that as many people as possible should be involved in the
development of a code. According to Mr. Wood it is hard to have a democratic process but it

67
all depends how far down the chain one wants to go. Mr. Wood further stated that
management typically develops these kinds of policies, which contradicts what is being
suggested by Drummond and Bain (1994), but they are so standard in the U.S. that the
company would probably not see the need to get all the employees involved. Mr. Wood did
however conclude by stating that in the past these kinds of policies have been circulated
among employees in order to receive input. This statement is on the other hand in accordance
with what is being put forth by Drummond and Bain (1994).
♦ THE CONTENT OF A CODE OF ETHICS
According to Mr. Wood, there is within VCE North America a document that covers a vide
variety of issues. This document is divided up into different sections and one section is called
Performance, Management and Conduct. Mr. Wood stated that this section could be looked
upon as a code of ethics. Within this section policies regarding anti trust compliance, legal
matters, ethics and business transactions, employee conduct, harassment, parents, smoking
and safety are brought up. This statement by Mr. Wood validates part of what is being
discussed by Weaver (1993) and McDonald (2000), who are discussing the importance of
including issues such as conflict of interest, the handling of confidential information, bribes
and whistle blowing in an ethical code.

Regarding the different levels of a code of ethics Mr. Wood stated that VCE North America
recently has developed a Human Resource (HR) agenda. According to Mr. Wood this is not a
policy, but more guidelines for the development of HR policies locally. In this policy, issues
such as the use of child and slave labor are brought up. By stating this Mr. Wood validates
Kaptein (1998) who states than an organization may develop a code of ethics for each of its
levels. Furthermore, on the issue of different levels of a code Mr. Wood concluded that it is
impossible to force a code upon different countries; one can supply guidelines but not force a
code upon different cultures.

6.2.3 WITHIN-CASE ANALYSIS OF CASE 3: VOLVO CHINA

♦THE PURPOSE OF A CODE


According to Mr. Adolfsson the purpose of a code is that the employees know how they are
expected to behave. This is in accordance with what is being stated by Weaver (1993) and
Kaptein (1998) who state that the purpose of a code is to make roles and expectations within
an organization clear. Another purpose of a code is according to Mr. Adolfsson that it creates
clarity and it creates a situation where all the employees within the company are working in
the same direction.
♦WHO IS INVOLVED IN DEVELOPING A CODE
According to Mr. Adolfsson, it would in his opinion be hard to develop a code through some
sort of democratic process; it has to be done by the management. A written document could
possibly be circulated among employees but according to Mr. Adolfsson this would be
difficult to handle on a broad basis due to practical difficulties. These thoughts by Mr.
Adolfsson are in accordance with what is being stated by Hosmer (1987) who states that
senior executives should develop the code. On the other hand it contradicts Drummond and
Bain’s thoughts that as many employees as possible should be involved in developing a code
of ethics.

Mr. Adolfsson concluded that it is furthermore important to consider that the average
employee on a daily basis does not consider explicit ethical issues. There are according to Mr.

68
Adolfsson certain amounts of people who come into contact with these issues and think about
them frequently. These are also the ones that are most likely to be able to work intelligently
with a code of ethics.
♦THE CONTENT OF A CODE
On the issue of the content of a code Mr. Adolfsson stated that he feels that regarding these
kinds of issues one should not overdo the writing of policies. If a company has too much of
rules and regulations written down the management cannot expect the employees to know all
of it. Therefore, it is according to Mr. Adolfsson, better to keep the written policies to a
minimum, which makes it possible for management to demand that the employees are aware
of the rules. These statements contradicts, to some extent, what is being discussed by Kaptein
(1998), Weaver (1993), and McDonald (2000) who all discuss the importance of including
different areas in a code of ethics. Mr. Adolfsson did however state that it is important to have
a clear view of certain core values. In the case of Volvo these are product safety, environment,
and quality. Mr. Adolfsson was however not certain whether it all should be written down in a
code or not

Regarding the level of a code Mr. Adolfsson stated that he felt that a code should be global
within the company. This due to the fact that it is, according to Mr. Adolfsson, nearly
impossible to deal with issues that include values if the company has different values in
different countries. This contradicts Kaptein’s statement that a code can be divided up into
different levels such as international, supranational, national, sectoral and individual level.

6.2.4 CROSS-CASE ANALYSIS OF RESEARCH QUESTION TWO


Table 6.2 displays the respondents’ opinions on the variables that were investigated regarding
the issue of a code of ethics. In the table the respondents’ answers have been, as discussed
above, coded. As a reminder the coding system is once again explained below:

0 0 : Indicates that the respondent did not express an opinion regarding this variable.
- - : Indicates that the respondent disagreed with previous research.
- + : Indicates that the respondent interpreted the variable differently and gave his/her own
view on the matter.
+ - : Indicates that the respondent partly agrees with previous research.
++ : Indicates that the respondent agreed with previous research.

In table 6.2 the three broad topics of the research question have been listed to the left of the
table. The table furthermore includes a column where the different variables have been listed
while the three other columns include the findings of the three cases. After the table the reader
will be provided with a short discussion, on each variable, regarding the differences and
similarities found in the different cases of this research question.

69
Table 6.2: A code of ethics
VARIABLE CASE 1 CASE 2 CASE 3
Ms. Nilsson Mr. Wood Mr. Adolfsson
Mr. Tornberg
Minimum expectations of ++ –– ++
employees ++
THE PURPOSE OF A

Making roles and expectations +– –+ ++


clear 00
CODE

Assist employees by including +– 00 –+


ethics in decision making 00
A distinguishing function –+ 00 00
externally 00
A correcting function ++ 00 00
00
++ –+ –+
INVOLVED

Senior executives
WHO IS

00
As many employees as possible –– –+ ––
–+
Different levels of the code –– ++ ––
THE CONTENT OF A CODE

00
General information ++ 00 ––
00
Conflicts of interest ++ –+ ––
00
Relations with customers, ++ 00 ––
suppliers and contractors 00
Social responsibility –+ –+ ––
00
Responsibilities to share –+ –+ ––
holders and investors 00
Source: Authors’ own construction
♦THE PURPOSE OF A CODE
On the topic of the purpose of a code Ms. Nilsson stated that a code expresses some kind of
minimum standard that the company stands for while Ms. Tornberg stated that a code defines
the minimum expectations of the employees. On this issue Mr. Wood stated that VCE North
America does not have minimum and maximum standards, just standards. Mr. Adolfsson felt
that the main purpose of a code is that it clarifies for the employees how they are expected to
behave. According to Mr. Wood there are two different reasons for having a code of ethics.
The first is to comply with the law and the second reason is to avoid conflicts of interest
between employees and the company, and between the company and its customers and
suppliers

Regarding the issue of a code working as a tool that assists employees by including ethical
values in decision-making Ms. Nilsson stated that a code acts as a guideline for the company.
Mr. Adolfsson stated that a code creates clarity and a situation where all the employees within
the company are working in the same direction.

70
Another purpose of a code is, according to Ms. Nilsson, that it creates an internal Volvo
feeling and through this it has as a distinguishing function externally. A code does
furthermore according to Ms. Nilsson have a correcting function. Ms. Nilsson concluded by
stating that a company is not more ethical or socially responsible than its “weakest link”, and
this link is defined by a code of ethics.
♦WHO IS INVOLVED IN DEVELOPING THE CODE
Ms. Nilsson stated that the management should be responsible for developing a code of ethics;
this was also the opinion of Mr. Adolfsson who stated that it would be tough to develop a
code through some sort of democratic process. Mr. Adolfsson further added that it is
important to note that the average employee on a daily basis does not consider explicit ethical
issues. Further, according to Mr. Adolfsson, there are certain people who are likely to come
into contact with these types of issues and these are the ones most suitable for working with a
code of ethics.

On the topic of who is involved in developing a code Ms. Tornberg had a slightly different
view than the other respondents. Ms. Tornberg stated that in her opinion it would be ideal if a
“cross section” of all the employees within the company were involved in developing the
code. Mr. Wood stated that he felt that it would be difficult to establish a democratic process
when developing a code, however this depends on how far down the chain one want to go.
Mr. Wood did conclude by stating that in the past these kinds of policies have been circulated
among employees in order to receive input.
♦THE CONTENT OF A CODE
Regarding having different levels of a code Ms. Nilsson stated that due to the fact that Volvo
is a global company the code should be exhaustive rather than being detailed on each of the
different markets. Mr. Adolfsson agreed with Ms. Nilsson and added that a code should be
global due to the fact that it is nearly impossible to deal with issues that include values if the
company has different values in different countries. Mr. Wood stated that VCE North
America recently has developed a HR agenda, which includes guidelines for the development
of HR policies on a local level.

According to Mr. Wood, the HR agenda mentioned previously covers topics such as the use
of child labor and slavery. Within VCE America there is also another document that covers
ethical issues. This document is called Performance, Management and Conduct and covers
issues such as anti trust compliance, legal matters, ethics and business transactions, employee
conduct, harassment, parents, smoking and safety. According to Ms. Nilsson it would be
appropriate for Volvo head quarters to establish one very detailed document that deals with
ethics. This document would cover all the details such as conflicts of interest, bribes and
whistle blowing. On the issue of the content of a code Mr. Adolfsson stated that in his opinion
one should not overdo the writing of policies. If a company has too much of rules and
regulations written down the management cannot expect the employees to know all of it.
Therefore it is better, according to Mr. Adolfsson, to keep the written policies to a minimum,
which makes it possible for management to demand that the employees are aware of the rules.
These statements do also explain why Mr. Adolfsson’s column shows only the code for
“disagrees with previous research”.

71
6.3. RESEARCH QUESTION THREE: ETHICS TRAINING
As stated before, Kaptein (1998); McNamara (2000) and Jackson (1997) have all carried out
research in the field of ethical training and ethical training programs. This section will
provide the reader with a analysis of the empirical data gathered for this thesis and the results
from previously mentioned authors.

6.3.1 WITHIN-CASE ANALYSIS OF CASE ONE: VOLVO, SWEDEN


Kaptein (1998) and McNamara (2000) state that ethical training, among other things, aims to
create, discuss and resolve moral issues and apply them to real-life ethical dilemmas. Ms.
Tornberg verifies this by stating that within Volvo first time group managers are trained in
ethical dilemmas by working with a number of real life cases that have taken place within
Volvo. According to Ms. Tornberg, these cases make everyone think critically about what is
right and wrong in a specific situation. These statements made by Ms. Tornberg are also in
accordance with Kaptein (1998) and McNamara (2000), who have stated that ethical training
also aims to teach the employees to identify the moral components in their work.

Kaptein (2000) states that an external consultant could carry out ethical training; according to
Ms. Nilsson this is not recommendable. Ms. Nilsson stated that this could be quite risky for
the company. The reason for this is according to Ms. Nilsson, that Volvo needs to believe in
the ethical issues themselves and therefore the training must come from within the company.
Ms. Nilsson did however mention that it might be wise to use a consultant in order to know
how the entire process of developing codes, training employees, and setting up ethics officers
works.

Regarding an external consultant carrying out the ethical training Ms. Tornberg stated that
this depends on the material one has to begin with. If a consultant is brought in he or she
must, according to Ms. Tornberg, be extremely knowledgeable about the company. Ms.
Tornberg did however also state that it sounded a bit dangerous to give the whole
responsibility to a single person and that managers from inside the company should probably
handle these types of issues. These statements partly falsify Kaptein’s (2000) statement that
an external consultant could handle ethical training.

McNamara (2000) has suggested that ethical performance could be included as a dimension
in performing appraisals. On this topic Ms. Nilsson stated that this would be awkward,
mainly due to the fact that it would be difficult to imagine how it would be implemented. Ms.
Tornberg stated that it is necessary to measure the individual employee’s behavior in order to
be able to reward him or her. Volvo has such a measurement system when it comes to
customer satisfaction and maybe this system could offer hints on how to make ethical
behavior a part of appraisals. Another way of measuring this type of performance is to let
managers grade how satisfied they are with their input at work and compare that to what
demands that they have on themselves. According to Ms. Tornberg, such a system is not
impossible to implement.

6.3.2 WITHIN-CASE ANALYSIS OF CASE TWO: VOLVO, U.S.A.


When discussing ethical training Mr. Wood stated that this kind of training is only provided to
management. Mr. Wood furthermore stated that ethics training is provided within certain
areas and topics, for example harassment. When this type of training is conducted
understanding the particular issue and how to deal with it is highlighted. According to Kaptein
(1998) and McNamara (2000), one of the aims of ethical training is to teach the employees to

72
identify the moral components in their work; this is also in accordance with what is being
stated by Mr. Wood.

According to Mr. Wood, ethics an external consultant handles training within VCE North
America. Although Volvo has an internal policy regarding ethics the company uses an
external consultant that goes, according to Mr. Wood, more into detail than what the internal
policy does. On the topic of using an external consultant Mr. Wood’s statements above are in
perfect accordance with what is being stated Kaptein (2000).

Regarding rewarding ethical behavior Mr. Wood stated that certain things are included in the
condition of the employment. Behaving ethically, just like arriving in time to work, are
included in these conditions. If an employee has a problem with the ethical policy of the
company, then this person should, according to Mr. Wood, feel free to look for a job
elsewhere. These statements by Mr. Wood falsify the argument put forth by McNamara
(2000) that ethical performance should be included as a dimension in appraisals.

6.3.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA


When asked about ethical training, Mr. Adolfsson stated that he was not sure whether it would
be meaningful to mix all the different issues that are affected by ethics, and then put the label
“ethics training” on top of it. This statement is quite the opposite of what is being suggested
by Kaptein (1998), McNamara (2000) and Jackson (1997), who are stating that ethics training
should be seen as one area and not divided up into different pieces. Kaptein (1998),
McNamara (2000) and Jackson (1997) statements are further falsified when considering that
Mr. Adolfsson also stated that in his opinion it was necessary to develop each and every one
of these areas, and although one is guided by certain core values, the training should be
carried out separately.

Mr. Adolfsson did however agree with Kaptein (1998), McNamara (2000) and Jackson (1997)
by stating that within management teams and marketing departments, that are liable to come
into contact with ethical issues, in a narrow sense, there should be an awareness regarding
these issues. According to Mr. Adolfsson, there should furthermore be an ongoing discussion
on the ethical topics that are dealt with.

Kaptein (2000) suggests the use of an external consultant when carrying out ethical training.
According to Mr. Adolfsson, this depends on the size of the company and how these types of
issues have been handled traditionally. If for example Volvo were to carry out training within
product safety the company would hardly need an external consultant. If however Volvo were
to carry out training within the HR area the company could possibly, according to Mr.
Adolfsson, make use of an external consultant. Mr. Adolfsson concluded that the issue of
bringing in an external consultant much depends on what particular area, of the broad topic of
ethics, that is being focused on.

6.3.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION THREE


Table 6.3 displays the respondents’ opinions on the variables that were investigated regarding
the issue of ethics training. In the table the respondents’ answers have been coded. The
coding system is explained below:

0 0 : Indicates that the respondent did not express an opinion regarding this variable.
- - : Indicates that the respondent disagreed with previous research.

73
- + : Indicates that the respondent interpreted the variable differently and gave his/her own
view on the matter.
+ - : Indicates that the respondent partly agrees with previous research.
++ : Indicates that the respondent agreed with previous research.

Table 6.3: Ethical training


VARIABLE CASE 1 CASE 2 CASE 3
Ms. Nilsson Mr. Wood Mr. Adolfsson
Ms. Tornberg
Teach the
employees to 00 ++ 00
identify moral
++
components
Create, discuss and
resolve moral 00 00 00
issues and apply
++
them to real life
Communicate,
reinforce, clarify 00 00 00
develop and 00
review the ethical
code
Avoid or reduce
uncertainty about 00
who is responsible 00 00 00
for what, and to
what degree
Training is carried – –
out by an external +– ++ – +
consultant
Include ethical – –
performance in –+ – – 00
appraisals

Source: Authors’ own construction

According to Ms. Tornberg, Volvo Trucks provide their first-time group managers with
training concerning ethical dilemmas. This training makes, according to Ms. Tornberg,
everyone think critically about what is right and wrong in a specific situation. On the topic of
ethical training Mr. Adolfsson stated that in his opinion it would not meaningful to mix all the
different issues covered by the term ethics, and then carry out training under that particular
topic. Mr. Adolfsson stated that it would be better if each and every one of the sub areas
covered by the term ethics were divided up and training carried out within the different issues.
Mr. Wood stated that ethics training is only provided to management. Mr. Wood further stated
that training is carried out in small chunks, covering different sub topics such as, for example
harassment.

According to Mr. Wood, an external consultant handles ethical training within VCE North
America. According to Ms. Nilsson this is not recommendable, this due to the fact that Volvo
as a company needs to believe in the ethical issues themselves and therefore the training must
come from within the company. Ms. Nilsson did however mention that it might be wise to use
an external consultant in order to know how the entire process of developing codes, training
employees, and setting up ethics offices works. The use of an external consultant depends,
according to Mr. Adolfsson, on the issue that is being handled. If for example Volvo were to

74
carry out training within the field of product safety the company would hardly need an
external consultant.

On the issue of rewarding ethical behavior Mr. Wood stated that certain things are included
in the condition of employment. Behaving ethically, just like arriving in time for work, are
included in these conditions and therefore rewarding employees for behaving ethically is not
considered to be an important issue. Ms. Nilsson stated that it would be awkward to reward
someone for behaving ethically while Ms. Tornberg stated that in order to reward someone his
or her performance must be measured against something. According to Ms. Tornberg it is
probably possible to create a system where ethical behavior is measured, and rewarded. Volvo
Trucks has such a system for measuring customer satisfaction.

6.4. RESEARCH QUESTION FOUR: ADVANTAGES VERSUS


RISKS WITH FORMALIZING ETHICS
According to Nijhof et al (2000), Brytting (1997), Drummond and Bain (1994), Boje &
Winsor (1993), and Willmott, (1993), there are both advantages and risks with formalizing
ethics within an organization. These advantages and risks will be analyzed in the following
section of this thesis.

6.4.1 WITHIN-CASE ANALYSIS OF CASE 1: VOLVO, SWEDEN

♦ ADVANTAGES
According to Ms. Nilsson, it is important to be looked upon as an ethical company, compared
to other companies within the same industry, in order to gain and keep customers. Ms.
Nilsson further stated that ethics is seen as a resource within Volvo and as a resource it is also
used as one compared to other companies. Further, according to Ms. Nilsson, the market for
good employees is highly competitive and Volvo must work on attracting them as well as
keeping them, and in that process ethics is an important tool. These advantages are however
not brought up by Nijhof et al (2000), Brytting (1997), Drummond and Bain (1994), Boje &
Winsor (1993), and Willmott (1993). Ms. Nilsson concluded by stating that a final positive
side of a formalized ethics program within an organization is that it forces the organization to
be ethical. This statement is however in accordance with what is being stated by Brytting
(1997) and Drummond and Bain (1994) who state that one of the advantages with formalizing
ethics within an organization is that it motivates employees to consider ethical values in their
decision making

According to Ms. Tornberg, one of the advantages of formalizing ethics within an


organization is that it clarifies management’s opinion of what it is that makes behavior
ethical/unethical and it further motivates employees to consider ethical values in decision
making. These statements are in perfect accordance with what is being suggested by Nijhof et
al (2000), Brytting (1997), and Drummond and Bain (1994). Another positive aspect of
formalizing ethics is according to Ms. Tornberg that ethics is important to stakeholders in the
company. This statement is in partial accordance with Nijhof’s et al (2000) discussion that an
ethical code makes clear what external parties may expect from an organization.
♦ RISKS
According to Ms. Nilsson, a formalized ethics program might become rigid if it is too
complicated and detailed. This risk is not brought up by Nijhof et al (2000), Drummond and
Bain (1994), Boje & Winsor, (1993) and Willmott, (1993). These authors do on the other

75
hand mention the risk of indoctrinating employees with an ethical code. On the risk of
indoctrinating employees Ms. Nilsson stated that if an organization indoctrinates its
employees the organization has not lived up to its ethical code. According to Ms. Tornberg,
indoctrination is a strong word and that in her opinion Volvo does not enforce ethics in a way
that it would threaten to indoctrinate employees.

6.4.2 WITHIN-CASE ANALYSIS OF CASE 2: VOLVO, U.S.A.

♦ ADVANTAGES
An advantage that is not brought up by Nijhof et al (2000), Brytting (1997), Drummond and
Bain (1994), Boje & Winsor, (1993) and Willmott, (1993) but discussed by Mr. Wood is that
by formalizing ethics within an organization it this prevents the organization from breaking
the law. Mr. Wood did however verify Nijhof et. al. (2000), Brytting (1997) and Drummond
and Bain (1994) statement that one of the positive aspects of formalizing ethics within an
organization is that it clarifies management’s opinion of what it is that makes behavior ethical
versus unethical.

Mr. Wood further verified Nijhof’s et al (2000) suggestion that by formalizing ethics the
organization makes clear what external parties may expect from the organization. Mr. Wood
further stated that investors are considering ethics, as an important issue, to a greater degree
than before. Brytting (1997) and Drummond and Bain (1994) state that another positive
aspect is that by formalizing ethics an organization motivates employees to consider ethical
components in their decision making. On this topic Mr. Wood stated that motivate is the
wrong word. According to Mr. Wood, motivate is a word that causes an employee to do
something good as opposed to a word that prohibits him or her from doing something bad.
♦ RISKS
Regarding the risk of indoctrination of employees when formalizing ethics within an
organization Mr. Wood stated that this depends on the rules and regulations that the company
is trying to force upon its employees. According to Mr. Wood, it would be hazardous for a
company if it tried to force its employees to attend a Buddhist temple every day. This
discussion by Mr. Wood sheds some new light on the discussion carried on by Boje and
Winsor (1993) and Willmott (1993) that there is a risk of indoctrinating employees with a
code of ethics.

Regarding the risks Mr. Wood also brought up that the risk with any policy is that it is not
enforced or that the company makes exceptions form the established policy. This is not
brought up by Nijhof et al. (2000), Brytting (1997), Drummond and Bain (1994), Boje &
Winsor (1993), and Willmott, (1993).

6.4.3 WITHIN-CASE ANALYSIS OF CASE THREE: VOLVO, CHINA

♦ ADVANTAGES
According to Mr. Adolfsson, one of the positive aspects of formalizing ethics within an
organization is that it makes clear what external parties may expect from the organization.
This is in perfect accordance with what is being suggested by Nijhof et al (2000). According
to Mr. Adolfsson, it should be known that when one buys a Volvo product it should stand for
certain things, such as certain values that can be looked upon as ethical.

76
♦ RISKS
On the issue of indoctrination of employees, as suggested by Boje & Winsor (1993), and
Willmott, (1993), Mr. Adolfsson stated that this was an interesting topic. According to Mr.
Adolfsson, values are something that lies very close to the core of a human being and one
should generally put a question mark whether a company at all should claim to formulate
values. Mr. Adolfsson further stated that the risk of indoctrinating employees depends on
what sort of values that the company wants their employees to adapt to. If the values of the
company could be seen as offensive or as something that is opposite of what certain
employees tend to feel this might be a sensitive issue. By these statements Mr. Adolfsson
neither verifies nor falsifies what is being suggested by Nijhof et. al. (2000), Brytting (1997),
Drummond and Bain (1994), Boje & Winsor (1993), and Willmott, (1993).

6.4.4 CROSS CASE ANALYSIS OF RESEARCH QUESTION FOUR


Table 6.4 displays the respondents’ opinions on the variables that were investigated regarding
the issue of benefits versus risks with formalizing ethics within an organization. In the table
the respondents’ answers have been coded. The coding system is explained below:

0 0 : Indicates that the respondent did not express an opinion regarding this variable.
- - : Indicates that the respondent disagreed with previous research.
- + : Indicates that the respondent interpreted the variable differently and gave his/her own
view on the matter.
+ - : Indicates that the respondent partly agrees with previous research.
++ : Indicates that the respondent agreed with previous research.

Table 6.4: Advantages versus Risks with formalizing ethics within an organization
VARIABLE CASE 1 CASE 2 CASE 3
Ms. Nilsson Mr. Wood Mr. Adolfsson
Ms. Tornberg
Clarifies management’s
opinion of what it is that 00 ++ 00
makes behavior ethical vs.
++
ADVANTAGES

unethical
Motivates employees to
consider ethical values in +–
decision making 00
++ –+

Makes clear what external 00


parties may expect +– ++ ++
Resistance to coercion, a 00
code is forced upon the 00 00 00
employees
RISKS

Employees are –+ +– +–
indoctrinated ––
Danger of moral inversion 00 00 00
00
Source: Authors’ own construction

77
♦ ADVANTAGES
Ms. Nilsson stated that one advantage of formalizing ethics within an organization is that it
forces the organization to be ethical while Mr. Wood stated that an advantage of this is that it
prevents the organization from breaking the law. Both Mr. Adolfsson and Mr. Wood stated
that another positive aspect of formalizing ethics within an organization is that it makes clear
for external parties what to expect. Ms. Tornberg also touched upon this by stating that ethics
is becoming important to stakeholders while Mr. Wood further stated that investors are
considering ethics, as an important issue, to a greater degree than before.

Mr. Wood agreed with Ms. Tornberg who stated that one of the positive aspects of
formalizing ethics is that it clarifies the management’s opinion of what is ethical versus
unethical behavior. Ms. Tornberg further stated that another positive aspect is that it motivates
employees to consider ethical values in their decision making. On this issue Mr. Wood stated
that he felt that motivate was the wrong word. Motivate is, in Mr. Wood’s opinion, a word
that causes an employee to do something good as opposed to something that prohibits
someone from doing something bad.
♦ RISKS
According to Ms. Nilsson, one of the risks with formalizing ethics is that the program might
become rigid if it is too complicated and detailed. Mr. Wood discussed that there is a risk
involved in formalizing ethics if the company does not enforce the policy or if the company
makes exceptions from the established policy.

Mr. Adolfsson stated that one may actually question whether a company should at all claim to
formulate values, however, regarding the risk of indoctrinating employees, Mr. Adolfsson
stated that this depends on the values that the company wants their employees to adapt to. Mr.
Wood also stated that there is a risk of indoctrination, but this risk depends on the values that
are formulated by the company. Ms. Nilsson concluded by stating that if an organization
indoctrinates its employees it has not lived up to its ethical code.

78
7. CONCLUSIONS AND IMPLICATIONS
In this chapter an attempt will be made to answer the four research questions. This chapter
will further provide the reader with the conclusions drawn based on the theory and the
analyzed data. At the end of the chapter implications for management, theory and future
research will be presented.

7.1 THE PEOPLE INVOLVED IN ETHICS MANAGEMENT


Kaptein (1998) and the Center for Business Ethics (1992) state that there is a need for an
ethics committee within an organization. The empirical data gathered for this thesis showed
that none of the respondents felt that this was important, this, according to two of the
respondents, mainly due to the fact that the organization was not big enough to justify the use
of an ethics committee.

The empirical data did however point to the fact that the functions of an ethics committee, as
suggested by Kaptein (1998) and the Center for Business Ethics (1992), were viewed to be
important. The functions were however perceived differently between the respondents; one
example of this is the channeling function. Regarding this function Mr. Wood pointed out the
fact that an internal document filled this function while Mr. Adolfsson stated that three “core
value” managers were responsible for this particular function. Ms. Nilsson stated that a single
ombudsperson could fill all the functions and among them the channeling function. This
example points to the fact that although certain variables, suggested by previous research, are
viewed to be of interest the interpretation of how they are best used is differs significantly
between the respondents.

The issue of who should be involved in an ethics committee was not thoroughly discussed due
to the fact that none of the respondents felt that an ethics committee was an important issue to
consider. The respondents did however discuss the involvement of other persons, in the work
of ethics, more extensively. Mr. Adolfsson stated that ethics was not something that belongs
to certain people; it is something that concerns all of the employees. Two of the respondents,
Mr. Wood and Ms. Tornberg pointed out that the HR departments, to a certain extent, handled
ethical issues. One explanation of this could be that the two work within the HR departments
that are responsible for the development of internal ethical codes of the working conditions
for the employees. Wood further stated that within the HR steering committee VCE North
America used both someone from the HR department as well as one person from the top
management. It is interesting to note that Mr. Wood, who is the only American in the sample,
was also the only one who pointed to the use of an attorney when working with ethical issues.

Regarding the use of a single ethics ombudsperson Ms. Nilsson stated that management
should appoint a person that really felt for these kinds of issues. This was quite contradictory
to what was stated by Mr. Wood who felt that ethics, as everything else, is a team effort.

In the sample selection we stated that this research covered three different regions: The Far
East, Northern Europe and North America. On the Chinese market, ethics is not something
that belongs to certain people while in Sweden it is viewed to be desirable that one single
person is responsible for ethical issues. In North America, ethics was an issue that belonged to
something called an HRM steering committee. We can see that the further east one moves, the
less formalized is the organization of people working with ethics. This is due to the different
demands of the judicial systems in the different regions.

79
The most significant conclusions that may be drawn regarding the people involved in ethics
management are listed below.

! This research indicates that the use of an ethics committee is highly related to the size
of the company.

! The evidence of this research points to the fact that the different functions (the
initiating, the coordinating, the channeling, the facilitating, the mediating and the role
of a devils advocate) of an ethics committee are important to consider when working
with ethics within an organization.

! This study revealed that the Human Resource department is important for an
organization’s ethical capability.

! The findings of this research indicates that although an organization does not have a
formalized ethics institution the organization may still be working quite actively with
ethical issues.

7.2 A CODE OF ETHICS


Regarding the purpose of a code, three out of four respondents stated that one of the purposes
with a code is that it defines the minimum expectations of the employees. Mr. Wood, who
was the only one who expressed a different view, stated that within VCE North America no
such thing as minimum and maximum standards exist, just standards. According to Mr. Wood
there are two different reasons for having a code of ethics, to comply with the law and to
avoid conflicts between the company and the employees and between the company and its
customers and suppliers. It should be noted that once again does Mr. Wood refer to legal
incitements regarding the internal use of ethics.

On the issue of who is involved in the development of a code of ethics both Ms. Nilsson and
Mr. Adolfsson stated that the management should be responsible for developing a code of
ethics. Mr. Wood agreed upon this and further added that a draft could be circulated among
the employees prior to finalizing the policy. Ms. Tornberg had a different view and stated that
it would be ideal if a cross-section of the employees were involved in developing the code.

According to Mr. Wood, who is working for VCE North America, the company uses a
number of documents that cover ethical issues. These documents cover a wide range of
subjects and are quite extensive. Mr. Adolfsson, who is involved in Volvo Buses in China, did
on the other hand state that he tended to think that one should not overdo the writing of
policies. Ms. Nilsson felt that there is a need for Volvo head quarters to establish a detailed
document covering the field of ethics. Although the evidence are to weak to draw any
conclusions it is interesting to note the differences, between the three cases, regarding the use
of written documents. The evidence regarding this particular topic do however point to the
fact that written policies are of more importance in VCE North America than what they are in
China and Sweden. This might partly be due to the fact that as Mr. Wood put it, Sweden is a
more ethical society and therefore the need for written policies are not as great as in the U.S.

Regarding the different levels of a code both Ms. Nilsson and Mr. Adolfsson stated that Volvo
should have one code as opposed to having different codes on each of the individual markets.
Mr. Wood stated that VCE North America recently has developed a HR agenda, which
includes guidelines for the development of HR policies on a local level. It is interesting to

80
note that the only case that shows on a willingness to leave certain issues to a more local
decision level deal is the U.S. case. This proves that any suspicions regarding American
“imperialistic views” were ungrounded.

Finally, all respondents stated the importance on developing ethical codes as a competitive
tool, especially in attracting the most qualified people. Ethics is also viewed to be an
important issue for competing on these three markets.

The most significant conclusions that may be drawn regarding a code of ethics are listed
below.

! This study has revealed that one of the main purposes of a code is that it defines the
minimum expectations of the employees.

! The empirical data gathered and analyzed for this research suggest that the
management should develop a code of ethics.

! Evidence of this research has showed that code of ethics is important for the
recruitment of qualified people.

7.3 ETHICS TRAINING


According to Ms. Tornberg, only first-time group managers are provided with ethical training
by reviewing realistic ethical dilemmas. Mr. Wood also stated that ethical training is only
provided for management but that the training is handled piece by piece. Mr. Adolfsson stated
that it is not meaningful to carry out ethics training, this due to the fact there are too many
different areas included in the concept of ethics and all of these areas require special attention.
One may conclude that it is evident that the further east one moves, less importance is placed
on ethics training.

The opinions expressed regarding the use of an external consultant were quite inconclusive.
Ms. Nilsson stated that it was not recommendable to use an external consultant, this due to the
fact that the ethical values must come from within the company. Mr. Adolfsson stated that the
use of an external consultant much depends on the particular issue that is being trained. Mr.
Wood stated that within VCE North America an external consultant handles the ethical
training, which is based on internal documents.

On the issue of rewarding ethical behavior Mr. Wood claimed that the terms of employment
included that an employee should behave ethically. Ms. Nilsson stated that she could not
visualize how such a reward system would work while Ms. Tornberg stated that it in order to
reward someone the company must have a system for measuring ethical performance. Ms.
Tornberg further pointed out the fact that such a system would not be impossible to
implement. Finally, Ms. Tornberg works closely with employee issues on a daily basis.
Therefore, she has a greater understanding on how to reward the staff.

! The evidence of this thesis suggests that ethics is such a big area that it is difficult to
cover all the different topics in a training program.

! The empirical data gathered and analyzed for this research suggest that it might be
wise to use an external consultant within certain areas of ethical training.

81
! This study has revealed that although a rewarding system for ethical behavior is not
considered to be important it is possible to implement.

7.4 ADVANTAGES VERSUS RISKS WITH FORMALIZING


ETHICS
Regarding the advantages of formalizing ethics within an organization, Mr. Wood once again
returned to the legal incitements and stated that one of the advantages is that it prevents the
organization from breaking the law. Both Mr. Wood and Mr. Adolfsson stated that another
positive aspect of formalizing ethics within an organization is that it makes clear for external
parties what to expect. Ms. Tornberg added that ethics is becoming more and more important
for stakeholders and Mr. Wood concluded by stating that investors are starting to consider
ethics as an important variable in their work. Both Mr. Wood and Ms. Tornberg agreed upon
the fact that another positive aspect of formalizing ethics is that it clarifies the management’s
opinion of what is ethical versus unethical behavior. Mr. Adolfsson concluded by stating that
the advantages far outweigh the risks of formalizing ethics within an organization.

On the issue of potential risks with formalizing ethics within an organization Mr. Adolfsson
had the interesting view that it is questionable whether a company should at all claim to
formulate values. Mr. Adolfsson did however agree with Mr. Wood and Ms. Nilsson who
stated that there might be a risk of indoctrinating employees but this risk depends totally on
the values that the organization wishes to express.

! The evidence from this research strongly suggest that one of the positive aspects of
formalizing ethics within an organization is that it makes clear for external parties
what they can expect.

! The empirical data gathered and analyzed for this research suggest that there is a risk
of indoctrinating employees when formalizing ethics within an organization, this risk
could however be minimized if the organization is careful with the values that it
formulates.

7.5 IMPLICATIONS
In the final section of this thesis, recommendations, which are based on the findings of this
research, to managers of organizations who one day may need to, consider how the issue of
using ethical capability as a competitive advantage. The reader will also be provided with
implications for theory and future research.

7.5.1 IMPLICATIONS FOR MANAGEMENT


This study has investigated how ethical capability can be used as a competitive advantage.
The implications for management concern both the cases that were investigated for this thesis
as well as other organizations interested in this particular topic.

The findings of this thesis indicate that there are a number of different functions involved in
ethics management. Among these functions are the initializing, coordinating, channeling,
facilitating and the mediating function. These different functions are important to consider
including when developing an organization’s ethical capability. This research also pointed to
the fact that it is not necessary to institutionalize ethics by appointing one or a number of
employees to ethical positions, but the HR department may very well handle ethics.

82
On the issue of a code of ethics this study has pointed out the facts that a code is probably best
developed by the management, if it is possible a draft could however be circulated among
employees in order to gain a better acceptance for the values of the organization. Although the
evidence of this research showed that one of the main purposes of a code is that it defines the
minimum expectations of the employees a code may still serve a number of other purposes,
such as providing the organization with a distinguishing function externally.

One of the conclusions of this thesis was that ethics is too big of an area for carrying out
training in. It is important to remember that ethical training covers a wide span of issues and
these issues need to be divided up in order to carry out training effectively. Regarding the use
of an external consultant it is important to consider whether an external consultant can
provide the company with knowledge that cannot be collected from within the organization
itself.

In this thesis it was stated that the advantages far outweigh the risks of formalizing ethics and
that one of the most important advantages of formalizing ethics within an organization is that
it makes clear for external parties what they can expect. A manager does however need to
consider that there are possible pitfalls when formalizing ethics. These can however be
avoided if care is taken when formulating the policies.

7.5.2 IMPLICATIONS FOR THEORY


The overall purpose of this thesis was to gain a better understanding of how ethical capability
may be used as a competitive advantage. In order to fulfill this purpose it has been explored
how ethical capability may be used as a competitive advantage. In order to explore this, the
issues of the actors involved in ethics management, an ethical code, ethics training and the
advantages versus the risks of formalizing ethics within an organization have been described.
When the empirical data was analyzed and the conclusions were drawn these issues were
explained to the reader and by doing so this thesis has reached its purpose.

7.5.3 IMPLICATIONS FOR FUTURE RESEARCH


This thesis has not covered all the aspects regarding using ethical capability as a competitive
advantage. The topics that would be of interest for further research include:

! Evidence of this research pointed to the fact that it is difficult anchor a code of ethics
among a majority of the employees prior to distributing the final version. Due to this it
would be of interest to see research carried out in the field of “establishing a code of
ethics among white- and blue-collar workers”.

! The findings of this thesis have highlighted the problems of carrying out ethical
training in an effective and concise way. Due to this further research within the area of
“effective ways of carrying out meaningful ethical training” would be of interest.

! One piece of empirical data suggested that it is questionable whether an organization


can at all claim to formulate values. This comment has triggered an interest of seeing
future research carried out in the field of “organizational advantages and risks
involved in formulating values”.

83
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89
APPENDICES
INTERVIEW GUIDE (ENGLISH VERSION)
1. BACKGROUND

! Corporation Background

! Position of the interviewee

2. THE PEOPLE INVOLVED IN ETHICS MANAGEMENT

♦ THE FUNCTION OF AN ETHICS COMMITTEE / ETHICAL OMBUDSPERSON

! The Initiator.
# Stimulates the organization of ethics, the driving force.

! The Coordinator.
# Answers questions regarding the organization’s ethics policy.

! The Channeler.
# Creates communication channels between the corporation and its
surrounding, between employees and management, and among departments.

! The “Devils Advocate”.

! The Facilitator.
# Offers instruments, which departments can use for their ethics programs.

! The Mediator.
# Mediates in both internal and external conflicts.

♦ WHO IS INVOLVED IN AN ETHICS COMMITTEE

! Someone from top management.

! Members in the committee are rotated among the employees.

! Someone from the Human Resource Department.

! Someone who is non-managerial.


# A shop or clerical worker.

♦ ETHICAL OMBUDSPERSON

! Has experience from within the company and is fully integrated into the corporate
value system.

! Independent, reporting directly to the CEO or to the board.


! An investigative, counseling and advisory role.

! If selected by top management there is a risk of impairing the trustworthiness.

! Resolves ethical conflict.

! Is responsible for ongoing ethical work and updating of the code.

♦ ANYTHING TO ADD

3. A CODE OF ETHICS

♦ THE PURPOSE OF A CODE

! Minimum expectations of employees.

! Making roles and expectations within an organization clear.

! Assist employees by including ethical values in decision making.

! A distinguishing function externally.

! A correcting function, the code creates checks and balances in that employees can
check each other in living up to the code.

♦ WHO IS INVOLVED IN DEVELOPING THE CODE

! Senior executives.

! As many employees as possible

♦ THE CONTENT OF A CODE

! One code or one for each level: international, supranational, national, sectoral,
individual.

! General information regarding the code and the organization.

! Conflicts of interest, e.g. handling confidential information, bribes, “whistle blowing”.

! Relations with customers, suppliers and contractors.

! Social responsibility.

! Responsibilities to shareholders and investors.

4. ETHICS TRAINING PROGRAMS

♦ ETHICS TRAINING
! Teach the employees to identify the moral components in their work.

! Create, discuss and resolve moral issues and apply them to real-life ethical dilemmas.

! Communicate, reinforce, clarify, develop and review the ethical code with the staff.

! Avoid or reduce uncertainty about who is responsible for what and to what degree.

! An external consultant carries out the training.

! Include ethical performance as a dimension in performing appraisals.

♦ ANYTHING TO ADD

5. ADVANTAGES VERSUS RISKS WITH FORMALIZING ETHICS WITHIN AN


ORGANIZATION

♦ ADVANTAGES

! Clarifies management’s opinions of what it is that makes behavior ethical/unethical.

! Motivates employees to consider ethical values in decision-making.

! The code makes clear what external parties may expect from the organization.

♦ RISKS

! Resistance to coercion. Employees do not truly believe in the code, therefore the code
is force upon them.

! The code is forced upon employees, who are being indoctrinated into something they
do not believe in.

! Danger of moral inversion. The emphasis on fixed ethical rules removes the necessity
for employees to ethically reflect on their behavior.

♦ ANYTHING TO ADD
INTERVJUGUIDE (SWEDISH VERSION)
1. BAKGRUND

! Företagsbakgrund

! Position inom företaget

2. PERSONER INVOLVERADE I ETIK MANAGEMENT

♦ FUNKTIONEN AV EN ETISK KOMMITE / ETISK OMBUDSMAN

! Initiator
# Stimulerar organisationen av etik, den drivande kraften

! Koordinator
# Svarar på frågor angående organisationens etiska policy.

! Samordnare
# Skapar kommunikations kanaler mellan företaget och dess omgivning,
mellan anställda och management samt mellan avdelningar.

! Djävulens Advokat

! Hjälpredan
# Erbjuder verktyg som olika avdelningar kan använda i deras etiska arbete.

! Medlaren
# Medlar i både interna och externa konflikter.

♦ MEDLEMMAR I EN ETISK KOMMITE

! Någon från top management

! Medlemskap i kommittén roteras bland anställda inom företaget

! Någon från Human Resource Department

! Någon som inte innehar en chefsposition


# En medarbetare från ”golvet”

♦ ETISK OMBUDSMAN

! Har erfarenhet inom företaget och är fullständigt integrerad i företagets värde system.

! Självständig person som rapporterar direkt till VDn eller styrelsen.

! En undersökande, rådgivande och stödjande roll.


! Om den etiska ombudsmannen väljs av lednings gruppen så föreligger en risk av att
detta hämmar dennes trovärdighet.

! Löser etiska konflikter.

! Är ansvarig för det fortlöpande etiska arbetet och uppdateringar av den etiska koden.

♦ NÅGOT ATT TILLÄGGA

3. EN ETISK KOD

♦ SYFTET MED EN KOD

! Vad man minst kan förvänta sig av de anställda.

! Klargör roller och förväntningar inom en organisation.

! Hjälper anställda genom att inkludera etiska värden i deras beslutsprocesser.

! En, externt, särskiljande funktion.

! En korrigerande funktion, koden skapar ett medel för anställda att kolla upp varandra i
etiska avseenden.

♦ VILKA ÄR INVOLVERADE MED ATT TA FRAM EN KOD

! Lednings gruppen.

! Så många anställda som möjligt.

♦ INNEHÅLLET I EN ETISK KOD

! En kod för varje nivå: internationell, supranationell, national, sektoral, individuell.

! Generell information angående koden och organisationen.

! Intresse konflikter, t.ex. handhavande av konfidentiell information, mutor och ”internt


skvaller (whistle blowing)”.

! Relationer med kunder, leverantörer och entreprenörer.

! Socialt ansvarstagande.

! Ansvar gentemot aktieägare och investerare.

♦ NÅGOT ATT TILLÄGGA

4. ETISKA TRÄNINGS PROGRAM


♦ ETISK TRÄNING

! Undervisa de anställda angående de etiska och moraliska komponenterna i deras


arbete.

! Skapa, diskutera och lös moraliska frågor och problem och applicera dem på verkliga
etiska dilemman

! Kommunicera, förstärk, klargör, utveckla och utvärdera den etiska koden med de
anställda.

! Undvik eller reducera osäkerhet angående vem som är ansvarig för vad och till vilken
grad.

! Den etiska träningen utförs av en extern konsult.

! Inkludera etisk prestation som en dimension i löneförhöjning

♦ NÅGOT ATT TILLÄGGA

5. FÖRDELAR RESPEKTIVE RISKER MED ATT FORMALISERA ETIK INOM EN


ORGANISATION

♦ FÖRDELAR

! Tydliggör ledningsgruppens åsikter om vad som är etiskt respektive oetiskt beteende.

! Motiverar anställda att inkludera etiska värden i sin beslutsfattning.

! Koden klargör vad externa intressenter kan förvänta sig av organisationen

♦ RISKER

! Motstånd mot tvång. Anställda tror inte helhjärtat på koden och den blir därför
påtvingad på dem.

! Koden är påtvingad de anställda vilka i sin tur blir indoktrinerade I något som de inte
tror på.

! Fara med moralisk omvändhet. Betoningen läggs på fasta etiska regler vilket tar bort
nödvändigheten för anställda att ta hänsyn till det etiska i sitt eget beteende.

♦ NÅGOT ATT TILLÄGGA