Global Environment AT&T

AT&T's code of ethics can be found on its ATT.com website (2014). The code exists in accordance with the requirements of the Securities and Exchange Commission, according to the company. The code contains nine items: honest and ethical conduct, conflicts of interest, disclosure, compliance, reporting and accountability, corporate opportunities, confidentiality, fair dealing and protection and proper use of company assets. Under each category, the company explains its policies. Under "honest and ethical conduct," AT&T says it will "act with integrity," using a synonym to make a redundant statement. It also says it will "observe both the form and spirit of laws and government rules and regulations," which is the same as line IV, compliance. It will "adhere to a high standard of business ethics," another redundant statement, and without defining "high standard."

The company rather curiously defines "conflict of interest:" as arising when a personal interest interferes with the interests of the company. This is true in that such situations can arise and when they do the actions undertaken can be detrimental to the company. Where the potential for conflict of interest in company actions arises, the statement dismisses this possibility -- such occurrences are apparently "for investment purposes only."

The remainder of the statement is equally soft or absurd. The disclosure section is about a type of compliance, the bit about reporting and accountability discusses how the code will be enforceable but a code without specifics is not going to be enforceable to any serious degree. Basically, the document says little about corporate behavior and only takes into account the interests of shareholders, if that. The fact that the company states up front that the only reason it has a code of ethics is because the SEC says they have to is rather telling, especially when combined with the wishy-washy nature of the code's language, its multiple redundancies and repetitions and the lack of any genuinely actionable elements.

With such a weak code, it is interesting to see how AT&T's code stacks up against the codes of its major competitors, Verizon and Sprint. They are also publicly traded, so the SEC makes them have a code of ethics, too.

Verizon

Verizon's code of conduct comes in a 41-page pdf. The highlights are integrity, respect, performance excellence and accountability. The company is already ahead of AT&T, with the inclusion of "we know it is critical that we respect everyone at every level of our business," which already goes beyond the "shareholders-only" view of AT&T. The company explains its values and how they underpin its business. When it talks about integrity, it notes what it means by this and how it is applied to the company's activities. For example "We are good corporate citizens and share our success with the community to make the world in which we work better than it was yesterday." The company, at least on paper, seems to genuinely take the issue of corporate citizenship and ethical behavior seriously.

Sprint

The company has a series of webpages on its website. There are several pertinent sections including the executive team, corporate governance, corporate responsibility, inclusion & diversity, supply chain management, strategic alliances, business opportunities, history, awards & recognition and executive briefing centers. The company therefore covers off a variety of issues both internal and external. There does not appear to be a centralized code that is used here, but the company does address some issues individually and helps to provide guidance at least on a few issues. Again, it is better than AT&T's code because it actually reflects that there are other interests besides those of the shareholders.

1. All three of these companies are major telecommunications providers. They operate in the U.S. And at least AT&T and Sprint have some international operations. They are large companies, and they all operate with organizational structures based around different customers -- usually residential and business -- broken down from there by product. There are no key issues within their codes of conduct that are critical for success. The key success drivers in this industry are marketing competency, service delivery and technological investment. The codes of conduct are nice to have, but success for these companies is not dependent on the elements contained therein. This is especially true for AT&T, which only wrote a code of conduct because it had to, and clearly didn't put much thought or effort into it. The...

There are striking differences between the codes of conduct between the three major telecoms. While they all talk in basic terms about basic things -- compliance with laws and things like that -- the differences are in the underlying philosophies. Verizon, and to a lesser extent Sprint, both have a more balanced and comprehensive view of how a code of conduct can contribute to the organization's success. Verizon in particular has been able to draw links between its philosophies and the actions that the company will take. This is something that AT&T cannot do, because it has an empty code of conduct that offers no coherent philosophy and no concrete, actionable items. It makes little sense to talk further about AT&T's code of conduct. On the most fundamental level, it is a waste of time and even the company treats it as an afterthought. With Verizon, on paper at least they have a strong code of conduct that can genuinely be applied to strategy. Sprint's code of conduct is weaker, but still much more valid and useable than AT&T's. Sprint's code of conduct is not comprehensive, but the issues it touches upon are delivered with actionable concepts.
3. The first part of this is the same question as #2, where we also compared the other two companies to that of AT&T. On the second part, Verizon has the best code of conduct. If it follows through on it, it may find that it offers superior customer service -- the big about respecting people including customers is important here. That should create greater levels of customer loyalty. Another outcome that Verizon in particular might enjoy is that the company might have lower turnover rates among its staff members. This outcome occurs where there is a genuine philosophy of ethical dealing, transparency and treating employees well. The employees, especially at the lower levels, might stay with the company longer if they genuinely believe in its approach to doing business.

If Verizon does not walk the walk, then it could face some backlash from employees and customers who expected a more ethical company. If they find out that Verizon fails to live up to its expectations and is no better than anybody else, disillusionment will follow, leading to lower customer service scores and higher turnover rates. Verizon could also face loss of reputation, because it raised expectations of itself but failed to meet those.

Sprint has only a few specific items in its code of conduct. One is supply chain management, where the company has a goal "to purchase quality products and services at competitive costs from suppliers who support our corporate values." This type of supply chain policy is normally good for ensuring that no Apple-Foxconn type of debacles occur. The upside of the policy is that the suppliers are aligned with Sprint's ethics and therefore cannot create the kind of ethical problems that occur when suppliers do not share the same ethical principles as the buyer company. The downside of failure with this policy is that the company does face an ethical issue, that is related to a supplier. Another part of the Sprint code of conduct is a commitment to charity. The upside for charity is enjoyed mostly by the beneficiaries of the charity. Sprint can feel good about that, and maybe impress a few potential customers. The downside of charitable giving is that it takes money away from the shareholders.

AT&T's decision not to sweat ethics is the biggest story for them. The upside is that they can focus all of their energy on maximizing shareholder wealth.. The benefits of this include bigger bonuses for management and richer shareholders. The downsides of this are that the company is more exposed to ethical problems that can undermine its reputation, and more exposed to legal actions because there is no coherent ethical culture at the company.

4.

To ensure that AT&T's code of conduct remains relevant is not asking the right question. What needs to be done to make AT&T's code of conduct relevant? That is the question. The first is to take a stakeholder approach, rather than a shareholder approach. Take into account the interests of the entire AT&T community, rather than just the shareholders. The second recommendation is to provide a coherent philosophy and actionable measures. By doing this, AT&T will provide a sense of guidance to both internal and external stakeholders about what the company wants to do about its responsibilities. Saying three times over that it will behave ethically means nothing…