HP and Code of Ethics - Case Study Example

Introduction HP with 156000 employees is a leading computer technology solution provider of the world. This year, Fortune 500 has ranked HP at No.14. To give guidance to such a large workforce, and the supply-chain network, HP has created the Standards of Business Conduct Brochure (SBC)—a charter of ethical conduct and a ready reckoner for sound decision making. At core of company’s aims and objectives lies realization of highest level of compliance to ethical conduct and achievement of “Global citizenship” that is defined by the CEO, Michael Hurd as the hidden component in HP products. The CEO, the Board consisting of nine members, are the guiding lights for the company of sound ethical conduct. Hierarchy and Ethics and Compliance Committee At the pinnacle of HP’s hierarchical order is HP’s Board that comprises nine members and the CEO The watch dog for ethical behavior is the Chief Ethics and Compliance Officer. He heads the Ethics and Compliance Committee. A Compliance Council has been constituted for risk assessment and to enforce development training. It is further assisted by Global SBC team. All production, management, marketing and sales heads are supported by the SBC team to help them do their activities in conformance to Standards of Business Conduct. HP Legal, HP Global Trade, HP Government Affairs, and HP Corporate Communications are other departments that lend lateral support to the company for good governance and ethical conduct. Evaluation Ever since its inception in 1939, HP faced its worst ever ethical crisis in 2006. The Chairman, Patricia Dunn had to resign in wake of charges leveled against her, and some Board members, for spying (http://money.cnn.com/2006/09/22/technology/hurd_conference/index.htm). Although, the company is fast on the track to retrieve its lost reputation, criminal charges against her persist. If such a scandal could exist at the top, definitely it must have made ripple effect flowing downwards. The Board has asked its member G. Thomson Kennedy to review HP’s compliance to legal and ethical behavior. John Hoak has been administered the charge of Chief Ethics and Compliance Officer (http://www.hp.com/hpinfo/newsroom/press/2006/061012a.html). Bart M. Schwartz, a former U.S. prosecutor is leading an independent enquiry to review company’s ethics program. Effective checks and balances have been introduced in the top order to scrutinize their work. A worldwide initiative for training into ethics has begun and in 2006, 95% of employees of HP participated in it (http://www.hp.com/hpinfo/globalcitizenship/gcreport/ethics/approach.html). Standard Business Code in Brief At the surface level, the SBC may seem purely a treatise on ethical behaviour. But its careful perusal reveals that it is a problem solving and decision making document also. At all possible points of confusion in discharge of duty, the SBC clearly shows the line to be toed by an employee. The guidelines in SBC are to be followed not only in internal behavior of the employees but also in their external activities.(http://www.hp.com/hpinfo/globalcitizenship/csr/sbcbrochure.pdf). HP wants its Board members, employees, channel partners to abide by a common code of ethical behavior. Clauses 1 through 10 of SBC provide the frame work of ethical behavior by the employees. HP SBC also asks its executives and managers to lead by personal example in the implementation of these guidelines. The Standard Business Conduct brochure of the company delineates why, how, when, and by whom the code is used. It also clearly demarcates the ethical from the unethical behavior. Through the Open Door policy, HP has made it mandatory for its employees to report to the management, if there is any doubt about appropriateness of any decision and action. HP staff is supposed to be legally right when dealing with customer or competitor. When entering into contracts with other parties, the terms and conditions need to be clearly written defining the obligation of HP and the other contracting party. HP has specified that anti-trust and competition laws need to be followed in the open competitive market. HP recognizes the need for exchange of ceremonial gifts, or acceptance of customary service like meal, entertainment or any favor by its employees for furtherance of HP’s business interests. But wherever such a favor exceeds the nominal value, it has to be accepted with permission of the Vice-president. It is the duty of the employee to consult HP Global Trade whether a particular activity is subject to US controls. Doing business with governments have exclusive guidelines. HP’s distribution network or channel partners in all parts of the world including the US have to be subjected to preview by HP Legal. No minimum price barrier can be enforced on a HP’s channel partners. In no way the sales staff can set up a price differential for different channel partners. HP’s interaction with competitors is governed by anti-trust and competition laws. HP prohibits such agreements with competitors that eliminate or restrict competition. HP prohibits its employees and its channel partners to gain information of their competitors from illegal and espionage activities. Only the best supplier is to be selected as a vendor of HP. Supplier’s responsiveness, quality of material and punctuality need to be considered before entering into a contract with him. The supplier’s quality of product and service should be accorded priority over everything else. Minority owned and women owned small organizations may be given a preference in choosing a supplier. The code of ethics also calls for annulment of a contract with the supplier, if it violates local laws or laws pertaining to labor or environmental standards. HP permits an employee or a director to volunteer in a charity activity or act a director of any public or private of concern but wherever there is a conflict of interests between that particular activity and the interests of HP, and then the person has to relinquish office either in HP or concern in question. The employees of HP are prohibited from holding any office in a competitor’s concern. Similarly the code also restricts its employees from holding any office in the concern or channel partner or a regular customer of HP products and services. The employee is also prohibited from holding an office in any of HP’s subsidiaries without the permission of the executive vice-president or HP Legal. The immediate family members of an employee too are prohibited from having interests in HP’s customers, suppliers, subsidiaries or competitors. All secret information of HP has to be handled most cautiously and according to the rules and regulations of HP. Any information regarding products, sales, marketing, and manufacture and products should be labeled as HP Private, HP Confidential, and HP Restricted. It is suggested to the employees to exercise caution even while receiving sensitive information. It can only be made public for compliance with an earlier agreement or a if a fresh written agreement for its disclosure has been concluded. No one except designated individuals is allowed by the Code to make public any information. HP’s commitment to protection of information regarding its customers, employees, channel partners and suppliers is managed by HP Global Master Privacy Policy. The information handling procedures also requires that the records of the company be professionally drafted and properly managed and recorded. The Global Records Retention Schedule (GRRS) guides the personnel how to retain and dispose of information. However, in case of litigation, GRRS is suspended and all records that may be required in the lawsuit are preserved. All information regarding a lawsuit in the US need to be turned over to HP Legal Litigation Section in Palo Alto, and elsewhere to HP Legal. In account keeping, generally accepted principles are to be followed. HP delegation of authority overlooks any authorization given to empower an employee to make or receive payments on behalf of HP. No such payment will be made that is not supported by adequate documentation. HP Government Affairs overlooks contribution to political organizations that help to propel the business interests of HP. Any activity that is purportedly made by an employee to further the interests of HP in political arena needs the express permission of HP vice-president. However, HP doesn’t interfere in the private participation of an employee in the political process. HP makes a discreet statement of protection of its intellectual property that comprises designs, systems, logos, artificial intelligence, trade secrets and patents and calls for their protection. HP calls upon its employees to show proper conduct towards their colleagues and treat everyone with dignity and courtesy; maintain a discrimination free equable work atmosphere. Any misconduct may lead to termination of disciplinary action as per the HP Global HR Policies Discussion There are certain areas of ambiguity in SBC. In case of acceptance of a gift there is ambiguity on who will determine whether the gift is of nominal value or not. An Open Door policy may lead to increase in number of trivial complaints, vendetta, and bickering. At times the documents tend to become too theoretical although we know that ethics, uprightness, integrity are more of personal virtues than public attributes. An employee who likes to keep his conduct good may rarely talk of it or make a pretense of it. As such focus should be more on practical training in decision making and problem solving than on preaching ethics. Till the time, the spying scandal that rocked the company at the top is effaced from public memory; the code will be viewed more with skepticism by the employees than acceptance. Since HP is a very large company, the true effects and larger goals of the company may take some time to actually percolate to the bottom. There is a potential are of non-conformance between GRRS and lawsuits. Documents required in a law suit may have got destroyed much earlier. To an extent the code will possibly help HP emerge out of its present identity crisis. It will also lead to quicker decision making in face of options and defining what is ethical and what is not. But a dynamic and practical ethical training program has to be initiated in the company. Employees at all levels need to be given training to believe in the ideals of HP. The code can be made more region specific and department oriented. Recommendations According to me, the code is very inflexible; it tends to centralize authority and can be subject to misuse as clauses can be interpreted differently. I will like its few clauses to be region-centric so they that can be molded expressly by a local ethics committee to promote HP’s operation in a region. The code of ethics should be allowed to be fine tuned by regional ethics committee in the broader interests of HP. I find the imposition of code of ethics on channel partners, resellers, and subsidiaries, suppliers very strict and hard to comply with. They may shift their loyalties to competitors for fear of code. The vendors, the channel partners and resellers shouldn’t be equated with employees. There should be separate code for this group. Also clear cut demarcations should be made in what is to be done and what not as in the case of acceptance of a gift there is ambiguity on what constitutes a breach of privilege. Code of ethics also needs to be separated for Marketing, R&D, and Manufacturing. Nothing should be left at the discretion of Vice-presidents and every dispute should be resolved by the Area Code of Ethics Committee. Conclusion: To conclude we can reasonably the say that the code of ethics as stated in the SBC brochure has the potential to pay rich dividends to HP in the longer run. However, the effectiveness of any system is proved only if it withstands the test of time. The company’s leadership has to consistently prove that its conduct is above board. Firm adherence to ethics by the leadership will add credibility to the SBC. The pragmatism of virtuous conduct of the top management, and theoretical guidance of SBC both put together, can pave to strong ethical commitment in the workforce of HP. We know that a company with strong moral fiber as its backbone has greater chances of material success than an organization that lacks direction of right conduct. Sources: http://blogs.guardian.co.uk/greenslade/usa/ http://www.hp.com http://www.hp.com/hpinfo/globalcitizenship/csr/sbcbrochure.pdf http://www.hp.com/hpinfo/globalcitizenship/csr/sbcbrochure.pdf Read More