Frequently Asked Question: Why is an annual employee signoff important to the success of the code of ethics?

An annual employee signoff serves three major purposes.

1. It highlights the importance of the code of ethics if an employee has to acknowledge reading it on an annual basis, discussing it as part of an annual performance appraisal, and demonstrating knowledge about to whom to go when facing certain dilemmas, as well as acknowledging relevant corporate policy documents like insider trading, anti-harassment, and privacy rules.
2. It refreshes employees’ minds so the goals and ethics in the code are not forgotten and gradually become less important in daily decision-making.
3. Such a signoff makes it easier for changes to be regularly made and implemented if the employee must be reviewed annually. Unfortunately, many companies, even those with extensive codes of ethics, do not have such an annual signoff.

“Codes that are formulated and then stuck in the back drawer of the director of human resources or VP of legal affairs appear to be little more than public relations exercises” (The Corporate Ethics Monitor, Volume 1, Issue 4, page 58). One simple way to tell if a corporation is serious about its code of ethics is how often employees apply it, assess it, and signoff on it as well as how often the code is reviewed, updated and/or amended. Therefore, not only is an annual employee signoff important to the success of a code of ethics, it is also an indication of the success of a code of ethics.