Codes of Ethics and Boards of Directors: The moderating effect of the corporate governance system

Resumen

Business ethics is one of the most significant demands made by institutional and individual investors, who usually require the participation of the board of directors in the planning and implementation of ethical behaviour in corporations. This is done by drawing up an ethics code and then monitoring its fulfilment. This study has a dual objective: first, to analyse the role played by the composition of the board of directors, and by that we mean its independence and the diversity of its members, on the implementation and scope of an ethics code, and, second, to detect whether the corporate governance system moderates the level of involvement of the board in ethical issues. Previous empirical evidence regarding the new responsibilities of this monitoring body is limited, and furthermore is focused on transversal analyses at country level and time period, which circumscribes the conclusions that may be derived from their findings. In this work, the analysis is undertaken with a sample of 760 listed companies from 12 countries for the years 2003 to 2009, using panel data procedures. The findings obtained show that the largest companies with large-sized and diverse boards are the most ethically active. Nevertheless, the extent of involvement of the independent directors is conditioned by the level of shareholder orientation characteristic of the system of corporate governance in the corporation's country of origin.