Developing Code of Ethics and

Conduct
• Helps ensure that all employees understand the organization's values
and comply with the policies and codes of conduct that create its ethical
climate
• Ca nnot assume that employees will know how to behave when
entering an orga nization
Compliance Orientation:
Values Orientation:
Strives to develop shared values.
Creates order by requiring that
Although penalties are attached,
employees identify with and
the focus is more on an abstract
commit to specific required
core of ideals such as respect and
conduct. It uses legal terms,
responsibility. Instead of relying on
statutes, and contracts that
coercion, the company's values are
teach employees the rules and
seen as something to which people
penalties for noncompliance.
willingly aspire
• a written document that may conta in some inspirationa l statements
but usually specifies accepta ble or unaccepta ble types of behavior.
A code of conduct is more akin to a regulatory set of rules and.
as such, tends to elicit less debate about specific actions.
Or

• Formal statements that describe what an organization expects of its

employees
• the most comprehensive and consists of genera l statements,
sometimes altruistic or inspirational that serve as principles and
the basis for rules of conduct. A code of ethics generally
specifies methods for reporting violations, disciplinary action for
violations, and a structure of due process.

• Most comprehensive document

• Consists of genera l statements that serve as principles and
the basis for the rules of conduct
 • Code of Ethics • Code of Conduct
A code of ethics is a document, usua lly issued A code of conduct typica lly is issued by
by a boa rd of directors, that outlines a set of a boa rd of directors; however, it
principles that affect decision-ma king. For exa outlines specific behaviors that are
mple, a code of ethics might stipulate that XYZ required or prohibited as a condition of
Cor poration is committed to environmental ongoing employment
protection and green initiatives. The
expectation is that individual employees, when
faced with the option, will select the greenest
Code values
solution. for
Business
Ethic s
serves the genera l public and also addresses distinct groups such as sta
keholders. Va lues statements are conceived by management and are fully
developed with input from a ll sta keholders.

Or

Serves the genera l public and addresses sta keholder

interests
 Often contain six core va lues
• trustworthiness
• respect
• responsibility
• fairness
• caring
• citizenship

These va lues will not be effective without distribution, training, and of top
the support management in making these va lues part of the corporate
culture.
1. Consider areas of risk and state the va lues as well as conduct necessa ry to comply with laws

and regulations. Va lues are an importa nt buffer in preventing serious misconduct.

2. Identify va lues that specifica lly address current ethica l issues.

3. Consider va lues that link the orga nization to a stakeholder orientation. Attempt to find

overlaps in orga nizationa l and stakeholder values.

4. Make the code understandable by providing examples that reflect values.

5. Communicate the code frequently and in language that the employees can understand.

6. Revise the code every year with input from orga nizational members and stakeholders.
They are responsible for managing their organizations ethics and legal
compliance programs. They are usually responsible for:
• 1. assessing the needs and risks that an organization-wide ethics program
must address
• 2. developing and distributing a code of conduct of ethics
• 3. conducting training programs for employees

• 4. establishing and maintaining a confidential service to answer employees'

questions about ethical issues
• 5. making sure that the company is in compliance with government regulation
• 6. monitoring and auditing ethical conduct
• 7. taking action on possible violations of the company's code
• 8. reviewing and updating the code
• 1. help employees identify the ethica l dimensions of a business decision

• 2. give employees a mea ns to address ethica l

issues
• 3. help employees understa nd the ambiguity inherent in ethica l situations

• 4. Ma ke employees awa re that their actions define the compa ny's ethica
posturel both inter nally and exter
nally
• Provide direction for employees to find managers or others who can help
5.them resolve ethica l conflicts

• Eliminate the belief that unethica l behavior is ever justifia ble by stressing
6.
that
a. Stretching the ethica l bounda ries results in unethica l behavior

b. W hether discovered or not, an unethica l act is just

that
c. An unethica l act is never in the best interests of the compa
ny
d. The fir m is held responsible for the misconduct of its members
Commo n Mista kes in Designing and Implementing an
Ethics
Progra m

• Failure to understa nd and appreciate these goa ls is the first mistake that
many firms make when designing ethics progra ms.

• A second mista ke is not setting realistic and measura ble progra m

objectives. Once a consensus on objectives is reaches, compa nies should
solicit input through interviews, focus groups, and survey instruments.

• The third mista ke is senior management's fa ilure to ta ke ownership of the

ethics progra m. Mainta ining an ethica l culture may be impossible if CEO's do
not support an ethica l culture.
Commo n Mista kes in Designing and Implementing an
Ethics
Progra m

• The fourth mista ke is developing progra m materia ls that do not address the
needs of the average employee. Ma ny complia nce progra ms are designed
by lawyers to ensure that the compa ny is legally protected.

• The fifth common mista ke made in implementing ethics progra ms in tra

nsfer ring an "America n" progra m to a fir m's inter nationa l operations.

• A fina l common mista ke is designing an ethics progra m that is little more tha n
a series of lectures. In such cases, participa nts typica lly recall less tha n 15
percent the day after the lecture. A more practica l solution is to allow
employees to practice the skills they learn through case studies or sma ll group
exercises.