The 1990s have been the decade of the ethics officer. A new breed of managers charged with ensuring corporate probity has emerged in the US and become a model for multinationals in other parts of the world. But whether they have changed corporate behaviour is debatable.

Ed Petry, executive director of the Massachusetts-based Ethics Officer Association, claims the new profession has achieved "a broad-based acceptance of the concept of business ethics". Standards have risen as officers build on each other's experiences. "Without ethics officers, business ethics would still be thought of as an oxymoron," he says.

The movement sprang from the US Federal Sentencing Guidelines in 1991, which introduced hefty penalties for corporate crimes but allowed reductions if a company already had an effective system to prevent and detect violations.

Larger companies have sought to insure themselves by appointing ethics officers and introducing codes of conduct and training programmes. However, this has not stopped the cost of corporate misdemeanours from rising. Criminal fines imposed on organisations by the US Sentencing Commission more than doubled from nearly $154m (96m) in 1995-96 to $331m a year later, although most of the punishment has been taken by small companies.

Setting up an ethics programme does not always help even large companies. Sears Roebuck, the US retailer which in February pleaded guilty to bankruptcy fraud and accepted a $60m fine, had an ethics office and telephone hotline in place three years before its improper debt collection practice came to light in 1997. The practice was so institutionalised that "nobody ever called the ethics line about it", says Jan Drummond, corporate spokeswoman.

Recent research by Arthur Andersen, the professional services firm, suggests that the millions of dollars spent annually on ethics and compliance programmes may be misdirected.

It finds that two of the most common methods of ensuring probity - a code of conduct and telephone hotline - have the least impact on staff behaviour. Far more important in controlling unethical conduct, according to survey responses from 2,883 employees in six large US companies, was whether staff believed senior management adhered to and valued ethical behaviour as much as the bottom line.

"Having an ethics and compliance programme that employees perceive exists only to protect the reputation of top management may be more harmful than having no programme at all," the report says.

Codes, officers and hotlines are about compliance rather than values, argues Barbara Ley Toffler, head of Arthur Andersen's ethics and responsible business practices group in New York. Measuring the ethical climate of a company by what structures are in place "is like asking someone if they have a good marriage and getting the reply: 'well, I have a husband, children, a house and an SUV [sports utility vehicle]'. I wouldn't call those measures of a good marriage."

Ms Toffler is a fan of the European approach to business ethics, which she defines as "building an environment or culture within an organisation that enables people to act with integrity". For a growing number of top European companies, compliance is just one aspect of corporate social responsibility, which also addresses external constituents and causes in the interests of long-term shareholder value.

In the UK, the Hub Initiative, run by the Institute of Directors, is taking this approach beyond the level of individual companies. It aims to improve the reputation of business, and thus encourage enterprise, by sending corporate "ambassadors" to meet the public and discuss the purpose and values of business.

Oonagh Mary Harpur, chief executive of the initiative, does not believe officers and rules alone can change corporate culture. "If you want everyone in a business to operate to higher standards, you have to work out what your common purpose and values are and train people in that."

Should ethics officers in the US concern themselves with such issues or rely on what detractors call the "checklist approach" to good conduct? Patrick Gnazzo grapples daily with this question in his role as vice-president for business practices - the ethics officer - at United Technologies Corporation, the US group that incorporates Pratt & Whitney aircraft engines and Otis elevators.

As a senior officer of one of the top 10 US defence contractors, he restricts himself to overseeing "how we're operating within the system". It is not his role to decide whether UTC should be making military equipment, he says. That is a matter of "social responsibility" - how society expects businesses to behave.

Similarly, the pay gap between chief executives and factory workers is a matter for the marketplace, government, directors, investors and public opinion, but not for ethics officers, he says.

Others, however, see these issues as ethical ones. Dawn-Marie Driscoll and Michael Hoffman of the Centre for Business Ethics in Massachusetts believe corporate governance and business ethics are converging. They have argued that controversy over high boardroom pay will not go away, yet companies are failing to address it.

Mr. Gnazzo acknowledges these tensions. "I think we'll see more and more ethics officers and managements trying to address these (social responsibility) issues in the best way they can, while understanding that the reason we're in business is to sell a product and to make a profit."

He argues that high standards can be maintained internally with a code of conduct, leadership from the top, training and guidance for managers and an environment that encourages staff to seek advice when they are unsure.

In one case at UTC, an independent distributor offered proprietary information about a rival company to a marketing manager in Carrier, UTC's heating and air conditioning division. The manager checked with one of the group's 160 "business practice" officers if it would be right to look at the information. "The answer was no."

The US system could be a model in countries such as Japan where regulatory compliance is at an early stage, says Ms Toffler. But she believes US ethics officers must become more involved with issues such as human rights.

This can happen only if they have more authority and expertise in ethical decision-making. "Many ethics officers are lawyers. I think more high-level line managers should be in that position," she says. "That would make it integral to the way you do business.

Copyright Financial Times Limited 1999. All Rights Reserved.