A Comparison Between Corporate and Public Sector Business Ethics In Sweden

Volume 13

Numbers 2/3 April/July 2004

A comparison between corporate and public sector business ethics in Sweden G˛ran Svensson,Greg Wood and Michael Callaghann

Respectively: Associate Professor, Halmstad University, Sweden; Senior Lecturer, Bowater School of Management and Marketing, Deakin University, Australia; and Lecturer, Bowater School of Management and Marketing, Deakin University, Australia.

this study. One study has been published in the wider area of business ethics (Brytting 1997), but it appears that there has been nothing specifically done on codes of ethics in the largest organizations in Sweden. The suggestion has been made that organizations consider the implementation of a code of ethics because they value the document and perceive that such a document is important to the organization (Adams et al. 2001, Somers 2001, Wotruba et al. 2001). If organizations do have this view of their codes, then surely they should be committed to them. For if they are not committed to their code of ethics, one could view it ostensibly as a public relations exercise that is a cynical attempt to capitalize on a real desire by the marketplace to deal with ethical organizations (Wood & Rimmer 2003). A code can be seen as the first indicator of commitment, but the existence of a code is not of and in itself enough to ensure ethical behaviour by staff, nor does a code guarantee an ethical corporate culture. In and of itself, a code is only one of a range of measures that corporations should have in place to inculcate an ethical ethos into the heart and soul of the organization. Corporations must go beyond this initial level of commitment and enact procedures that will ensure that the ethical ethos of the organization permeates all levels of the corporation (McDonald & Zepp 1989, Sims 1991, Fraedrich 1992, Sims 1992, Weaver et al. 1999, Somers 2001, Wood 2002, Wood & Callaghan 2003). The

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Introduction The establishment of a code of ethics has been seen by many as an indicator that an organization is beginning to show an interest in its ethical performance. The notion that a code of ethics should exist as a means of enhancing the ethical environment of an organization has been proposed by a plethora of writers (Gellerman 1989, Stoner 1989, Laczniak & Murphy 1991, Sims 1991, Harrington 1991, Fraedrich 1992, Adams et al. 2001, Somers 2001, Wood 2002, Carasco & Singh 2003). Codes of ethics are not only a signal to the general public, but they also bring into sharp focus for all staff the need to examine the ethical precepts upon which the business is predicated (Wood 2002). In the USA, codes of ethics have been in evidence in many organizations (Baumhart 1961, De George 1987, Benson 1989, Weaver et al. 1999) since the early 1960s. In Britain, the development of codes of ethics seems to have occurred mainly as a direct response to the stock market crashes of the late 1980s (Schlegelmilch 1989, Donaldson & Davis 1990, Mahoney 1990, Maclagan 1992). In Sweden, however, the use of codes of ethics in either the corporate or the public sectors has not been investigated prior to

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establishment of a code of ethics is the first tangible step on the road to a commitment to business ethics (Townley 1992). The concept of ‘commitment’ to business ethics is integral to this research. Commitment is not a simple idea that can be quantified easily. It is a complex concept that embraces a number of elements. Six areas of questioning were asked. The intent of these questions was as follows. First, how common are codes of ethics? Second, who was involved in the development of these codes and why? Third, how are they implemented? Fourth, do organizations inform internal and external publics of the codes? Fifth, what are the reasons for the codes? Sixth, what are the prescribed benefits of codes? The construct of commitment to ethics in corporate and public sector organizations was

operationalized by consideration of the inputs, objectives and outputs of the code across the six areas mentioned above: incidence, development, implementation, communication, reason and perceived benefits (Figure 1). In this research, commitment to ethics is operationalized in terms of the following elements:  Inputs (the commitment of time and resources in developing, implementing and communicating the code).  Objectives (the role the code plays in terms of prescribing ethical behaviour for internal and external publics).  Outputs (the perceived benefits which flow from the code, or a potential code in the future).

Figure 1: The Operationalization and Analysis of the Construct of Commitment to Ethics in the Corporate and Public Sectors.

Corporate Sector

Public Sector

´´ Inputs

Inputs

1) THE INCIDENCE OF CODES 2) THE DEVELOPMENT OF CODES 3) THE IMPLEMENTATION OF CODES - Communication to Employees - Staff Induction - Consequences for a Breach of the Code - Employee Appraisal - Whistleblowing procedures - The Use of Codes of Ethics in Strategic Planning - An Ethics Training Committee and Ethics Training - An Ombudsman - Ethical Evaluations 4) THE COMMUNICATION OF CODES - Informing Customers and Suppliers of Codes

1) THE INCIDENCE OF CODES 2) THE DEVELOPMENT OF CODES 3) THE IMPLEMENTATION OF CODES - Communication to Employees - Staff Induction - Consequences for a Breach of the Code - Employee Appraisal - Whistleblowing procedures - The Use of Codes of Ethics in Strategic Planning - An Ethics Training Committee and Ethics Training - An Ombudsman - Ethical Evaluations 4) THE COMMUNICATION OF CODES - Informing Customers and Suppliers of Codes

Objectives

Objectives

5) THE REASON FOR CODES

5) THE REASON FOR CODES

Outputs

Outputs

6) THE PERCEIVED BENEFITS OF CODES - Ethics and Profit - The Listed Effects of the Code on the Bottom Line (i.e. Profit) - Resolving Ethical Dilemmas in the Marketplace - Code Effectiveness

6) THE PERCEIVED BENEFITS OF CODES - Ethics and Goal Accomplishment - The Listed Effects of the Code on the Goals - (i.e. Accomplishment) - Resolving Ethical Dilemmas in the Society - Code Effectiveness

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Methodology In order to evaluate the use of codes of ethics by corporate and public sector organizations operating in Sweden, a three-stage research procedure was used and conducted in 2002. First, a questionnaire was sent to the public relations managers of the top 100 Swedish organizations (based on revenue) operating in the corporate sector (SCB 2002): firms that, for several reasons such as size of turnover, employee numbers and business profile, are more likely to have developed a formal code of ethics (Brytting 1997). A questionnaire was also sent to the human resource managers of 100 top Swedish public sector organizations. The public sector in Sweden is divided into three categories of organizations, namely entities of government, county councils, and municipalities. The questionnaires were sent to the top 40 entities of government, 40 municipalities, and 20 county councils. The selection of these organizations was based upon staff numbers in the public sector (SCB 2002). These organizations were asked to answer up to 29 questions and to supply a copy of their code of ethics. The second stage involved content analysis of the codes of ethics supplied by survey respondents. The third stage involved a more detailed followup of a smaller group of organizations that appeared to be close to best practice. Findings from the first stage of the research are reported in this article. The package sent to each of the organizations in the corporate and public sectors contained a covering letter and a questionnaire. The package was sent to the public relations managers in the corporate sector and human resource managers in the public sector organizations rather than the top management or leadership of these organizations. This was done in the hope that these professionals would be more focused on staff concerns and that they were more knowledgeable and committed to the task at hand than other organizational functionaries. Each respondent was assured of complete anonymity as the results were to be aggregated. A substantial amount of work was performed in the preparation, implementation, control and conclusion of the mail survey. Each respondent

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at each organization was initially contacted by phone in order to confirm their appropriateness to respond to the questionnaire, and eventually to promote the importance of the survey. Each respondent was also briefly introduced to the research project to stimulate his or her interest and willingness to participate in the survey. Those executives who initially did not answer the questionnaire were contacted again by telephone in order to stimulate their interest to fill in the required answers. The close attention to this part of the research led to the achievement of a high response rate. The response rate for the corporate sector organizations was 74% with 72 organizations returning the completed questionnaire. For the public sector there was a response rate of 83%. The comparisons between the corporate and public sectors are in part tested by the aid of different statistical bivariate tests (Norusis 1993, 1994). One parametric test is applied, namely the Independent Samples T-test. In addition, four nonparametric tests are applied as a complement, namely the Pearson Chi-Square, the Continuity Correction, the Likelihood Ratio and the Linearby-Linear Association. The selection forms twoway tables and provides a variety of measures of association for two-way tables. In all forthcoming reporting of results the corporate sector univariate responses will be in normal font and the public sector responses will be in italics.

The incidence of codes The respondents upon whom this research focuses comprise those 40 organizations in the corporate sector and the 27 organizations in the public sector with a code of ethics. It would appear that the majority of codes (57.5%:81.5%) have been constructed in the last six years. This phenomenon may well be indicative of an awakening in Sweden of the need for a code of ethics. It is of interest that 32.5% of corporate sector organizations with codes cannot say when the code was developed. This may indicate earlier code development than the overall figures may appear to suggest. If organizations

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cannot give a definite response it may well indicate that the codes were established prior to recent institutional memory. In the public sector the interest in codes of ethics is very recent.

The development of codes The development of a code is a task to which an organization must devote time and energy as the code will showcase the organization’s value system to the world. It should not be a document that is rushed or one that is not representative of the views of all staff members and even other stakeholders. The code must be of relevance and significance to all staff and as such they should be involved in its construction (Raiborn & Payne 1990, Stead et al. 1990). The individuals involved in establishing a code are: Senior Managers (70%:51.9%), Chief Executive Officers (67.5%:63.0%), Board of Directors (50%:63.0%), and Other Staff (26.4%:14.8%). It is of interest that in corporate sector organizations the Boards, which have responsibility for overseeing the policies of the organizations, are involved less than the senior managers of organizations who surprisingly are involved more than the CEO; yet in the public sector organizations the Board are as involved as often as the CEO and more than senior managers. The initiatives and responsibility appear to rest with CEOs and Boards more in the public sector in Sweden than in the corporate sector. If good corporate governance is to be practised then CEOs and Boards should be at the forefront of code development. They should not abrogate their responsibility to senior managers. Both sectors seem to have missed an opportunity to involve all staff in a manner that makes the code more real for these staff. Staff members who are not in senior management (26.4%:14.8%) appear not to play a large role within the establishment of the code in either sector. This is disappointing as not involving other employees is a lost opportunity to establish universal ownership of the ethos of the code throughout the organization. To impose a code on them can run the risk of being seen as an act of imposition

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rather than one of engagement. If the staff do not own the code, then organizations run the very real risk that they will bear less allegiance to it (Wood 2002). Organizations were asked for their reasons for developing a code of ethics. The major reasons given tend to centre upon ‘instill organization values, culture, and philosophy’ (45.0%:66.7%), ‘adherence to policy, procedures, and objectives’ (52.5%:29.6%) and ‘staff integrity and behaviour standards’ (12.5%:40.7%). Organizations appear to be wanting to instil values of the organizational philosophy into their staff and in many cases at the same time wanting to formalize in the code of ethics organizational policies and procedures. These ideas, one could suggest, can be seen to link, as one would hope, policy, procedures, and objectives are aligned in organizations with values, philosophy and culture. The Swedish approach appears to strive towards creating an understanding of ethical considerations among the employees in the organization. It is done voluntarily, since there are no explicit legal requirements asking for it. The ethical values in society are integrated within the operations of the organizations. Organizations were asked about the time lines to develop their codes. The researchers were interested in whether there were any apparent patterns. When the respondent knew when their code was developed, it was usually in less than a year (32.5%:40.7%). In both sectors of Sweden, these documents appear to be ones over which organizations do not linger. Once the decision has been made to establish a code, then organizations get on and do it. A point of interest in the public sector is that 25.9% of organizations take between 1 and 2 years to develop a code. This longer length of time could well be a feature of being a public sector organization that needs to report to outside political or regulatory bodies for the ratification of the code and, therefore, delays may well be a feature of process rather than intent.

Implementing codes The methods that organizations institute to implement their codes tend to reveal their level

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of commitment to the process. If they adapt existing processes, then that is an indicator of a level of commitment, but if they create new processes to assist in code implementation, then one could say that this is evidence of a higher level of commitment. The adaptation of existing processes can relate to communication with employees, induction, discipline, staff appraisal, and strategic planning. If the organization introduces new initiatives such as an ombudsman, whistleblowing protection for employees, ethics committees, ethics education committees, and ethics education, then one could say that a higher level of commitment has been achieved (Wood & Rimmer 2003). Communication to employees Electronic Communication (55%:37.0%), a Booklet (40%:48.1%), Induction (32.5%:55.6%) and Internal Publications (32.5%:37.0%) are the major methods of code communication to employees in both sectors. The fact that electronic communication is the most used means in the corporate sector is to be expected, because the growth in intranets within organizations in the last few years has meant that we have become more reliant on technology in all of our business activities. The most used means of communication in the public sector is induction of employees. Inducting employees is important, as not to do so

devalues the code for all employees. If the code is not of significant enough importance to be on the corporate radar at induction time, then the message to staff about its importance is surely devalued. The Swedish public sector seems to be more in tune here with best practice than its counterpart corporate sector organizations. Staff induction The use of training and discussion (65%:51.9%) at the time of staff induction is a preferred option to just distributing a booklet (30%:44.4%) containing the code. The impact that the organization wants the code to make upon the employee may be lost if the attention required is not given at the time of induction. How is the employee meant to know that the code is important if it is not discussed or education given in its nuances? Consequences for a breach of the code Sims (1991), Fraedrich (1992), Stoner (1989), and Hegarty & Sims (1979) all suggest that within a code of ethics one should outline enforcement provisions for those individuals who do not uphold the code. By having procedures for a breach of the code, the organization signals to employees the significance, for both themselves and the organization, of the need to abide by the code. The respondents for consequences for breaches of the code were very definite in their attention to

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Table 1: Consequences for a Breach in Corporate and Public Sectors Consequences for a breach Yes No No response Total (N 5 67 1)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 31 8 1 40

Value 8.629 7.155 8.663 8.498

% 77.5 20.0 2.5 100.0

df 1 1 1 1

Public (n 5 27) 12 15 0 27

N valid 66 66 66 66

% 44.4 55.6 0.0 100.0

Significance 0.003nn 0.007nn 0.003nn 0.004nn

1

0 cells (0%) have expected count less than 5. The minimum expected count is 9.41. Significant at 1%.

nn

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staff behaviour in this situation (Table 1). The overwhelming majority of organizations in the corporate sector (77.5%) do have consequences for a breach of the code, yet in the public sector only 44.4% of organizations do so. This is an interesting disparity. The public sector organizations support the employees more than in the corporate sector where business considerations are taken more into account. The public servant should focus on ways to serve the citizen and as a consequence should behave appropriately in his or her dealings. The second part of this question asked the organizations to clarify the nature of the consequences of the breach. One gets a ‘verbal warning’ (58.1%:100.0%) as the preferred choice of disapproval at the employee’s actions in both sectors. A ‘formal reprimand’ is also a method of action taken (35.5%:66.7%). The difference may be explained by the actual consequences that a verbal warning and a formal reprimand may have on the employee. The impact that these actions have on the employee may be more severe in the corporate sector due to the fact that a public servant, through government legislation, has stronger legal support in the workplace. The ultimate weapon against the employee is ‘cessation of employment’ and it would appear that this course of action is one that is not as acceptable in Swedish corporate organizations or public sector organizations as it may be in other management

cultures (35.5%:33.3%). The Swedish management style is one of more participatory management, where employees are coached and coaxed into doing the ‘right thing’. The manager is not seen as a disciplinarian there to ensure employee compliance as may be the case in other cultures, but the Swedish manager perceives their role more as a mentor to lead and guide the staff members to their own enlightenment and selfcorrection in the areas where their performance may be lacking. Employee appraisal Respondents were asked whether their organizations attempted to assess an employee’s ethical performance as a part of the employee appraisal system (Table 2). The major response is that an employee’s ethical performance is not assessed (57.5%:51.9%). There is no significant association between the ethical performance criterion for employee appraisal and the organizational sector to which one belongs. It would appear that in Sweden in both the corporate and public sectors some organizations do want to control their employees by subjecting them to a level of scrutiny in this area, but many others do not. This is an interesting finding for it seems to run as a juxtaposition to normal business practice in that if an organization sets a goal in most areas of its business, it would usually check to see that the

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Table 2: Employee Ethical Performance: a Criterion for Employee Appraisal in Corporate and Public Sectors A criterion for employee appraisal Yes No No response Total (N 5 67 3)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 15 23 2 40

Value 0.282 0.075 0.282 0.278

% 37.5 57.5 5.0 100.0

df 1 1 1 1

Public (n 5 27) 12 14 1 27

N valid 64 64 64 64

% 44.4 51.9 3.7 100.0

Significance 0.595 0.784 0.595 0.598

1

0 cells (0%) have expected count less than 5. The minimum expected count is 10.97.

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employee is adhering to the espoused organizational standards. The reason for this finding cannot be answered from this study but could usefully be addressed in future research. If an employee appraisal regarding ethics is practised then a review by superiors is practised (53.3%:58.3%). However, it must be acknowledged that the relevant sample size is only 15 organizations in the corporate sector and only 12 organizations in the public sector. This in itself reveals that this type of practice may not be widespread in either sector of Sweden. Even so, there are some concerns raised with these figures. If only two organizations (13.3%, of the sample in the corporate sector) and only one organization (8.3% of the respondents in the public sector) evaluate ethical performance against formal organizational standards then there is reason for concern. If there are no formal standards in the other 86% of corporate sector organizations and no standards in the other 91% of public sector organizations in Sweden, then against what criteria would the assessment of staff performance be judged? Employee appraisal is an area in which one must try to be as objective as possible. However, not having formal guidelines for appraisal places both the supervisor and the subordinate in an extremely precarious position. Each one could suffer through the assessment which may adversely affect them, but which neither party can

compare against formal guidelines to either substantiate or refute the assessment. Whistleblowing procedures If organizations are going to expect ethical behaviour from their employees, then the act of whistleblowing (someone who reports wrongdoing by the organization) should be considered by the organization (Miceli et al. 1991, Grace & Cohen 1998, McLain & Keenan 1999, Grant 2002). It should be encouraged, because if standards are to be set one needs ways to ensure that violations or breaches can be reported, reviewed, and corrected. In Sweden, this concept appears not to be considered by many organizations (Table 3). The figure of 27.5% in the corporate sector is a concern, but of more concern is the public sector figure of 7.4%. There is a significant association between the guidelines to support whistleblowers and the organizational sector to which one belongs; the guidelines to support whistleblowers are much less frequent in the public sector organizations than in the corporate sector organizations. One wonders whether the fact that there is no perceived need for guidelines to support whistleblowers is because of the cultural norm that such behaviour would be expected and would never be punished and therefore one does not need to codify it. Hopefully this is the case,

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Table 3: Guidelines to Support Whistleblowers in Corporate and Public Sectors Guidelines to support whistleblowers Yes No Do not know No response Total (N 5 67 3)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 11 28 0 1 40

Value 3.842 2.695 4.263 3.782

df 1 1 1 1

% 27.5 70.0 0.0 2.5 100.0

Public (n 5 27) 2 23 1 1 27

N valid 64 64 64 64

% 7.4 85.2 3.7 3.7 100.0

Significance 0.050n 0.101 0.039n 0.052

1

0 cells (0%) have expected count less than 5. The minimum expected count is 5.08. Significant at 5%.

n

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because the downside to employees often is not pleasant and in most cases may be hostile. Also this concept may be one that has not previously warranted consideration in Sweden. Employees should be able to report infractions they witness, and feel secure that they will be free of potential retribution for their actions. Not to have such safeguards in place for staff leaves genuine individuals exposed and does not promote a confidence in them to report their concerns. Of the organizations that do have whistleblowing procedures, many of them have tried to put in place measures to support the individual. The concern is that only 27.3% of these organizations in the corporate sector and only 50% of public sector organizations (only two respondents) have a ‘formal resolution process’. This ambiguity is not acceptable for all parties, as all parties need protection in this area. Not to have a ‘formal resolution process’ can often provide an environment that is prone to inconsistencies of policy and in turn can lead to vagaries of interpretation. The use of codes of ethics in strategic planning If the organization is serious about inculcating ethics into the organization, then ethics should be an integral part of the strategic planning process (Robin & Reidenbach 1987, Harrington 1991). Organizations should consider and review their plans in light of the ethical principles that the

organization believes that it should practise and upon which it has predicated its decisions in respect of its marketplace participation. The researchers’ intent in asking this question was to test this potential link between the code and its use in the strategic planning process. It is encouraging to see that 55% of corporate sector organizations and 63% of public sector organizations use their codes in respect of their strategic planning (Table 4). There is no significant association between the code of ethics in strategic planning and the organizational sector. However, it is a concern in both sectors that so many organizations appear not to recognize the need to ensure that their plan matches their ethical rhetoric. The interesting and puzzling situation is that just less than 23% (9.1%113.6%) of Swedish corporate sector organizations and 17.7% (11.8%15.9%) of public sector organizations compare their finished strategic plan against their code. It is fascinating that those very organizations that have expressed the recognition of the need to align their codes with strategic planning do not make that final comparison. What if the plans and the codes are incongruous? Surely a check should be obligatory as just good corporate governance. Such an omission leaves the organization vulnerable to the possibility of inconsistency of word and deed. A comparison at this

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Table 4: Code of Ethics and Strategic Planning in Corporate and Public Sectors Code of ethics and strategic planning Yes No Do not know No response Total (N 5 67 14)

Chi-square Tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear Association

Corporate (n 5 40) 22 6 11 1 40

Value 0.759 0.313 0.760 0.745

df 1 1 1 1

% 55.0 15.0 27.5 2.5 100.0

Public (n 5 27) 17 8 2 0 27

N valid 53 53 53 53

% 63.0 29.6 7.4 0.0 100.0

Significance 0.384 0.576 0.383 0.388

1

0 cells (0%) have expected count less than 5. The minimum expected count is 6.60.

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time is a chance to prevent future heartache and dissonance in the marketplace.

A standing ethics committee This question was asked to see whether this concept, used in US organizations and recommended by a number of writers (Weber 1981, Center for Business Ethics 1986, McDonald & Zepp 1989, Wood & Callaghan 2003), has actually been incorporated by organizations operating in Sweden. In Sweden, this is a major area of differentiation between the two sectors. There is a significant association between the standing ethics committee or its equivalent and one’s organizational sector; it is much less frequent in public sector organizations than in the corporate sector. In the corporate sector 50% of organizations do have a standing ethics committee whilst in the public sector only 14.8% of organizations do so (Table 5). Not to have a committee designated for this purpose signals to the organization and other stakeholders that the organization does not see business ethics as an important enough area to warrant such attention. This perception in itself can devalue the experience that organizations are trying to provide for their staff. Once again, it could well be a feature of the Swedish public sector not seeing the relevance of such a concept to them.

An ethics training committee and ethics training The two areas of ethics training committee and ethics training are linked because one cannot just expect individuals to be ethical to the level of organizational expectations without having some involvement with training. An ethics training committee would hopefully provide the focus and initiative to expose employees to discussion and education in ethics in business situations that they might face whilst in the organization’s employment (Weber 1981, Center for Business Ethics 1986, Murphy 1988, McDonald & Zepp 1989, McDonald & Zepp 1990, Harrington 1991, Maclagan 1992, Sims 1992, Maclagan 1994, Weaver et al. 1999, Thorne Le Clair & Ferrell 2000, Wood 2002, Wood & Callaghan 2003). The fact that only a small number of respondents in each sector in Sweden have an Ethics Training Committee is a concern (17.5%:3.7%) (Table 6). There is no significant association between the ethics training committee or its equivalent and the organizational sector. This figure is low in the corporate sector and inordinately low in the public sector. In the public sector, it really appears not to be a concept for consideration. A designated committee set up for the specific purpose of ethics training and the discussion of relevant issues, the researchers contend, flags to employees of the organization the sincerity of the organization to pursue ethical principles. Not to have such a committee also flags to employees and other

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Table 5: The Existence of a Standing Ethics Committee or its Equivalent in Corporate and Public Sectors Standing Ethics Committee or equivalent Yes No No response Total (N 5 67)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Value 8.680 7.217 9.315 8.551

Corporate (n 5 40) 20 20 0 40

df 1 1 1 1

% 50.0 50.0 0.0 100.0

N valid 67 67 67 67

Public (n 5 27) 4 23 0 27

% 14.8 85.2 0.0 100.0

Significance 0.003nn 0.007nn 0.002nn 0.003nn

1

0 cells (0%) have expected count less than 5. The minimum expected count is 9.67. Significant at 1%.

n

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Table 6: The Existence of an Ethics Training Committee or its Equivalent in Corporate and Public Sectors Ethics training committee or its equivalent Yes No No response Total (N 5 67 1)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 7 32 1 40

Value 3.039 1.849 3.490 2.993

% 17.5 80.0 2.5 100.0

df 1 1 1 1

Public (n 5 27) 1 26 0 27

N valid 66 66 66 66

% 3.7 96.3 0.0 100.0

Significance 0.081 0.174 0.062 0.084

1

2 cells (50%) have expected count less than 5. The minimum expected count is 3.27.

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stakeholders that the organization may not see this area as one of importance. On a much more positive note, in both sectors of Sweden 55% of the organizations have ethics training (Table 7). There is no significant association between the existence of ethics training and the organizational sector. Hence, the need for training is pursued in both sectors even though an ethics training committee per se is not in evidence. However, someone in the organization must be coordinating these efforts to move the organization forward in this area. All employees come from different backgrounds and world experiences and ethics training is needed in order to make employees aware of the ethical values of the organization. Osmotic transfer of the organization’s ethical values

does not just occur (Wood 2000a). Staff cannot be left to their own devices in this area. Each person approaches the organization with different values and perspectives on the world, and what they may perceive as acceptable and unacceptable conduct. Training in ethics at the time of induction is not enough. At induction time, the employee is usually bombarded with many new ideas, philosophies, rules and regulations and as such they are often overwhelmed with information (Wood 2002). Training needs to be ongoing as business ethics and people’s perceptions of right and wrong evolve over time. An ombudsman This area of inquiry has a definite relationship with the issue of whistleblowing. Organizations

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Table 7: The Existence of Ethics Training in Corporate and Public Sectors Ethics training Yes No No response Total (N 5 67)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 22 18 0 40

Value 0.002 0.000 0.002 0.002

% 55.0 45.0 0.0 100.0

df 1 1 1 1

Public (n 5 27) 15 12 0 27

N valid 67 67 67 67

% 55.6 44.4 0.0 100.0

Significance 0.964 1.000 0.964 0.964

1

0 cells (0%) have expected count less than 5. The minimum expected count is 12.09.

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Table 8: The Existence of an Organizational Ombudsman or its Equivalent in Corporate and Public Sectors Organizational ombudsman or its equivalent Yes No No response Total (N 5 67 1)

Chi-square Tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 13 26 1 40

Value 4.290 3.165 4.624 4.225

df 1 1 1 1

% 32.5 65.0 2.5 100.0

N valid 66 66 66 66

Public (n 5 27) 3 24 0 27

% 11.1 88.9 0.0 100.0

Significance 0.038n 0.075 0.032n 0.040n

1

0 cells (0%) have expected count less than 5. The minimum expected count is 6.55. Significant at 5%.

n

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need individuals who are designated in this position, in order that individuals within the organization who have genuine concerns can feel free to voice them to an independent arbiter. Such a position can only but enhance the ethical health of the organization. The fact that 65% of corporate sector organizations and 88.9% of public sector organizations do not have such a person is disturbing (Table 8). There is a significant association between the existence of an organizational ombudsman or its equivalent and organizational sector. This means that the existence of an organizational ombudsman or its equivalent is much less frequent in the public sector organizations than in the corporate sector organizations. To whom do staff members go with their concerns? The obvious answer is the person’s supervisor, but research shows that it is often the supervisor who is at the centre of the ethical conflict that the staff member wishes to resolve (Baumhart 1961, Brenner & Molander 1977). This lack of a designated person leaves the staff and the organization vulnerable. Opportunities may be missed and practices allowed to continue and proliferate that may be anathema to the values that the organization wishes to perpetuate. Such a position of ombudsman is a safeguard and an internal watchdog of corporate behaviour. It is far better to be alerted by one’s own internal watchdog than by external watchdogs such as government regulatory bodies or

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even worse the media pack that hounds organizations that breach ethical standards. Prevention is far better than cure in this situation. Ethical evaluations Organizations use evaluations in various facets of their operations in order to monitor the adherence to organizational policies and guidelines. Ethics should be one such area in which evaluations and/ or audits could be used to determine if employees are following the organization’s policies and ethical ethos. Many organizations in the corporate sector do conduct an ethical evaluation of their business (62.5%) (Table 9). There is a significant association between the existence of an ethical evaluation and organizational sector: the existence of an ethical evaluation is much less frequent in the public sector organizations than in the corporate sector organizations. The response rate in the corporate sector may well be a feature of the Swedish perspective of trusting employees to be self-sufficient in their jobs and the organization’s desire to aim for constant improvement. Therefore, the organization feels a responsibility to ensure that what they believe should be happening is actually happening. Thus, they conduct evaluations to ensure that everything is happening, as they would hope it to be. However, in the public sector an ethical evaluation is virtually not

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Table 9: The Existence of an Ethical Evaluation in Corporate and Public Sectors Existence of an ethical evaluation Yes No No response Total (N 5 67 2)

Chi-square tests Pearson Chi-square1 Continuity correction Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 25 15 0 40

Value 18.817 16.640 21.375 18.528

% 62.5 37.5 0.0 100.0

df 1 1 1 1

Public (n 5 27) 2 23 2 27

N valid 65 65 65 65

% 7.4 85.2 7.4 100.0

Significance 0.000nn 0.000nn 0.000nn 0.000nn

1

0 cells (0%) have expected count less than 5. The minimum expected count is 10.38. Significant at 1%.

nn

......................................................................................................................................

practised (7.4%). Once again, it could be a feature of the Swedish public sector not seeing the relevance of such a concept to them. When one investigates the special measures to support the inculcation of ethical values at the organizational level, there appears to be some shortfall. In particular, there appears to be a failure to use the supporting measures available to organizations to model corporate culture. The supporting measures of ethics committees (50%: 14.8%), ethics training committees (17.5%:3.7%), ethics training (55%:55%), ombudsman (32.5%: 11.1%), an ethical audit (62.5%:7.4%) and procedures to protect whistleblowers (27.5%:7.4%) appear to be underutilized in corporate sector organizations that possess codes and grossly underutilized in public sector organizations. This lack of utilization of these supporting processes tends to suggest that organizations in the corporate sector in Sweden, as yet, have not developed a high commitment to supporting business ethics in their organizations. In the public sector organizations, this extensive lack of supporting measures may well be a feature of the time differential between the sectors in respect of their focus on business ethics. The recent developments in this area in the public sector are commendable, but could be much better when it comes to measures in place to enhance the level of support for staff. The Swedish public sector organizations need to move quickly to this next level of support or run

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the very real risk of devaluing the current processes that they have in place. They need to consolidate and move forward to the next level of commitment (Wood 2002).

Communicating codes Section 4 asked whether organizations inform stakeholders of both the existence of a code and its content. Is the code a document that is shared with stakeholders outside the organization? (Benson 1989, Fraedrich 1992). The link with stakeholders is that it is the marketplace that impacts on profitability for organizations in the corporate sector and it is the citizenry who determine the effectiveness of public sector organizations. It has been noted already that communication with employees is almost universal. More problematic is communication with external stakeholders, especially customers/citizens and suppliers. Informing customers and suppliers Fraedrich (1992) believes that a code should have both an internal and an external focus. Benson (1989) also believes that outside publics should be considered when ethical issues are being discussed and policies are being framed. The questions in this section were designed to explore the individual organization’s interaction with the public outside of the organization.

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Table 10: Customer Knowledge of the Existence of the Code in Corporate and Public Sectors Customer knowledge of the existence of the code Yes No Do not Know No response Total (N 5 67 1)

Chi-square Tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Value 7.647 7.821 5.444

Corporate (n 5 40) 25 9 5 1 40

df 2 2 1

% 62.5 22.5 12.5 2.5 100.0

Public (n 5 27) 8 13 6 0 27

N valid 66 66 66

% 29.6 48.1 22.2 0.0 100.0

Significance 0.022n 0.020n 0.020n

1

1 cells (16.7%) have expected count less than 5. The minimum expected count 4.50. Significant at 5%.

n

......................................................................................................................................

Nearly 63% of organizations in the corporate sector report that their customers are aware of the existence of their codes (Table 10). This is a high figure and a commendable one. There is a significant association between the customer knowledge of the existence of the code and the organizational sector; customer knowledge of the existence of the code is much less frequent in the public sector than in the corporate sector. When communicating the code to customers, the use of informal methods (60%) was by far the highest individual category (Table 11). There is no significant association between the communication of the code to customers and the organizational sector. The reliance on informal methods

raises the issue of an ad hoc approach, in that organizations cannot be sure that the organization’s ethics policy is being communicated to customers. If it is done in an informal manner, then the depth of understanding by the customers may at best be superficial and at worst non-existent. In the public sector, only 29.6% of organizations communicate their code to their customers and of this small group, 62.5% do it informally. The Swedish public sector appears to have missed an opportunity to engage with its external stakeholders for the improvement of their business practices. In respect of supplier knowledge of the codes, just over two-thirds of organizations (67.5%) in

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Table 11: Communicating the Code to Customers in Corporate and Public Sectors Communicating the code to customers Formal Informal Other No response Total (N 5 33)

Chi-square tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Corporate (n 5 25) 9 15 1 0 25

Value 4.051 3.740 3.335

df 2 2 1

% 36.0 60.0 4.0 0.0 100.0

N valid 33 33 33

Public (n 5 8) 1 5 2 0 8

% 12.5 62.5 25.0 0.0 100.0

Significance 0.132 0.154 0.068

1

4 cells (66.7%) have expected count less than 5. The minimum expected count is 0.73.

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Table 12: Supplier Knowledge of the Existence of the Code in Corporate and Public Sectors Supplier knowledge of the existence of the code Yes No Do not know No response Total (N 5 67)

Chi-square tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Value 7.681 7.801 5.673

Corporate (n 5 40) 27 5 8 0 40

% 67.5 12.5 20.0 0.0 100.0

df 2 2 1

Public (n 5 27) 9 8 10 0 27

N valid 67 67 67

% 33.3 29.6 37.0 0.0 100.0

Significance 0.021n 0.020n 0.017n

1

0 cells (0%) have expected count less than 5. The minimum expected count is 5.24. Significant at 5%.

n

......................................................................................................................................

the corporate sector report that their suppliers are aware of the existence of their codes. In the public sector, the code is communicated to suppliers in 33.3% of cases (Table 12). There is a significant association between the supplier knowledge of the existence of the code and the organizational sector. This means that supplier knowledge of the existence of the code is much less frequent in the public sector than in the corporate sector. It is of interest that in both sectors, organizations communicate their codes formally to suppliers (63.0%:66.6%) (Table 13). There is no significant association between the communication of the code to suppliers and the organiza-

tional sector. It is of interest that organizations communicate the code much more formally to suppliers (63.0%:66.6%) than they do to their customers (36%:12.5%). This disparity could well be indicative of the perceived difference in the power relationship that the organizations have with suppliers as compared to their customers. With suppliers, organizations can be more in control and can take charge of the relationship, whereas with customers they are open more to the whims of the customers. Organizations have power over suppliers from whom they may withdraw business if they consider that the supplier’s performance is not of a sufficient

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Table 13: Communicating the Code to Suppliers in Corporate and Public Sectors Communicating the code to suppliers Formal Informal Other No response Total (N 5 34)

Chi-square tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Corporate (n 5 27) 17 6 2 2 27

Value 0.940 1.439 0.081

df 2 2 1

% 63.0 22.2 7.4 7.4 100.0

Public (n 5 9) 6 3 0 0 9

N valid 34 34 34

% 66.6 33.3 0.0 0.0 100.0

Significance 0.625 0.487 0.776

1

3 cells (50.0%) have expected count less than 5. The minimum expected count is 0.53.

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standard. However, in their relationship with customers, power usually lies with the customer. Hence, organizations may have been reticent to reveal a code because of the fear that customers/ citizens may have used a perceived disparity between the code and actual practice to criticize the organization. This situation may not be a conscious decision, but one that has been made in a ‘subconscious’ manner by the organization in response to its perceptions of its interactions with its marketplace. This disparity, however, does open up the debate about whether organizations in both sectors of business in Sweden have missed the salient point of being ethical in their business dealings. One needs to ensure that one’s employees always engage in open and honest interaction with all parties with whom they come into contact.

Perceived benefits In the previous sections of this paper, commitment has been viewed in terms of inputs: the areas of managerial time, implementation, resources, and communications that may signify whether a code is considered of marginal significance or of importance to an organization’s operation. Another perspective is to consider outputs. What benefits do firms expect to derive? If these benefits are significant, commitment is more beneficial than if they believe that they do not derive any or at best limited benefit.

the concept from the perspective of the organizations surveyed. An effect of a code of ethics on the bottom line was acknowledged by 60% of organizations in the corporate sector whilst 74.1% of organizations in the public sector saw the code as having an effect on their organization. The listed effects of the code Organizations were asked to list the effects on them of having a code of ethics. The responses could be classified into a number of types. The responses centred around altruistic ideals such as being good corporate citizens; mercenary ideals that focused on improving the position of the organization; and regulatory ideals that were fixed on ensuring that the employees of the organizations were controlled and prevented from doing damage to the organization. Organizations pursue ethical practices and behaviours for a wide range of reasons. Not all of these, it would appear, are based upon the highest ethical considerations. The corporate sector seems to have a stronger focus on those ideals that may be indicative of a more mercenary perspective (72% of listed effects), while the public sector organizations seem to focus more upon altruistic ideals (50% of listed effects). This difference in focus could well be just as a result of their different roles and goals within society. More investigation is needed here before more definite opinions can be expressed and as such further speculation is outside the current scope of this study.

Ethics, profit and outcomes There was an interest in discovering whether organizations perceive that having an ethical commitment has assisted organizational outcomes. In the corporate sector this is usually judged by the impact on profitability, whilst in the public sector the measure is usually with respect to how these processes have assisted goal accomplishment. In the corporate sector, the link between profit and being ethical has perplexed researchers for many years. It is a debate about which it is difficult to be definitive, because there are so many variables and uncertainties. Yet, it is a question that needs to be asked, in order to view

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Resolving ethical dilemmas in the marketplace This question was designed to determine practical examples of the code being of use in the marketplace with other organizations and/or individuals with whom the organization has dealt. Just over 50% of corporate sector organizations use their code to resolve ethical dilemmas in the marketplace, whereas the concept was not one that appeared relevant to the public sector organizations (11.1%) (Table 14). There is significant association between the use of the code to resolve ethical dilemmas in the marketplace/ society and the organizational sector; it is much

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Table 14: The Use of the Code to Resolve Ethical Dilemmas in the Marketplace/Society in Corporate and Public Sectors Resolve ethical dilemmas Yes No Do not Know No response Total (N 5 67 6)

Chi-square tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Corporate (n 5 40) 21 3 11 5 40

Value 18.881 20.639 6.146

% 52.5 7.5 27.5 12.5 100.0

df 2 2 1

Public (n 5 27) 3 13 10 1 27

N valid 61 61 61

% 11.1 48.1 37.0 3.7 100.0

Significance 0.000nn 0.000nn 0.013n

1

0 cells (0%) have expected count less than 5. The minimum expected count is 6.82. Significant at 5%. nn Significant at 1%. n

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less frequent in the public sector organizations than in the corporate sector organizations. The public sector organizations may not have seen a ‘marketplace orientation’ as appropriate to the use of their codes of ethics. Yet, one would hope that as they do interact with those external to their own organization, they would have had some cognizance of the relevance of the code to these ‘marketplace’ activities. A concern with both groups is that so many organizations proffered a ‘no’ or ‘do not know’ response (35.0%:85.1%). If codes are not resolving, or respondents just ‘do not know’ if they are resolving, ethical dilemmas in their business environment, then what are the codes used for in organizations? Are codes of ethics, then, inward regulatory documents – as suggested by Mathews (1987), Lefebvre & Singh (1992) and Wood (2000b) – or are organizations just missing an opportunity to maximize their utilization? Or even worse, could it be that codes are just window dressing that appear to be perceived as having minimal relevance to the daily operations of organizations? If a code does not assist one in resolving ethical dilemmas in the marketplace then why have one? Perhaps the code is assisting to resolve ethical dilemmas in the marketplace, because the staff members are using its ethos subconsciously to solve daily dilemmas, but not

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consciously recognizing its effects on them. The responses to this question do raise a conundrum. Code effectiveness It would appear that, in general, organizations do view the code as an effective document that appears to be assisting the organization in its business practices. There is a significant difference (Independent Samples t-test/significance: 0.009nn – Levene’s Test for Equality of Variances – F: 0.561 and significance: 0.457 – Six-point scale: 1 5 No Effect and 6 5 Excellent) between the effectiveness of the code of ethics and one’s organizational sector. This means that the effectiveness of the code of ethics is perceived as higher in the corporate sector organizations than in the public sector organizations. In general, Swedish corporate sector organizations do view the code as an effective document that appears to be assisting the organization in its business practices. 82.5% of organizations see the code as being positive or better (Mean: 4.4). This figure does contrast with the public sector where 66.6% (Mean: 4.0) of public sector organizations see the code as being positive or better. Public sector organizations seem to rate their codes less highly than corporate sector organizations. Of and in itself this phenomenon is of interest. Could this

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Table 15: Intention to Establish a Code within the Next 2 Years in Corporate and Public Sectors Code within the next 2 years Yes No Do not Know No response Total (N 5 88 2)

Chi-square tests Pearson Chi-square1 Likelihood ratio Linear-by-linear association

Corporate (n 5 32) 22 4 4 2 32

Value 18.834 19.294 13.434

% 68.8 12.5 12.5 6.3 100.0

df 2 2 1

Public (n 5 56) 14 24 18 0 56

N valid 86 86 86

% 25.0 42.9 32.1 0.0 100.0

Significance 0.000nn 0.000nn 0.000nn

1

0 cells (0%) have expected count less than 5. The minimum expected count is 7.67. Significant at 1%.

nn

......................................................................................................................................

impression be the result of the fact that public sector organizations may well have implemented codes of ethics as a direct result of outside political and regulatory pressure to do so and, therefore, whilst the artefact has appeared, the ethos behind the artefact may well not have been embraced as was expected or even for which the creators had hoped? A code within the next 2 years The organizations that did not have a code were asked of their intentions to establish a code within the next two years (Table 15). There is a significant association between the intention to establish a code within the next 2 years and the organizational sector; it is lower in public sector organizations than in corporate sector organizations. The positive response rate in the corporate sector was 68.8%. Based on these figures, it would appear that the movement towards having a code of ethics in the corporate sector will continue to grow within Sweden. However, in the public sector, the growth of the movement in respect of codes is much less assured. Only 25.0% of organizations reported that a code is on their agenda within the next two years. If these figures are indicative of the interest that will be shown in the next 2 years, then the divergence between code numbers in the corporate and public sectors will grow dramatically.

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Codes will be increasingly more prevalent in the corporate sector as compared to the public sector. The current figures show 40/72 (55.6%) codes in the corporate sector and 27/83 (32.5%) in the public sector. In two years, if one adds the figures for the current code usage and the figures for the proposed code usage, the situation in Sweden may well look like 62/72 (86.1%) codes in the corporate sector as compared to 41/83 (49.4%) codes in the public sector. Sweden effectively may have its two sectors of business becoming highly divergent in their acceptance of business ethics practices as a norm. Moving in parallel would surely be a more desirable outcome than such a marked disparity that may lead to intersector concerns and machinations about the precepts upon which business interaction in Sweden is predicated.

Conclusion Within both the corporate and the public sectors of Sweden, the processes involved in business ethics have begun to be recognized and acted upon at an organizational level. Evidence is now available to show that codes of ethics are well developed in many of Sweden’s largest corporate organizations and a lesser number of public sector organizations: organizations that from their responses see a diverse range of benefits in developing the area of business ethics. These

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organizations are beginning to implement not only a code of ethics, but also other complementary initiatives that reinforce the need for the culture of the organization to focus more on business ethics than has been done until recently. The movement towards business ethics varies between the corporate and the public sectors. This may well be just a feature of the current spotlight being upon corporate excesses and the need for business to be seen to be doing the ‘right thing’. The relevance to the public sector of this need and perhaps even a requirement to be ethical may not yet have become as apparent as it has become within the corporate world in Sweden. The researchers have concerns in both sectors with the lack of use of the range of support measures that one could invoke to inculcate the ethos of the code into the organization and that individually and collectively are indicative of a high commitment to being ethical. There is an obvious lack of staff training, ethics committees, whistleblowing procedures, and ombudsmen in both sectors. It is not enough to have the artefacts of an ethical culture, such as codes, without ensuring that all employees are assisted to understand what is required of them. These observations are not meant to be seen to admonish the corporate and public sectors in Sweden, but to highlight that the Swedish business ethics experience is one that is in its early forms of evolution and if organizations wish to move to the next level of ethical development they need to seriously consider these higher-order indicators of organizational commitment. Such initiatives are designed to ensure better outcomes for all.

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