European Business Ethics Forum: Sharing Ideas and Successful Practices
Annual Conference in association with IBE, ECOA, CEA-CED and EBEN for those responsible for ethics within their organisation.
view the conference website www.ebef.eu

Open Discussion
Ethical Due Diligence
Patrick Dunne, Group Communications Director, 3i

In his talk, Patrick Dunne explained why in 3i corporate responsibility forms an important part of their commercial due diligence. A publicly listed private equity company, 3i has corporate responsibility policies in place, both for the corporation itself and for their investment activities. The company's CR report and policies are regarded as sales tools, as sound corporate responsibility standards will improve the sustainability and long-term prospects of a business.

Corporate responsibility considerations play a role both during the pre-investment phase and in portfolio management. 3i's commercial due diligence into potential investment targets includes an assessment of ethical risks and opportunities. They also seek to ensure that they work with people who have high ethical and professional standards and sensitivity for potential ethical risks. 3i requires the companies they own to comply with local regulation or to adopt higher standards (e.g. regarding child labour, health & safety). This is particularly important if the company is subsequently to be sold to a globally operating business. 3i also seeks to resolve any arising responsibility issues, knowing that a good CR record will help to sell the company. As an example, the speaker mentioned that in one case a major part of the value creation from particular chemical company was the opportunity to transform it to meet higher environmental standards. Furthermore, engagement with employees and trade unions where relevant is considered key to successful private equity projects. Finally, when companies are sold back into the market, 3i does not always accept the highest bidder, as the quality of the organisation or person purchasing is important.

The speaker said that with every investment project it is important to have a clear purpose, and the right people and processes in place. Value creation takes place primarily through earnings growth, not financial engineering. However, the communication of the importance of CR for the long-term viability of the businesses remains an on-going challenge.

Discussion topics included:

• What happens when things goes wrong
• Private Equity in China
• Relevant indicators in Ethical Due Diligence exercises
  

Speaker Lunch
How Imperial Tobacco approaches stewardship
Ian Bailey, Head of Science & Stewardship, Imperial Tobacco

The speaker set out how his organisation, a globally operating tobacco company, seeks to ensure it lives up to high standards of corporate responsibility. He explained that in the context of Imperial Tobacco stewardship means 1) discharge of legal responsibilities which any manufacturer has under UK case law ("Duty of care") and 2) behaviour consistent with ethical systems and standards.

In addition to compliance with existing legislation and regulation, manufacturers are required to take reasonable care in the design and manufacture of their products. They are expected to keep themselves informed about the product and its reported effects and to respond to new information. Imperial Tobacco meets these requirements by, for example, having stewardship processes for ingredients and 'contact' materials in place, by pursuing a quality driven management approach (ISO 9000 and 14001) and by promoting good agricultural practice among their leaf growers. Their research and development department creates internal understanding of the product, for example, by carrying out toxicology assessments and testing of ingredients and emissions. Furthermore, they review relevant scientific literature, attend conferences and engage with independent experts. Imperial Tobacco also seeks to develop new products that may prove to be less harmful to the consumer.

The speaker argued that more formal ethical analysis is needed both in business and civil society. He referred to four ethical theories that could be used for such analysis: deontology, consequentialism, post-modern ethics, and virtue / value ethics. All of these approaches should be used together, otherwise only partial solutions to ethical problems will be found.

Ian Bailey mentioned a number of ethical instruments that are used within Imperial Tobacco: a values statement that sets out actions the company will do, a set of business principles, and group-wide policies and standards. Education and persuasion is preferred to a coercive approach to changing behaviours. Imperial Tobacco sets itself high expectations with regards to responsible behaviour. These include an international marketing standard, environmental stewardship, enlightened employment practices (compliance with ILO core conventions), elimination of smuggling and counterfeit and community investment and capability building.

Discussion topics included:

• the benefits of a principles-based marketing code of practice
• board sensitivity to ethical issues
• ethical decision-making in business
• the value of the 'business case'
  

Ethics in the Workplace
The Good Employer
Mike Emmott, Chartered Institute of Personnel & Development

Mike Emmott began by looking at what is meant by the idea of a 'good employer'. He discussed concepts of paternalism, fair pay and conditions, and job security. Employee satisfaction was another measure frequently used in employee attitude surveys. But, along with other examples, Mike suggested that 'good work' was essentially 'well-managed work'. The People and Performance model, developed by Prof John Purcell, shows that HR practices are mediated by line managers; if managers do their job well, employees will do their best for the organisation. Their 'discretionary behaviour' gives fulfilment to staff and enhances performance.

Mike outlined the elements of the psychological contract and talked through a model drawn up through CIPD research on how to manage it. The main elements of the psychological contract are trust, fairness and 'delivery of the deal' ie. employers doing what the employee expects of them and vice versa. The key element underpinning a positive employment relationship as well as an ethical framework, is trust. Employers' interest in corporate social responsibility means that employees are increasingly seen as stakeholders.

The following issues were raised in discussion -

• Engaging employees and seeing them as a key relationship
• The importance of front line managers in raising levels of of employee engagement
• The rights of agency workers
• The psychological contract across the generations
• The importance of respect to individuals, no matter what their job
• The difficulty of marrying the requirements of staff for work/home balance and the demands of clients for 24 hour contact.
  

Publication Launch
Use of Codes of Ethics in Business: 2007 survey & analysis of trends
by Simon Webley with Nicole Dando, Niall Gallagher & Lutz Preuss.

Jenny Dawkins, Head of Corporate Responsibility Research at Ipsos MORI Reputation Centre provided some context for the IBE's Use of Codes of Business Ethics Survey. Using a number of surveys, she showed how consumer views of business has changed and profit is no longer enough to legitimise a company's role in society.
Stakeholders have high expectations of companies and do not feel they are living up to them. Integrity and honesty of companies are the key things which consumers judge companies on, yet there is still a trust gap between what the public expect and how they perceive business behaviour.

Simon Webley, IBE Research Director, the author of the report, then described the main findings and the principal results of the fifth IBE survey of FTSE350 companies on how they use and implement their codes of ethics. The Institute has been conducting this survey since 1995 and so can trace trends and changes in the way companies use their codes of ethics to embed their values within company culture. (see here >> for more information about the report).

Nicole Dando, Head of Projects at IBE and author of a chapter of the report, then spoke about the findings of the survey with regards to how companies deal with climate change in their codes of ethics.

Discussion topics included:

• The mismatch between what concerns companies and what concerns the general public
• Ethical assurance - companies measuring their performance against their own ethical values
• Cost of investment in business ethics.
• Bonus structures to reward long-term thinking rather than short term profits.
• Values-based versus compliance-based codes.
• The role of leaders in setting the cultural tone of an organisation from the top
  

Roundtable
Promoting Integrity in Reporting
Anne Davis, Institute of Chartered Accountants in England & Wales

Calls for a renewal of integrity in business reporting are common whenever there is a lack of public confidence in business. An IBE survey conducted by Ipsos-MORI shows that the public believe that business is behaving less ethically that a year ago (54% compared to 58% in 2006). Mistrust in business leads to calls for greater regulation

• What can be done to enhance the standards of corporate reporting?
• What is meant by integrity in business reporting?
• Why is integrity in business reporting important?
• How can reporting inspire trust and confidence?
• How does an organisation achieve the consistency and openness required for reporting with integrity?

Anne Davis, Ethics Manager, at the ICAEW will introduce the discussion at a corporate subscriber only roundtable on the subject of promoting integrity in reporting on Thursday 13th March . Her responsibilities include the ICAEW's Code of Ethics and consultations/representations to regulators and other bodies on ethics related matters. Anne is principal author of the ICAEW's Reporting with Integrity publication.

Speaker Lunch
Tackling corruption: Anglo American and the EITI
Edward Bickham, Executive Vice President, External Affairs Anglo American
The speaker first outlined his organisation's anti-corruption policies and then explained more about the Extractive Industry Transparency Initiative (EITI), on the Board of which he serves and in which Anglo American is an active participant.

A globally operating mining company, Anglo American has developed a range of standards and tools designed to combat bribery and corruption. In their Business Principles, they set out their position on corruption: 'We are implacably opposed to corruption. We will not offer, pay or accept bribes.' Furthermore, the company has a policy of making no political donations and they seek to avoid any misuse of social investment funds for political ends. Anglo American also seeks to promote the application of their Business Principles to their business partners and in their joint ventures.

The company has a range of mechanisms in place designed to ensure compliance with their anti-corruption policy. As part of an Annual Letter of Assurance, Business Unit CEOs are required to confirm compliance with the Business Principles including the anti-corruption policy and to explain in which circumstances they may have encountered attempts to solicit bribes and how they dealt with it. External assurance processes and the company's Integrated Risk Management Process also consider bribery and corruption. Furthermore, Anglo American provides a well-used global 'speak-up' facility to their employees. On-line training modules are also being developed to provide more guidance to staff on this issue.

The context of the EITI is the highly specific nature of the extractive sector. Extractive projects are characterised by long-term investment horizons and immobile (geologically defined) assets. As such, they have a strong interest in good governance and stability. On the other hand, there are concerns around how the revenues that extractive companies generate are being used by host governments. Will they be used to further the country's socio-economic development or will they serve only to enrich the country's elite? Extractive operations also pose a number of macro-economic challenges. For example, as an export-oriented industry they can significantly influence the host country's exchange rate of currency and may 'crowd-out' other sectors; moreover, the volatility of commodity prices may lead governments to over-extend their public expenditure during boom times, leading to debt during downturns.

The EITI was set up in 2002 as multi-stakeholder initiative to improve governance in resource-dependent countries. Oil, gas and mining companies declare all their tax and royalty payments, whereas host governments declare receipts. The benefits of this initiative include capacity building, greater transparency and protection against embezzlement by elites.

The EITI is governed by an international board comprising representatives of implementing countries, supporting countries, NGOs, oil/gas and mining companies, investors and international financial institutions (observers). The implementation of the EITI is a country-led process; each country decides which stakeholders will be involved. No country has been verified for compliance yet but there are more than 20 candidate countries.

The EITI is seeking to extend its scope. In future, it will aim to improve the transparency of sub-national revenue flows. The EITI++ project, being proposed by the World Bank, on the other hand, will focus on "the entire chain of managing natural resources - from awarding contracts, monitoring operations to collecting taxes, to improving resource extraction and economic management" (http://eitransparency.org/). Finally, EITI's approach may also spread to other sectors with government rent.


Discussion topics included:

• Challenges around the multi-stakeholder approach
• Possible involvement of the BRIC countries in EITI
• Challenge of extending business principles to join-ventures

Open Discussion
Ethics & Ageism
Rachel Krys, Employers Forum on Age

Age discrimination in employment is now unlawful.
But like most laws designed to combat discrimination and promote equality, there are many grey areas and much debate about what this really means, both for employers and employees.

• What are the ethical issues surrounding ageism in the workplace?
• What impacts does the new legislation have on the workplace?
• How are decisions about recruitment, redundancy and retirement affected?
• How can employers fairly reward loyalty and performance?
• Why is age an issue?

Rachel Krys is the Director of the Employers Forum on Age (EFA), the UK's leading authority on age. Founded in 1996 the EFA is an independent network of leading employers who recognise the value of an age diverse workforce.

Rachel will examine these questions which will then be followed by an open discussion under the Chatham House Rule. The event will take place at 24 Greencoat Place, London SW1P 1BE starting at 3pm. The event will close at 5.00pm.

Ethics in the Workplace
Crisis Management: Preparation - the Key to Avoiding Negligence
Dom Chester, Senior Consultant, Crisis Management and Business Continuity, Control Risks

This talk focused on companies' duty of care in relation to crisis management. Drawing from a case study in which he had been involved as a consultant, Dom Chester highlighted a number of issues that may arise if organisations are not sufficiently prepared for a crisis. The case study was about the evacuation of employees from Lebanon during the military conflict between the Hezbollah and Israel in 2006. Issues that emerged during the evacuation included companies' failure to have a contingency plan in place, confusion over ownership of the problem (i.e. which corporate function or department should be responsible), over-reliance on the relevant authorities, lack of understanding over time required, and poor communication.

The speaker said that there are three phases to every crisis: Before (the preparation phase), During (reaction and response) and After (review and realign). Particularly focusing on the preparation phase, he emphasised how crucial it was for a company to develop and maintain capability and to provide adequate training. Important aspects of crisis capability include

• having a dedicated team in place,
• being clear about what needs protecting (people, finance, assets etc),
• up-to-date contingency plans and provision of adequate training to people who will use them,
• having appropriate communication channels in place,
• provision of an adequate forum for team members to meet and communicate,
• relevant experience (including experience from scenario exercises).

In the final part of his talk, Dom Chester explained some provisions of the 2007 Corporate Manslaughter Act and how they affect corporate duty of care.

Discussion topics included:

• importance of worst-case-scenario training
• who in the company should be trained
• levels of risk assessment
• importance of stakeholder perception of how a company responds to a crisis
• challenge of providing appropriate support to different kinds of employees in the event of a crisis (e.g. expats vs local workers)
• how crisis evaluation can lead to a review of other corporate policies (e.g. policies on home working)