FINEX FILES

“IN the next century, a company will stand or fall on its values,” Robert Haas, Levi Strauss chief executive officer, was quoted as saying, probably not long after all the humongous financial scandals in the United States and other countries shook the foundations of corporate integrity. For indeed, if you were to dig into what did them all in, you could really conclude that it was when corporations and their executives began to play around values and with the meanings of right and wrong that these companies began to slide down to perdition.

In the aftermath of those scandals, corporate governance gained importance, one of its aspects being the code of donduct, which is encouraged by all three regulators ( Securities and Exchange Commission, Bangko Sentral ng Pilipinas, and Insurance Commission) to promote the highest ethical and professional standards in boards of directors and individual company directors. Such a code should provide guidance to directors and help them in carrying out their duties and responsibilities, and should define the standards of professional competence and conduct that companies must expect of their directors.

Moreover, companies that develop codes of conduct provide tangible evidence that they are committed to meeting the expectations of their shareholders, stakeholders and the general public. Such codes of conduct, especially if they are made public, help companies with their compliance and fiduciary obligations.

Companies with codes of conduct and ethical behavior enhance the company ’ s reputation for fair and responsible dealing, help maintain high standards of behavior throughout the organization, inform all employees with a clear idea of what the company is setting out to do and how it will do it, and develop pride among the staff.

In crafting a code of conduct, one has to take into consideration what is ethical. But how does one define what is “ethical behavior?” The dictionary actually provides a variety of meanings to ethics; one that is given to it is “the principles of conduct governing an individual or a group.” Ethics is also defined as the standard of conduct that indicates how one should behave based on moral duties and virtues arising from principles about right and wrong. Ethics is not about the way things are, but rather about how things ought to be.

A code of ethical behavior would have to answer the question, “What ought one to do?” Or, “What may be done, and what may not be done?” Or “Am I acting rightly or wrongly?” Further, one has to also ask, “To act rightly or wrongly, according to what, or according to whom?” In other words, the company defines what are the right things to do, and what things the company will not abide. Moreover, in the implementation of such a code of conduct, policy must definitively state the sanctions for misbehavior, or acts that violate the specific provisions of the code. The one thing that a code of conduct must never be is to be just a wish list, or a grandiose description of good behavior merely enshrined perhaps in a bronze plaque in the company’s main lobby. Regulation demands compliance.

A code of conduct promotes a culture of transparency and accountability, and in the end, brings about investor confidence. Needless to say, such a code enhances the image and standing of companies before regulators, investors and of the public as a whole.