Some farmers remember to lock the barn after the horse has been stolen.
Some corporations do, too. A smaller number of them even lock up before someone tries to steal the horse.
Locking the barn, in this case, means establishing an explicit policy of ethical conduct as an essential part of a company's way of doing business.
The need for stronger ethical policies has been vividly underlined by a procession of corporate wrongdoing over the past year -- illegal check overdrafting at E. F. Hutton & Co., the Bank of Boston's conviction for failing to report large cash transactions, the $2 million fine and guilty plea by General Electric Co. for time card mischarges at a defense subsidiary, and a long roll call of scandals by other companies in the defense and investment industries. They have given business the biggest self-inflicted black eye it has worn since the campaign spending and foreign bribery scandals more than a decade ago.
Ironically, they come at a time when many major companies appear to be paying more attention than ever to their ethical conduct and their reputations, said W. Michael Hoffman, director of the Center for Business Ethics at Bentley College, in Waltham, Mass. The escalating legal penalties for wrongdoing at the public's expense are a powerful motivation for good conduct, said Hoffman. And there is a growing, genuine recognition among business leaders that a company that sets and meets high ethical standards will have an easier time meeting other goals it cares about -- like product quality, or customer service or employe loyalty.
If companies are talking more about ethical conduct, is the message getting through? It's a question that concerns Hoffman, a host of the center's sixth annual conference on corporate ethics at the college this week.
His concerns are based on the center's latest survey of the ethical policies of the nation's 1,000 largest industrial and service companies. The survey, completed this summer, drew responses from 279 companies -- 28 percent of those surveyed.
The answers reveal two contrary patterns, said Hoffman.
More companies than ever are insisting upon ethical conduct by their employes, from top managers on down. According to the survey, 80 percent of the companies that responded said they are taking steps to "institutionalize ethical values" within the corporation. And of these companies, nine out of ten have issued a written code of ethics, spelling out what the company stands for.
"That's good. That's encouraging. What isn't so encouraging is how they're implementing their ethical goals," said Hoffman.
Only 18 percent of the companies that responded have an ethics committee to review the company's performance in this area. Only 7 percent have an ombudsman with an open door to whistle-blowers inside the company. And only 1 percent have a judiciary board to handle enforcement issues.
"If over 80 percent don't have an ethics committee, how are they implementing their code of ethics? How are they monitoring it or enforcing it? It becomes unclear to me without these strategies how the code of ethics is getting across and becoming a part of the company," said Hoffman.
That is an issue GE faced after its indictment for defense contracting fraud this spring. The response by Chairman John F. Welch Jr. included the appointment of corporate ombudsman, John D. Peterson, with an office in the company's Connecticut headquarters and a hotline.
The letter to employes announcing Peterson's appointment said in part that employes who believe that a co-worker has violated the company's government contracting policy are required to report the information to management or directly to the ombudsman.
The ombusdman's role is to provide a fail safe place where a whistle-blower can go to report wrongdoing without jeopardizing her or his job, GE said.
The value of such a system is pretty obvious after the fact, but not before, in most major companies, Hoffman's survey showed. But the pressures to break rules and cut corners are inevitable within a business, and the bigger the institution, the harder to control the problem.
The normal way a society achieves ethical standards is through the public's knowledge that their behavior will be observed, said Joseph L. Bower, professor at the Harvard University School of Business Administration. "That's a powerful sanction because we pay attention to how we're regarded by others," Bower said.
"When you have a very large organization, and people are constantly moving, it's very easy for those sanctions to break down . . .
"If you're really a citizen of E. F. Hutton, more than of a particular town or country, it's possible to let things get out of proportion. How you are regarded by the people you work with day in and day out becomes more important than other standards," Bower said.
The problem is more difficult when companies are under pressure, says Hoffman. "Any time corporations -- and it's no different from individuals -- find themselves in difficult times, then people begin to look to cut corners," he said.
"When middle-level managers say they feel pressures to compromise their own personal ethics for corporate goals, you know that kind of environment is going to increase" when a business is in trouble. . .
"It's that kind of pressure that corporations have to learn to deal with better . . . I don't think people in business are any less ethical than anyone else," Hoffman added. "[But] there is something in the system that can produce that kind of pressure." The pressures are part of the system, he says.
And that's why prevention should be made part of the system, too, he said.