Making Codes of Corporate ConductWork: Management Control Systems and Corporate Responsibility

WORKING PAPERS ON INTERNATIONAL INVESTMENT
Number 2001/3, February 2001

AUTHOR:
Organisation for Economic Co-operation and Development

OVERVIEW:
Many companies have implemented programmes that help them to respond to societal concerns about the economic, social and environmental impacts of their activities. These help them to manage their compliance with legal or regulatory requirements and their response to “softer” forms of social control of business. These voluntary initiatives by companies have included public statements -- codes of conduct -- in which they commit to behavioural norms in a variety of areas of business ethics (e.g. environment, anticorruption, etc.). Some companies have backed these up with management systems designed to help them respect their commitments. Indeed, codes of conduct often represent just the first step in a process of improving management processes in support of legal and ethical compliance. Subsequent steps include the implementation of systems of management control designed to promote compliance. These systems typically employ a range of tools including accounting and record keeping systems, training, hierarchical controls, compliance offices, whistle-blowing facilities, hiring practices, production controls, internal incentive systems and both internal and external audits. Management control, of course, is a core business function and exists as a separate, well-established discipline within the management field. The extension of this discipline to business ethics and its partial merging with legal risk management has been one of the more important developments in international business of the last two decades.

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