An increasing number of companies requires employees to attend trainings regarding business conduct. These typically include discussions of the company’s policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company’s rules of conduct.
As part of more comprehensive compliance and ethics programs, many companies have formulated internal policies pertaining to the ethical conduct of employees. They are generally documented in one of two ways:
Corporate Code of Ethics
A code of ethics, also known as a code of conduct, is a policy statement of a company’s values, responsibilities, and conduct expectations. The purpose of a code of ethics is to guide employees in handling ethical dilemmas. It is essentially a moral compass. A code of ethics typically begins by setting out the values that underpin the code and describes a company’s obligation to its stakeholders. The code is publicly available and addressed to anyone with an interest in the company’s activities and the way it does business. It includes details of how the company plans to implement its values and vision, as well as guidance to staff on ethical standards and how to achieve them. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters.
In response to the Enron accounting scandal, the government passed the Sarbanes-Oxley Act, which requires that companies listed or applying to be listed on a public stock exchange establish and enforce a code of ethics. Even companies that are not required to have a code of ethics should take steps to encourage ethical choices.
Codes of ethics vary in content, length, and complexity. Johnson & Johnson has a relatively simple code of conduct, with just four paragraphs that can be summarized as:
Our customers are our first priority, then our employees, then our communities. Stockholders come last. But if we take care of the others, then stockholders will do well.1Johnson & Johnson, “Our Credo,” accessed August 03, 2017.
Without being too detailed or lengthy, this credo expresses the company’s values and gives employees the guidance they need to make ethical decisions.
Code of Practice
A code of practice is adopted by a profession or by a governmental or nongovernmental organization to regulate that profession. A code of practice may be styled as a code of professional responsibility, and it will discuss difficult issues, difficult decisions that will often need to be made, and provide a clear account of what behavior is considered “ethical” or “correct” or “right” in the circumstances. In a membership context, failure to comply with a code of practice can result in expulsion from the professional organization.
Richard DeGeorge, author of Business Ethics, has this to say about the importance of maintaining a corporate code:
Corporate codes have a certain usefulness and there are several advantages to developing them. First, the very exercise of doing so in itself is worthwhile, especially if it forces a large number of people in the firm to think through, in a fresh way, their mission and the important obligations they as a group and as individuals have to the firm, to each other, to their clients and customers, and to society as a whole. Second, once adopted, a code can be used to generate continuing discussion and possible modification to the code. Third, it could help to inculcate in new employees at all levels the perspective of responsibility, the need to think in moral terms about their actions, and the importance of developing the virtues appropriate to their position.2DeGeorge, Richard. Business Ethics. Prentice Hall. pp. 207–208
Some companies go a step further and articulate a set of values that drives their code of conduct, as “Procter & Gamble’s Values and Code of Ethics” shows.
Procter & Gamble’s Values and Code of Ethics
Procter & Gamble Company lives by a set of five values that drive its code of business conduct. These values are:
Integrity
- We always try to do the right thing.
- We are honest and straightforward with each other.
- We operate within the letter and spirit of the law.
- We uphold the values and principles of P&G in every action and decision.
- We are data-based and intellectually honest in advocating proposals, including recognizing risks.
Passion for Winning
- We are determined to be the best at doing what matters most.
- We have a healthy dissatisfaction with the status quo.
- We have a compelling desire to improve and to win in the marketplace.
Leadership
- We are all leaders in our area of responsibility, with a deep commitment to delivering leadership results.
- We have a clear vision of where we are going.
- We focus our resources to achieve leadership objectives and strategies.
- We develop the capability to deliver our strategies and eliminate organizational barriers.
Trust
- We respect our P&G colleagues, customers and consumers, and treat them as we want to be treated.
- We have confidence in each other’s capabilities and intentions.
- We believe that people work best when there is a foundation of trust.
Ownership
- We accept personal accountability to meet our business needs, improve our systems, and help others improve their effectiveness.
Beyond establishing policies or codes that guide the ethical behavior of the company or employees, many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. A competitive business environment may call for unethical behavior. For example, lying has become the norm among some in the stock and security trading profession. Sometimes there is disconnection between the company’s code of ethics and the company’s actual practices. Thus, whether or not such conduct is explicitly sanctioned by management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing tool.
Not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by relying upon employees to use their own judgment. Others believe that corporate ethics policies are primarily rooted in utilitarian concerns, and that they are mainly to limit the company’s legal liability, or to curry public favor by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can claim that the problem wouldn’t have arisen if the employee had followed the code properly.
Management 2020 text remixed from multiple sources under a CC Attribution-NonCommercial-ShareAlike 4.0 International License. View a complete list of original sources.
