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Financial remuneration increasingly linked to companies’ codes of ethical behaviour

An increasing number of companies are looking to link bonuses to ethical behaviour, according to a survey of the largest publicly listed companies in Europe.

The report, carried out by Brussels-based Integrity Interactive, shows organisations’ growing desire to create stronger links between individuals’ financial remuneration and compliance with their companies’ codes of ethics. The 2008 European Corporate Integrity Survey reveals 21 per cent of companies currently link awareness of ethical practices with employees’ salaries and bonuses. Over two thirds, 68 per cent, are in favour of introducing a direct link between the two.

A majority of companies, 85 per cent, have in place or have almost completed a formal code of conduct or ethics. But only 57 per cent of companies surveyed make it mandatory for all their employees to be trained in the code of conduct.

The survey also reveals that companies increasingly expect suppliers to also comply with their code of ethics. Seven out of 10 of companies now contractually oblige suppliers to comply with their code of conduct. Where companies do not have a contractual obligation for suppliers, they still expected them to comply with their code of conduct, even if they do not have anything specific in place to enforce this. The survey also revealed that UK companies are the least likely to have contractual arrangements with third party suppliers.

Paul Basson, president of Integrity Interactive Europe, says: “Monitoring and rewarding ethical behaviour is seen as an effective means of guarding against corporate scandal. In last year’s research, respondents supported the view that ethical behaviour often stands in opposition to individual and company gain; making ethical behaviour ‘pay’ removes any potential conflict of interest. There is no knowing whether a greater emphasis on instituting ‘good’ behaviour, rather than encouraging compliance with the rules, would have prevented nuclear sized scandals such as Société Générale but the risk would certainly have been minimised.”


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