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The Balanced CompanyA Theory of Corporate Integrity$

Muel Kaptein and Johan Wempe

Print publication date: 2002

Print ISBN-13: 9780199255504

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199255504.001.0001

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(p.299) Appendix: Examples of Integrity Indicators

(p.299) Appendix: Examples of Integrity Indicators

Source:
The Balanced Company
Publisher:
Oxford University Press

This appendix gives an overview of possible integrity indicators. The indicators are classified after the three corporate dilemmas and a distinction is drawn between “hard” and “soft” indicators (Chapter 7). In accordance with the proposed method in Chapter 7, key integrity indicators can be distilled and placed in a causal relationship with one another.

(p.300) (p.301)

Table A.1. Examples of soft indicators for Dirty Hands Dilemmas regarding customers

Stakeholder

Soft indicators for input

Soft indicators for conduct

Soft indicators for output

Customers

The degree to which the corporation makes clear to employees what their responsibilities are toward customers.

The degree to which direct managers set a good example for employees in treating customers responsibly.

Employees can realize the norms pertaining to customers.

The corporation stimulates employees to identify with consumers.

The corporation provides sufficient, authentic and relevant information to customers on who it is, what it stands for, and what it aims to accomplish.

Information the organization provides to customers reflects reality.

The corporation is open to customer criticism, suggestions, and questions.

The organization takes proper note of customer criticism.

The organization shows a good understanding of the extent and way in which the interests of customers are realized.

The organization supplies high quality products and services.

The organization asks reasonable prices commensurate with quality.

Its products are available at the right place and time and in the right amount.

The organization has reasonable sale and payment conditions.

The organization produces sufficient products and services tailored to indigenous consumers.

The degree to which an employee cannot get away with irresponsible conduct toward customers.

The extent to which an employee who mistreats a customer appreciates having his conduct discussed.

The extent to which an employee who mistreats customers on a regular basis is reprimanded and, if necessary, punished.

The mutual benefits and responsibilities are reasonably divided between the organization and customers.

If the organization fails to keep its promises, there are enough ways for customers to end the relationship with the corporation without too much cost.

The organization and its representatives show their willingness to realize the corporate responsibilities toward customers.

The organization helps customers to make the best possible use of products and services.

The products and services that customers purchase do not put their health or safety at risk.

The products and services that customers purchase are healthy and safe.

(p.302) (p.303)

Table A.2. Examples of hard indicators for Dirty Hands Dilemmas

Stakeholder

Hard indicators for input

Hard indicators for conduct

Hard indicators for output

Customers

Formal policy regarding responsibilities toward customers (e.g. complaints, marketing, and advertising, improvement programs).

Instruments available (budgets, percentage of working time) to give substance to consumer policy.

Training programs to improve customer orientation.

Service and price uniformity per customer group.

Investments in product improvement programs as a proportion of budget or turnover.

Scope and type of communication with customers as a proportion of total communications (e.g. on finished products, ingredients/components).

Degree to which product adds to consumers’ well-being.

Product innovation rate.

Number and nature of complaints from consumers.

Number of consumer boycotts and protests.

Customer retention rate.

Information systems for (racing customers’ interests and expectations (e.g. number of studies on customer trends).

Systems and mechanisms for rapid and credible communication with customers.

Screening procedures (e.g. new product and services, new customers).

Monitoring and documentation systems on external standards, complaints, product failures, legal precedents (e.g. number of inspections and audits).

Sanction systems (procedures on customer-unfriendly conducts.

Protection systems for customers (e.g. privacy).

Number and intensity of consultations with customers’ representatives.

Speed of response to customer complaints.

Customer complaints not observed by the corporation.

Number of customer policy and consumer law transgressions.

Number and nature of contract cancellations.

Number and nature of product recalls.

Reporting of near product failures expressed as proportion of time worked, units of production, output, people employed.

Damages paid to customers as proportion of total transactions.

Number of transgressions and scope of repercussions for employees guilty of irresponsible conduct towards customers.

Height of exit barriers (e.g. terms of notice for contracts and ease or difficulty of substituting product parts).

Product price/quality ratio.

Length of time that products remain sold out.

Percentage of product range offered to indigenous consumers under the market price.

Number and gravity of accidents owing to product use.

Frequency and intensity of negative publicity.

Number of quality awards.

Stockholders

Formal policy regarding responsibilities toward stockholders

Efficiency of business processes.

Frequency of board meetings.

Turnover, Net profit.

(directors’ remuneration, dividends, mergers and acquisitions).

Screening procedures for new directors and executives.

Formal decision-making procedures in Board.

Explicit job descriptions for directors and executives.

Information systems for tracing stockholders’ interests and expectations (e.g. number of studies on stockholder trends).

Systems for rapid and credible communication with stockholders.

Documentation of important investment decisions.

Checks and balances in the board structure.

Measures against hostile takeovers.

Procedures to prevent insider trading (i.e. appointment of compliance officer, record of activities, lock-up periods).

Sanction systems for fraud and embezzlement by managers and employees.

Monitoring and documentation systems on external standards, complaints, and legal precedents.

Transparency about salaries, bonuses, pension plans, stock options, and long-term incentives.

Scope and type of communication toward stockholders.

Compliance with financial reporting standards.

Spread of ownership (value and percentage of options and actual ownership by executives and employees).

Whether or not stocks are freely negotiable.

Number of failures to comply with financial regulations and policy.

Number of employees fired because of fraud and embezzlement.

Ratio between profits paid and retained.

Number of tax audits.

Research intensity (percentage R&D Investment/revenue).

Rate of return on assets (ROA).

Rate of return on equity (ROE) or total shareholder return.

Rate of return on investment (ROI).

Stock price movements.

Solvency and liquidity.

Reserves.

Length of period to repay loans.

Stock price.

Dividend paid per share in stock.

Brand value.

Measures of intangible financial value like intellectual property, new patents, education, and training.

Number of proposals rejected and amendments adopted at stockholder meetings.

Included in ethical mutual funds.

Qualified auditors’ report

Employees

Policy and documentation regarding responsibilities toward employees (e.g. remuneration, career development, grievances, equal opportunity, diversity, flexible working, representation, health and safety, whistle blowing procedures, leave arrangements, employee commitment).

Protection procedures against unemployment, harassment, security incidents, and the violation of privacy.

Information systems toward employees.

Fair grievance and disciplinary procedures.

Systems of independent representation.

Proper employee files.

Wage differential from top to bottom (ratio of top salary to lowest salary; ratio of top 10% to lowest 10%).

Percentage of women and minorities in management positions.

Average salary of women and minorities compared with general average.

Age structure.

Percentage of employees belonging to a trade union.

Frequency of meetings between Board and staff council.

Anomalies addressed allowing for negotiation and appeal.

Facilities for daycare.

Facilities for special personal leave.

Training and education programs and budgets.

Investment in illness and injury prevention.

Costs of providing daycare and other pro-diversity benefits.

Cost of severance pay per employee.

Number of employees in permanent and temporary service.

Number of employees dismissed.

Personnel turnover and average length of employment.

Ratio of jobs accepted to jobs offered.

Average working hours.

Salary/wages.

Ratio of lowest wage to local cost of living.

Illness or absentee rates.

Number of trade union conflicts.

Number of legitimate sexual harassment complaints.

Number of visits to company counselor or physician.

Number of whistle blowing incidents and the related consequences for employees.

Number of employees who contest their dismissal in court.

Training intensity per employee.

Proportion of job performance reviews and exit interviews.

Term of notice for employees to terminate their employment.

Communication about pricing and margins.

Total employee/stock option volume.

Paid leave for mothers/fathers.

Frequency of time loss due to safety matters (lack of safety).

Number of safety incidents.

Number of cases won/lost in court relating to employee dismissal.

Suppliers

Formal policy regarding responsibilities toward society (gifts, bribery, segregation of duties).

Reference to ethical standards in contracts.

Tracking the speed of payment.

Documentation on contracts and their selection.

Formal decision-making procedures for selecting suppliers.

Information systems toward suppliers.

Monitoring and auditing system.

Supply chain management systems.

Systems to protect confidential supplier information.

Communication about pricing and margins.

Trade with marginalized groups.

Activities that are undertaken to increase suppliers’ ethical content of operations.

Confirmation that the suppliers conform to ethical standards.

Number of contracts terminated because suppliers did not conform to supplier code.

Degree to which suppliers are selected on the basis of community and environmental performance, too.

Number of cases won/lost when taken to court by suppliers.

Number of complaints from suppliers.

Number of contracts cancelled by suppliers before end of term.

Duration of relationship.

Duration of contracts.

Number of suppliers who have gone bankrupt because of corporation’s policy.

Ratio between price paid/quality delivered.

Actual payment terms applied.

Society

Formal policy regarding responsibilities toward society toward society (volunteer work, donations, human rights).

Number and content of consultation with NGOs and governmental bodies.

Frequency of informational

Financial contributions to charities and community as percentage of total sales.

Percentage of pre-tax profits

Records on, for example, donations, employee community involvement.

Information and feedback systems for representatives of society.

Training and education programs for employees and suppliers on human rights.

Community relations program.

Monitoring systems regarding social developments (e.g. budget for studies).

Procedures to review social acceptability of decisions.

Number of employees who have completed human rights training program.

meetings for media and press releases.

Number of visits received by the company.

Participation in and support of community bodies.

Activities for promoting human rights.

Investments in underdeveloped regions.

Activities to resolve social issues.

Participation in community activities.

Number of statutory violations, lawsuits and damages paid as a result.

Percentage of local employees.

Distribution of tax paid in each country.

Number of social impact studies conducted as the basis for investment decisions.

Percentage investment proposals rejected because of poor social standards in targeted country.

contributed to philanthropic organizations.

Total amount of taxes paid to central and local government.

Number and nature of complaints from neighbors.

Multiplier effect of presence in communities (generation of business).

Value of technology and skills transfer.

Degree to which products and services boost society’s prosperity and well-being.

Percentage of sales made in socially illegitimate and questionable markets.

Contribution to political parties.

Competitors

Policy for anti-bribery and management detection systems.

Number of employees dismissed for accepting bribes.

Number of cases lost after being taken to court by rivals.

Natural environment

Formal policy regarding environmental responsibilities.

Environmental management system, including annual plans for improvements.

Number and intensity of discussions with environmental groups.

Investment in the environment as percentage of total investments.

Total emissions.

Damage due to fatal industrial accidents.

Material intensity per unit of activity.

Material intensity/energy

Risk management system on both production and product levels.

Formal and hierarchical integration of the environmental management system.

Explicit competence and responsibility at executive management level.

Time and money allocated to environmental training.

Number of fatal industrial accidents.

Use of hazardous chemicals/materials.

Waste and waste treatment (re-use/recycling).

Number of failures to comply with permits or regulations in the environmental area.

Number of inspections and audits.

Human resources devoted to environmental concerns.

Dollars spent in response to major incidents.

consumption per dollar stockholder value added.

Clean up.

Energy consumption (percentage renewable, water consumption, raw material use.)

Greenhouse emissions.

Out harmful to ozone (CFC, VOC).

Insurance premium (as proxy for effectiveness risk management).

Impact on bio-diversity.

Number and content of complaints.

(p.304) (p.305)

Table A.3. Examples of soft indicators for Many Hands Dilemmas

Indicators for input

Indicators for conduct

Indicators for output

Extent to which Job description is clear to employees.

Number of unfair accusations for mistakes made by others.

Extent to which external stakeholders are sent from pillar to post.

Extent to which employees feel that their superiors take proper care with their tasks and authority.

Number of times that others went unpunished for blameworthy behavior.

Degree to which internal responsibilities get lost.

Degree of employee solidarity.

Extent to which employees feel that tasks assigned can be executed.

Extent to which the same people are assigned onerous tasks.

Degree to which employees feel that their activities contribute to the achievement of corporate objectives.

Degree to which employees are stimulated to identify with the organization and internal partners.

Extent to which some functions are ignored.

Extent to which some functions are discredited.

Degree of employee frustration about Joint projects.

Degree to which job-related problems can be discussed.

Extent to which appreciation is received for good work.

Degree of employee confidence in setting up new joint projects.

Degree of employee awareness of colleagues fulfilling their responsibilities.

Degree to which employees help colleagues with problems.

Degree of decisiveness at internal consultations.

Degree to which employees feel that fulfilling responsibilities is rewarded and neglecting responsibilities is punished.

Degree of awareness of functions in other departments.

Extent to which important information is shared internally.

Extent of vulnerability in joint projects.

Degree to which unscrupulous colleagues seize opportunities.

Degree to which internal agreements are kept.

(p.306) (p.307)

Table A.4. Examples of hard indicators for Many Hands Dilemmas

Indicators for input

Indicators for conduct

Indicators for output

Frequency of job training.

Codes of conduct.

Percentage of time spent on consultation.

Duration of time that problems remain unsolved.

Sanctioning mechanisms regarding job responsibilities.

Percentage of time spent on activities beyond job description.

Speed at which new recruits reach required performance levels.

Recruitment and selection procedures.

Number of joint projects between departments.

Meetings within departments.

Number of conflicts between departments and functionaries.

Degree to which mistakes are reported.

Time lapse after mistakes are reported.

Meetings between departments.

Minutes of meetings.

Number of (successful/failed) internal conflict mediation sessions.

Extent of individual target achievement.

Description of responsibilities and job description.

Replacement procedures.

Extent of job rotation.

Number and details of explicit contracts.

Information channels (bottom-up and top-down).

Systems for protecting/guaranteeing agreements.

Mistakes register.

Complaints system.

Performance feedback system.

Reverse policing.

Personalized products and actions (product labeling).

Multiple decision-making procedures (the four eyes principle).

Orientation program for new recruits.

Number of unsuccessful projects due to internal friction.

Attendance of internal meetings.

Employee awareness of generally relevant information.

Time spent supporting new recruits.

Time spent on under-achieving employees.

Time spent on vulnerable employees (illness, etc.).

Difference between highest and lowest output per employee.

Extent of employee shares in joint proceeds (e.g. profit-sharing).

Degree to which organizational policy is actually adopted in subdivisions.

Compatibility of systems.

Extent of group target achievement.

Percentage of agreements kept.

Number of unassigned mistakes.

Dismissal of employees for poor performance.

Number of new products and services developed in interdepartmental projects.

Number of stakeholder requests followed up.

(p.308) (p.309)

Table A.5. Examples of soft indicators for Entangled Hands Dilemmas

Indicators for input

Indicators for conduct

Indicators for output

Extent to which organization makes clear to employees what their responsibilities are regarding corporate assets.

Extent to which manager sets a good example in responsible treatment of corporate assets.

Improper use of budgets.

Personnel fraud.

Unjustified billing of working hours.

Incorrect handling of funds received.

Incorrect handling of expenses returns.

Level of job satisfaction.

Stress level and overly stressful work situation.

Degree of frustration among employees regarding defective corporate assets due to colleagues’ carelessness.

Extent to which employees can realize norms regarding corporate assets.

Extent to which corporation stimulates employees to treat corporate assets with care.

Degree to which employee cannot get away with irresponsible conduct regarding corporate assets; the others always find out.

The extent to which irresponsible treatment of corporate assets can be discussed with the (alleged) perpetrator.

The extent to which employees that treat corporate assets irresponsibly on a regular basis are reprimanded and, if necessary, punished.

Embezzlement of funds.

Reckless use of company vehicles.

Misuse of means of communication.

Neglect of maintenance.

Theft of business equipment.

Taking home business equipment for private use.

Leaking of confidential information.

Unauthorized use of access codes.

Use of insider information when trading shares or other securities.

Insufficient effort.

Employees fail to observe stipulated working hours.

Alcohol and drug use.

Private surfing on the internet during working hours.

Falsely calling in sick.

Non-performance of tasks in return for money or favors from stakeholders.

Acceptance of gifts from stakeholders.

Favoring of friends and family.

Conflicting sideline activities.

Misuse of personal information.

Verbal abuse.

Bullying

Unusually high employee expenditure patterns.

Extent of internal cooperation.

Extent to which suppliers prefer doing business with specific buyers.

Frequency of whistle blowing.

(p.310)

Table A.6. Examples of hard indicators for Entangled Hands Dilemmas

Indicators for input

Indicators for conduct

Indicators for output

Ethics hotline for misuse of corporate assets.

Training in use of corporate assets.

Codes of conduct for careful use of corporate assets.

Sanction mechanism for misuse of corporate assets.

Recruitment and selection procedures.

Security system for minutes and agreements.

Degree of Job rotation.

Information channels (bottom-up and top-down).

Register of misuse of corporate assets.

Complaints system.

Performance feedback system.

Personification products and actions.

Multiple decision-making procedures.

Conflict of interests register.

Administration.

Orientation program for new recruits.

Number of media reports on employee leakage of confidential information.

Unaccountable inventory discrepancies.

Employee expenses improperly billed to the company.

Damage to company property.

Incongruous leave of absence due to illness.

Supervisors’ awareness of sideline activities of colleagues.

Halt to production due to sabotage and obstruction.

Halt to production due to neglect of maintenance.

Damage to reputation due to improper employee conduct.

Amount of fines paid due to improper employee conduct.

Amount of damages paid for improper employee conduct.

Competitors’ use of leaked confidential information.

Number of hours spent on repairing company property due to improper employee conduct.

The actual technical life span of company property compared to average life span.

Total lost income due to improper employee conduct.

Costs incurred due to improper employee conduct.