In a time when media reports focus largely on the negative aspects of business news-corruption, unethical behavior, and the like-it was nice to see some positive news recently.
Ethisphere Magazine, a US publication dedicated to identifying the correlation between ethics and increased profits, recognized ethical companies worldwide for its 2007 report in May. Several oil and gas companies were recognized for their efforts to focus on ethical business behavior.
Ethisphere researched 5,000 companies focusing on 30 industries. Among the companies that made the list were Suncor Energy and Royal Dutch Shell PLC (oil and gas), Scottish & Southern Energy, Duke Energy, and FPL Group (energy and utilities), Akzo Nobel (chemicals), Fluor (engineering and construction), Koch Industries Inc. and Wesfarmers (diversified industries), and Alcoa (metals and mining).
“This was a rigorous process that identified a select group of companies that were unequalled in their industries for their commitment to ethical leadership and corporate social responsibility,” wrote Alex Brigham, executive editor of Ethisphere. “These organizations go beyond making statements about doing business ethically; they translate those words into action.”
Eight steps
Screening consisted of a sequential analysis:
- Litigation, controversy, and conflict.
- Ethical tone.
- Innovation and industry leadership.
- Corporate citizenship.
- Pan-industry effort participation.
- Governance and transparency.
- Public and trade partner perception.
- Ethics and compliance programs and systems.
Results of the first six steps narrowed candidates to finalists. They were then notified of their standing.
Step No. 7 examined outside stakeholders’ reputation and perception of each company. Ethics audit letters were sent to customers and suppliers. Input was gathered from nearly two dozen nongovernmental organizations and socially responsible investment firms.
The final step analyzed internal ethics and compliance activities by using Ethisphere’s database on companies’ ethics and compliance programs. Also, the magazine interviewed CEOs and chief ethics officers of the finalists about their ethics and compliance systems. If a company did not participate in Step No. 8, Ethisphere relied on available third-party information. If such information was not obtainable, the highest score given was “neutral” regarding internal systems, a heavily weighted criterion. A neutral rating defined the difference between winning and losing.
Scoring consisted of nine weighted criteria: citizenship, 15%; industry leadership, 15%; internal systems, 15%; legal and regulatory, 15%; executive leadership, 10%; innovation, 10%; perception and reputation, 10%; governance, 5%; and transparency, 5%.
The completed analysis separated into 30 industries based on standard industrial classification codes. Within each industry, companies with a higher aggregate score made Ethisphere’s list of the world’s most ethical.
Industry highlights
Suncor achieves its vision by placing value on safety leadership, people and relationships, high performance, sustainability, and accountability to exceed expectations and deliver on commitments. It was also selected as one of the most respected corporations in Alberta in 2007 by Alberta Venture magazine.
Duke Energy’s Code of Business Ethics provides guidance on social and ethical issues and offers information on the international EthicsLine through which employees can anonymously report unethical corporate conduct and ask questions to resolve dilemmas within the organization without fear of retaliation.
Nine of the 10 members of Fluor’s board are nonemployee directors, independent from management. The CEO is the only board member who is an employee. The members meet at least quarterly without management present. The lead independent director acts as a liaison between the independent directors and management and also consults with the chairman and CEO.
Alcoa provides its code of conduct to suppliers so they understand policies and expectations. “If a vendor’s values or policies differ drastically from Alcoa, chances are they won’t be doing business with us,” said Perry Minnis, director of ethics and compliance. “The most important thing is our values. We have a set of values and policies that is consistent across the company, and we train all employees to adhere to and uphold those values.”
Lastly, Koch practices the market-based management business philosophy developed by associates working for and with Koch. It is a value system and guide that encourages employees to think and act like principled entrepreneurs through five dimensions: vision, virtue and talents, knowledge processes, decision rights, and incentives.