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


Practical application of business ethics 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 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 (NAFTA) 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 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 of multinational corporate business operations. 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." 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 [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. 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) affiliated with the University of St. Thomas 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 the Caux Principles [4:12]. The other concept is "human dignity" 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 as defined by U.S. law (e.g., bribery and money laundering) [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 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), financial services, utilities and health services.

Each business was contacted to determine the name of the person to whom a follow-up letter 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 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). 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 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; 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, 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.

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.


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 Application of the ADA." 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 Law Review, Vol. 31, No. 4, Fall 1994, pp. 10251055.
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Author:Carlson, Patricia; Blodgett, Mark S.
Publication:Review of Business
Date:Mar 22, 1997
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