Codes of Ethics and Codes of Conduct

CODES OF ETHICS AND CODES OF CONDUCT

Chapter Four

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Chapter 4

Learning Objectives

Understand the difference between a Code of Ethics and a Code of Conduct

Explain the importance of code awareness and expectations

Describe the content found in most Codes of Ethics and Codes of Conduct

Create and implement an effective Code of Ethics communication strategy

Conduct an annual employee assessment of the Code of Ethics

Chapter 4: Collins, Business Ethics

Difference Between a Code of Ethics and a Code of Conduct

Code of Ethics:A Code of Ethics briefly describes broad

ethical aspirationsIt is sometimes referred to as a Values

StatementIt has a few general principles to guide

behavior that could fit on a business cardThese principles describe the kind of people

we want to be


Difference Between a Code of Ethics and a Code of Conduct

Code of Conduct:A Code of Conduct more extensively

describes acceptable behaviors for specific situations that are likely to arise

It is often developed by an employee with legal expertise, provides substance to the Code of Ethics and is usually several pages long


Purpose and Importance of Codes

The extent of an organization’s ethics program isoften related to its size

In the 1960s, only 15 percent of surveyed companies had a Code of Ethics

Now, nearly all Fortune 1000 companies have a Code of Ethics


Exhibit 4.1 Ethics Program Growth and Organizational Size

Insert Exhibit 4.1



Demonstrate Managerial Concern for EthicsDiscuss the organization’s Codes of Ethics

and Conduct with new employees to establish ethical expectations

New employees play a pivotal role in helping an organization achieve the highest standards for honesty and ethical behaviors



Convey a Particular Set of Values and Obligations

Codes of Ethics clarifies appropriate behaviors and provides employees with clear and consistent moral guidance

It articulates and reinforce a moral consensusIt legitimizes dialogue about ethical issues

when challenging situations arise



Meet Legal Requirements and Industry TrendsThe Sarbanes-Oxley Act: required all publicly

traded companies to disclose whether they had a Code of Ethics for senior financial officers

Many industry associations and professional organizations develop codes as a self-regulating strategy that deflects government regulation



Positive impact on employee behaviors:Researchers report that organizations with

Codes of Ethics have higher levels of employee commitment and greater tolerance for diversity


Code of Ethics Content

Providing employees with a list of prohibitions—things they should not do—can feel oppressive

Make the Code of Ethics an affirmative statement of how employees should act



An extensive scholarly review of corporate Codes of Ethics, global Codes of Ethics, and business ethics literature found the following six values continually expressed:

1.Trustworthiness2.Respect3.Responsibility4.Fairness5.Caring6.Citizenship


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International Codes

The Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. businesses to directly pay bribes in other nations

The FCPA differentiates bribery from facilitating payments A bribe is typically defined as providing someone with

a monetary incentive to do something contrary to his or her job description

Facilitating payments, which are legal, expedite performance of “routine governmental action”



American businesses are obligated to obey both U.S. laws and host nation laws, with the higher ethical standards taking precedence

The Caux Round Table spearheaded a collaborative effort to develop the Caux Principles for Responsible Business


Exhibit 4.4a Caux Principles for Responsible Business

Insert Exhibit 4.4


Exhibit 4.4b Caux Principles for Responsible Business

Insert Exhibit 4.4


Creating a Code of Ethics

Following are 13 steps for creating a Code of Ethics as a team-building exercise:

Step 1-Obtain approvalStep 2-Create a code-writing teamStep 3-Gather list of ethical issues from

relevant stakeholdersStep 4-Define a “Code of Ethics”Step 5-Gather a list of ethical behaviors from

participants



Step 6-Determine common themesStep 7-Draft a Code of EthicsStep 8-Compare to other codes and modifyStep 9-Compare to other groupsStep 10-Code alignmentStep 11-Code reviewStep 12-Code communication strategyStep 13-Code revision


Connecting Code of Ethics to Strategic Planning

Strategic planning integrates an organization’s mission with its vision and provides clear direction on how the organization will progress from its current situation to a highly desired future situation


Exhibit 4.5: Crafting a Cause-Based Strategic Message

Insert Exhibit 4.4


Jim Armstrong’s 10-step process for developing a cause-based communication strategy

Code of Conduct Content

A Code of Conduct addresses the wide range of legal expectations and ethical risks unique to an organization or job title



The New York Stock Exchange recommends that a Code of Conduct address the following seven topics:

1. Conflicts of Interest2. Corporate Opportunities3. Confidentiality 4. Fair Dealing5. Protection and Proper Use of Assets6. Compliance with Laws, Rules, and Regulations7. Encouraging the Reporting of Any Illegal or

Unethical Behavior



Codes of Conduct are based on shifting moral expectations and legal obligations

New technologies create new ethical dilemmas requiring new ethical guidelines

Insert Exhibit 4.7


Code of Conduct Relevancy

Business GratuityA business gratuity is a present, gift,

hospitality, or favor for which fair market value is not paid by the recipient

A fine line exists between a business gratuity and a bribe

The general guideline for when a gratuity evolves into a bribe is when the object of value unduly influences buying decisions



EmailA 2009 survey reported that approximately

half of all organizations monitor email use

Clearly note in the Code of Conduct that the employer’s right to monitor email communications on company-owned computers and network systems supersedes employee privacy rights



Association of Consulting Engineers Australia Code of Conduct Policy

Insert Exhibit 4.8


Implementing an Effective Code Communication Strategy

Ethical hypocrisy, the gap between an organization’s formal ethical proclamations and its actual behavior, damages employee morale

Researchers report that people working for a supervisor who encouraged employees to lie about delivery information to clients had less job and organizational satisfaction



Elements of an Effective Code Communication Strategy:

Connect the code to the organization’s strategyMention the Code of Ethics in job announcementsIntroduce the code during employee orientationAnnually distribute the Code of Ethics with a

letter signed by a high-level executive emphasizing the importance of applying the code on a daily basis



Elements (cont.)Display the Code of Ethics in newsletters, highly

traveled areas, and on stationary and websitesDiscuss the code during ethics training workshopsMention the Code of Ethics in correspondences with

suppliers and customersEvaluate employees on code adherence in

performance appraisalsLink code adherence to promotions and merit raisesAnnually assess how well the organization embodies

the code


Annual Code of Ethics Assessment

Insert Exhibit 4.9


Codes of Ethics and Codes of Conduct

Documents

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