Decade Long Dilemma of Business Ethics

Gizem AlperBy Dr. Gizem Alper

Over the past decade, corporate compliance and ethics has become an increasingly important topic in many jurisdictions around the world. Multinational businesses have been adopting internal compliance programs, however the problem of effective implementation “in practice” has yet to be solved.

There have been numerous global corporate scandals in the past decade.  Most of the businesses involved in the corporate scandals already had internal compliance programs in force- though as it appears, they were ineffective.  It has been noted by some practitioners that the ineffectiveness is largely due to the lack of ethics in compliance programs and consequently, the lack of an ethical corporate environment in the workplace.

Global top business schools have been making efforts to teach ethical corporate behavior: they have redesigned their curriculum by offering courses emphasizing ethics. However, when it comes to ethical business decision-making, what has been taught to prospective leaders and executives have not been as effective as initially envisioned.

On the other hand, global businesses worldwide have adopted codes of conduct that emphasize ethical values, such as honesty and integrity. However, in actual practice, in some cases, these values have only remained as “words on paper”.

As it is today, there seems to be a dilemma. Why are compliance programs “ineffective” in practice? Why is it not “enough” to teach ethics in the classroom and emphasize ethical values in the codes of business conduct in order to create an ethical corporate environment?

Business ethics is a vague and gray area; therefore analytical teaching methods and emphasizing ethical values through “mission and vision” statements of codes of business conduct lack effectiveness. Global businesses need to take concrete measures. Some of the concrete measures that have already been taken or noted are: seeking the engagement of board of directors by instituting ethics committees; providing training to employees on internal ethical policies; encouraging ethical behavior in the workplace through incentives, such as determining ethical- related activities as a criteria for performance review; using gamification as awareness campaigns; and implementing monitoring and accountability measures, such as setting up 24/7 helplines and foreseeing disciplinary measures.

I believe that there is yet another accountability measure- a unique “tool”, which can be used to ensure that executives comply with business ethics. If the ultra vires doctrine was to be interpreted in a progressive manner, it could be used as a tool to monitor unethical business conduct.

Ultra vires is a Latin term meaning “beyond powers”. Historically, the ultra vires doctrine was used to control the activities of businesses: businesses were only allowed to conduct activities in which they had been granted permission to conduct. Over time, the ultra vires doctrine was “left to die” when regulators enabled businesses to conduct any lawful activity.

I suggest that a new and progressive “meaning” could be vested on the ultra vires doctrine. If the codes of business conduct that have ethical dimensions were to be endorsed and signed by executives as legally binding documents, any breach of ethical values could be interpreted as the breach of duty of the executives, thus this would mean that the executives lacked power of conducting such unethical acts.

Moreover, having especially top- level executives endorse and sign the codes of business conduct as legally binding documents and emphasizing therein that unethical conduct is “beyond powers” or in other words “ultra vires” would –at the least- set an ethical tone in the corporate work environment. I do believe that this tone may in time lead to ethical business practices in a larger scale.

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Dr. Gizem ALPER, corporate lawyer registered to the Istanbul Bar Association and currently a visiting scholar at The New School, Milano School of International Affairs, Management and Urban Policy in New York City.