Business Ethics Programme for the Bauernfeind Company

by: Christian Herbst

Table of content:

Part I

1. Globalization and Business ethics

2. Basics of Business ethics

2.1 SA 8000
2.2 Code of Ethics
2.2 Code of Conduct
2.3 Questionnaire

3. Overview of the Semiconductor Industry

Part II

1. Code of ethics

2. Code of Conduct

3. Corporate Governance

4. Implementation

5. Summary

Appendix

1. INTRODUCTION

The goal of this project is to establish a complete, globally applicable set of values and norms, as well as guidelines and regulations which should be accepted by each employee and manager, no matter in which country he or she works. Concerning the structure of this programme, two parts are distinguished - a theoretical approach to business ethics on the one hand and a concrete framework of ethical guidelines and on the other hand. In the first part a basic explanation about the role of business ethics in a changing business environment is given, followed by an overview of some important concepts of business ethics, social accountability standard SA 8000 and implementation of it. In the second part, we start with a code of ethics, where the necessity and importance of it is pointed out.

The highlight is put on important aspects related to corporate governance, which includes especially a set of relationships between a company’s management, its board, its shareholders and other stakeholders. The next chapter deals with the code of conduct, in which rules and regulations will for ethical behaviour based on Bauernfeind′s values are outlined. The code applies to all employees and managers in all countries where the Company is conducting its business, even if some of the aspects mentioned in this Code of Conduct are not required by law in some of these countries. Furthermore the questionnaire for the company is developed Finally, the project work is summarized and conclusion is drawn.

2. GENERAL INFORMATION

2.1 Business ethics and globalization

The recent 20 years have been the era of globalization with enormous growth in international trade, financial flows and foreign direct investment (FDI). In former times, most Western companies did not engage in international business activities. On the one hand their domestic market seemed to be attractive enough and there were sufficient opportunities for growth. On the other hand, companies did not have to take into consideration the specific features of foreign markets. Managers did not have to deal with foreign languages, currencies and “strange” cultural behaviour. Furthermore, companies did not need to adapt their products to different customer preferences or care about legal and political uncertainties.¹

Nowadays, however, the changing business environment and the dependency on other nations’ goods and services has forced most companies to seek opportunities in foreign markets as well. In general, companies decide to invest abroad for a variety of reasons: ü Limited domestic growth is one of the major reasons why firms enter foreign markets. This development has started in the 70’s when Japanese manufacturers began to enter Western markets in many sectors. Nowadays those companies have to face competition from other Asian countries, such as South Korea and Taiwan, which have gained advantages through their low-cost labour force. ü Geographic market diversification to reduce country-specific risk is another popular reason behind many companies′ expansion plans. Country specific risk is defined as the risk of operating in only one country and thus being dependent on its political and economical system.

ü Lower cost of production in developing countries is a popular reason, as well. However, such a "cost-led approach" is unlikely to lead to be successful in the long-term. If customers′ needs are not identified and satisfied, the company will not be able to become a successful "global player".² However, this development assigns companies new tasks and challenges, especially concerning business ethics. Global companies will have to face the question, how and under which guidelines and principles they will conduct their business. This could imply the following fields: ü working conditions, like child - labour or equal treatment of male and female workers (shall companies introduce a global standard regardless of national law differences); ü human rights (clear principles, which consequences a global company will take, when human rights in one the countries, where this company is conducting business, are violated); ü environmental issues (with regard to globally effective pollution and environmental standards); ü Social responsibility (which measures a global company will take to make its contributions to society); ü Bribery and corruption (where the definition of what bribery is has to be exactly defined and the way how to behave when bribes are offered has to be made clear).

2.2 Corporate culture and Business Ethics

Corporate culture

Corporate culture refers to the values, beliefs and customs of a company. It is the collection of beliefs, expectations, and values shared by an organization’s members and transmitted from one generation of employees to another. The culture sets norms (rules of conduct) that define acceptable behavior of employees of the organization.³ Since the quality of ethical operating of a company gains more and more importance business ethics is to be linked with corporate culture.⁴ Ethical beliefs have to become part of the daily thinking and acting and therefore these beliefs shall become part of the company’s mission statement. Not only profit or other rational facts, but also human recourses, the environment and other issues are considered in the overall concept of a company.

7-S model

Linked to the corporate culture, the 7-S-Model is based on the assumption that the members of an organisation are sharing a system of combined values and beliefs. Therefore organisations where the employees are taking the center stage of the company are considered to be more successful than others⁵. Based on that fact the 7-S-Model shows the multiplicity interconnectedness of all the seven elements that define an organization’s ability to change. Those elements are divided into the so called soft facts and the hard facts. Strategy, structure and systems belong to the hard S´s. They are feasible and easy to identify. The soft facts include skills, staff, style and the shared values. Soft facts are hardly feasible and they are highly determined by the people at work in the organisation. Although the soft factors are below the surface, they can have a great impact of the hard structures, strategies and systems of the organisation.

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1 Kotler, Armstrong, Saunders, Wong; Page 166

2 Kotler, Armstrong, Saunders, Wong; Page 167

3 www.quintcareers.com/jobseeker_glossary.html

4 J. Rothlauf: Total Quality Management; 2. Auflage; 2004

5 J. Rothlauf: Total Quality Management; 2. Auflage; 2004