local hr departments offer training sessions B u s i n e s s F i n a n c e
Please respond to the following.
Consider IHRM in Action Case 9.3: Degussa’s global code of conduct from this week’s reading. What do you think makes codes of conduct successful in managing industrial relations in MNEs? How could Degussa improve its global code of conduct?
IHRM in Action Case 9.3
Degussa’s global code of conduct
Degussa group is a multinational corporation with a market leadership position in the sector of specialty chemistry. The group is represented worldwide on all five continents and based in more than 300 locations. The cornerstone for Degussa was placed in 1843 in Frankfurt, Germany; after several acquisitions, today 44 000 employees work for this company worldwide. Since June 2004, the Degussa group has been a 100 per cent subsidiary of Rag AG. Due to its important size and long history, as well as its broad international experience, Degussa operates relatively independently from the parent company. Key production facilities, sales and marketing offices of Degussa can be found in around 60 countries, whereas the business activity focuses on Europe, North America, and Asia. Degussa generates almost three-quarters of its sales volume outside of Germany.
Degussa has a decentralized organization within a global business framework. This is achieved through business units, which have full accountability for local operations. However, to maintain strategic control of its international business, strategic management decisions are mainly made in the headquarters – this philosophy is also reflected in the structure of the management board, which consists solely of German managers.
To foster a corporate strategy and a new corporate culture known as ‘Blue Spirit’, a set of supporting principles including Degussa’s Global Social Policy, guiding missions which are incorporated in management practices (e.g. a bonus system for executives linked to corporate goals), as well as a Global Code of Conduct were developed. The aim was to bring together several different corporate cultures and to create one company in which every employee at every site feels as though he or she is part of a common whole.
The Global Code of Conduct
The Global Code of Conduct aims at supporting the employees in their daily work and providing them with reference points. In the course of growing globalization, the variety of relevant markets and cultures has increased. The expectations of employees as well as customers are becoming more complex, and different national and cultural backgrounds gain importance in the day-to-day work in this multinational company. The Code of Conduct is binding for every Degussa staff member and is applied in all subsidiaries as well as in the parent company. In addition, the code includes guidelines which control interactions with the corporate environment as well as with the public and governmental agencies or institutions. Even in countries (e.g. India) where local rules and laws have other standards, the Global Code of Conduct is enforced. In case regional requirements go beyond the Degussa Code, the firm is forced to adapt to these conditions and has to include respective deviations within the Code.
Every employee worldwide is expected to comply with the Global Code of Conduct. Degussa has appointed various compliance officers in different units to ensure that the rules are respected. In addition, these officers might answer any related questions to assist employees in complying with these rules. Beyond this, local HR departments offer training sessions, information and publications to ensure that all employees are familiar with the Code. All employees are encouraged to name strengths and weaknesses and to actively participate in the continuing further development of this Global Code of Conduct.
Additional information from the professor…
Class, in this case Degussa should also update their code of conduct to improve its global code of conduct. Considering Degussa are in approximately 60 countries with business activity focusing on North America, Asia, and Europe, they need to supply their employees in other countries of different cultures/different laws and standards (not all countries have the same rules, regulations, and customs). They need to protect their employees (and self) needs and wants by ensuring their code of conduct covers organizational diversity domestically and internationally. Degussa needs to take into consideration their organizational cultures when creating their code of conduct. Degussa’s rules of conduct and behavior should reflect their organizational core values (they should guide how the organization is expected to operate). They must adapt and include respective deviations within the code of conduct. Degussa’s code of conduct should convey their organization’s vision, mission, and culture.
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