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International ethics standards for business: NAFTA, CAUX principles and corporate codes of ethics.


Practical application of business ethics business ethics, the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company's obligation to be honest with its customers, to broader social  should be the focus of corporate ethics codes. Since many U.S. companies do business internationally and the number is growing every year, their ethics codes should address international ethics standards. A guide for such ethics is the Caux Roundtable Principles for Business, "the first international ethics code for business."

The goal of the Caux Roundtable Principles is to set "a world standard against which business behavior can be measured," a yardstick which individual companies can use to write their own codes.

Thirty-one codes of ethics are compared with the Caux International Ethics Code using content analysis techniques. Each of the codes of ethics is examined for representative words and phrases Words and Phrases®

A multivolume set of law books published by West Group containing thousands of judicial definitions of words and phrases, arranged alphabetically, from 1658 to the present.
 taken from the recommended Caux Ethics code. The data comparing corporate codes of ethics with the Caux International Ethics Code are presented in Exhibit 1.

The North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994.  (NAFTA NAFTA
 in full North American Free Trade Agreement

Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's
) provides guidance for the analysis of international trade issues, because it addresses new issues concerning employment, intellectual property and trade. While these provisions are included in NAFTA for their trade implications, they in [TABULAR tab·u·lar
1. Having a plane surface; flat.

2. Organized as a table or list.

3. Calculated by means of a table.


resembling a table.
 DATA FOR EXHIBIT 1 OMITTED] effect encompass ethical concerns that belong in corporate codes of ethics. Extending the analysis, we identify three major ethical issues in NAFTA and compare them to the Caux Principles and 29 corporate codes of ethics. The comparison is presented in Exhibit 2. Conclusions are drawn from the analyses, and practical recommendations are made to help finns update their codes of ethics to include both the spirit and the letter of the new emphasis on international business ethics.
Exhibit 2. Data Set                       Number of Codes of Ethics

Economic and Social Impact of Business               15
Respect for Rules                                     8
Support for Multilateral Trade                       11
Respect for Environment                               4
Avoidance of Illicit Operations                      31

North American Free Trade Agreement

The multilateral agreement was executed on January 1, 1994. Some of the main provisions of this unparalleled agreement deal with the elimination of tariff and non-tariff barriers and the facilitation Facilitation

The process of providing a market for a security. Normally, this refers to bids and offers made for large blocks of securities, such as those traded by institutions.
 of multinational corporate business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . Also, central to the agreement is a strong position on environmental protection [5]. The agreement states that each party is to implement the provisions of the agreement so that "there will be a progressive elimination of all tariffs on goods qualifying as North American North American

named after North America.

North American blastomycosis
see North American blastomycosis.

North American cattle tick
see boophilusannulatus.
." It also calls for protection of intellectual property rights [3:242]. NAFTA's ample employment protections are particularly important since Mexico does not enforce the liberal labor guarantees of its constitution that otherwise bear many similarities to U.S. and Canadian labor laws labor law, legislation dealing with human beings in their capacity as workers or wage earners. The Industrial Revolution, by introducing the machine and factory production, greatly expanded the class of workers dependent on wages as their source of income.  [1].

NAFTA's provisions deal with some of the most timely issues within the global environment. Do these issues reflect the concerns of businesses as players in a global ethical context? One indication of multinational concern is found in the Caux Round Table Principles of Business Ethics.

CAUX Principles

Simultaneous with the implementation of the multilateral NAFTA agreement among the U.S., Canada and Mexico to promote flee trade by eliminating tariff and non-tariff barriers was the creation of the Caux Principles. Considered to be the first international code of ethics for business, the Caux Roundtable Principles originated at a meeting of international business leaders in Caux, Switzerland Caux is a small village in the Canton of Vaud, Switzerland. Looking out over Lake Geneva from an altitude of 1000 meters, the Caux conference centre of Initiatives of Change[1] can accommodate up to 450 people. . These business people represented the U.S., Europe and Japan. The Caux Principles are based on the Minnesota Principles, which originated from the Minnesota Center for Corporate Responsibility (MCCR MCCR Miner County Community Revitalization (Miner County, South Dakota)
MCCR Manchester Council for Community Relations (England)
MCCR Medical Care Cost Recovery
) affiliated with the University of St. Thomas University of St. Thomas can refer to:
  • University of St. Thomas (Houston)
  • University of St. Thomas (Minnesota)
  • University of Santo Tomas, Manila, Philippines
  • Pontifical University of St. Thomas Aquinas
See also St. Thomas University
 in the Twin Cities, Minnesota [4].

The Japanese influence is particularly notable since their concept of kyosei, "living and working together for the common good," is one of two ethical concepts permeating per·me·ate  
v. per·me·at·ed, per·me·at·ing, per·me·ates
1. To spread or flow throughout; pervade: "Our thinking is permeated by our historical myths" 
 the Caux Principles [4:12]. The other concept is "human dignity Human dignity is an expression that can be used as a moral concept or as a legal term. Sometimes it means no more than that human beings should not be treated as objects. Beyond this, it is meant to convey an idea of absolute and inherent worth that does not need to be acquired and " defined by the code as the "sacredness or value of each person as an end, not simply as a means to the fulfillment of other's purposes or even majority prescription" [2:14].

The Caux Principles promote action to further the two main concepts of fairness and respect for others by promoting free trade, environmental and cultural integrity, and the prevention of actions that fall in the category of foreign corrupt practices corrupt practices, in politics, fraud connected with elections. The term also refers to various offenses by public officials, including bribery, the sale of offices, granting of public contracts to favored firms or individuals, and granting of land or franchises in  as defined by U.S. law (e.g., bribery bribery

Crime of giving a benefit (e.g., money) in order to influence the judgment or conduct of a person in a position of trust (e.g., an official or witness). Accepting a bribe also constitutes a crime.
 and money laundering The process of taking the proceeds of criminal activity and making them appear legal.

Laundering allows criminals to transform illegally obtained gain into seemingly legitimate funds.
) [4]. Among the principles that expand upon the concepts of fairness and respect for others are the following General Principles in Section 2 of the Caux Roundtable Principles for Business:

2. Economic and Social Impact of Business

4. Respect for the Rules

5. Support for Multilateral Trade

6. Respect for the Environment

7. Avoidance of Illicit Operations.[1]

These principles are further explained as Stakeholder stakeholder n. a person having in his/her possession (holding) money or property in which he/she has no interest, right or title, awaiting the outcome of a dispute between two or more claimants to the money or property.  Principles of the Caux Roundtable Principles for Business under the following topics: Customers, Employees, Owners/Investors, Suppliers, Competitors and Communities. The purpose of this project was to examine codes of ethics from major corporations to determine whether they include the provisions of the Caux Principles. An analysis of the data from the corporate codes of ethics and a discussion of the implications of the findings are directed toward responsible corporations doing business in the international arena.

Research Methodology

The project was carried out in a large northeastern city during the months of February and March 1994. Codes of ethics were solicited from businesses represented in the area, as evidenced by their listing in the yellow pages. The businesses were chosen based on two criteria: size and industry. Since larger businesses were considered most likely to have formal codes of ethics, the sample was limited to businesses with national prominence (national chains) or those easily recognizable as locally prominent. The industries selected were retail (e.g., fast food, grocery or department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. ), financial services The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please [ improve this article] or discuss the issue on the talk page.
, utilities and health services health services Managed care The benefits covered under a health contract .

Each business was contacted to determine the name of the person to whom a follow-up letter follow-up letter ncarta recordatoria  should be addressed. Once the name of the person was known, a letter soliciting the company code of ethics was sent by the researchers. A follow-up phone call to those businesses who had not responded within a two month time period resulted in a response rate of 84 percent - 37 letters were sent, 31 codes were received. Each corporate code of ethics was read by one of the researchers, and references to important concepts were noted. The researchers each read a subset of the other researcher's codes so that the coding would be uniform.

Salient concepts were selected before the coding process by combining principles mentioned in NAFTA with those from the Caux Principles. NAFTA is essentially an international trade agreement which addresses the main issues of multinational trade, environmental protection, intellectual property and employment, among others. The Caux Principles contain a broad statement of ethical principles encompassing and enlarging upon these NAFTA provisions. The final coding scheme consisted of five all-encompassing concepts from the Caux Principles, as shown in Exhibit 1.

Research Data

The typical composition of the codes of ethics includes three parts: (1) a cover letter, (2) a general statement at the beginning of the code and (3) a list of compliance situations in which ethical dilemmas An ethical dilemma is a situation that will often involve an apparent conflict between moral imperatives, in which to obey one would result in transgressing another.

This is also called an ethical paradox
 may arise. A cover letter was included with 62 percent of the codes of ethics. The cover letter is always from the Chairman of the Board and/or the Chief Executive Officer (CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. ). The letter contains broad general statements about the importance of the code of ethics, and in many cases, it is this document that instructs the employee about correct behavior when a situation is not specifically mentioned in the code of ethics. It is interesting that fully 38 percent of the companies attached so little importance to the code of ethics that no cover letter from upper management was included.

The general statement that prefaces the formal code of ethics usually consists of from two to six short paragraphs that include information about the importance of the code and who it affects. It often contains information about the person who should be contacted when situations not covered not covered Health care adjective Referring to a procedure, test or other health service to which a policy holder or insurance beneficiary is not entitled under the terms of the policy or payment system–eg, Medicare. Cf Covered.  in the code of ethics arise.

The final and longest part of the code of ethics, from five to ten pages, lists compliance situations that could present an ethical dilemma to employees. The lists that are most helpful to employees are those that in addition to listing the situations in formal terms also give examples of actual situations adapted to a particular industry. Some companies have only the lists without explanation or examples of situations. All of these sections were searched for references to the international ethics principles from the Caux Principles. Each of the codes of ethics was examined for evidence of the five coding categories from Exhibit 1, and the results are shown in Exhibit 2.

Analytical Results

The primary objective of the study was to determine whether corporate codes of ethics contain any references that show an awareness of international ethical issues. This concern is manifested by statements alluding to any of the General Principles of the Caux Roundtable Principles for Business.

From the frequencies reported in Exhibit 2, the areas of major concern in corporate codes of ethics are evident. All of the codes contained references to illicit operations such as bribery and corrupt practices. Fully half of the codes of ethics contained references to the economic and social impact of business such as equal opportunity for all employees, the importance of ethnicity and equal conditions of work. Nearly one-third of the companies was concerned about multilateral trade and relationships with suppliers. However, a majority of the companies did not mention intellectual property, copyright and trade marks TRADE MARKS. Signs, writings or tickets put upon manufactured goods, to distinguish them from others.
     2. It seems at one time to have been thought that no man acquired a right in a particular mark or stamp. 2 Atk. 484.
; only four companies included statements about respect for the environment.

When all the information is considered, several concerns of business become apparent.

* Businesses are very aware of the importance of instructing employees about one of the concepts - avoiding corrupt practices.

* Businesses are somewhat aware of the importance of instructing employees about proper actions concerning two other concepts. The economic and social impact of business and support for multilateral trade are mentioned by at least one-third of the codes of ethics.

* Businesses are, for the most part, not instructing employees about actions regarding two important concepts - respect for the rules or for intellectual property and copyrights and respect for the environment, which are mentioned in only a few of the codes.

* Organizations are apparently doing a good job of informing employees about only one out of the five principles, and they are doing an adequate job for two more principles. What impact could the resulting lack of information have on employee actions in a domestic or an international setting?


The analysis shows that at least 50 percent of the time, employees are not informed about corporate preferences for action on four of the tested principles. In this scenario, corporations run the risk that employees will not know how to respond when faced with certain situations. This might lead to two undesirable results:

* Employees might not act when action should be undertaken.

* Employees might act in an inappropriate manner.

How important is correct action? From a society's point of view, both the Caux Principles and NAFTA tell us that correct action is important. Making incorrect choices concerning employment, trade, intellectual property or environmental protection will lead to undesirable consequences, such as child labor child labor, use of the young as workers in factories, farms, and mines. Child labor was first recognized as a social problem with the introduction of the factory system in late 18th-century Great Britain. , unfair trade practices, pirating of copyrights and environmental pollution. These actions have undesirable consequences at a societal level.

How important is correct action at an organizational level? In today's society, organizations are expected to be responsible citizens at home. In our global economy, organizations must also be responsible citizens abroad. This responsibility is enforced by laws and sanctions which organizations must respect or suffer the consequences of legal action.

Universal adoption of ethical standards, such as the Caux Principles, will enhance corporate codes of ethics as well as international treaties. From a practical point of view and when these ethical standards are translated into behavior, our global environment will be more desirable and organizations will be required to spend less time preparing for and carrying out litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.

When a person begins a civil lawsuit, the person enters into a process called litigation.

As members of the "local, national, and global communities in which they operate, businesses share a part in shaping the future" [2:14]. When corporations are actively promoting kyosei and human dignity (sacredness or value of each person), the result is a world society where employees, intellectual property and the environment are respected; trade is enhanced; and business profits rise.

Endnote See footnote.  

1. The general Caux Principles 1 and 3 were not tested in this project because more extensive resources would be required. The authors investigated Caux Principle 3 in a previous project.


1. Benton, J. "Extraterritorial ex·tra·ter·ri·to·ri·al  
1. Located outside territorial boundaries: fishing in extraterritorial waters.

 Application of the ADA Ada, city, United States
Ada (ā`ə), city (1990 pop. 15,820), seat of Pontotoc co., S central Okla.; inc. 1904. It is a large cattle market and the center of a rich oil and ranch area.
." George Mason Independent Law Review, Vol. 2, No. 1, 1993, pp. 218-219.

2. "Caux Roundtable Principles for Business." Society for Business Ethics Newsletter, Vol. 6, No. 1, May 1995, pp. 14-15.

3. Litka, M. and M. Blodgett International Dimensions of the Legal Environment of Business, Third Edition. Cincinnati: South-Western College Publishing, 1995.

4. Nelton, S. "Promoting a World Ethical Standard." Nation's Business, Vol. 84, No. 4, April 1996, p. 12.

5. San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay.  Law Review, Vol. 31, No. 4, Fall 1994, pp. 10251055.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Author:Carlson, Patricia; Blodgett, Mark S.
Publication:Review of Business
Date:Mar 22, 1997
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