Introduction
Toyota is a company that was established in the mid 1930’s. It deals with manufacture and sales of automobiles, textiles and material handling. It is commonly known for its automotive production. With a capital of approximately 80.4 billion Yen as of march 2010, Toyota has more than 38,000 workers at its headquarters in Japan. However Toyota has subsidiary plants in all the six continents and its one of the biggest car manufacturer.
Mission statement Over the decades of its existence, Toyota has sought harmony between people, society, and the global environment, as well as the sustainable development of society, through manufacturing. “Since its foundation, Toyota has continuously worked to contribute to the sustainable development of society through provision of innovative and high-quality products and services that lead the times” (Toyota, 2006).
Ethical system In its success, the management of Toyota has implemented a code of ethics which has kept its sustainability for over seven decades. With a legal duty driven and somehow relativistic ethical system, based on the seven principles since its foundation in the 1930’s Toyota is a corporate success story. These principles are:
• Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.
• Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities.
• Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.
• Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.
• Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.
• Pursue growth in harmony with the global community through innovative management.
• Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships (Toyota, 2006).
How the code of ethics is used
The code of ethics contains several articles but this essay will discuss eleven articles touching on the board of directors and the management. Article one of the ethics is on the compliance by all officers. Its sets forth the basic rules that in addition to those outlined in “guiding principles at Toyota”, “Toyota code of conduct” and other guidelines and international regulations each officer is to comply with the performance of their professional management duties. This article is used to ensure that all officers have a full comprehension of the code at all times.
In addition, Toyota states, “Article two states the objective of the code which is to seek honest and ethical conduct by all officers as well as their compliance with applicable laws and regulations” (2003). This article gives the general function of the code of ethics sets the codes objective. Article three states that the code shall be applicable to all the officers. Legally, article four can be quoted in a court in cases where an employee or officer does not comply with the code (Fackler, 2009). Article four indicates that the code shall be appropriately disclosed in accordance with applicable laws and regulations. This article sets forth the notion that there is a way in which the code is disclosed and this should not abuse the law.
According to Toyota, “On honest and ethical conduct, all officers are required to act in an honest and ethical manner in the course of any business activity of the company” (2003). An officer who engages in any act or transaction that gives rise to a conflicting interest with the company without prior reporting the matter to the board of directors and obtaining prior approval may not participate in the determination of the board of director’s resolution relating to the granting of such approval. This article tries to curb corruption and reckless decision making without consultation. This is important to keep the control of the company solid.
The clause on ensuring fairness and accuracy requires that the chairman of the board, president , accounting and financial officers or people doing similar functions should take responsibility and ensure that documents submitted to applicable government authorities and other information made public by the company with respect to the company’s financial position and financial statements are fair and readily comprehensible in content and method of presentation and they should be disclosed at the right time. Furthermore “the chairman of the board, president, accounting and financial officers and people with similar functions shall be responsible for establishing and maintaining disclosure and internal controls for documents” (Edgar, 2003) and information specified above. Also, an Officer should not act in a way that may cause a material misunderstanding to or otherwise materially mislead any employee or independent public accountant involved in the preparation of such financial statements. This clause tries to ensure that their is openness in the financial status of the company and no meddling in the company’s financial affairs.
According to Toyota “Article seven requires that Officers comply with all applicable laws, rules and regulations, including those involving prohibition of insider trading, in each of the member countries and areas in which the company operates” (2003). Insider trading has made many big corporations in the world to crumble. This article ensures that all officers follow all the rules and laws accordingly. Also “Article eight stipulates that all Officer’s should report to the Board of Directors, Representative Director, Disclosure Committee, Corporate Ethics Committee, or other responsible sectors appointed by these committees, in the event that an Officer or other Officers violated the laws or ethics.” (Toyota Motor Corp • 20-F • For 3/31/06 • EX-11.1, 2003) The company will then take appropriate measures based on reports and recommendations from ethical inquiries. This will help in reducing corruption amongst the workers and employees.
Accountability and adherence to the code asserts that each officer recognizes legal compliance and ethical conduct form the basis for all corporate activities, and is obligated to comply with this Code. Furthermore, the company will take appropriate and necessary disciplinary action according to the applicable laws and internal regulations of the company against any Officer who acts in violation of the Code. Officers subjected to disciplinary action will not participate in any meeting, in relation to the determination of such disciplinary action, of the Board of Directors, Disclosure Committee, Corporate Ethics Committee, or other investigative committees appointed thereby (Toyota, 2003).
Furthermore, Toyota’s code of ethics has an exemption clause that is only granted pursuant to a resolution by the Board of Directors, and any such exemption should be appropriately disclosed in line with applicable laws. The Corporate Ethics Committee has the responsibility of evaluating the appropriateness of the Code at regular interval, and make recommendations in relation to any necessary amendments of the Code to the Board of Directors (Toyota, 2003).
Why might the organization need to modify their existing code of ethics? Consider how you might modify the code if you were the new CEO and how you would implement the changes.
The code of conduct of Toyota may need to be modified so as to cover subsidiary companies outside of Japan. This is important because it will cover the worldwide market as Toyota is a global company and employees come from countries with different cultures. To implement changes, as a CEO, I would consult widely and also set up ethical committees to help in the implementation. This will ensure swift and smooth switch to the new and suggested modifications to the new code of ethics.
What possible reactions to the code are to be expected from employees and managers? What effects does the organizational culture have on the acceptance of the code?
The Toyota code of Ethics is expected to be wholly accepted by all its employees and management because of its universality and wide consultation done before modification. The code will also consider people from different cultures all over the world. The organizational structure of Toyota is well defined with all branches of the organization having defined duties. The organizational culture will allow the employees and managers to accept the modification due to the long standing culture of accepting change.
Conclusion
The code of ethics has had a positive effect on the organization. It is the source of the organizations success and it will continue being so for along time. This is due to the ability of the code being flexible and ability to respect the fundamental and basic human rights. Due to the code of Ethics, Toyota is a culture and not only an industry. A hardworking, honest and fair society, are the members and workers of Toyota worldwide. A good code of ethics is essential for any company’s success.
References
Fackler, Martin (2009-01-07). “Toyota to Shut Factories for 11 Days”. The New York Times. Retrieved 9th December 2010 from http://www.nytimes.com/2009/01/07/business/worldbusiness/07toyota.html?bl&ex=12313908 00&en=be40ce4593ec2976&ei=5087%0A.
Toyota (2006).Retrieved 9th December 2010 from http://www2.toyota.co.jp/en/vision/code_of_conduct/index.html
Toyota Motor Corp • 20-F • For 3/31/06 • EX-11.1. (2003). “Toyota code of ethics” Retrieved 9th December 2010 from
http://www.secinfo.com/d14D5a.v44yj.9.htm
