corporate ethical policies in large corporations in argentina

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Corporate Ethical Policies in Large Corporations in Argentina, Brazil and SpainAuthor(s): Domnec Mel, Patricia Debeljuh and M. Cecilia ArrudaSource: Journal of Business Ethics, Vol. 63, No. 1 (Jan., 2006), pp. 21-38Published by: SpringerStable URL: http://www.jstor.org/stable/25123685.

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Journal of Business Ethics (2006) 63: 21-38DOI 10.1007/sl0551-005-7100-y? Springer 2006

Corporate Ethical Policies in LargeCorporations in Argentina, Braziland Spain

Domenec MelePatricia Debeljuh

M. Cecilia Arruda

Domenec Mele is Professor and Director of the Department ofBusiness Ethics at IESE Business School, University ofNavarra, Spain. He chairs the biennial 'InternationalSymposium onEthics, Business and Society held by IESE.

He has a Doctoratedegree

in IndustrialEngineering

andanother in Theology. He is author or co-author of seven bookson business ethics and social ethics (in Spanish) and has editedten books (in Spanish), which include different topics onbusiness ethics and corporate social responsibility. In addition,he has written 20 case studies (IESE Publishing) andnumerous articles and chapters in this field.

Patricia Debeljuh is an Associate Professor at the Departmentof Administration and Human Resources at Universidad

Argentina de la Empresa (UADE), Argentina. Sheobtained her degree in Human Resources at UADE and adoctorate in Philosophy at the University of Navarra,Spain. Her areas of specialization include business ethics,

philosophical foundations for management and corporateresponsibility. She is author of 'El desafio de la etica'(The ChaUenge of Ethics) and 'La conquista de las

virtudes en la empresa' (The conquest of virtues inthe company) and co-author of three books on businessethics and philosophy of management. She is also Academic

Director of the Latin American Association of Ethics,Business and Economics (ALENE).

M. Cecilia Arruda is an Associate Professor at the FundacaoGetulio Vargas - Sao Paulo, Brazil, where she teaches in

the area of Marketing and Ethics. She got her Bachelordegree in Economics and Doctorate in Business Administration at the University of Sao Paulo, and aMaster degreein Business Administration at the Fundacao Getulio Var

gas ? Sao Paulo. Her post-doctorate program on Ethics inAdvertising was developed at theCUNY ? City UniversityofNew York. Professor Arruda is afounding member ofALENE (LatinAmerican Business Ethics Network) and oftheCenter of Studiesfor Ethics in organizations, which shecurrently coordinates (CENE/EAESP/FGV). Currentlyshe serves as a member in the Executive Committee of theInternational Society of Business, Economics and Ethics(ISBEE).

ABSTRACT. This paper examines the status of CorporateEthical Policies (CEP) in large companies in Argentina,Brazil and Spain, with a special emphasis on CorporateEthics Statements (CES), documents that define the firms'philosophy, values and norms of conduct. It is based on asurvey of the 500 largest companies in these nations. Thefindings reveal many similarities between these countries.

Among other things, it emerges that most companies giveconsideration to ethics in business and have adopted somekind of formal or informal ethical policies. Regardless of

whether or not they have a CES, companies agree thatethical conduct must be taken into account when selecting,appraising and promoting personnel as an important ethicalpolicy. There is a growing tendency to draw up formalcorporate ethics documents. These documents are perceived, first and foremost, as supporting the development ofcorporate culture. Most respondents believe that primaryresponsibility for ethical issues in the company restswith the

CEO. Finally, the findings indicate that most companiesthat devote more resources to communicating and imple

menting CESs have two or more formal ethics documents.The main differences between the countries included in thestudy concern the emphasis given to specific aspects, such asavoiding misconduct or taking ethical criteria into account

when selecting personnel. The emphasis is greatest incountries where corruption seems most prevalent.

KEY WORDS: codes of conduct, values statement,business ethics policy, institutionalization of businessethics, Argentina, Brazil, Spain.

Introduction

Over the last two decades, there has been a growinginterest in developing and implementing CorporateEthical Policies (CEP) in order to foster ethicalconduct among managers and employees. Accordingto Brooks (1989), the factors underlying the growing

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22omenec Mele et al.interest in business ethics policies include: the

widespread mistrust of business activities; the demand for a better standard of life in line with peoples' expectations; the requirement that executivesdo not act solely for their own profit, the awarenessof companies' increasing power and the need toregulate the activities of certain interest groups;greater public interest in these matters and a greaterawareness of them. A change in perspective thatargues against reducing the goal of business to theshort-term maximization of profit is also relevant.

Beyond these influences, there is the fact, acceptedsince Aristotle made his first impact, that ethics ispart of every human action, and the recognition ofthis helps to humanize business activity.At the core of any CEP lie certain corporatedocuments (corporate creeds, mission and valuesstatements, business principles and similar texts) thatdefine the firm's philosophy and values and/or acode of conduct setting out rules for dealing withcertain business dilemmas or special issues that mayarise in the workplace (Mele, 1994). These docu

ments, which generically can be called CorporateEthics Statements (CES), are like a compass for thecompany, guiding it in practices that lead to goodethical behavior. A CES usually goes hand in handwith a process of communication and appropriatetraining, as well as with other support measures.

According to Nash (1992), the introduction ofethical practices in firms tends to be triggered byevents such as a scandal, the appointment of a newChief Executive Officer, the retirement of a founderor the introduction of new legislation. There may beother reasons, but the important thing is that theinstitutionalization of ethics in business, and morespecifically the development and implementation of

CESs, has become a significant social phenomenonin many business corporations. It started in theUnited States and then spread to Europe, Canadaand Japan .More recently, this practice has reachedLatin America.

There is extensive literature on CESs, mainly oncorporate values and codes of ethics (Benson, 1989;

Brooks, 1989; Chatov, 1980; Cressey and Moore,1983; Dean, 1992; Mathews, 1987; Molander, 1987;

Murphy, 1989, 1995; Osborne, 1991; Ryan, 1991;Weaver, 1993; Weller, 1988; among many others)

and on other aspects of corporate ethical policies(Andrews, 1989; Brenner, 1992; Cash, 1987; Center

for Business Ethics, 1992; DriscoU and Hoffman,2000; Gaumnitz and Lere, 2004; Kaptein and

Wempe, 1998; McDonald, 2000, etc.).There are also publications on the spread ofCEP and, more SpecificaUy, on codes of conductand other CESs in particular countries. Large UScompanies have been studied by White andMontgomery (1980), Berenbeim of the Conference Board (1987, 1992), the Center for BusinessEthics (1986, 1992), Sweeny and Siers (1990),

Murphy (1995, 2000) and Weaver et al. (1999a).Schlegelmilch and Houston (1989) study corporatecodes of ethics in large UK companies, while

Kaye (1992) does the same for Australian corporations and Snell et al. (1999) for corporations inHong Kong. Lefebvre and Singh (1992) analyzeCanadian corporate codes of ethics, while Lindsayet al. (1996) survey how Canadian companies areinstilling ethical policies. Mele et al. (2000) reportthe results of a survey on CEP in large Spanishcompanies and Arruda (2001) offers a comparativeanalysis of the contents of Brazilian codes ofethics.

Other scholars have carried out comparativestudies of codes of ethics and other CESs in different countries. Schlegelmilch (1989) comparesthe UK and the USA, while Langlois and Schlegelmilch (1990) compare the USA and threeEuropean countries (Britain, France and WestGermany). Berenbeim (1992) compares the diffusion of codes of ethics in the USA, European andCanadian firms. GuiUen et al. (2002) analyze severaldifferences in large Spanish companies that haveheadquarters in either the USA or Spain, whileWood et al. (2004) deal with the implementationof corporate codes of ethics in Australia, Canada,and Sweden.

Similar studies for Latin America are very scarce,whether on individual countries or on makingcomparisons between countries. The purpose of thispaper, is to help to fiU this gap by exploring thecurrent state of implementation of corporate ethicalpolicies in large companies in Spain, Argentina andBrazil (see Appendix for some socioeconomic andhistorical data relating to these countries). Thiscomparison seems interesting because of the Spanishinfluence on the Argentinean culture and the stronglinks between Argentina and Brazil. All of thesecountries, although with differences, share a Latin



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Corporate Ethical Policies in Large Corporations 23

culture and a vast majority of their population isnominaUy Roman Catholic (between 80 and 90%,although only 20% practice regularly). Additionally,

Argentina and Brazil are the two largest countries inLatin America (the population of these countries ismore than 210 miUions), which could be a referencepoint for other studies.The paper presents research based on a survey ofthe 500 largest companies in these countries. It startsby describing the methodology employed. Then, the

main results are shown and discussed.

MethodologyInstrument

The questionnaire used for our survey was draftedand tried out on a pilot sample of 25 executives andthen subsequently improved . A lot of detailed,helpful comments were received. The end result wasawritten list of 16 questions which could be completed in approximately 10 min. Some ofthe questions had single answers while others had multipleanswers. Each questionnaire was posted to the CEOofthe company or, in some cases, to the Director of

Human Resources or the Director of CorporateCommunications . A letter was attached to thequestionnaire explaining the nature of the researchand assuring confidentiahty of the responses and ofany information disclosed.

SampleWe chose the 500 largest companies in each countryas our sample, taking different databases intoaccount. The selection criterion for size was the

number of employees, since we thought that, inbusiness ethics, people are the most relevant factor.Several companies were excluded on the groundsthat they were not commercial enterprises. Government bodies, educational and social services, mutualand national health organizations, for instance, werenot included. Assuming that there were no significantdifferences among companies belonging to the samegroup, we decided to take company groups as singleentities (e.g. the Telefonica Group, which includesseveral companies, was treated as a single company for

the purposes of our survey). So, in Spain, although thequestionnaire was sent to 500 companies, it actuallycovers the 590 largest Spanish commercial companiesranked by number of employees. Following the samecriterion, in Argentina the survey covers the 555largest Argentinean commercial companies ranked bynumber of employees, and the 500 largest in Brazil.In Spain, we used the Dun & Bradstreet Marketing database, which has information on morethan 700,000 companies. InArgentina, the selectionwas made from two databases that are widely used inthe country: La Quia VIP, edited by Comunicaciones Publicas S.A., and the day-to-day list of the1000 Leading Companies published by PrensaEconomica, a well-known and widely-read magazinespecializing in this kind of study. In Brazil, the

Exame Maiores eMelhores ranking of the 500 largestBrazilian companies was the chosen source ofinformation .The survey was carried out in 2000 inSpain, in 2001 in Argentina and in 2002 in Brazil.Table I shows the structure of the sample andresponses obtained.

Description of the responsesIn Spain we received 106 responses (21.2% of thesample); in Argentina, 126 (25.2% of the sample);and in Brazil, 100 (20% of the sample). These response levels are similar to those obtained in otherstudies of this kind carried out in other countries4,and even higher than in similar surveys carried out inthese counties, especially in the case of Argentina,

where most surveys do not receive more than a 15%response rate.In Spain, the responses came from the Presidentor General Manager (32.1%), the Director of Human Resources (20.8%), the Director of CorporateCommunications (13.2%) or some other senior

manager. In Argentina, the President or GeneralManager (7.2%), Director of Human Resources

(84.1%) or some other senior manager. And inBrazil, the President or General Manager (12%),Director of Human Resources (52%) or some othersenior manager. In all three cases, the largest companies have the highest response rates.In Spain, 55% of responses are from companiesheadquartered in Spain, while the rest are fromcompanies based abroad (22% in Europe and 21%



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24omenec Mele et al.

TABLE INumber of corporations (ordered by number of employees) and responses obtained (Percentages in brackets)

Number of employees Argentina Brazil SpainCorporations Responses Corporations Responses Corporations Responses

>20000-10000 11 (2.0) 5 (45.5) 27 (5.4) 8 (29.6) 173 (76.5)9999-5000 14 (2.5) 9 (64.3) 51 (10.2) 18 (35.2) 296 (55.2)4999-2000 54 (9.7) 12 (22.2) 127 (25.4) 30 (23.5) 118 24 (20.3)1999-1000 88 (15.9) 25 (28.4) 111 (22.2) 18 (16.2) 231 40 (24.3)999-50063 (29.3) 29 (17.8) 74 (14.8) 11 (14.8) 195* 13 (6.7)499-less 225 (40.5) 46 (20.4) 55 (11) 9 (16.3)n/a 6 (10.9)Total55 (100) 126 500 10090 106

The range used in Spain was (999-750).

in the USA). In Argentina, 40.5% have theirheadquarters in Argentina, while 30.2% are based inthe USA, 23.8% in Europe, 0.8% in Japan and4.8% in other Latin American countries. In Brazil,50% of responses are from companies based inBrazil, 21% from companies with headquarters inthe USA, 26% in Europe, 2% in Japan and 1%

in Canada.

Diffusion of corporate ethical policies andcorporate ethics statementsEthics Statements are probably one of the mostimportant parts of a CEP, but there are others.Another measure envisaged in CEPs is that of takingethical conduct into account in personnel selection,appraisal and promotion (Table II). Results indicate

that this is common practice in companies of aUkinds (whether or not they have formal ethicsdocuments) and in all countries (ranging from 62%in Spain to 75% in Brazil and 79% in Argentina).Although these findings are difficult to interpret, thehigher score in Latin American countries could havesomething to do with the supposedly higher level ofcorruption in these countries and maybe the eagerness of large companies to obtain a good reputation.This could explain the high score of Brazil. Due tothe devaluation ofthe real (Brazilian currency) some

years ago, Brazilian companies became very attractive for international business and investments.Given the high level of corruption (see Appendix),Brazilian companies can only be considered trustworthy suppliers to foreign customers if theydemonstrate a commitment to ethics (e.g. byimplementing ethical programs). Having a code ofethics has become a requirement as well.

TABLE IIAdoption of corporate ethical policies, apart from Corporate ethical statements

Policies Argentina Brazil SpainTaking moral behavior into account for personnel appraisal and promotion 79 (62) 75 (60) 62 (75)Periodic ethical accounting, auditing and reporting 39 (24) 45 (30) 27 (9)Standardized procedures for dealing with ethical issues 39 (11) 36 (17) 24 (6)Ethical training programs for managers or employees 22 (3) 15 (13) 19 (6)Ethical offices 29 (8) 9 (4) 15 (0)Supporting research on business ethics 15 (8) 12 (4) 1 (3)Percentage of companies with a formal ethics document; those without in brackets.



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Although much less common, other measures arealso sometimes adopted, notably: periodic ethicalaccounting, auditing and reporting, standardizedprocedures for dealing with ethical issues, and ethicalprograms for managers or employees. Only a fewcompanies have ethical offices or are funding research in business ethics.

Additional findings of our survey show thatcompanies with ethics statements are more likely tohave formal ethics programs, standardized procedures, periodic audits and special ethics offices. Mostof the companies in our sample, whether they haveethics statements or not, also show particular concern for fostering the human excellence of theiremployees by signaling practices to be avoided,resolving conflicts, and penalizing misconduct.

According toMurphy (1995), documents settingout companies' ethical policies generally fall intothree categories: values statements, corporate credosand codes of ethics. Furthermore, ethics may beincluded in corporate mission statements aswell, orin vision statements. Both mission and vision state

ments are, or should be, crucial to management. In abroad sense therefore, when ethics is embedded invision and mission statements, these statementsshould also be considered as CESs. That is whatLindsay et al. (1996) do in their analysis of ethicsdocuments in Canadian companies. Nearly 44% ofthe respondents to these authors' survey say thatethical concepts and philosophies are included intheir companies' corporate mission statements(p. 396). Accordingly, in our survey we consideredcorporate vision or mission statements with ethicalcontent as formal corporate ethics documents. Also,because of their affinity, values statements and corporate credos were added to the same group.

Our survey data (see Table III) show that 71% ofthe Spanish companies, 70% of the Argentineancompanies and 77% of the Brazilian companies inour sample have some kind of written ethics docu

ment. The most common documents are codes ofethics or conduct and company vision or missionstatements. Some companies have more than onedocument (see Table IV): for instance, a valuesstatement and a code of ethics. Some even havethree: a mission statement, a corporate values statement and a code of ethics (22-25%).Most CESs were introduced after 1990. Beforethen, only 23% of Spanish companies, 30% of

Argentinean companies and 20% of Brazilian companies had one. Before 1990, most ofthe companiesthat had codes of ethics were US-based

multinationals. In the USA many companies drewup codes of conduct in the mid '70s and '80s, after aseries of scandals. Understood as good practiceguidelines , these codes were adopted by foreigncountries. The Foreign Corrupt Act of 1977 also hada lot to do with this concern. Another factor thatinfluenced the diffusion of codes of ethics in the

U.S. was the implementation ofthe U.S. SentencingCommission (USSC) guidelines in 1991, which gavesome legal advantages to companies that reinforcedlegal compliance by implementing codes of ethicsand ethical programs (Dalton et al., 1994). This mayaccount for the higher level of codes of ethicsintroduced in the USA in 1993 and 1994 (Weaveret al, 1999a, p. 286).In the last three years there has been a growingtrend for companies to revise their ethics statementsin all three countries. This probably has to do withan increasing interest in business ethics in all of thesecountries. In Spain, despite some problems andambiguities in the past, business ethics has been

making progress in recent years (Argandofia, 1999).Even though many problems remain, there is now agroup of academics working in this field. Moreover,

many managers are now more sensitive to corporateethical issues and the social responsibility of business.In Brazil, as in other Latin American countries,including Argentina, the interest in business ethicshas also been increasing in academia, companies andgovernment, and a significant effort to create codesof ethics in organizations has been made (Arruda,1997). In addition, some companies have also startedto include business ethics in their recruitment andtraining programs for managers. The press hascooperated in this effort by creating rankings ofcompanies which display special values. A similarinterest can be noted in Argentina.More relevant still is the finding that manycompanies that do not yet have a formal corporateethics document are thinking of introducing one inthe near future (25% in Spain, 32% inArgentina and15% in Brazil).

The proportion of companies with CESs ishighest, in our sample, among those that have theirheadquarters in the US, rather than in any othercountry (100% ofthe U.S.-based companies in our



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TABLE IIICorporate Ethical Statements

Statements Argentina Brazil Spain

Vision Scmission statements 67 509with ethical valuesValues statement or 48347

corporate credoCorporate code of ethics 70 495

or simUar documentSome kind of corporate 70 771

ethical statementOthers 8 7 -

Expressed as percentage of responses received.

TABLE IVNumber of Corporate Ethical Statements in each

company

Number of documents Argentina Brazil SpainOne document 35 315Two documents 37 212Three documents 25 224Percentage of companies having formal ethicaldocuments.

Spanish and Brazilian samples, and 89% of those inthe Argentinean sample). That is not surprising,considering that a survey of Fortune 500 firms(mostly North American corporations) in the mid'90s found that 98% of firms claimed to addressethics and conduct issues in some kind of formaldocument, and 78% of those had a code of ethics(Weaver et al., 1999a, p. 285).

Furthermore, the proportion of companies withan ethics statement is higher among listed companiesand for large transnational and holding companiesthan among family businesses, companies with a lowdegree of internationaUzation and smaU companies(see Table V). This finding is consistent with the

weU-known fact that large organizations react morequickly when it comes to introducing CESs thansmaU ones, especiaUy in response to public demandsfor higher ethical standards and social responsibility(Center for Business Ethics, 1986; Lindsay et al.,1996; Sweeney and Siers, 1990).

TABLE VProportion of companies having Corporate Ethical

Statements by type of company

CompanyArgentina Brazil SpainLarge multinational companies 85 96 83Listed companies 835 84Companies belonging to 75 100 57

an international holdingCompanies with headquarters 73 71 84

in the countryNational companies or with 45 71 81little internationalization

Small and medium sized 655 77companies (less than 900)

Family businesses 429 60Percentage of responses.

The level of ethical concern over employeebehavior is much the same in companies with aformal code of ethics as in companies without one(Table VI). At this point a question arises: whatreasons did companies give for not having aCES andwhat alternatives did they put forward? The answersare shown in Table VII. Only a very few respondeesclaimed that there was no need to reinforce ethical

behavior among their personnel, and hardly any ofthem approved the statement Ethics has nothing todo with business . This confirms that the myth thatbusiness is an amoral endeavor is no longer accepted.

Many respondees said that their companies haveadopted general professional codes and that they arethinking of introducing a code of ethics or someother corporate ethics document in the near future

TABLE VICommon ethical concerns of large companies

Ethical concerns Argentina Brazil SpainEmployee practices 4.4 (4.0) 4.4 (4.3) 4.3 (4.2)

Wrong practices to avoid 4.4 (3.9) 4.0 (4.1) 4.0 (3.9)Solving possible conflicts 4.2 (3.5) 4.1 (3.8) 3.7 (3.6)

of interestSanctions for breaking 3.8 (3.7) 3.4 (3.7) 3.1 (3.8)

the rules

Companies with a formal ethics document; those withoutin brackets. Scale from 1 (very low)to 5 (very high).



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TABLE VIICompanies without a written ethical statement: Reasons and alternatives

Reasons Argentina Brazil Spain

They reinforce ethical behaviors in other ways 51.3 43.5 40.6They foUow generic professional codes of ethics 29.7 34.8 40.6They consider the exemplarity of senior managementto be more influential than any written statement 16.2 13.0 31.3A written statement does not seem useful 2.7 4.3 6.3It is not necessary to reinforce personnel ethical behavior 5.4 0 3.1

They think ethics has nothing to do with business 2.7 0 0They plan to introduce a formal document 32.4 65.2 25Other alternatives 8.1 4.3 0Expressed as percentage of responses received.

TABLE VIIIMotives for implementing ethical statements

Motives Argentina Brazil SpainSpreading the company's values or philosophy 6.5 6.8 6.5Presenting a corporate public commitment 5.5 6.0 5.6Reminding employees of their obligations 6.0 6.1 5.2Promoting human development 5.8 6.0 5.4Avoiding damage to the company's reputation 5.1 5.6 4.7Building trust and confidence within the company 5.8 6.2 5.0Gaining competitive advantage 4.4 5.3 4.5Protecting the firm against legal actions 4.3 5.2 3.5Scale from 1 (very low) to 7 (very high).or are trying to reinforce ethical behavior in other

ways. Some agreed that the example given by acompany's executives is more influential than anywritten statement. Only aminority (1-6%) considered that having an ethics document is useless.

Some companies without ethics documents arereluctant to adopt alternatives to codes or otherdocuments to promote ethical behavior. We interpret this to mean that the executives in question feelthat existing laws are sufficient to ensure good

TABLE IXPriority of objectives

Ethical aspectsrgentina Brazil SpainExpress corporate values 4.8 4.7.6Construct corporate identity 4.5 4.6.4Foster awareness of expected behavior 4.6 .6.3Promote human excellence 4.5 4.5.2

Reinforce common standards of business ethics 4.4.4.3Scale from 1 (very low) to 5 (very high).



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behavior. In this sense, executives tend to emulatetheir peers or competitors, even if it is not totallylegal or ethical. They do not feel strong enough tochange unethical habits because they fear that if theyact ethically they will be forced out of the market.

Purpose and grounds of corporate ethicsstatements

Purpose of corporate ethics statements

An opinion poll published in 1980 (mentioned byKaye, 1992, p. 858) showed that chief executivesand other senior officers of U.S. corporations feltthat the main reasons for developing corporate codesof conduct were public image and reputation. In1992 another survey gave awider set of motives forintroducing ethics into a company: to be a sociallyresponsible company (95% of the respondees); toprovide guidelines for conduct (94%); to ensurecompliance with the law (79%); to improve thecompany's public image (43%); and to improveprofits (30%) (Center for Business Ethics, 1992,p. 864). More recently, Weaver et al. (1999a) havefound that a particular set of environmental influences are more strongly associated with the scope ofethics programs than are top management's com

mitment to ethics. The environmental influencesthey mention include awareness of USSC guidelines,media attention to a firm's ethical problems, andrepresentation at The Conference Board meetings.The respondees to our survey stated that the mostimportant reason for implementing CESs is to spreadcorporate values or the corporate philosophythroughout the organization (see Table VIII). The

next most important reason was to evidence a publiccorporate commitment, to promote human development and to build trust and confidence. In contrastwith companies in the U.S., in the countries westudied top management's commitment to ethicsseemed more important than environmental influences. However, reminding employees of theirobligations and avoiding damage to the company'sreputation are also important, mainly in Argentinaand Brazil. This is probably attributable to the factthat corruption in these two countries is high (see

Appendix). The cultural context can help tounderstand the causes. For many years, it was easier

to achieve goals by corrupt means than throughhonesty and competence. Unfair practices wereseldom punished and a social and moral disorderbecame common in the country. Governmentprocedures were often so slow that managers andcompanies started to use the same expedient .Theproblem of corruption in Argentina could be evenworse. One ofthe authors (Debeljuh), based on herknowledge of Argentina, believes that corruptionhas been pervaded all levels of society and aU institutions, in various forms: privileges, favoritism,cronyism, bribery, and so on. She thinks that, in thiscontext, personal effort and merit are often pushedaside by opportunism, which slowly undermines thefoundations of a healthy work culture .

Creating competitive advantage and protectingthe firm against legal action get the lowest score,although it is still significant. The former may bedue to a lower level of concern for relating ethicalpolicies with competitive advantage. The lattercould be attributable to a lack of legislation inthese countries giving advantages to companieswith formal ethical programs. Itmay also be worthemphasizing that in Latin countries, respect for thelaw is probably not as strong as in Anglo-Saxonand Scandinavian countries. In our perception,people are more concerned with legitimacy thanwith legality. The problem is that, aU too often,legitimacy becomes purely subjective or is understood as whatever other people do . Sometimes,this attitude has repercussions, for instance in taxevasion, lack of compliance with the law, or thepresence of the underground economy in certainindustries. It could be argued that in some LatinAmerican countries, laws have all too often been

made not with a view to building strong institutions but to satisfy the needs and wishes of thosein power, which can lead to a lack of respect forthe law. This has a detrimental effect not only onindividuals but also on institutions .

Our survey also asked what ethical goals thecompanies considered important, a question closelyrelated to the previous one. The answers with thehighest scores were express the company's valuesand construct corporate identity (Table IX).Fostering awareness of expected behavior and pro

moting human exceUence and reinforcing standardsof business ethics also received a good score. In ourperception, in these countries there is a certain



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TABLE XGeneral principles applied in drafting the statements

General principles Argentina Brazil SpainHuman virtues 4.5 4.2 4.1Universal ethical principles 4.3 3.9 4.0Generally accepted social values 4.3 3.8 4.1Utilitarianism 3.2 3.5 3.5Legal requirements 3.5 3.3 2.9International texts of human rights 2.7 3.2 2.9Scale from 1 (very low) to 5 (very high).

tendency towards individualism, unwiUingness toengage in teamwork and a lack of trust in people.

Thus, emphasizing the company's values and corporate identity could be related with promotingcooperation and awareness of being part of awhole.

However, further research would necessary to give afirm answer to this question.

Philosophical grounds of corporate ethical policiesDunfee and Robenson, after defining a code ofbusiness ethics as a list of fundamental principles,add that a code can provide this (needed)immediate link between ethical theory and dailydecision making (quoted by Dean, 1992, p. 286).

Among these principles one can find: compliancewith the law, respect for persons and for humanwell-being, keeping promises, honoring contracts,avoiding bribes and exercising due care, confidentiality, fidelity to special responsibilities andcommitments, avoiding conflicts of interest, acting

in good faith in negotiations and some others.These are universal principles or at least normswhich enjoy wide social acceptance. They are alsoappropriate for developing human virtues (integrity, justice, truthfulness, loyalty, etc.). Codes ofconduct can be taken from law or from international texts on human rights. They can also befounded on a consequentialist approach (Utilitarianism) .In spite of these considerations, it is difficult toargue that every corporate ethical policy is strictlybased on philosophical or ethical theories, sincecodes and other ethical statements are instrumentalin their implementation. However, an exploratoryreview of some relevant corporate ethics statementsled us to suppose that, to a certain extent, formalethics documents reflect ethical theories. They canexpress universal principles, Utilitarianism, virtueethics, social values, legal requirements, humanrights and so on. In order to obtain some information about this point, the questionnaire listed possible theoretical grounds on which ethical statements

TABLE XIWho developed Corporate Ethical Statements?

PositionArgentina Brazil SpainTop managers 67 42 47Board of Directors 27 8 35

Middle managers 13 17 25Managers and employees 14 13 12A communicative process with the main stakeholders 132Collaboration of external experts 14 8 21

Expressed as percentage of responses received.



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TABLE XIIHow ethical statements are communicated and promoted

MeansArgentina Brazil SpainPosters, handbooks, brochures, web sites 8654Oral presentations 52 24 25Seminars or workshops 41 14 14Periodical revisions 31 16 8Signature on the document 0 0 12Others 11 8 0Expressed as percentage of responses received.

are based, giving a short, simple explanation inbrackets7. The findings (Table X) show that humanvirtues come first, closely foUowed by universalethical principles and generaUy-accepted values.Utilitarianism comes in fourth place. That seemslogical since, in the countries we studied, socialvalues are not so different from universal ethicalprinciples and the requirements contained in humanvirtues. Their tradition is more deontological thanconsequentialist. At the bottom of the list are legalrequirements and international texts on humanrights. One possible explanation for this is that ethicsismuch more highly-regarded than the law and theinternational texts on human rights may be considered too generic. AdditionaUy, in these countriesthere is nothing comparable to the U.S. Sentencing

Commission guidelines encouraging the incorporation of legal content in codes of ethics (Dalton et al.,1994).

The role of top managementin organizational ethical policies

Who is responsible for ethical issues in the company?Most authors think that the first step to promoting

ethical behavior in an organization is to ensure thatthe organization's leaders propound the importanceof ethical conduct in business (Andrews, 1989;

DriscoU and Hoffman, 2000; HaU, 1993). Othersemphasize the value of organizational culture ininstiUing ethics in organizations (Gandz and Bird,1989; Knouse and Giacalone, 1992; Murphy, 1988).Both of these positions have a lot to do with man

agerial commitment, employee training and continuous monitoring.

When asked: Who has primary responsibility forethical issues in the company? , most of therespondees cited the Executive Manager (80?84%).

The second most common response was the HumanResources Manager (25-30%), and then middlemanagers (6-15%) and the legal department (5?9%).A few replied that nobody in particular has respon

sibility for ethical issues (1?5%). These latterresponses generally came from companies that haveno formal ethics statements.

Very few companies considered that responsibilityfor ethical issues in the company lay with the EthicsOfficer (7% inArgentina, 0% in Spain and Brazil) orthe Ethics Committee (1?2%). These findings contrast with U.S. companies, in which many topmanagers delegate responsibility for ethical management to others (Weaver et al., 1999b, p. 55).This may explain why about 30% of the US companies surveyed byWeaver et al. (1999a, p. 288) hadspecial officers to monitor ethical and legal compliance. In the countries in our survey these functionsseem generally to be performed by legal or humanresources departments.

Drafting and communicating corporate ethics statements

An important issue in relation to corporate ethicalpolicies is how to draw up CESs and how to communicate them. In most of the companies in oursample, ethics statements were drawn up by top

management Table XI): 47% in Spain, 67% inArgentina and 42% in Brazil. In some cases they



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TABLE XIIIPerceived impact of ethical statements

Aspectsrgentina Brazil Spain

Building the corporate culture 6.1 6.1 5.8Shaping policies and practices 6.1 6.0 5.4Fostering moral excellence 5.7 6.3 5.2Improving the corporate image 5.6 5.9 5.2

Avoiding misconduct 5.7 7.0 5.1Helping in the day-to-day running of the organization 5.5.44.5

Scale from 1 (very low) to 7 (very high).were developed by the Board of Directors: nearly35% in Spain, 27% in Argentina, but only 8% inBrazil. Middle management also took part in thisprocess: 25% in Spain, but only 13% in Argentinaand 17% in Brazil.

Not many companies encourage wider participation in drawing up formal documents of corporateethics. The involvement of managers and employeeswas between 12% and 14%, and even lower forother stakeholders (5.3% in Spain, 13% in Argentinaand 12% in Brazil). The explanation for this may liein the complexity of managing awider participationprocess; or perhaps managers think that having toomany conflicting interests will make it difficult toachieve high ethical standards. However, such a lowrate of participation is hardly ideal, asmost scholarsstress the importance of high employee involvementin the process of creating and implementing corporate ethical policies (Berenbeim, 1987). It is alsoworth noting the low level of involvement ofexternal experts in formulating the documents(21.3% in Spain, 14% in Argentina and only 8% in

Brazil). This may be because companies already haveskilled people to do it, because managers feel theycan do it on their own, or even because there are noknown experts in the field.

Implementing corporate ethics statements in acompany requires an effective communication system (Stevens, 1999; Wells and Spinks, 1996). Oursurvey asked about this and, as Table XII shows, in

most cases corporate ethics documents are communicated and promoted through brochures,posters, handbooks, or via the corporate web site(44% in Spain, 86% in Argentina and 25% in

Brazil). About a quarter of companies in Spain andBrazil, and half in Argentina backed this up with an

oral presentation. It is significant that only 14% ofthe companies in Spain and Brazil held working ortraining sessions, whereas in Argentina the figure

was 41%. The proportion of companies that heldperiodic meetings to study or review the documents and apply their content to the organization'sactual practices came out at 31% in Argentina, 16%in Brazil and 8% in Spain. The higher percentageof companies in Argentina that stressed communication and training in corporate ethics may be dueto the growing awareness of the need to overcomethe current moral crisis in Argentina, as ethics

programs are a way of confronting corruption andstrengthening common values.

A smaU proportion of companies wanted to promote and implement their ethics documents byrequiring employees to sign them to prove that theyhad read them (12.2% in Spain and 0% in Argentinaand Brazil).It isworth pointing out that there is a correlationbetween the number of documents in each company and the intensity of means used to implementthem. The more documents there are, the greaterthe intensity of means used to communicate andimplement them. This phenomenon was apparent inall three countries (see Figure la?c). Accordingly,

when there is more than one corporate ethics document (corporate mission, values statement, code ofconduct), companies frequently also employ awiderrange of means for effective implementation.It has been said that the only reason somecompanies have a values statement or ethics codeis to hang it on the waU or as window dressing ,while other companies take these documentsseriously and try to make them effective. Thecorrelation we found supports the statement that



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WOthersLSeminarsHHjf^^'

Reviewing eetings^^^^^^^BOralresentationW//////BKKK^^^Posters,handbook,tc.HMHBHB^^^^^^^^I i i ??i-1-1

0 20 40 60 80 1001document M2 or more documents

OthersH|JPSeminarsHH^'^^^^ReviewingmeetingsHJHIBBBBi^'i

Oral resentationBBHMHH^^^^^^^^Posters,handbook,tc.HHBBB^^^^^^^^^

0 10 20 30 40 50 601 document M2 or more documents

(c) ~^^^^^^^^^^^^^mSeminars^^^^^^^^^^^^^^^^^^Reviewing eetings BB^^'^^^^^'^^^^^^'

Signing f documentH^^P^^HOralpresentationM^H^M^gy

Posters,andbook,tc.W///////////^^^A-1 '', ' i-1-1-10 20 40 60 80 100

1document M2 or more documents

Figure 1. Correlation between the number of formal ethical documents and the measires taken to implementCorporate Ethical Statements in (a)Argentina, (b) Brazil (c) Spain.

quite a few of the companies that make a majoreffort to implement ethics have more than oneformal ethics document.Another relevant aspect is the scope of com

munication of the document. Only 36% of respondees in Spain, 33% in Argentina and 47% inBrazU stated that codes of ethics or any otherformal ethics documents had been communicated

outside the company. This proportion increasedfor companies that had their headquarters in theUSA. One possible explanation for this finding arecultural differences, such as the sense of transparency and openness. Another reason for these lowpercentages could be a fear of making a pubUccommitment on ethical issues and then faUing toUve up to it. However, the lack of interest in



14/19


making ethical commitments public could be dueto ignorance of the advantages for companies ofpublishing and promoting ethics documents.

Do executives think that corporate ethics statementsare effective?

Knowing the impact these documents have isimportant, but itwould require a broader and deeperinvestigation than ours. Nevertheless, we can make afirst approximation from the responses we received(see Table XIII).

As we have seen, the main motive for implementing ethics statements is to spread the company'svalues or corporate philosophy (Table VIII) and theprimary objective is to express corporate values(Table IX). Itwould appear that both goals have beenachieved, as the impact these documents have had onthe development of a corporate culture is significant(6.1 in Argentina and Brazil and 5.8 in Spain).Another important motive was to promote human

development (Tables VII and VIII). Again the findings suggest the CESs have been effective, as there wasalso a high score for fostering moral exceUence (5.7 in

Argentina, 6.3 in Brazil and 5.2 in Spain).According to our respondees, these documents

have had amajor impact on various business policesand practices: 5.4 out of 7 in Spain, and much morein Argentina (6.1) and Brazil (6.0). This wouldsuggest that inmany companies these documents arenot used merely for public relations purposes, but aretaken seriously.Ethics statements seem to improve corporateimage and prevent misconduct. The score for prevention of misconduct is extremely high in Brazil.This reflects the serious effort that has been made to

promote business ethics in Brazil, mostly in the pastfive years: as we state above, the risk of misbehavioron the Brazilian side could jeopardize trade terms, socompanies have decided to create codes of ethics andimplement ethics programs, mainly to avoid

misconduct.However, the impact on the day-to-day runningof companies turns out to be lower, though not

extremely low (from 5.5 in Argentina to 4.5 inSpain). This could depend on the degree of corruption, as most of the codes are focused on

misconduct.

ConclusionsIn examining the status of corporate ethical policiesin large companies in Argentina, Brazil and Spain,our research reveals a lot of common features andsome differences. Common features include agrowing trend for companies to implement formalethics statements, which can be considered as thecore of these kinds of policies. Large corporations aremore likely to implement ethics statements thansmall and medium-sized companies.It is worthy to note that companies that haveethics statements usually launch more initiatives toimprove ethical behavior among employees thanthose that don't. However, even companies that donot have formal ethics documents show an interestin business ethics. They are using other tools toreinforce ethical behavior, including the example oftop management and the application of ethical criteria in personnel selection, appraisal and promotion.This latter practice is, in fact, a relevant ethical policyin all companies, whether they have CESs or not.Furthermore, many of the companies that do nothave formal ethics documents are thinking ofintroducing them in the near future.

Although the code of ethics is still the mostpopular ethics document, others such as the corporate mission or corporate values statement have become more popular as a means of implementingethics in organizations. Another relevant fact is thatmost of the companies that have two or more formalethics documents devote more effort to communicating and implementing them than those that haveonly one document.The main reason given for formulating ethicsstatements is to define and promote corporate culture. Thus, these documents reinforce corporatevalues and build the corporate identity. Other reasons given are: to express public commitment, toremind employees of their obligations, and to promote human development. The perception is thatthe documents achieve their purpose in building thecompany's corporate culture and have an influenceon business policy making, on the pursuit of humanexcellence and on the avoidance of misconduct.

The criteria applied in formulating the ethicsstatements are mainly human virtues, generally-accepted social values and universal ethicalprinciples, followed by Utilitarianism. Legal



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requirements and international texts on humanrights are less influential.Most of the companies in our sample promotetheir CESs through posters or oral presentations.

However, a significant group of companies alsoconduct working sessions and periodic reviews.More than half of the companies we surveyedcommunicate their ethics statements exclusively inside the company. The proportion that also communicates it outside the company is higher amongU.S.-based firms. Most of the companies that havetwo or more formal ethics documents devote moreeffort to communicating and implementing themthan those that have only one document.CESs are generally drawn up by top managementand the degree of participation ismoderate or low.

Only a small percentage of respondees claim thattheir ethics statements are developed in a communicative process with the main stakeholders.

The main differences between the three countrieswe studied Ue in the importance given to avoidingmisconduct and the consideration of ethical criteria inthe selection of personnel. The countries in whichcorruption seemed most prevalent stressed these points.This research project has certain limitations. Oneof these derives from the number of respondees,which is significant but still not very large, and thesize of the companies (the larger the company, thegreater the proportion of response). Like any survey,it relies on the respondees' knowledge, sincerity andunderstanding ofthe questions. In addition, there is aself-selection factor, as is usual in any survey wherethe return is voluntary. Some telephone calls askingabout the receipt ofthe questionnaire suggested to usthat a few companies lacked interest in the topic andeven, in some smaU companies, that there wasignorance of what ethical policies were about. Thus,probably there was the tendency to respond onlywhen one had something positive to say. All of thisleads us to think that the reality is worse than thefindings suggest.In spite of these limitations, we hope that oursurvey wiU help to improve our knowledge of thecurrent situation with respect to corporate ethicalpolicies in the largest companies in Argentina, Braziland Spain. Further research should include a widersample and a survey with more precise questions,including causal links between corporate codes and

mission statements, and the incorporation of such

into the actual practices of the company. At the sametime, it would be worth attempting to obtaininformation from those companies which arereluctant to answer surveys like this, by using adifferent methodology.

This exploratory study also suggests the benefits ofdeveloping an in-depth analysis of the best corporateethical policies in each of these countries and asubsequent comparison between them. This couldinclude a detailed study of the specific content ofcodes of ethics, corporate values and other CESs.

Apart from other purposes, this would help us toknow better which particular corporate ethical issuesare foremost in these countries.

AppendixSome socioeconomic and historical data on Argentina, Brazil and Spain

Argentina

Argentina has an extension of more than 2.7 millionsq. km., and a population of 38 miUion people. Afterachieving independence from Spain in 1816, itopened up to massive immigration from Europe,

mainly between 1860 and 1930. This was a crucialperiod for the country's social and cultural development. In fact, this massive immigration has given

Argentina its own distinctive physiognomy withinthe ethnic panorama of Latin America.

The recent political history of Argentina beganwith a long period of authoritarian Peronist ruleafter World War IL In 1976 a military junta tookpower and in 1983 democracy was restored. Themarket reforms of the 1990s attracted foreigninvestment, which brought not only a moderninfrastructure but also the inefficiencies of private

monopolies. Only a few Argentinean companieswere able towithstand the fierce competition; that iswhy so many of them have ended up in foreignhands. The presence of foreign capital in the top 500companies in Argentina increased from 46% to 65%between 1993 and 2001 (INDEC, 2001). In 2003,the Gross National Income per capita of US$ 3650.In the last few decades, Argentina has gonethrough one crisis after another, with seriousinflation, a huge external debt, capital flight and



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budget deficits. The economic situation worsened in2001, with massive withdrawals from banks and ageneral lack of confidence among consumers andinvestors. Fortunately, from mid-2002 the economystabiUzed, albeit at a lower level and since then hasbeen growing little by Uttle. The latest crisis hasbrought about a change in civil society. People nolonger expect everything from the State, a sense ofsoUdarity is starting to emerge and society is callingfor stricter ethical standards. Companies show moreawareness of social responsibility (Paladino and

Mohan, 2002)Regarding corruption, in 2002, Argentina held70th place out of 102, with 2.8 points, in the Tl

Corruption Perceptions Index, surpassed only,among Latin American countries, by Venezuela,

Bolivia, Ecuador and Paraguay (TransparencyInternational, 2002)

BrazilBrazil is the largest and most populous country inSouth America, with an area of 8.5 miUion sq. km.,174 miUion inhabitants and vast natural resources.

Brazil became an independent nation in 1822 aftercenturies under Portuguese rule. In 1889 it became arepublic, although the country's socio-politicalbackground could hardly be considered democraticuntil recently. In 1964, a 20-year dictatorship beganwith the establishment of a military government.The lack of freedom and of incentives for education

made Brazilians less demanding in many respects.The Gross National Income per capita in Brazilwas US$ 2710 in 2003. The annual average growthrate between 1990 and 2002 was 2.8. Inflation,which was exorbitant for many years, is now about8%. According

to most economists, Brazil hasenormous potential and, in fact, is the leading economic power in South America.

Dissatisfaction was subtly communicated throughthe national press, literature, music, theater andmovies. Politicians seemed unable to change eitherthe regime or the system, until Fernando CoUor waselected President of the nation in 1992. In his

speeches he showed a deep concern for integrity andmoral conduct, but his actions seemed to go in another direction. In the end, after an impeachmentprocess he was expeUed from the government.

During the 1960s the internationalization processof many foreign companies became more intense.Many multinational companies set up subsidiaries indeveloping countries, including Brazil. This broughta new way of doing business and some of thesubsidiaries introduced codes of ethics to preventcustoms and behavior that were not aligned withtheir parent company's values and practices. Some ofthem, however, caused deforestation in the Amazon

Basin, destroying the habitat and endangering amultitude of plant and animal species indigenous tothe area.

The TI Corruption Perceptions Index for Brazilhas improved a little. Brazil moved from 2.96 pointsand 40th place in 1996 to 4.0 points and 45th placein 2002, when there were more countries in theranking (Transparency International, 1996, 2002).

SpainWith about 40 million inhabitants and an area ofmore than 500,000 sq. km., Spain is a member ofthe European Union and, like other countries inWestern Europe, is highly industrialized and has a

large services industry, although agriculture is stillquite significant. After the Spanish civil war (1936?1939), Spain remained under General Franco'sauthoritarian regime up to 1975. Democracy arrivedwith the adoption of a new Constitution in 1978,which established a parliamentary monarchy. Economic development started in the sixties and received fresh impetus in 1986 when Spain became amember of the European Economic Community.Spain's Gross National Income per capita was 16,990

US$ in 2003, equivalent to 80% of that of the fourleading West European economies. As a consequence of privatizations, mergers and acquisitions,and the establishment or consolidation of wellknown transnational companies, a great number oflarge companies now operate in Spain.The family has a prominent role and is central toSpanish life. After several years of welfare state, civilsociety is relatively underdeveloped in terms of socialinitiatives; and membership of associations, politicalparties and unions is lower than in other countriesthat are close to Spain politically. However, there isa growing interest in voluntary work, and thenumber of NGOs is increasing, although Spanish



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NGOs are not as active in relation to businessactivities as they are in other Western countries.At the end of the eighties and the beginning ofthe nineties notorious cases of corruption arose

but, fortunately, these have decreased in the lastfew years. Consequently, the Tl Corruption Perceptions Index for Spain jumped from 4.31 in1996 to 7.1 points in 2002 and its correspondingposition in the ranking of countries went from32nd place to 20th (Transparency International,1996, 2002).

In Spain and companies are passing from paternalistic positions to responsible and sustainablebusiness (Fernandez and Mele, 2004). In addition, amany managers are more and more sensitive tocorporate ethical issues and the social responsibilityof business, and so are part of mass media and publicopinion.

NotesInstead of corporate ethical poUcies some scholars

prefer to talk about institutionalizing ethics in business (Weber, 1981, 1993), understanding by thatintegrating ethics into aU daily decision making and

work practices for aU employees (Weber, 1981, p. 47).Others employ the concept of corporate ethical programs (e.g., Brenner, 1992; Weaver et al., 1999b), or

corporate ethics practices (e.g., Weaver et al., 1999a)or even compliance programs (Lovitky and Ahern,1999) in a similar way.In 1992, a survey by The Conference Board of1900 firms (264 responses) revealed that 83% of US,68% of Canadian and only 50% of European firms havecodes (Berenbeim, 1992).

This stage was carried out by one of the authors(D.Mele) at IESE Business School (Spain), working on

previous draft prepared by M. GuiUen (University ofValencia, Spain) and Patrick Murphy (Notre DameUniversity, USA).4 Weaver et al. (1999a) received responses from 254out of 990 firms (response rate: 26%); Center for Business Ethics (1986) achieved 270 out of 1000 (27%), andin another survey (1992), 229 out of 1000 (22.9); Berenbeim (1987) received 300 responses out of 2100 firms

(14.3%) and in the next survey (1992), 264 out of 1900(13.9); Lindsay et al. (1996) got 171 responses out of

300 (an overaU response rate of 57%), but this seemsquite exceptional.

In Brazil, there is a tradition which in Portuguese iscalled the agrado. Literally, an agrado is a thoughtful gesture such as a bunch of flowers or a gift as an expression of gratitude. What in practice is understood byagrado, however, is a sum of money to get a problemsorted out faster and to the giver's satisfaction, avoidinglong queues, for example.

The Argentinean expression viveza criolla (creoleshrewdness) encapsulates a way of life characterized by

making the least possible effort, ignoring the law andseeking individual advantage over any other interest. Inaddition, there is a widespread assumption that it is theState's responsibility to solve problems that could bebetter dealt with by determined and committed citizens.

Literally, the sentences to choose among were: Generally accepted social values , Human virtues (such as, justice, integrity, loyalty, etc.) , Universal Ethical Principles(such as 'the golden rule') , Utilitarianism (welfare for the

majority) , Legal Requirements and Human Rights(international text) .Elaborated by the authors from dates of the World

Facts Book (http://www.cia.gov/cia/publications/factbook/), World Development Indicators database, (http://

www.worldbank.org/data/databytopic/GNIPC.pdf) andthe author personal knowledge of Argentina, Brazil andSpain. 'As 500 Maiores Empresas do Brasil', Exame, July2002, pp. 81-101.

In the largest companies, we had made inquiriesbeforehand to identify the appropriate person to addressour request to.

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