MORE and more attention is being focused on how companies are run and

tomorrow sees the publication of the Cadbury Committee's report into the

financial aspects of corporate governance as the subject is known by

these days.

The legal parameters within which directors operate has been tightened

up, with tough new laws on insider trading an example, and there is

greater willingness to track down and prosecute wrongdoers, as Gerald

Ronson found out. And it may not be just the bosses who get jumped on.

Executives further down the ladder can be expected to end up in the

dock if American experience is anything to go by for breaches of

regulations relating to the environment and employee relations as well

as corporate governance in general. Apart from tougher laws companies

are increasingly having to work within a tighter ethical framework.

A new comprehensive guide* to social responsibility for management has

been published to give guidance to management over how they can improve

their performance in this area.

Moral questions do not naturally impinge on the busy industrialist's

mind but it is in companies' own interests to have a social conscience

and work within an ethical framework. A positive image in these respects

helps to secure customers and keep them loyal while brand names can be

badly damaged by negative publicity, such as through insensitive

treatment of customers or a cavalier attitude towards a pollution risk.

Companies which are alive to the external social environment can be

expected to react more quickly to shifting consumer tastes. The best

quality employees are likely to gravitate to companies with positive

images. This is shown in a generally lower labour turnover rate and less

''shrinkage'' or theft.

Revelations of wrong-doing have led to higher expectations for company

behaviour and in many cases this will mean more management resources

being devoted to ethical matters. Applying management processes to

social responsibility still has a long way to go, though surveys suggest

companies are gradually becoming more aware of the importance of the

issues.

So far there are relatively few ethical committees in European

companies, though they are common across the Atlantic. However, the

Royal Bank of Scotland refers ethical issues to a board-level committee.

The study suggests that ethical responsibilities be written into every

manager's job description and that exemplary behaviour be rewarded and

breaches of the ethical code punished publicly.

Even investors are becoming aware that treating ethical issues

seriously is not just a diversion of resources away from the main

business of the company of earning more profit. Companies with a

responsible culture are less likely to have skeletons in the cupboard

and will have a more motivated workforce.

It is easy for companies to write well-sounding platitudes about

ethics and social responsibility in their annual reports and leave it at

that. It is far more difficult to put them into practice and imbue the

corporate culture with them, particularly when times are hard and

pressures to perform financially are so strong.

* Actions Speak Louder than Words by David Clutterbuck with Dez

Dearlove and Deborah Snow, published by Kogan Page.

Sir Adrian Cadbury