As addressed in Ethical Advocate’s “Effective Compliance Programs” blog post, a code of conduct is the foundation for an effective compliance program. The most effective codes are clear, concise, and accessible to all employees and to those conducting business on behalf of an organization. It is also periodically reviewed and updated.
The Sarbanes-Oxley Act requires publicly traded U.S. companies to have a formal code of conduct, but all organizations and institutions – for-profit, non-profit, educational, governmental, and other – benefit from them. A well-developed code of conduct or code of ethics states an organization’s values. It sets the desired ethical tone and provides clear guidance for employees, staff, suppliers, and others.
It sets out the expected standards of behavior, and should help employees and others solve ethical dilemmas they face at work by providing a framework and clear examples. An effective code of conduct can also prevent fraud or other instances of unethical actions by alerting employees to questionable behavior.
A formal, written code of conduct will typically include the following sections:
An organization’s mission and values, an introductory statement from the CEO or equivalent leader, ethical conduct guidelines and guidance, rules of conduct, and information about consequences for violating the code of conduct.
The code should specifically address such topics as confidentiality, conflicts of interest, discrimination and harassment, fraud, misuse of organizational assets, and related topics, and should also cover laws and regulations specific to the relevant industry or type of organization. To be effective, the code will contain specific examples of situations that employees and others are likely to encounter as they engage in their daily work. It will also refer to other available resources, such as an ethics hotline.
An effective organizational code of conduct cannot be written by one person or even one department. It takes senior management buy-in, a diverse view, and a deep understanding of the entire organization and its regulatory environment. The following steps will help you create and maintain an effective code of conduct:
1. Obtain buy-in from the CEO, Board of Directors, or equivalent roles.
2. Create a diverse, multi-disciplinary team of employees and other key stakeholders to help ensure the code reflects the needs of the entire organization.
3. Collect needed data, to include sample codes from other organizations.
4. Write and re-write a draft, with contributions from the multi-disciplinary team.
5. Validate the draft with employees, bargaining units, and other key stakeholders before finalizing the initial version.
6. Identify and introduce communication and education strategies.
7. Plan for ongoing code updates and revisions.
8. Enforce the code of conduct.
A well-written, enforced code of conduct helps employees, staff, suppliers and others adhere to the organization’s ethical culture. Ethical Advocate believes strongly in the value of an ethics code of conduct. Contact us for a consultation or training on ethics, compliance, ethics hotline implementation, and related topics.