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US companies launch ethical standards push

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By Francesco Guerrera and Jonathan Birchall

Published: December 7 2008 22:51 | Last updated: December 7 2008 22:51

Some of the largest companies in the US, including General ElectricWal-Mart and PepsiCo, were expected on Monday to launch a drive to improve ethical standards in business in an attempt to stem the decline in corporate America’s public standing.

The move by 17 companies, with nearly $1,000bn in sales, to commit to key principles of good business conduct comes as the financial crisis and recession are fuelling a political and public backlash against the corporate world.

The huge problems faced by companies, such as banks and carmakers, that are run by highly paid executives have exacerbated anger among ordinary Americans who have seen their living standards deteriorate due to the economic slowdown.

“In these challenging economic times, it is important that the public have confidence in all of business and not just select companies. We take this very seriously,” said Larry Thompson, PepsiCo’s general counsel and a former deputy US attorney-general.

Under the agreement, from the Ethisphere Institute, companies will sign up to four principles of ethical behaviour: legal compliance, including not paying bribes; transparency; avoiding conflict of interests and increasing accountability.

The organisers admit that the initiative, called the Business Ethics Leadership Alliance, is partly driven by companies’ desire to burnish ethical credentials and curry favour with Barack Obama’s Democratic administration.

But although the principles are vague and most companies should be able to comply with them, the 17 signatories, which also include United Airlines, Dell andAccenture, have agreed to periodic examinations by independent auditors.

The founding members have also pledged to try to get other companies to join.

Gary Hill, chief ethics officer at Wal-Mart, said the retail group would encourage its huge supplier base to sign up to the principles.

Mr Hill said that unethical behaviour was on the rise in corporate America, reversing a trend sparked by the regulatory clean-up that followed the Enron collapse.

Some of the companies involved in the pact have faced their own ethical challenges. In 2006, Sempra Energy agreed to pay more than $377m to settle accusations that it manipulated natural gas prices during the 2001 California energy crisis. Sempra could not be reached. In 2005, Wal-Mart paid $11m to the Department of Justice to settle an investigation into the use of illegal immigrants by cleaning contractors at its US stores.

Three employees of CACI International, the defence services company, were cited in a 2004 report by the Pentagon into the abuses at Abu Ghraib prison in Baghdad.

CACI could not be reached but said at the time: “Nothing in the…report can be construed as CACI employees directing, participating in or even observing” the abuses.

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