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Legal challenges in the introduction of codes of conduct (Part 1)
Legal requirements must be observed when developing and introducing codes of conduct.
1. Introduction
As companies move into markets in developing and emerging countries, considerations of corporate responsibility are becoming increasingly relevant. In many host countries, companies are often confronted with unfamiliar realities: foreign cultural norms, legal uncertainty, volatile political conditions, unpredictable administrative bodies, or irresponsible treatment of the environment, corruption and the violation of internationally recognised labour standards and human rights.
The company must actively address these framework conditions, as it is expected to assert the high standards of responsible business practices customary in its home country in its sphere of influence (suppliers, employees, locations, etc.) as well as in the sourcing, production and export countries.
An established instrument for avoiding possible impairment by stakeholders in the sphere of influence of a company is the so-called Code of Conduct. With a customised Code of Conduct, a company lays down concrete guidelines for action to comply with its central ethical and moral obligations. This instrument has a regulatory (suppliers) as well as a communicative component (stakeholders) and can make a major contribution to the credibility of the company through practical development and credible implementation.
2. Reasons for the introduction of codes of conduct
On the one hand, the reasons for the introduction of a Code of Conduct lie in the aforementioned dangers, which have their origin in the internationalisation of companies as well as in the increasing globalisation. On the other hand, the reasons result from dependencies, e.g. on the US Sarbanes Oxley Act. This requires listed companies in the USA to ensure that misconduct in the areas of accounting and banking as well as white-collar crime - which encompasses a broad spectrum of possible offences - is uncovered and eliminated as quickly as possible. German companies are covered by the obligations of the Sarbanes Oxley Act if their parent company is listed in the USA.
The measures required for compliance with the requirements of the Sarbanes Oxley Act are implemented in the form of codes of conduct in the companies. Concrete behavioural requirements are intended to reduce or minimise the liability risks of the companies.
In Germany, there is an increasing trend for companies that are not listed on the stock exchange or do not have a listed parent company to commit to the introduction of codes of conduct or the establishment of reporting systems in the event of breaches of the rules. There are very different reasons for this form of voluntary commitment - from the planning of an IPO to the realisation that a code of conduct is a contemporary instrument of "corporate governance" that is expected by stakeholders.
3. Goals and contents of codes of conduct
The objectives of codes of conduct are mostly comparable, while the contents can vary greatly from company to company.
The essential goal - although often formulated in very different ways - is to minimise liability risks by specifying concrete rules of conduct. These usually refer to different organisational units (e.g. sales, human resources, etc.) as well as to different processes. In a certain sense, the company "shifts" the risks resulting from misconduct to the respective acting persons and thus takes advantage of a possibility of exculpation. The fact that this is only of a relative nature is ultimately shown by the fact that the company and not the individual employee is usually pilloried in the media - exception: board or management members.
The contents, on the other hand, usually vary greatly: some companies limit themselves to briefly and succinctly obliging their employees to comply with the applicable laws and internal instructions and to report violations. In most companies, however, it can be observed that the Code of Conduct contains a large number of concrete, situation-related rules of conduct, which in total go far beyond what is required by the Sarbanes Oxley Act. Here are a few examples:
- Confidentiality obligations
- Acceptance of gifts
- Prohibition of alcohol, drugs and intoxicating medicines
- Use of company facilities (telephone, machines, vehicles)
- Non-acceptance of child labour
- Violations against environmental protection
- Employment of family members with competitors
The establishment of the rules of conduct is further accompanied by sanctions that are determined in the event of violations of the rules of conduct. These range from simple disciplinary measures to summary dismissal with criminal charges.
Another component of codes of conduct are so-called "whistleblowing systems", through which violations are reported. These are usually hotlines or special e-mail addresses - anonymity and discretion are basic requirements without which such a reporting system would hardly work in practice (who wants to be seen as a "denunciator", even if they are obliged to report violations under the Code of Conduct?)
If we compare the development of codes of conduct between the USA and Germany, the high number of specific rules of conduct in the US codes of conduct can be explained historically by a significantly lower density of legal regulations in labour law than we know from Germany. However, in Germany, too, there is sometimes a pronounced "regulatory frenzy" on the part of those responsible for compliance, although many of the regulated facts find their legal recognition both in substantive labour law and in labour law jurisprudence, which has been developing for decades.
About the author
Eckart Achauer, studied law and business administration, postgraduate studies to become a Master of Business Administration (MBA). In-service training to become a European Quality Manager (DGQ), a mediator specialising in business mediation and a Certified Compliance Manager (TÜV).
He worked for around 10 years in the international insurance industry in the management of a Swiss insurance group in various functions (claims department, sales, assistance) before moving into management and business consulting in 1997.
As a consultant and managing director of various consulting companies, Mr Achauer has specialised thematically in organisational and process optimisation as well as in the development and implementation of management systems - quality management, risk and compliance management.
At Senator Executive Search Partners, Mr Achauer is responsible for the area of compliance management. Within the scope of compliance audits, he analyses their organisational "compliance fitness", he sensitises and trains the management, executives and employees and supports the companies in setting up and implementing individual compliance management systems. In doing so, he always takes into account the specific risk situation of the companies. Due to his many years of experience as a manager and consultant, he is very familiar with the entrepreneurial challenges from practice.
Negotiating in China (Part 2)
Like at the bazaar?
"At first, everything went very correctly and formally. The longer the negotiations
and the deeper it went into the details, the more you felt like you were at a bazaar. There were literally hours of haggling over details". This was the experience of the negotiator of a German automotive supplier.
Chinese negotiators have immense stamina to clarify detailed issues that are important to them. They expect the same from their negotiating partner. The negotiation phases in which concessions are granted take a long time. Remain as tough as your counterpart, but at the same time maintain a positive atmosphere. Concessions should always be discussed in terms of compensation and win-to-win. Do not forget reciprocity ("if..., then...") as a basis and combine a demand from the other side with a demand from your side.
Work in Progress: The Contract
It is quite common in China to modify once agreed stipulations in the next round of negotiations. There is not always a kind of "contract constancy" or an obligation to stick to concluded agreements. Therefore, all negotiation outcomes should be recorded in detail in writing, regardless of whether the agreement has been reached in part or in full. Oral commitments do not usually have a long life.
It is advisable to clarify the authority of the other side at the beginning of the negotiations. Is she authorised to conclude a deal or is it initially just to gather information and sound out the terrain so that in the next round of negotiations another staff member can conclude the agreement in a binding manner? Since China is a socialist country, trade is usually conducted through state-owned enterprises or government institutions. With a few exceptions, such as rental agreements, the drafting of contracts is relatively free. Certain regulations are stipulated, but experience shows that these can be fulfilled with "pro forma content". For domestic business, one should bear in mind that a corresponding contract law has only existed for a few years and the issuance of licences, which are required for many businesses, can already take longer.
Complex legal situation
In China, lawyers play an important role for foreign business partners. Lawyers serve not only as legal advisors, but often also as interpreters. If one wants to consult a lawyer, the question is whether to choose a Chinese lawyer or a foreign one who works for an international company in China. Whatever one decides, pitfalls remain: On the one hand, a Chinese lawyer loses his admission to the Chinese bar if he joins an international law firm in China.
On the other hand, a lawyer admitted abroad is not entitled to give an opinion on Chinese law. The best choice is a lawyer from an international law firm who knows the mentality of the Chinese and is not dependent on the government. Often, internationally active law firms employ Chinese who have studied abroad. They are familiar with Western and Chinese ways of thinking. Many things that are considered a matter of course in Germany require a written agreement in China. As mentioned, the Chinese treat contracts like laws: The wording is vague, leaving room for different interpretations. According to the Chinese, this way of concluding a contract includes the "human side"; the "paragraphing" of Western managers is often met with incomprehension.
In terms of Chinese legal sensibilities, choosing the right lawyer also pays off, as does imagination in marketing and negotiation. Example: Where we are talking about brand piracy, the Chinese tend to focus on the attractiveness of the product and any imitations are understood as a distinction for the original.
This situation can be mastered, as the example of Coca Cola shows: before production began, the corporation launched a far-reaching campaign in the media. It explained to citizens what a registered trademark is, what the Coca Cola brand stands for, that its purpose is to ensure quality, and that imitations are illegal and inferior. Such actions pay off: despite concrete brand piracy in China, Coca Cola is very successfully positioned on the market there.
Working time (part 2)
The second form of working time is part-time. Here, employees regularly work shorter hours than comparable full-time employees. Women with children in particular benefit from part-time work. There are almost 9 million employees in part-time jobs. Of these, almost 80 % are female.
A current topic is the decision of the law on the introduction of so-called bridge part-time work. Employees who agree to part-time work after 1 January 2019 are affected by the regulation.
However, the right to bridge part-time work only applies to companies with more than 45 employees. Only then can a temporary part-time phase of between one and five years be applied for. However, almost 15 million people already work in companies with fewer than 45 employees. For this group, the new regulation does not apply at all.
Employees working for companies with up to 200 workers are also affected by a special rule. For every 15 employees, only one must be granted the right to bridge part-time work.
The new law on bridging part-time work is thus not applicable to all workers. And the "part-time trap" remains for most. Bridge part-time work is well-intentioned, but the law was watered down too much during the negotiations.
It can be seen that there are always new ideas and laws relating to working time. However, it always takes time before these can be implemented.
About the author
After graduating as an automotive engineer and industrial engineer, he began his career in the automotive industry in the areas of sales, development and marketing and also spent a year in Japan with one of the largest automotive suppliers.
He then moved to a world-renowned premium car manufacturer, where he was responsible for product marketing in Japan and South America and marketing strategy in North and South America.
In 1994 he decided to become self-employed and founded a personnel consultancy in Munich, where he has been driving development and expansion for over 20 years. As managing director, his industry focus is naturally on the automotive world as well as mechanical and plant engineering.
With his doctorate in the field of aptitude diagnostics, he ideally rounds off his fields of competence, especially with regard to personnel and management consultancy. The dissertation deals with the identification and proof of typical personality traits of engineers as well as the definition of development areas for a successful professional career.
These are scientifically derived and presented in the book "Eignungsdiagnostik im Praxiseinsatz".
At the same time, his focus is on building networks and cooperation models as well as the continuous further development of systems and processes in HR consulting.
Within the last 20 years in personnel consulting, he has developed several brands that are still successful on the market today.
Negotiating in China (Part 1)
In recent years, the People's Republic of China has grown to become an important economic factor worldwide. The financial crisis has not changed this, quite the contrary. Moreover, recent political developments in America have made China an increasingly important partner for Europe. The rapid growth in China has slowed down during the political turmoil and uncertainties of the recent past - although it is still growing at an above-average rate of around 6 % to 7 % ("the new normal"). The Chinese market remains attractive for German investors and cooperation partners, especially because of its considerable domestic market potential. Conversely, we see a trend that Chinese companies are in many cases beginning to invest in Europe and especially in German-speaking countries.
Not only global players such as Volkswagen, BASF, Bayer, Coca Cola, Henkel or Procter & Gamble, to name but a few, are represented in the Middle Kingdom. German small and medium-sized enterprises are now also very strongly involved and in many different ways. But is this giant empire really a rapidly developing and hopeful future market that justifies sustained and protracted investment? China is not China. The People's Republic is a world apart, with a history dating back more than 4000 years, different languages and dialects, and different social frameworks and behaviour. The size of the country, the gradual opening to the West and rapid economic growth make China a significant growth market with high attractiveness for foreign investors. According to Volkswagen, China is the fastest-growing market in the world. But not every economic engagement is crowned with success. Many companies have not achieved the quick returns they had hoped for. What mistakes do Western entrepreneurs make in their engagement in China? What are the special features of negotiating and doing business as well as running a company on the ground?
The middleman
Western business people have little chance of closing a deal in China without the middleman, also called "Zhong-jian Ren". This middleman is familiar with the specific, personal and reciprocal relationship system that prevails in China and goes beyond conventional networking in the Western sense. In the West, we often tend to trust others until we have reason not to.
In China, it's a little different: in business, you can't build trust, because any kind of business relationship doesn't even happen without trust. Instead, trust has to be conveyed with the help of "guanxi". This Chinese
term refers to the network of personal relationships in China, meaning it stands for mutual give and take. This means, for example, that a business partner whom you trust will refer you to business partners whom he trusts in turn. The crucial first step in China in this phase of the negotiation, also called the "exploratory phase", helps you to establish the personal contacts with the respective company or manager.
A talented Chinese middleman is indispensable even after the first meeting. Think of what happens during a typical negotiation session between Chinese and Western business people. Instead of saying no outright, Chinese business people prefer to change the subject, keep quiet, ask another question or respond by using ambiguous or vaguely positive expressions that have a slightly negative undertone.
A native Chinese speaker can accurately interpret and explain the moods, facial expressions and body language that Chinese negotiators display during a formal meeting. Often, only the middleman can determine what is happening. If an impatient negotiator from the Western world wants to know what the Chinese think of the proposal, they will invariably answer in an evasive way, such as "Let's see" or "Let's check it out" - even if they think there is something wrong with the proposal. This is one of the situations where the middleman can intervene, because his job is not so much to translate words as to mediate between cultures.
It often happens that both parties can openly say things to the middleman that they would not be able to convey to each other directly. In China, it is the middleman, not the actual negotiating partner, who first brings up the business topic to be discussed. He or she can also often reconcile differences. In fact, a good middleman can significantly reduce complex situations and significant disagreements.
