American corporations should establish written codes of ethics to state their obligations and to provide general guidelines for behaviour in areas deemed morally ambiguous.
This was a major recommendation of about 50 Washington area business, union, civic and religious leaders at the conclusion last weekend of a Catholic University conference on corporate conduct.
Conferees backed 13 recommendations to America's corporate leadership. Where disputes on language developed in drafting the final consensus report, a majority vote decided the issue.
Conference participants noted that society's expectations about the role of corporations are "changing dramatically." No longer is a company accountable solely to owner-managers or stockholders, they said, but it must respond also to "larger demands of employees and the community at large - both here and abroad."
With society demanding more production with less pollution, and continued competition tempered by concern for social justice, normal measures of behaviour - return on investment, profit optimization - "are by themselves inadequate to the new tasks," the Washington area leaders agreed.
In part to meet the new demands, the conference said corporate codes of ethics should be developed by directors and top management, and not delegated to lawyers or other professionals.
The proposed codes - which a number of U.S. companies have drawn up in recent years - should state explicitly those practices they deem unethical and should prescribe penalties, such as demotion or dismissal, for serious infractions.
In addition to individual company codes, the conference proposed that business should support efforts to "upgrade ethical behavior in an industry" through professional associations. These efforts might include industrywide codes of conduct, the conference said.
Companies and trade groups also should bring together government, corporate, worker and lay persons to develop new mechanisms to promote "meaningful corporate self-regulation," the final recommendations stated.
In the past, some self-regulation has been used improperly to enhance special corporate interests, and some government regulation has become costly and out of touch with the needs of employers, employees and consumers, the Washington area leaders said.
Catholic University president Clarence C. Walton said that, for the long range, the recommendations made over the weekend represent "a step toward a statement of standards that individuals and organizations can agree upon."
The area meeting was co-sponsored by C.U. and Columbia University's American Assembly, which conducted a nationwide meeting on corporate ethics last April.
Among Washingtonians who took part in the meeting were Giant Food chairman Joseph B. Danzansky, Columbia Federal Savings and Loan president T. William Blumenauer Jr., and Kent T. Cushenberry, manager of community relations for International Business Machines.
O. Gordon Banks, former president of the Washington Society of Association Executives and executive director of the National Micrographics Association, also took part. He said afterward that, "Considering the diversity of participants, it made for a most productive conference."
Although no one received expression in the final recommendations of "all he wanted . . . there was no real quarrel . . . it was done fairly and resulted in something of substance that goes beyond what most U.S. companies have done," Banks added.
Jean Head Sisco, a Washington who sits on six corporate boards an an outsider or independent, said she believes directors such as herself have a "special role to fill in the morality of the corporation."
She said that although several of the boards have codes that are equal to or go beyond the recommendations approved here last weekend, she plans to send copies of the conclusions to all the companies she serves - Macke Co., Perpetual Federal Savings and Loan, Textron, Santa Fe Industries, United Brands and Carter Hawley Hale (which owns Neiman-Marcus).
Among other recommendations to America's corporate leadership, approved by consensus, were the following:
Boards of directors should monitor not only the financial, but also the ethical, health of the company through an "extensive use of checks and balances," including consultations with outside professionals when necessary.
Total compensation to top company officers should be determined by outside (not company-employed) directors, and ethical as well as financial considerations should be taken into account in reviewing performance.
Lower-paid workers of a company with years of service "have a special claim" on the corporation, and employment policies should "reflect this principle:" overall, corporations "have an obligation to respect the rights and dignity" of their workers, whose value "is to be defined not simply in terms of their current productivity."
Corporations have an obligation to initiate programs that will provide equal employment opportunities with "special recogniation of the need to bring minorities and women into the mainstream" of the economy. Specifically, firms should review practices that have hindered achievement of these goals.
Management should be responsible not only for the moral content of company advertising but also the moral content of television programs it sponsors.