KPMG and RSM Erasmus University have carried out research into business codes drawn up by businesses that rank among the Fortune Global 200. Their conclusion is that most business codes give little attention to shareholders, who - as owners of the company - may have expected to receive pride of place in these codes.
In reality, a meagre 48% of the codes deal with the company's responsibility vis-à-vis its shareholders. Business codes focus most heavily on the company's duty toward its employees. Of the companies surveyed, 87% have codes that deal with this issue, and almost 50% do so very extensively.
The environment, too, attracts a great deal of attention. Almost 75% of the companies involved describe their roles in protecting the environment. The research conducted by KPMG and RSM Erasmus University also demonstrates that, over the past ten years, the number of companies using a business code of conduct has risen substantially. Of the world's 200 largest companies, 86% now have such a code. This compares with only 14% in 1990 and 51% in 2000.
Companies cite compliance with legal requirements as their most important reason to introduce a code of conduct. "We can understand their attitude, in the view of the demands placed on them by the Sarbanes-Oxley Act, the US Federal Sentencing Guidelines, as well as all national corporate governance codes and stock exchange regulations," says Peter Jonker, who is Senior Manger Integrity Services at KPMG Forensic in Switzerland.
Jonker goes on to say, "But business codes of conduct are just as important in improving a company's reputation and creating a positive corporate culture. Less-often cited reasons for adopting the code are to limit liability in the event of a mishap; to strengthen competitive strength; and to head off new external legislation."
Most business codes lay down a company's obligation towards its employees and vice versa in norms and values, as well as in detailed rules. Jonker says, "Norms and values provide guidance to management and the workforce for situations where hard-and-fast rules are unworkable or undesirable. 85% of the codes provide specific norms and rules for dealing with confidential information. Moreover, 75% of the codes formulate norms and rules for financial as well as for the protection of company property. But only 15% of the codes contain concrete rules covering working times-related issues, such as tardiness, absenteeism and overtime."
One important development is that business codes are increasingly alike, says Jonker, who adds, "For many companies it is important to develop codes of conduct specifically geared towards their own business situations, strategies, identities and the dilemmas they are facing in their organizations. Especially companies that, in recent years, have been under great pressure to swiftly put together codes of conduct are now expected to pay more attention to their own distinctive issues when updating these codes of conduct."
The research also looked at how these large companies are implementing their codes of conduct. More than 80% of them have their employees undergo code-focused training; have appointed an official to whom transgressions can be reported; and enforce compliance. Less than half of the companies vet job applicants with an eye towards the code; have incorporated elements of the code into their performance evaluation standards for employees; and publish information on how well the code is being adhered to within the organization.
Date: 06/10/08
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KPMG International is a worldwide leading network of audit and advisory services firms with approx. 123,000 employees in 145 countries. The activities of KPMG Switzerland are combined under KPMG Holding Ltd (the Swiss member firm of KPMG International). Under this umbrella, KPMG Ltd has approx. 1,628 employees in 13 locations in Switzerland. In fiscal year 2007, KPMG Switzerland generated sales of CHF 422 million which corresponds to a growth rate of 6 percent compared with the previous year.
