A CODE OF ETHICS: GETTING THE BASICS RIGHT

Guidelines for drafting or revising a Code of Ethics

Codes of Ethics and Codes of Conduct have long been accepted within organisations as a basic part of their ethics and compliance programme. While these Codes can, and should, serve a valuable role within the organisation, all too often employees know little of either the intent or the contents of their company’s Codes.

There are five factors that would significantly improve the usability and value of a company’s Codes.

1. Do you need a Code of Ethics or a Code of Conduct?

Ideally, organisations should have a Code of Ethics that comprises two parts: a Code of Values that defines the organisation’s values, vision and mission, and a Code of Conduct that outlines the standards of behaviour required within the organisation. This combination is based on the recognition that ethics (encompassing ethical conduct and an ethical culture) is shaped both by building an increased commitment to the company’s values and by improving compliance with the organisation’s rules and policies.

Distinguishing between the Code of Values and the Code of Conduct is also warranted to realise the benefits of their differences. Values and value-based initiatives are a more effective approach to improve ethics and ethical conduct, while rules, regulations and policies (as contained in the Code of Conduct) are a more effective mechanism to curb or reduce unethical conduct.

2. What is the purpose of the Codes?

The purpose of the Codes of Ethics, as a conglomerate term for the Code of Values and Conduct, needs to be clear to all employees and to anyone else to whom it may apply (such as business partners).

The Code of Ethics should take account of business best practice as well as current, applicable legislation. It should form an integral part of the company’s initiatives aimed at managing ethics in the workplace. These initiatives taken together should be aimed at creating an ethical culture in terms of which ethical conduct is the norm within the company and relative to all stakeholders.

The Code of Values should clarify the organisation’s values so as to effectively align workplace behaviour with an organisation’s values. The Code of Values should therefore serve as the foundation of the Code of Ethics as well as underpin the Code of Conduct. As such, the company’s values should be clearly linked to the expected conduct (as, for example, the value of honesty would relate to a fraud and corruption policy).

The purpose of the Code of Conduct is to clarify the standards of behaviour that are expected of employees and to provide guidance to employees with regard to what this entails, with the aim of preventing or reducing unethical behavior. Unacceptable behaviour is generally addressed in the Code of Conduct in the form of separate policies. These are generally intended for employees, although certain policies can also be directed to external stakeholders to define standards of behaviour when dealing with the company.

3. The factors that promote the effectiveness of your Codes

• The Code of Ethics (especially the company’s values) needs to reflect reality and avoid creating ethical gaps between what is stated and what is lived. If the Code says the company is committed to "the highest ethical standards" but this is in fact a huge overstatement, it will erode the effectiveness of the Code and risk undermining the individual employee’s commitment to ethics.
• Fairness is crucial to ensure the Codes (especially the Code of Conduct and its supporting policies) are seen as legitimate mechanisms. There cannot be different or selective applications of the Codes and policies. Instead, equity dictates that the company’s policies are consistently applied to all people.
• The company should have a plan in place to maintain on-going awareness and knowledge of its Codes. This can be done by its inclusion in employee inductions, via a well-developed communications plan, and as part of the company’s ethics training programmes.

4. Reviewing your Codes and updating your policies

A Code of Ethics, and particularly a Code of Conduct, should be reviewed annually to ensure that it complies with current legislation and promotes best business practice. Employees can also be involved in this process, for example by providing feedback on the practical application of policies.

Since many policies “belong” to certain departments - typically when that department is expected to champion and enforce the policy - the department can be resistant to change, especially if the review is being done by an external consultant. To minimise this resistance, the review should be a shared process. Also, rather than simply writing new policies, where possible, current policies should be used and updated.

5. The factors that create a user-friendly Code of Ethics

• In pursuit of transparency, the Codes need to be written in clear, plain language so that they are understandable to all stakeholders. This may warrant translating the Codes to accommodate the dominant languages amongst employees.
• In order to create a user-friendly Code of Ethics, it should be as succinct as possible. This applies in particular to the policies contained in the Code of Conduct where the need to be comprehensive should be continually balanced against the need for brevity. For policies that warrant more detail, it is preferable to include only a summary in the Code of Conduct and to reference the location of the full version of the policy, for example via a hyperlink.
• The Code of Ethics should endeavour to encompass all the issues and policies that are pertinent to ethics in the organisation so that it serves as a “one stop” location for the company’s ethics documentation and ethics-related policies. Since a number of policies may be referenced to the department responsible for that issue (for example, the Code of Conduct could reference many issues addressed in HR’s Employee Handbook), the company needs to ensure that this does not undermine the status of the Code of Ethics as the primary repository.
• A list of definitions (in alphabetical order) should be included to provide readers with a concise summary of the meaning of the issues, topics, terms and concepts used in the Code of Ethics. These definitions can be cross referenced to the relevant policies via hyperlinks. However, it should be noted that these definitions are intended as a guide, and that the identification of misconduct, as well as actions against misconduct, will not be limited by these definitions.
• To promote ease of use, the Code of Ethics should include a table of contents and the Code of Conduct should include an alphabetical index of issues and topics that are addressed, as well as the name of the policy in which those topics are addressed. Where necessary, more than one topic can be listed for a policy. For example, the Bribery, Corruption and Fraud Policy would be referenced alphabetically under all three words.

Ensuring that a company’s Code of Ethics (encompassing a Code of Conduct and a Code of Values) is a well-designed element of its management of ethics and compliance is a valuable start. Making the Code a visible aspect of the company’s ethics management and ensuring its fair and consistent application are important next steps. But it’s not enough: to this needs to be added other ethics management initiatives to further support building and maintaining an ethical culture.

© Cynthia Schoeman, Ethics Monitoring & Management Services (Pty) Ltd, 2013