When it comes to corporate ethics, technology may again be playing an important role in leveling the playing field, and helping to create more consistent policies and standards in companies across the globe.

“We live in an age of information, where there are no secrets, and no places to hide,” says Keith Darcy, chief operating officer for the Ethics and Compliance Officer Association, based in Waltham, Massachusetts. “All day-to-day, standard business practices will see the light of day eventually—information can no longer be contained. That’s transforming decision making and creating a greater sense of conformance to acceptable standards of what’s good and right.”

There’s no question that the corporate scandals that rocked the U.S. at the beginning of this century sharpened the focus of companies, and countries, on the importance of establishing ethics policies and processes. The Enron and WorldCom bankruptcies, as well as the problems that unfolded at companies ranging from Adelphia to Tyco, shattered investor confidence and prompted U.S. regulators to confront the need for tighter oversight in the areas of ethics and corporate governance.

The U.S. clung to the rule of law to overcome these corporate transgressions, first with the adoption of Sarbanes-Oxley in 2002, and then with the revision in 2004 of the U.S. Sentencing Commission’s Organizational Sentencing Guidelines, which required companies to establish ethics standards and a corporate culture that embraces them.

The impact of the American corporate scandals, and the resulting regulatory response, was felt across Europe and Asia as well and continues to linger. On the one hand, Europe’s capital markets benefited from the stiffer controls in the U.S. because companies moved to financial centers such as London, where it was easier and less expensive to raise funds. The U.S.’s subsequent loss of its competitive advantage has recently prompted some leaders to rethink some of the restrictions placed on companies.

But Europe saw its share of corporate governance-related scandals as well, including those at Parmalat, the so-called “Enron of Europe.” The bribery and corruption accusations at Siemens, as well as the falsified reserves scandal that emerged at Royal Dutch Shell, are other examples. In the wake of these incidents, Europe has experienced a rise in efforts to promote corporate social responsibility, or CSR, to reinforce ethical principles and guidelines. CSR encourages organizations to consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, and the environment.

Darcy

“Europe was reluctant to adopt the heavy-handed legal and regulatory approach that we’ve taken here,” Darcy says. And now, in the U.S., Treasury Secretary Paulsen is “trying to move the U.S. away from a rules-based initiative toward a much more European model of principles-based initiatives,” he said.

Asia has recognized the need for more transparent corporate governance and ethics standards as well. Japan, which recently emerged from a long-term economic malaise, is considering a regulatory framework that is a variation of SOX to help strengthen the country’s markets and shore up investor confidence. The new regulation may take effect early next year, Darcy says.

As one example of how standards are helping to drive harmonization, regulatory authorities in China are embracing the principles of the Committee of Sponsoring Organizations of the Treadway Commission, and are examining how the COSO framework can be reflected in the country’s laws and regulations, notes Carlo di Florio, a partner in the Governance, Risk and Compliance practice of PricewaterhouseCoopers.

“There’s an enthusiasm about having a regulatory framework that reflects leading practices and a business environment that reflects governance, risk management, compliance and business ethics principles. These standards are seen as one means of attracting capital and growing the economy. They’re bringing the same kind of regulatory standards that exist in Europe and the U.S. into their increasingly commercially oriented markets.”

The stock exchange in China, for example, wants to have a risk-management and control framework that reflects COSO principles. It’s looking to require companies that list there to also demonstrate that they have effective internal controls and risk-management processes, following in the footsteps of exchanges in Europe and the United States, di Florio said.

While there are certainly business and cultural differences across Asia, Europe, and the United States, there are also many similarities. Studies done by the Institute for Global Ethics for instance, have identified five values that are common across cultures globally: honesty and trust; responsibility; respect; fairness; and compassion, di Florio says. The adoption of corporate governance, risk management, compliance, and business ethics standards by companies and regulators across the globe is another example of bridging differences to find common ground.

Companies can build on these common standards and values to establish effective global compliance and ethics programs. The Open Compliance and Ethics Guidelines is a U.S.-based non-profit that offers guidelines with global applicability in this area.

As with any program, it starts at the top, with senior management and the board setting the tone for an ethical culture by defining the values that govern the employees and the principles they should be using when making business decisions for the company. As the Institute for Global Ethics study reveals, generally, “these core values aren’t that dissimilar across countries and companies, whether you’re looking at Tata in India or General Electric in the U.S.,” di Florio says.

Next, companies need to establish, communicate, and train codes of conduct, which provide employees with standards and tools to help them execute the business in line with the core values. “Codes and ethical decision-making tools help you think through how to navigate various ethical dilemmas,” adds di Florio. Those policies and procedures need to be monitored and tracked over time.

Finally, ethics and compliance programs need to be integrated so the values and codes are supported by robust processes that embed the standards in the DNA of the business and ensure operating effectiveness. Implementing the values and standards of business conduct through robust compliance processes allows companies to effectively communicate and train their employees across different regions and divisions, monitor and test the efficacy of compliance, set goals, and report on their progress and effectiveness to senior management, the board, and regulators as necessary.

According to di Florio, “Whether you’re operating in China, Russia, Italy, or America, these are the common tools: the values, the codes, and the compliance processes.” He adds, “Responsible leaders in all four of these regions who get it and understand the value of having a good reputation, brand, and employee morale do this as a matter of business. It doesn’t matter which region of the world they’re in.”

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