Magazine article Business Credit

Government-Mandated Ethics Codes Do Little to Influence Executive Behavior

Magazine article Business Credit

Government-Mandated Ethics Codes Do Little to Influence Executive Behavior

Article excerpt

Regulatory or governmental mandates that call for the implementation of corporate ethics codes do less to influence the strategic decisions of financial executives than pressure from key market-related stakeholders with economic ties to the firm according to research co-authored by John (Jack) Stevens and David Harrison of Penn State's Smeal College of Business. "Almost every large firm has adopted an ethics code, yet certain unethical and illegal behaviors have persisted," Harrison said. "In attempting to understand and explain this phenomenon, we tried to distinguish between those firms that treat their codes as symbols or window dressing from those who make it an integral part of their strategic decisions."

"Symbolic or Substantive Document? The Influence of Ethics Codes on Financial Executives' Decisions," which appears in the February issue of Strategic Management Journal, is based on extensive telephone interviews with more than 300 senior financial officers at companies with formal ethics codes. The executives were asked a range of questions to determine what factors motivate firms to actually use the codes they choose to adopt. "The distinction between ethics code adoption and ethics code use is non-trivial," the authors write. "Enron's ethics code was extremely detailed, numbering over 60 pages. However, there is little evidence that this code was internalized into the strategic decision-making processes of their executives."

Stevens, Harrison, and their co-authors H. …

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