Embeddedness

This section will analyze the degree COC embeddedness into the entire company. The first step is to generally assess whether the managers are familiar with the code. All interviewees of HQ were part of the project team; thus, they know about the code’s existence. All expatriates know about the existence of the COC, since everyone shared some thoughts about the COC in the beginning of the interview. Expat1 said:

“The company’s COC gives you more or less the moral and ethical guideline for the company, for employees and all stakeholders in all business operations, like suppliers, customers, partners, whatsoever. I want to involve this COC, it gives you the standards of interacting with each other.”

This quote clearly states the knowledge of the code’s existence. All expatriates also stated that the COC provides the basis to fight corruption, child labor, fraud, as well as gift giving and accepting. Expatriate5 also mentioned the importance of reducing environmental damage.

Another factor of checking the embeddedness is to analyze whether the code is accepted among employees and partners. All participants recognize the necessity of the code and are in favor of it. HQ1, HQ2 and Expat2 mentioned that they have never had the problem that people would not accept the code. HQ2 explained that all suppliers immediately signed the contract and there was no positive or negative reaction. It had been communicated that the COC would be necessary for a long-term collaboration. HQ3 added that the long-term partners saw the necessity of introducing the COC. HQ2 stated:

“In Europe everybody knows exactly nobody likes to have this children labor or corruption. This was absolutely not complicated to convince all our colleagues.”

This statement can be linked to Chapter 7.3.2 and suggests that the COC is especially necessary for doing business outside of Europe. HQ2 is personally convinced that the

COC is the right step, especially since child labor is something that should not happen under any circumstances.

Expat1 and Expat2 favored the COC as it provides a secure basis in case of unethical behavior and encourages people to ask questions about it. Expat1 thought that a sustainable business model is good for maintaining business relationships and employer branding. Good partners or potential candidates can be lost due to ethical failure on integrity. He also shared that some suppliers already had their own COC, and in most cases they were similar to PALFINGER’s COC. This shows that both the company and the partners accept the code. Expat2 saw the code as a tool to reduce the risk of people behaving the wrong way in the name of the company.

In China, some people favor working for a western company while others prefer a typical Chinese company. Those who favor western companies understand the necessity of a COC and want to learn more. The others do not support the introduction of a COC. As mentioned by Expat3 in Chapter 7.3.2., the company stopped their business in the waste management, as this business is too corrupt. Chinese colleagues who are against the COC regard leaving this business as a loss and think that the company would be more successful to firstly, eliminate the COC and secondly, to enter that business again.

However, a different example about a painting line that was installed based on European standards has been stated earlier. Since Chinese law has changed, European standards became valid in China as well. It was a good example for Chinese employees who are against the COC to visualize that the introduction of the COC was a good decision for the long run. Otherwise, the company would be in trouble, like competitors currently are.

To summarize, there are always people who are against new guidelines. HQ3 mentioned that there was no discussion about the COC, although some people were not satisfied. If people refuse the code, they have to deal with the consequences. Nevertheless, people accepting the code predominate those against it.

The role of audits

The interviews have revealed that the content of the COC is partly integrated in company internal and external audits. No questions concerning audits were asked. This shows that

the COC is integrated in internal processes. Although regular audits are held within the company, no separate audits focusing only on COC topics exist. HQ1 explained that they were asked during the sustainability audit to check whether there were cases of child labor, which is obviously part of the COC. Besides, a European company was hired to search for additional risks at the company in Russia prior the purchase. Certainly, some topics of the COC were covered in that process.

Supplier audits are carried out every two years, and the content of the COC is included in this audit. HQ2 shared:

“…The biggest difficulties maybe are there some sub-suppliers where we are not directly in the house or in the rooms of the suppliers, this is hard…”

This statement reveals the challenge of having sub-suppliers, since only the suppliers of PALFINGER are checked during the audit. However, it is the responsibility of the supplier to communicate PALFINGER’s COC, and in case of non-compliance, PALFINGER will stop the collaboration. Several topics are checked during the audit. However, it also depends on experience and the ability of knowing people, as HQ2 stated:

“…normally when you go through a workshop you see, when you enter the door you see immediately, are these persons lying? Are they telling a story to us? You see this in the cleanliness you can see that in the organization and process, are the people trustful guys or not. And when I have a trustful guy in front of me, then we can believe also this that when they promise to us…”

This statement shows the challenge of audits. Certainly, specific topics can be checked.

However, to assess whether a person is telling the truth or not requires experience and a sense of knowing people, as the above statement reveals. HQ2 stated that in case the auditing person is not certain, intense discussion will be held, and more specific questions will be asked. Such discussion indicates if the audited people get nervous. In case some points are missing during the audit, the suppliers receive some time to work upon these points. In case of non-fulfillment within the given time-frame, the collaboration will be ended. HQ3 also mentioned the supplier audits. The points of the COC are integrated in those audits. All suppliers are ranked after the audit. The result is based on the percentage points they earned in the audit. The best suppliers are contacted first. Although no official COC audit exists, Expat4 saw his role in checking the points of the COC during the stay in Brazil. Furthermore, another check is planned within the next months.

Consequences of non-compliance

Most participants outlined that a consequence for non-compliance of the code is the dismissal of that person, in case this person is a PALFINGER employee. This has already occurred at management level. If suppliers do not comply with the code, the collaboration will be ended immediately. One participant outlined that non-compliance never occurred and that it might not come up in his position, except an individual person breaches the COC once. Expat3 mentioned that departments with the most contact with external companies have the biggest issues with complying with the COC. These departments are typically purchasing and sales. They are more in danger of corrupt actions of partner companies. Furthermore, he explained:

“In China it needs to be discussed, I am having, especially the quality department is also very tricky for corruption, I am communicating once a month, in the monthly meeting: ‘People if I find out that someone was corrupt, received money for letting bad quality pass, he will be immediately fired and he will be sued by law and we did already.’ I did fire people in the service department and in the quality department because they were corrupt, they were proved to be. We are trying to state samples when I find out that someone is corrupt, there are no regrets, no nothing that, this person will be fired. This is for the others to see okay, there is a borderline that I am not supposed to cross and since we have fired those people, first of all it got better because they were gone and it also had a very good effect on the others because now they know the rules, but you need to communicate it all the time…”

This shows that there are clear consequences for non-compliance. The person gets fired and the others realize that actions are taken in case of misbehavior. Expat3 explained that people have changed their behavior since then and share concerns with him in case they feel uncomfortable with a supplier. This is how corrupt behavior can be addressed directly.

Expat4 explained the investigation process in case of non-compliance. It has to be reported immediately to the risk and legal management. Then it is discussed whether it is an actual compliance violation. All following steps, e. g. whether a lawyer is needed or not, depend on the level of code violation.

Having outlined the state of the art of the audit and the consequences for non-compliance, attention should be linked to the company’s structure when embedding a COC. A MNE consists of subsidiaries abroad; thus, the relationship between headquarters and subsidiaries is important. Sometimes expatriates are actively assigned to transfer the values of headquarters to the subsidiaries. Expat4 shared an example:

“Two persons from Madal PALFINGER are coming to headquarters in Austria, being trained here on the new issues of the COC, being updated and we will now update our COC on the group guidelines and to be aligned with our COC that we have here in Europe, currently.

This way the company tries to train the people at headquarters. It should help them understand why the company introduces a COC and how it is understood at headquarters.

Then, the two people are sent back to the subsidiary and they can act as transmitter of corporate values. Local employees might more easily accept values that are shared by other local employees instead of sending a person from headquarters that will return to headquarters after a short period of time.

Sometimes the relationship between headquarters and subsidiaries is not ideal. Local employees are skeptical about new processes as Expat3 explained:

“…in China in our current plant, when we designed the painting area, the painting line, the Chinese wanted to do a pure Chinese painting line, which means they would dump the water into the river, they would dump all the chemicals of the painting line in the river nearby and we absolutely refused that, we said that this needs to be done the proper way, needs to have proper filters, have a proper cleaning system, have a proper removing of the chemicals and the contaminated waste of the painting. At that time we had to go to the board of directors of PALFINGER and discuss it with them and then they ordered the local management to do it the right way. At the moment Chinese government is taking a lot of care of environment protection and they are closing down competitors painting lines and ours is not affected because we already did it properly the right way the first time. So this is also quite a good example for the Chinese to find out, oh maybe it is not all bad what the Austrians think about.”

This example clearly shows the skepticism of local management regarding new systems and processes. Top management had to be included in this decision, since local management did not want to adapt and did not see the urge to do so. Ultimately, top management ordered local management to install the prober painting line with filters.

Chinese laws have changed resulting in the closure of competitors’ painting lines, if they do not have proper filters etc. This was the moment when local employees accepted the new systems and understood why a proper painting line was installed. This example illustrates the monthly discussions about the COC in China, as has been mentioned earlier. It is important to increase people’s awareness to avoid situations, i. e. that employees refuse the COC and do not see the importance behind such document.

Communication channels

Expatriates are used to implement the COC abroad. Besides, several communication channels are used to spread the COC and embed it within the entire organization. Firstly, it is available on the homepage and sent out to all employees via email. Secondly, an article about the company’s COC had been published on the corporate blog online.

A whistle blower hotline, the so-called integrity line, was installed simultaneously with the COC. This is an anonymous line where any breach or misbehavior can be reported via email. The message goes to two people of the company in charge of such breaches, who do not confront a person directly. These two people would focus on the process and make sure that the process is free of leakages now and in the future. It can be accessed via the website and is available to everyone, including all stakeholders.

Satisfaction, possible changes and future steps

The last paragraphs of this chapter will focus on the satisfaction of the code including possible changes and future steps. HQ1 was overall satisfied and would not change the overall topics, but he would add more details and examples to the code. This way it would be easier to communicate specific measures. HQ3 would have introduced the video earlier. In the future, HQ3 wanted to implement e-learning. Some situations would be shown after the person had watched the video, and then the person has to share how he/she would react. Expat2 agreed on it. He also wished to introduce e-learning and pointed out the risk of exposing people to the COC only once. Therefore, the topic should be communicated and tested more frequently. Overall, Expat2 felt very comfortable with the current situation. Furthermore, HQ3 suggested that additional training is needed for people who are more often confronted with corrupt behavior, like in the purchasing or sales department. These people should be trained on how to react in case of a potential corrupt situation. In most cases, time is the key factor. The following example is used: The components have to be delivered by a specific date and get stuck at customs. Sometimes money is the answer. Therefore, these people should be trained on how to react, since paying the requested unofficial fee is not the right behavior. Apart from e-learning and training, HQ3 wanted to introduce a COC audit that only focuses on the points in the COC.

The expatriates had different opinions about the future steps or changes regarding the COC. Expat1 wished for more particular examples in specific departments. He mentioned:

“To translate this one page of COC into examples. What does corruption mean for the guys for purchasing or sales? To bring really people to get a picture of it.”

The COC would be more specified this way. It would probably also contain more pages.

It is questionable to have a global document that includes specific situations. Furthermore, he suggested involving employees and maybe posting a picture, which might be included in the COC video. This is how employees can identify with the COC.

Expat3 wished for sub-contracts in certain areas to address corruption, especially in China. Furthermore, he emphasized the need for more periodically meetings, audits, trainings, and discussions about the COC to increase the awareness.

Expat4 felt very comfortable with the current situation and pointed out:

“…we have a very high standard on that [COC] because I know that there were a lot of people thinking about that and doing it the right way so I should really be a specialist to find something in there to do it better because as you know as we are a public company, it has to be done to 100% the right way…”

This statement reveals that Expat4 completely trusts the project team at headquarters. He feels comfortable with it and would not change anything. The company is listed at the stock exchange. Therefore, guidelines have to be fulfilled more strictly.

All the findings will be summarized within the next chapter.