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The Purpose of a Code of Ethics

Creating a Pathway for Ethical Behavior in Organizations

I've been out of touch for awhile because of unexpected surgery. I'm on the mend and glad to be blogging again about compelling ethics issues.

A code of ethics creates an ethical framework upon which all decisions are founded. A code should identify the common values that underlie strategic planning and the goals to be achieved from an ethical perspective. Individuals should consider developing a code of ethics to guide them through the minefields of ethical decision making in life. I provide guidance in this blog to organizations that are considering adopting a code of ethics.

An effective code of ethics establishes a direction for the company and pathway to meet the organization’s ethical responsibilities to its stakeholders: customers, employees, suppliers, strategic partners; and so on.  A formal, well-communicated code of ethics can also help to protect a company's reputation and legal standing in the event of a breach of ethics by an individual employee.

A code of ethics is a vital document for any business, as breaches of ethics can land companies in serious trouble with consumers, other organizations or government authorities. Creating a code of ethics makes decision-making easier at all levels of an organization by reducing ambiguity and considerations of individual perspectives in ethical standards. However, it is essential that organizations do not treat codes as window-dressing, or documents to be filed and never looked at again.

The Institute of Business Ethics (IBE) outlines a 9-Step Model for developing and embedding a code of business ethics as follows:

  • Understand your context
  • Establish board level support
  • Articulate your core values
  • Find out what bothers people
  • Choose your approach
  • Draft your code
  • Test it
  • Launch it
  • Monitor it

The launch of a code of ethics is just the beginning of the journey. Ongoing monitoring, training on its use and rewarding those who demonstrate ethical leadership are also required.

I have previously blogged about the importance of establishing an ethical culture in an organization to support the code of ethics. A code is meaningless unless top management models ethical behavior in every action and decision made.

A report by the SHRM Foundation titled “Shaping an Ethical Workplace Culture” describes an ethical workplace culture as one that gives priority to employee rights, fair procedures, and equity in pay and promotion, and that promotes tolerance, compassion, loyalty and honesty in the treatment of customers and employees.

An ethical culture encourages employee support and respect for the rules of conduct and fair treatment by management. This, in turn, promotes trust in management and internalization of the company’s values. Once this happens, ethics becomes embedded in the workplace culture.

Another purpose of a code of ethics is to provide guidance and set common ethical standards to promote consistency in behavior across all levels of employment. A code governs the actions and working relationships of board members and top management with employees and in dealings with other stakeholders. Here is an outline those relationships.
Code of ethics

  • Requires the highest standards for honest and ethical conduct, including proper procedures for dealing with conflicts of interest between personal and professional relationships.
  • Requires full, fair, accurate, timely and understandable disclosure in reports and documents filed with regulators, including financial reports, and provided to shareholders.
  • Requires compliance with applicable governmental laws, rules and regulations.
  • Establishes accountability for adherence to the code.
  • Provides for methods to communicate violations of the code.

An effective code establishes an ongoing process to meet new and challenging situations that test a company’s ability to identify and respect the rights of its stakeholders and to act not necessarily to enhance shareholder value, although that can be the by-product of making ethical decisions, but, instead, to protect the rights of customers to have a safe product whether it be an automobile or financial investment.

Codes of ethics are the rules of the road for all employees to follow. They establish ethical expectations for employees and top management. To be of most value, these codes must be followed by all members of management. In other words, managers must “walk the talk” of ethics. In today’s organizations, pressures exist to deviate from the principles of the code. For example, top managers might exert pressure on employees to deviate from these standards of behavior to meet pre-established goals even through the pressure violates the code of ethics.

If you want to learn more about codes of conduct, write me at: steve@ethicssage.com.

My gift to you as we move into 2022, is a free copy of my book for those who want it. The book is titled, Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior. Here is a bit more about the book. Please send me an email to me at: steve@ethicssage.com to request your free copy and provide your mailing address.

If you live outside America, I can't provide a free copy because postage and handling is about $20. The book, Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior, can be purchased on Amazon for $9.95 for a limited time.

Blog posted by Dr. Steven Mintz, The Ethics Sage, on December 29, 2021. Steve is the author of Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.

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