Up to Code: Does Your Company's Conduct Meet World-Class Standards?

Lynn  Paine; Rohit   Deshpandé; Joshua D. Margolis; Kim Eric Bettcher

Article | Harvard Business Review | December 2005

Up to Code: Does Your Company's Conduct Meet World-Class Standards?

by Lynn Paine, Rohit Deshpandé, Joshua D. Margolis and Kim Eric Bettcher

Abstract

Codes of conduct have long been a feature of corporate life. Today, they are arguably a legal necessity—at least for public companies with a presence in the United States. But the issue goes beyond U.S. legal and regulatory requirements. Sparked by corruption and excess of various types, dozens of industry, government, investor, and multisector groups worldwide have proposed codes and guidelines to govern corporate behavior. These initiatives reflect an increasingly global debate on the nature of corporate legitimacy. Given the legal, organizational, reputational, and strategic considerations, few companies will want to be without a code. But what should it say? Apart from a handful of essentials spelled out in Sarbanes-Oxley regulations and NYSE rules, authoritative guidance is sorely lacking. In search of some reference points for managers, the authors undertook a systematic analysis of a select group of codes. In this article, they present their findings in the form of a "codex," a reference source on code content. The Global Business Standards Codex contains a set of overarching principles as well as a set of conduct standards for putting those principles into practice. The GBS Codex is not intended to be adopted as is, but is meant to be used as a benchmark by those wishing to create their own world-class code. The provisions of the codex must be customized to a company's specific business and situation; individual companies' codes will include their own distinctive elements as well. What the codex provides is a starting point grounded in ethical fundamentals and aligned with an emerging global consensus on basic standards of corporate behavior.

Keywords: Business ethics; Standards of Conduct; Globalized Firms and Management; Cross-Cultural and Cross-Border Issues; Values and Beliefs; Corporate Accountability; Corporate Governance;

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Citation:

Paine, Lynn, Rohit Deshpandé, Joshua D. Margolis, and Kim Eric Bettcher. "Up to Code: Does Your Company's Conduct Meet World-Class Standards?" Harvard Business Review 83, no. 12 (December 2005): 122–133.

How corporations govern themselves has become a matter of broad public interest in recent decades. Amid this many commentators and experts still disagree on such basic matters as the purpose of the corporation, the role of corporate boards of directors, the rights of shareholders, and the proper way to measure corporate performance. The issue of how shareholder interests should be considered in corporate decision making is particularly contentious. This article is a resource for understanding today’s key debates around governance and identifying the main areas in which changes are being called for. Many readers are grappling with these questions now or may have to address in the near future; in any case, the debates are sure to affect how business operates across the globe.

Ellen J. Kullman, the retired Chairman and CEO of DuPont, describes how she guided the storied science and technology company through a contentious proxy battle with activist investor Trian Partners, which acquired DuPont shares in 2013 and sought to break up the company. Trian’s pursuit of board seats led to a 2015 shareholder vote, which DuPont won under Kullman’s leadership. In a sweeping interview with Professor Lynn S. Paine, Kullman describes lessons from her experiences navigating the proxy contest that captured national attention as well as about working with your board, setting company strategy, leading a large corporation, evaluating time frames for shareholder returns, measuring stakeholder performance, assessing shareholder engagement, considering joining a new board and boardroom dynamics, and understanding how boards have changed over the years.

Silkroad—a cross-cultural music collaboration that world-famous cellist Yo-Yo Ma had spearheaded since 1998, was preparing to celebrate its 20th anniversary. In parallel, Ma was stepping back from his role as the organization’s Artistic Director. Silkroad had come of age, gaining international recognition for its uniquely global music, which blended musical traditions from across the world—especially Asia, the Middle East, Europe, and America. The Ensemble had also forged strong partnerships with universities, local governments, and civic groups and developed an array of outreach programs to help people understand and express themselves through music. Ma was confident that there could be no better time to hand over leadership. But the transition was bittersweet: He felt a deep personal connection both to the Ensemble as a whole and to every one of its performers and staff members. And he wondered how reducing his involvement would affect the organization’s sustainability.

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Up to Code: Does Your Company's Conduct Meet World-Class Standards?

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