Global codes of conduct, International ethics principles/standards/guidelines, global ethics guidelines

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1 Caux Round Table Principles for Responsible Business Archie B. Carroll University of Georgia Terry College of Business Athens, Georgia USA Synonyms Source: Encyclopedia of Corporate Social Responsibility, Vol. I, Samuel O. Idowu, Editorin-Chief, Springer Publishing, Global codes of conduct, International ethics principles/standards/guidelines, global ethics guidelines Definition The Caux Round Table (CRT) Principles for Business articulate a worldwide vision for ethical and responsible corporate behavior. As a set of seven core principles, they serve as a foundation for ethical action for business leaders across the globe. The CRT Principles are a statement of aspirations that seek to communicate a world standard against which business social and ethical behavior can be gauged. The CRT Principles for Business were created through a sophisticated, collaborative process in The Principles were developed by business leaders and, therefore, carry considerable credibility in the business community (About Caux Round Table, They are the end result of a process that sought to identify shared values, reconciling differing values, and concluding in a shared point of view about business behavior that would be deemed acceptable to and honored by all. There are seven core CRT Principles which include the following: 1. Respect Stakeholders Beyond Shareholders 2. Contribute to Economic, Social and Environmental Development 3. Build Trust by Going Beyond the Letter of the Law 4. Respect Rules and Conventions 5. Support Responsible Globalization 6. Respect the Environment 7. Avoid Illicit Activities Each of the seven core principles is supported by further documentation as to their meaning and application. In addition, a set of Stakeholder Management Guidelines supplement the principles with more thorough discussion of their implementation (Caux Round Table, Principles for Business, Introduction The CRT Principles were the joint product of collaboration between the Caux Round Table and the Minnesota Center for Corporate Responsibility (MCCR). To appreciate how the Principles came into existence, it is necessary to briefly understand each of these two organizations and the paths they took that brought them together.

2 In the 1980s, the Caux Round Table (CRT) was founded by senior Japanese and European executives who were concerned about trade frictions that were occurring in the automotive and electronics industries. In an effort to mediate the disputes that arose, the founding members agreed to meet at a hotel in Caux, Switzerland. The site was chosen to be a neutral site where the executives of the competing companies could get to know one another so that they could better appreciate one another s views on the issues at hand. The initial group was approximately twenty executives who agreed to meet each year at the Caux location and to have a second meeting annually rotating between the world s major trading regions. By the early 1990s, the group s objectives had been achieved. Much of the trade tension had dissolved, and the CRT began thinking about other missions it might pursue. During the years of meetings of the CRT, the members would often get together in the evenings and discuss the great issues of the day. They often wondered what roles CEOs ought to be playing in addressing these world issues. Independent of the activities of CRT, a group of responsible business executives in Minneapolis, Minnesota had founded an organization in 1977 which they officially called the Minnesota Project on Corporate Responsibility (MPCC). In the 1970s the group focused on the theme of corporate citizenship, and by the 1980s it was thinking in terms of responsibilities to businesses stakeholders customers, employees, shareholders, suppliers, and communities (Center for Ethical Business Cultures, 1992, 2001). The business leaders in the MPCC renamed themselves the Minnesota Center for Corporate Responsibility (MCCR). Under the leadership of Bob MacGregor, MCCR brought together a group of business and academic leaders who were deeply interested in the importance of business ethics and integrity. The newly-named Center decided to formulate what would be called the Minnesota Principles, a set of ethical guidelines, or code of conduct, that they thought would be valuable to businesses as they thought about their responsibilities to the world in which they operated. In 2000, the Minnesota Center took on a new name, the Center for Ethical Business Cultures (CEBC). Charles M. Denny, Jr., CEO of ADC Telecommunications was one of the early supporters of the principles, and MacGregor and Denny became the prime movers in the development of a cadre of executives and academics to formulate the ethical guidelines. They wanted the principles to be both pragmatic and universal in the sense that they could be applicable around the world in spite of cultural differences that might exist among the world s different trading regions. The business leaders enlisted the support of Professor Kenneth E. Goodpaster, who had come to the University of St. Thomas in Minneapolis in 1989 to fill the Koch Endowed Chair in Business Ethics, to commit the principles to paper. Dr. Goodpaster had developed the ethics curriculum at the Harvard Business School and had also taught ethics and philosophy at Notre Dame. According to David Koch, who founded the endowed chair which was filled by Goodpaster, the professor was their top choice to draft the principles (Koch, 2009). The Minnesota Center decided to name the document they produced The Minnesota Principles: Toward an Ethical Basis for Global Business. The Minnesota Principles were divided into five general principles and six stakeholder principles, embracing customers, employees, owners/investors, suppliers, communities, and competitors. Their principles were copyrighted in But, as Charles Denny later observed, the executives realized that they could have an important impact within the United States, but

3 they needed an organization that was embedded in the international business world to carry forth their message around the globe. Their fortuitous connection with the Caux Round Table turned out to be just the linkage they needed (Center for Ethical Business Cultures, 1992, 2001). In 1992, Charles Denny, who had been a member of the Caux Round Table, along with Bob MacGregor, representing the Minnesota Center, arranged to present the Minnesota Principles at one of the annual Caux meetings in Switzerland. Denny reported that the Caux membership was enthusiastic about their presentation and to their proposal that the Caux Round Table adopt the Minnesota Principles (Denny with Evans, April 2008). The Caux group concluded that a major revision of the Minnesota Principles would be necessary before it adopted them so that they could integrate the perspectives and philosophies of the Asian members to the principles. The Minnesota Principles had been written largely from a Eurocentric and Judeo-Christian perspective in which the focus had been on the rights and dignity of individuals. The Asian perspective, however, emphasized the idea of communitarianism which believed in the subordination of the individual to the group, or the common good. The chair of the CRT at the time of these developments was Ryuzaburo Kaku, who was CEO and Chair of Canon Corporation, the camera and office equipment company. Among his many achievements, Kaku was known for adopting the term kyosei to express the concept of working and living together for the common good. In a quest to produce a document that would be satisfactory to all, Charles Denny worked diligently to revise the Minnesota Principles to incorporate the philosophy of the common good. Chairman Kaku approved of his revisions and the document was presented to the group and the Caux Round Table Principles were adopted with a unanimous vote of the group (Center for Ethical Business Cultures, 1992, 2001). In the Introduction to the CRT Principles, it was stated that they were intended to be ethical norms for acceptable business practices. The trust and confidence that is needed to sustain free markets would be reflected in ethical businesses practices. It was argued that the singular pursuit of profits, with no concern for other stakeholders, would eventually lead to business failure and sometimes to regulations that were counterproductive. Therefore, it was necessary for business leaders to display ethical leadership if they wanted to sustain prosperity. The Introduction also asserted that a moral compass was needed by the business community and that it could not just rely on traditional measures of profitability. There are seven core principles in the Caux Round Table s conception of responsible business conduct. The principles were anchored in three ethical bases. These underpinnings included (1) the notion of responsible stewardship, (2) living and working together for mutual advantage, and (3) respect and protection of human dignity. The CRT Principles are supported by detailed Stakeholder Management Guidelines and these will be discussed after a coverage of each of the seven core principles (Caux Round Table, Principles for Responsible Business, 2009). Following is a presentation and summary explanation of each of the seven core principles as set forth by the Caux Round Table (Principles for Responsible Business, These principles were reviewed and updated in 2009 and 2010.

4 Principle 1. Respect Stakeholders Beyond Shareholders. Responsible businesses are expected to value not just the stockholders, but other stakeholders as well. Important stakeholders of business include, but are not limited to, its customers, employees, suppliers, competitors, and the broader community. Responsible businesses are expected to respect the interests of these stakeholders and to deal with them fairly and honestly. Principle 2. Contribute to Economic, Social and Environmental Development. Economic development is needed in societies in which businesses aspire to succeed. Therefore, responsible businesses will invest in the economic, social, and environmental sectors of these societies. These investments will improve societies through sensible use of resources, fair competition, and technological innovation. Principle 3. Respect the Letter and the Spirit of the Law. This principle recognizes that some business practices may be legal but not necessarily fair to all stakeholders. Therefore, it is recommended that businesses strive to honor the spirit as well as the letter of laws. This means that business conduct may have to operate at levels beyond the minimums required by law. In this pursuit, critical and necessary traits such as truthfulness, transparency, and promise keeping will be required. Principle 4. Respect Rules and Conventions. Responsible businesses strive to emphasize fairness and equality and respect local cultures and traditions found in the communities in which they operate. They also value relevant national and international laws, regulations, and conventions. Principle 5. Support Responsible Globalization. Open and fair multilateral trade should be supported. In the pursuit of fair global commerce, responsible businesses will support the reform of domestic rules and regulations that obstruct this objective. Principle 6. Respect the Environment. This principle addresses the natural environment in which businesses operate. The idea here is that businesses will protect and improve the environment and steer clear of wasteful uses of natural resources. Principle 7. Avoid Illicit Activities. To be responsible, businesses do not engage in or excuse corruption, bribery, money laundering, or other illicit activities. Responsible businesses also avoid transactions that are linked to or supported by terrorist activities, drug trafficking, or any other such questionable activity. In support of these seven core principles, the Caux Round Table supplements them with more detailed standards for interacting with key stakeholder groups. These are referred to as Stakeholder Management Guidelines ( The primary stakeholders are those constituent groups which are critical to the success and sustainability of the business enterprise. These stakeholders include the following groups that contribute in the ways indicated: Customers purchase goods and services and provide cash flows for the businesses. Employees produce the goods and services. Owners and other investors provide the capital for the business and any other needed funds. Suppliers provide needed resources. Competitors ensure that markets are efficient. Communities provide needed social capital and security for the businesses. The Environment provides natural resources and other needed conditions for operating.

5 Following is a summary description of the Stakeholder Management Guidelines which indicate how responsible businesses deal with the various stakeholder groups enumerated. Customers. Responsible businesses treat their customers with respect and dignity. They have a responsibility to: provide customers with high quality products and services; treat customers fairly; provide high levels of service; ensure their health and safety; protect them from harmful environmental impacts; and respect their rights, dignity, and culture. Employees. Responsible businesses are expected to treat their employees with dignity and respect. They have a responsibility to: provide jobs and compensation which improve their living standards; provide safe and healthy working conditions; provide working conditions that boost employees well-being as citizens, family members, and capacity for caring for others; be open and honest with them; listen to them; avoid discriminatory practices; provide equal treatment; support differently-abled employees; be sensitive to unemployment impacts; work with others to assist employee dislocations; ensure that executive compensation and benefits reward management carefulness and discourage too much risk taking; and avoid illicit child labor practices. Shareholders. Responsible businesses treat their shareholders with care and loyalty. They deal with them in good faith. They deal with them in the best interests of the organization. They have a responsibility to: apply diligent and professional management so that fair and competitive returns on investment may be achieved; disclose all relevant information to shareholders; to conserve, protect, and increase shareholder wealth; and to respect the views, complaints, and resolutions filed by shareholders. Suppliers. Responsible businesses treat their suppliers and subcontractors with mutual respect, candor, and fairness. They have a responsibility to: pursue fairness and openness in all relationships; ensure that supplier and subcontractor activities are free from threats and coercion; foster long-term stability in relationships; share information and integrate suppliers into planning processes; seek, encourage, and prefer suppliers that will use upstanding employment practices; seek, encourage, and prefer suppliers who practice good environmental management and who uphold high environmental standards. Competitors. Responsible businesses will engage in fair competition. They have a responsibility to: advance open markets; encourage competitive behavior; shun anti-competitive and/or collusive arrangements; avoid questionable payments that seek to bypass fair, competitive advantage; respect property rights; and refuse to acquire information through dishonest means, e.g., industrial espionage. Communities. Responsible businesses should strive to be global corporate citizens and to contribute to good public policy and human rights where it operates. These businesses have a responsibility to: respect human rights and democratic institutions, promoting them whenever possible; respect government s legitimate obligations to society and support policies that promote social capital; promote harmonious relationships between business and other societal sectors; collaborate with initiatives aimed at raising standards of health, education, workplace safety, and economic well being; promote sustainable development; support peace, security and the rule of law; and be a good corporate citizen through ongoing community investments.

6 According to the Caux Round Table, these Principles have been published in twelve languages, used in business school curricula worldwide, and are widely recognized as the most comprehensive statement of responsible business practices that have been formulated by business leaders for business leaders. Key Issues There is a growing anti-corruption movement in the world. With significant increases in global trade and competition, free markets and democracy over the past decade, this comes as no surprise. There are a number of different avenues of development aimed towards curtaining global corruption and bribery. There are multilateral treaties and agreements such as the North American Free Trade Agreement (NAFTA), the Kyoto Treaty on Global Warming, and the OECD Anti-Bribery Agreements. Another major avenue is that of global codes of business conduct created by international organizations. Among the more well known of these are the Caux Round Table Principles for Business, Global Sullivan Principles, United Nations Global Compact, and the Ceres Principles. Another avenue is that of individual corporations developing company-specific global codes of conduct of their own. Among the more well known of these are the global codes promulgated by companies such as Caterpillar Tractor, Chiquita Brands International, Allis Chalmers, S. C. Johnson, Medtronic, and Levi Strauss & Company (Carroll & Buchholtz, 2012, ). In light of these outstanding, high profile, and competing avenues for improving global business ethics, the major issue for the CRT Principles is attracting and retaining adherents in a world in which so many diverse ethics initiatives are competing to be the defining code. Each of the other global codes of conduct is also striving to be the gold standard by which all others are measured. All the competing standards are excellent and have their own followings. An issue and challenge for multinational enterprises is to decide which among these various global codes they wish to associate with and support. Some companies try to sign on to a number of different codes and others choose to just select and identify with one. Still other companies decide to develop their own codes of conduct or ethics. Most companies would agree, in general, with virtually all of the elements of the global codes, but typically choose to identify primarily with one of them. The CRT Principles, then, are in a friendly competition (to be adopted) with a number of other global codes of conduct and other avenues companies are taking to address the global corruption issue. Most of these codes compliment and overlap with each other. Future Directions In looking towards the future, the Caux Round Table website reveals that the CRT Principles are continuously being reviewed and updated so that they are constantly relevant and applicable. They were updated in 2009 and It is apparent that the CRT views the Principles to be one of the key building blocks in its mission to improve global business and government affairs now and in the future. To supplement the CRT Principles in their application to employees, the CRT has issued Guidelines for Management and Employees People, Performance, Well-Being a statement expressing specific concern for employee stakeholders (Caux Round Table, Though the CRT Principles for Business are the initial platform for improving business conduct around the world, the Caux Round Table continues to build upon this platform by developing related guidelines applicable to other types of organizations. For example, as part of its continuing stream, the CRT has also developed Principles for Governments, Principles for NGOs, Principles for Ownership and Wealth, and Principles for Responsible Globalization. Another initiative of the CRT, in partnership with The Global Leadership Commonwealth (GLC) is the creation of an assessment tool called the Ethical Leadership Profile (ELP) which is designed to help individuals in considering and applying their individual preferences in initiating ethical action in both business and government. Using the ELP, leaders may discover their personal preferences for decision-

7 making styles (Ethical Leadership Profile, It is apparent that the Caux Round Table is a vibrant, mature, and adapting organization and that many of its initiatives are being built around the CRT Principles for Business presented in this entry. The Caux Round Table is an active group of business executives and it should be expected that they will continue to be a major player in the quest to improve global ethics in all organizations operating at the world level. In describing its own role and future, the Caux Round Table says it is committed to move its ideals and principles into action programs to improve the outcomes of globalization in the world and to enhance the impact of ethical conduct and social responsibility in companies. The Caux Round Table defines its principal tasks as discussing, evaluating, drafting and distributing principles, implementation standards and benchmarks, position papers, commentaries and proposals. This statement clearly suggests that more can be expected from the CRT in the future. Cross-References Corporate Social Responsibility Bribery and corruption CERES Corporate codes of conduct Global governance and CSR UN Global Compact References Bockelman, Wilfred. (2000). Culture of Corporate Citizenship. Minneapolis, MN: Minnesota Center for Corporate Responsibility. Carroll, Archie B. And Buchholtz, Ann K. (2012). Business and Society: Ethics, Sustainability and Stakeholder Management, 8th Edition, South-Western/Cengage Learning, ; ; Caux Round Table: Moral Capitalism at Work, accessed May 21, 2010; February 27, Caux Round Table, (2009) Principles for Responsible Business, Caux Round Table, 8 pages. Cavanagh, Gerald F. (2004). Global Business Ethics: Regulation, Code, or Self-Restraint. Business Ethics Quarterly, Vol. 14, Issue 4, Center for Ethical Business Cultures, (1992, 2001) The Minnesota Principles: Toward an Ethical Basis for Global Business, Minneapolis, MN: Center for Ethical Business Cultures. Denny, Jr. Charles M. (with Paige E. Evans). (April 2008). The Corporation in Modern American Society. Minneapolis, MN: Hubert H. Humphrey Institute of Public Affairs, Univeristy of Minnesota. Goodpaster, Kenneth E. (2000). The Caux Round Table Principles: Corporate Moral Reflection in a Global Business Environment, in Global Codes of Conduct: An Idea Whose Time Has Come, Oliver F. Williams, editor, Notre Dame, IN: University of Notre Dame Press,

8 Koch, David A. (2009). Lessons in Life and Business: Dialogues with David A. Koch, Minneapolis, MN: Opus College of Business, University of St. Thomas.