Corporate Governance: Insights for Writing a Code of Ethics or Conduct

The heart of an organization is often expressed in its code of ethics or code of conduct. It tells the world what really matters to an organization and what it is all about. And companies that follow both the letter and the spirit of the law by taking a value-based approach to ethics and compliance may have a distinct advantage in the marketplace.

Give the average employee a legalistic “thou shall not . . .” code, and a negative response is almost guaranteed.

Give employees a document that states clearly and concisely the organization’s expectations, outlines acceptable behaviors and presents viable options for asking questions and voicing concerns – and the likelihood is much greater that they will meet those expectations and exhibit the desired behaviors.

Make the contents of the code equally applicable to, and understood by, everyone in the organization—at all levels, across all business units and spanning the geographies—and you have a key ingredient for a code that becomes ingrained in the corporate culture, with all of the benefits.

The code should apply to all employees and be global in scope. If the code addresses financial risk and applies to all personnel, there may be no need for a separate financial code of ethics

Code Basics

There is no standard wording for a code of ethics or a code of conduct. Each organization should develop a code to suit the needs of its personnel in defining expected behaviors and in addressing the risks, challenges and customs in the countries in which it operates, as well as to fit their specific industry and regulatory environment.

However, there are some basic points to keep in mind when creating or modifying a code:

  • The code language should be simple, concise and easily understood by all employees. It should be user friendly and written with the employee in mind.
  • The code should not be legalistic—written as “thou shall not”—but rather should state the expected behaviors.
  • The code should apply to all employees and be global in scope. If the code addresses financial risk and applies to all personnel, there may be no need for a separate financial code of ethics.
  • The code should be written, reviewed and edited by a multidisciplinary team in order to make it reasonably consistent with other corporate communications and policies and make sure it addresses relevant risk areas, has buy-in across the organization, and represents the organization’s culture.
  • The code should be revised and updated as appropriate to reflect business and regulatory changes.

Recommended Elements

The elements or sections within a code can vary, but here are some standard recommendations:

An introductory letter from the senior leadership team or CEO that sets the tone at the top and defines the importance of ethics and compliance to each employee and the organization.

The organization’s mission statement, vision, values and guiding principles. These should reflect the organization’s commitment to ethics, integrity and quality.

An ethical decision framework to assist employees in making choices. For example, a code might ask employees to answer some questions to guide them in making an ethical decision about a possible course of action. The goal is for employees to think before acting and to seek guidance when unsure.

They should be encouraged to think about this type of question in the context of an ethical dilemma. “Would you be unwilling or embarrassed to tell your family, friends, or co-workers?”

A listing of available resources for obtaining guidance and for good faith reporting of suspected misconduct. For example:

  • A means to report issues anonymously, such as a helpline or postal address
  • Information on how to contact the ethics and compliance officer or office
  • A definition of the reporting chain of command (e.g., supervisor, department head, etc.)
  • A listing of any internal ethics and compliance websites
  • A listing of any additional ethics and compliance resources and/or the identification of supplementary policies and procedures and their location.

Enforcement and implementation mechanisms that address the notion of accountability and discipline for unethical behavior. For example, unethical behavior will be subject to disciplinary action up to and including termination.

Generic examples of what constitutes acceptable and unacceptable behavior could be included to further explain risk areas. Examples could be based on relevant organization or industry experiences.

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