The Ethical Audit of the GE Company - Case Study Example

 Report on GE Ethics Introduction The ethical audit of a company of any size is a complex procedure since it requires taking into account the entire range of the company’s operation and understanding how the company considers itself to be behaving ethically while comparing it to ethical standards defined by professional organizations. As discussed by The Independent (2006) some of the biggest names in business and most admired global companies in the world have found themselves to be unethical when they were examined by external auditors. These include names such as Barclays, BP, Lloyds TSB, Apple, O2 and Marks & Spencer among many others. Luckily, the company I wish to work for i.e. GE was not on that list and the ethical report from GE as well as other data gathered from secondary sources about GE show that the company is on rather well footings when it comes to ethics. Methodology To conduct the audit, the first source was GE’s own report on their corporate ethics and their citizenship in terms of being a part of the business world (GE, 2006). As discussed by Carmichael et. al. (2008), elements such as ethical values, baseline ethics, social expectations and stakeholder analysis were used to create an ethical audit on the position of GE and to understand their current standings with regard to ethics. Additionally, secondary sources were also used that show that GE still has some trouble with regard to ethical treatment of certain minority employees which shows that there is room for improvement. Findings The company itself is well esteemed and held in high esteem by business analysts as well as CEOs of other companies (Demos, 2006). It has a long history of global operations and has excellent in many sectors and fields of business such as administration, human resources management. According to Welch (2005), a large part of this admiration comes from the manner in which GE handles its business aspects of good leadership coming from the highest end of the company and the process of creating positive motivation for the employees of the organisation. As a global player, GE is certainly a giant with a history that goes back to the invention of the light bulb at the hands of Edison. Today, GE is the name given to a large group of companies work under the same umbrella with eleven different concerns. From finance, to technology to aviation to manufacturing, GE engages in a variety of business which require a large number of employees spread across the globe. More than 300,000 employees in a 150 countries work for the company with a unified system that has been made relevant to all of GE’s operations and factors around the world (GE, 2006). At the same time, GE (2006) is one of companies where ethics, values and actions are all interrelated and dependent on each other. The ethics of the company do not change with the business they are in and the primary drive of the company remains translating ideas into products for the benefit of their stakeholders. In fact, even the high level of ethics and organisational principles which make GE admired and respected by other companies are essentially a step on their path to getting more business and being better than their competition in every possible way. Since companies can compete in a variety of tangible and non-tangible ways, having a high level of ethics gives GE the respect it needs when it comes to clients who demand that the companies they do business with also have a high level of ethics. Very recently, GE was rated as the single most admired company in the world (Demos, 2006) and the reason for this admiration becomes clear when we look at the business success GE has had in the past few years. However, along with business success GE also seeks ethical and social leadership which would certainly help the business purposes of the company. The guidelines for an ethical audit as given by Carmichael et. al. (2008) suggest that the ethical values of the company must be studied first and as per the ethics report given by the company, their primary ethical responsibility to is continually improve their economic output and increase their value for their stakeholders by using positive ethics (GE, 2006). Secondly, GE tries to create an ethical environment which goes beyond the legal requirements and the guidelines given to them by regulatory authorities. Finally, GE seeks to give priority of ethics which connect with accounting principles and legal regulations that are applicable to the regions where they operate. In light of these values one of the recent issues facing the word today is the looming energy crisis which is directly connected with rising oil prices and the need for clean energy. GE (20006) considers this to be a matter of global ethical concern and shows that is investing a lot of money in alternative energy. The ethics, compliance and corporate governance section in the report created by the company shows that their ethics related audits are conducted by independent evaluations. In this manner, the criticism on ethical reports which are made by Adams (2004) as well as Chwastiak and Young (2003) are tackled efficiently. GE is also proud to say that a recent ethics related global survey of CEOs conducted by The Financial Times places GE at top for its commitment to governance and ethical conduct (GE, 2006). In essence, the requirements for ethical audits containing independent viewpoints as discussed by Medawar (1976) are well met by the company. Beyond compliance with regulations, GE shows that they care a lot about human rights as well. They are concerned with the violations of human rights on a global scale since the world does not follow a unified code for the engagement of labour and in many countries, labour related laws leave a lot to be desired. For example GE (2006) notes that in certain Central American nations, it was a common practice to test female workers for pregnancy before giving them employment so as to avoid giving them maternity benefits a few months later. GE put a stop to this policy in their Central American operations and made it illegal for their managers to question employees concerning pregnancy. As discussed by Armstrong et. al. (1999, Pg. 94), “There are clear differences between the contractual obligations entered into by the several parties to a contract and the ethical duties of those parties” and GE enforces these ethical duties with all those whom it enters into a contract with. For example, in China it was considered acceptable to discriminate against employees based on age and GE stopped this by enforcing ethical internal employment regulations (GE, 2006). As discussed by the long term CEO of the company, the primary responsibility for ethics and following the right rules of the game falls on the CEO of the company and it seems that GE’s CEO as well as the board of directors is quite concerned about ethical behaviour (Welch, 2005). Undoubtedly, others have seen how GE behaves and their actions have been approved by many organisations. The finding show that GE obtained nearly two hundred national and international awards for maintaining a high level of ethics just in terms of the health and safety regulations it applies with its workers. Testing conducted by ISO (International Standards Organisation) and other such bodies show that GE is indeed serious about ethics and looking after its stakeholders. In fact, even anonymous surveys conducted the workers at GE show that the employees highly approve of the processes and management ethics at GE which include outreach programmes for workers who may be suffering from AIDS to the management of pension funds for all its employees (GE, 2006). In fact, while conducting the review of ethics followed at GE, It was difficult to find situations where the company was not following ethics. GE recognises that their ethics may not be at a hundred percent in some situations, but wherever GE was lacking they assured that are planning to improve ethical actions in those sectors (GE, 2006). In terms of ethical audits, Chwastiak and Young (2003) report that there may be gaps in audits and reports which are left alone, not mentioned at all or glossed over by some companies but GE says that 97% of the concerns which were raised by their employees or those which were raised by the governments of the countries where they operate have already been handled by them. As for the remaining issues, the company says that it is actively working to handle them to the satisfaction of all concerned parties (GE, 2006). As discussed by Colvin (2006), this is just one element of the continual drive for self improvement which is a part of everything else which the company does. In 2006, GE donated more than a hundred million pounds to various charities around the world and beyond ethical standards for itself, it also motivates its suppliers and business partners to follow high ethical standards. GE reports that it will not do business with countries that have strong ethical violations concerning human rights issues stacked against them. It will also not work with suppliers who do not comply with their home country’s laws concerning minimum wage, minimum age, health and safety, coerced labour, reasonable hours, overtime wages, or environmental laws. GE evaluates its suppliers with regards to these laws and those who do not comply are not used as GE’s suppliers any more (GE, 2006). However, despite the reports given by GE, there are still some questions concerning the ethics and procedures followed at GE. For example, Alleyne (2005) reports that even though GE has been appreciated as an excellent company to work for, there are some workers at GE, who feel that they have been discriminated against due to their racial heritage. Mr. Thomas was a high ranking official at GE working in their Aviation Materials Department of the company and has taken GE to court with regard to accusations of racial discrimination. He has claimed that GE discriminates against black employees and pays them less than their Caucasian fellow workers. Additionally, when GE employees brought the situation to light they were silenced and subjected to disciplinary procedures. While GE may be an ethical company and it may seek to encourage ethical behaviour everywhere it operates, it seems that there are stills some questions left unanswered which means that GE will have to focus on these issues to improve its ethical standings. For example, although GE’s report on ethics certainly shows that the company is doing all it can to follow a high level of ethics, the source of the report remains the company and the metrics as well as the claims in the report were verified internally (GE, 2006). Undoubtedly, it would be very hard to find a company which is perfectly ethical but GE does come quite close to the gold standard for a company which follows ethics as best as it can and matches the objectives which it set for itself. Conclusion It is easy to say that in comparison to many other companies such as McDonalds and Coca-Cola which have been accused of unethical practices up to and including murdering employees who wanted to form a union (The Independent, 2006), GE certainly appears to be quite ethical and a good company to work for. Morris & Colvin (2006) certainly think that there is something positively right about GE and other analysts also support their position. Most importantly, the company shows that it is very willing to bring improvements to its level of ethics whenever it can and is willing to make adjustments when it is necessary to do so. When a company such as GE does that, the rewards come in the shape of the world admiring it and giving it awards for ethical behaviour while the customers and clients of GE are reassured that GE is an ethical company. Most importantly for the people who are looking to work for GE or the people who are currently working for GE, knowing that the company is an ethical one certainly helps them sleep easier at night. Word Count: 2,218 Works Cited Adams, C. 2004, ‘The ethical, social and environmental reporting-portrayal gap’, Accounting, Auditing and Accountability Journal, vol. 17, no. 5, pp.731-757 Alleyne, S. 2005, ‘But Can You Walk the Walk’, Journal of Black Enterprise, vol. 36, no. 2, pp. 100-105. Armstrong, J. et. al. 1999, The Decision Makers, Thomas Telford Carmichael, S. et. al. 2008, ‘How ethical auditing can help companies compete more effectively at an international Level’, European Institute for Business Ethics, Nijenrode University, [Online] Available at: http://www-old.itcilo.org/actrav/actrav-english/telearn/global/ilo/code/audit.htm Chwastiak M. & Young J. 2003, ‘Silences in Annual Reports’, Critical Perspectives on Accounting, vol. 14, no. 1, pp. 533-552. Colvin, G. 2006, ‘What Makes GE Great?’, Fortune, vol. 153, no. 4, pp. 90-96. Demos, T. 2006, ‘The World’s Most Admired Companies’ Fortune, vol. 153, no. 4, pp. 72. GE. 2006, ‘Citizenship Report’, GE.com, [Online] Available at: http://www.ge.com/files/usa/citizenship/pdf/GE_2006_citizen_06rep.pdf Medawar, C. 1976, ‘The Social Audit: A Political View’, Accounting Organizations and Society, vol. 1, no 4. pp. 389-394. Morris, B and Colvin, G. 2006, ‘The GE Mystique’, Fortune, vol. 153, no. 4, pp. 98-104. The Independent. 2006, ‘The ethics audit’, [Online] Available at: http://www.independent.co.uk/environment/the-ethics-audit-2006-481531.html Welch, J. 2005, Winning. HarperCollins: New York. Read More