What sounds like a comedy-show joke is true: It is common practice for companies to copy others’ ethics codes, sometimes word for word, according to research by Finance Professors Tim Loughran and Bill McDonald and Finance Associate Professional Specialist Margaret Forster.
When they created a database of ethics codes comparing 2.5 billion sentences, they found that more than half of publicly traded companies had sentence correlations greater than 75 percent.
So why are companies freely cribbing from each other?
In part, copying is understandable: Public firms must disclose whether they have adopted a code of ethics for management or explain why not. Lawyers drafting the legalistic portion tend to see strict replication of language as a “best practice.” But the professors also saw much borrowing in the values-based portion, and argue that this should be held to a higher standard
Loughran sees the ethics-code requirement as a good intention watered down to a waste of time. “I would like them to start all over. Companies that care would do it right and actually provide something, and others would just drop out of the process and not simply plagiarize others’ ethics reports.”
“I think companies should think about what they are writing,” Loughran said.“Some do take it seriously and should be applauded.”
The professors presented their research at a conference titled Ethical Dimensions in Business: Reflections from the Business Academic Community, which was recently held in the Mendoza College and sponsored by the Institute for Ethical Business Worldwide.