Frequently Asked Question: What is a code of ethics and how does a corporation or organization develop one?
First, it is important to recognize that “every company, every organization, already has an ethic of some kind, even if it’s unwritten” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 14). This ethic is represented in the company’s corporate culture, which describes and regulates the behaviour of its employees and managers. Does the organization expect and reward doing the right thing? Many companies have now taken the next step by writing down and recording their normative or desirable corporate culture in the form of a code of ethics, code of conduct, responsibility statement to stakeholders, or code of responsible practices so that it is available and accessible to all employees, the public or whomever would like to investigate the company in question.
Early codes of ethics “typically address corrupt, illegal behaviour” as well as “employee’s obligations under the law, with particular focus on bribery, false expense claims, insider trading and political donations” (The Corporate Ethics Monitor, Volume 1, Issue 4, page 57). More advanced codes of ethics tend to cover four major areas of ethical behaviour: “issues of equity and fairness, rights, honesty, and the uses and exercise of corporate and managerial power” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 14). Equity and fairness relate to the way the corporation or organization treats its stakeholders, including “minority shareholders, customers, suppliers, the families of employees and the community in which the corporation operates” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 14). Rules must be established that outline the company policy towards its stakeholders so as to ensure that all stakeholders’ interests are taken into account when corporate decisions are made. Rights refer to issues such as the right to privacy of employees and of stakeholder or customer information as well as to the obligations the corporation has to uphold this right. Honesty pertains to the transparency of corporate policy and actions to the public. Finally, corporate and managerial power refers to how a company uses its power. Does the corporation use its power inappropriately or abusively “when dealing with employees, customers, partners or competitors?” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 14). Or does it use its power in a socially responsible manner? Additionally, many codes of ethics contain references to company policy regarding “product or service standards, corporate citizenship goals, and norms of employee conduct” (The Corporate Ethics Monitor, Volume 1, Issue 4, page 57).
However, many companies are lacking an important part to their code of ethics, namely a way to ensure that their code is implemented on an individual level. This is why it is necessary to address questions of training and internal communication. In other words, to “expose employees to the underlying rationale, or provide training in how to apply that rationale or ‘sniff test’ in daily decisions. This leads to reinforcing proper behaviour with recognition, performance appraisal, and reward systems” so that the code is not simply a piece of paper. Desirable behaviours need a management implementation framework that is regularly employed by both the corporation and its employees (The Corporate Ethics Monitor, Volume 1, Issue 4, page 49). The widespread use of codes of ethics and their integration into the workplace has meant that companies can “recruit and retain the kind of staff (especially at entry level) that they particularly want to attract” (The Corporate Ethics Monitor, Volume 1, Issue 4, page 59). Therefore, as a company turns over or replaces its staff with new employees who are literate in the company’s code of ethics, it will be better equipped to apply this code on a daily basis if it is reinforced with initial and regular or ongoing training.
Creating a code of ethics for a company or organization involves seven main steps. We offer an article on these steps when you sign up here!
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