Ethics

6. Moral DNA of the organisation

The moral DNA of the organisation relates to the quality of the company’s values and how well the company lives by them in terms of how it conducts its business with its stakeholders.

Amongst the factors that can challenge the maintenance of a consistent ethical culture are:

• The phase of the business (new and fast growing businesses face challenges as they move aggressively),
• The industry the business operates in (upholding freedom of expression and maintaining editorial fairness in the commercial media industry)
• The diversity of the cultures that participate in the operations of the business.
• Companies with high-profile brands face more severe downside risk when their ethics are called into question.

7. Theft, fraud and corruption (including conflicts of interest)

Sub-issues relating to the industrial sub-sectors include:

• Bribery and corruption – particularly of public officials to achieve competitive advantage, such as an exclusive, or advantageous licence to operate in the country. This issue also overlaps with ETHICS: ‘Anti-competitive behaviour’
• Theft & fraud – relates largely to company officials colluding to compromise the company’s assets in some way for private gain.

Aspects to consider in assessing response to the issue:

• Implementation of an anti-corruption programme
• Transparency re information about tax payments in foreign countries (see also under SOCIETY: Industry equity)
• Declaring and dealing with conflicts of interest (see also under GOVERNANCE: Board balance and effectiveness)
• Policy towards facilitation payments (and extended to agents)
• Policy re political donations
• Whistle-blowing policy and confidential reporting of corruption (prohibition against retaliation)
• Application of King IV principles

Theft, fraud and corruption may be regarded largely as a hygiene issue by the companies in sectors with low exposure. FarSight upweights for higher profile brands and for companies operating in vulnerable countries and regions, given the increasing incidence of corruption and the public outrage against corporates found to have colluded with public officials and and South African State Owned Enterprises.

8. Anti-competitive behaviour

How responsibly does the organisation guard against anti-competitive market practices, including monopolistic behaviour, collusion and theft of intellectual capital?

Aspects to consider:

• Corporate policies that deal with anti-competitive behaviour;
• Awareness programmes to embed the issue;
• Incidences of anti-competitive behaviour by the company or office-bearers of the company, including legal cases and investigations;
• Procedures and initiatives for preventing and/or alerting to potential or actual cases of anti-competitive behaviour (eg. Tip offs Tim);
• How incidences of anti-competitive behaviour have been reported (humility and transparency);
• How incidences of anti-competitive behaviour have been handled, disciplinary procedures, etc.

Collusion is a particular vulnerability for companies that can dominate niche markets. While the Competition Commission has become more active in recent years, sanctions tend to be relatively minor.

Ultimately, anti-competitive behaviour is to the detriment of the consumer, reducing the efficiency of the market and supply chain, or any of a number of other value outcomes, such as product innovation, consumer experience, etc. This issue is also closely related to CUSTOMERS: ‘Access to products and services’. The latter is concerned with what actions companies are taking to provide products and services to the poor at prices below price levels in normal, free markets. Further, access is also concerned with other measures that companies may take, such as collaborating with distribution partners to ensure distribution to remote and rural areas that would be traditionally under-served.