Setting an Ethical Tone at the Top

I have previously blogged about the importance of having a code of conduct for all organizations. A code of conduct establishes the ethical principles upon which the behavior of employees will be judged. It helps to distinguish right from wrong. A code provides guidelines on reporting wrongdoing, and so much more.

In reading “How to Write a Code of Conduct That is Helpful to Employees,” I have broadened my perspective and will discuss the elements of a code next.

Ethical Values

• Elaborates on company values.
• Guides behavior in the workplace.
• Adheres to applicable laws.
• Improves employee morale.
• Sets standards of behavior in dealing with customers, employees, supplier, and other stakeholders.

The values set by an organization sets the ethical tone at the top. Top management needs to ‘walk the talk’ of ethics. There is nothing worse than for members of top management saying what ethics are in their organization and then going out and not following their own guidelines. It creates hypocrisy. It builds A sentiment of ‘Do what I say, not what I do.’ It can create an environment where employees deviate from ethical norms, figuring that the company will not act against them because they, too, violate ethical standards. The result is all trust is lost between employees and management.

Codes of conduct can also be broadened with respect to values and include policies in a Statement of Corporate Social Responsibility policies. The following are examples of what might be included.

• Business ethics.
• Employee rights.
• Diversity and inclusion.
• Social responsibility.
• Environment responsibility.
• Corporate governance.

Additional Provisions

Additional provisions might include a policy on the use of social media at work and the use of personal cell phones during working hours. Social media is a challenging topic because it crosses over so many ethics and compliance issues. But like any other ethics and compliance topic, it can and must be proactively managed for a company to safeguard its reputation and provide its employees with the tools to manage their own personal and business activities.

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.

Model for Developing a Code of Ethics

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.

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 as follows.

• 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 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. Instead, the code should: describe the HR policies that might affect employee actions and how violations will be treated and protect the rights of customers to have a safe product whether it be an automobile or financial investment.

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 compliance is also required.

Blog posted by Steven Mintz, PhD on May 18, 2023. Find out more about his professional activities on his website (https://www.stevenmintzethics.com/).  Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage. Check out professional recommendations on LinkedIn.