Ethics in Businessby Simon Webley
The structure of a code of ethics
Corporate codes of ethics or conduct normally take one of two forms:
- An issues approach, consisting of a series of policy statements covering the company’s key areas of concern
- A stakeholder approach, which sets out a company’s obligations to its principal constituencies, often referred to as stakeholders.
- Shareholders and investors
- Suppliers and business partners
- The local/national community, including the environment
- Competitors and industry regulators (these may or may not be considered as stakeholders).
In either approach, a code should provide guidance to employees on such matters as how to behave with regard to a potential conflict of interest or the giving and receiving of gifts and hospitality. The code needs to explain the procedure that employees should follow when seeking advice on ethical issues.
The majority of corporate codes use the stakeholder approach.
No two codes are the same and there is no such thing as a ‘one size fits all’ model. However, an effective and credible code is one that reflects
- The values of the company and the way it conducts its business
- The concerns of employees and others at different levels and locations
- The relationships that the company would like to have with its stakeholders.
The code is normally kept under review and amended in response to issues that emerge in the course of business. Once every three years is normal. For instance, many recently-created or revised codes cover issues such as software copying, substance abuse, the use of communications equipment by employees, work/home balance and workplace security.
The stakeholder model
The following template is suggested for an organisation wishing to develop and implement a code of business ethics based on the stakeholder model.
Include a short introduction signed by the chairman and/or CEO. Start with a sentence on the purpose of the code, mentioning the core values – such as integrity, responsibility and trust – that are important in the conduct of the business.
State the commitment of the organisation and of senior executives to maintaining high standards, both internally and externally. Explain the importance of the code in providing guidance for employees on ethical issues, thereby helping to avoid potential problems and safeguard the company’s reputation. There should also be an assurance to staff that they will not be penalised if they follow the code, even if it means losing business.
Explain what the business is about: the products it makes or services it provides, its financial objectives, its role in society and some of the dilemmas the code will address. In other words, state how and by what means the company will achieve its purposes.
Describe the company’s policies and commitments on such matters as working conditions, recruitment, development and training, rewards, health and safety, equal opportunities, retirement, redundancy, discrimination and harassment, and the use of company assets by employees. Include the responsibilities of employees towards each other and towards the company’s other stakeholders.
Explain the company’s attitude to its customers with regard to such matters as business terms, quality, pricing, information, after-sales service, complaints and customer satisfaction.
Shareholders and investors
Describe the company’s commitment to those who fund the business, including issues such as dividend policy, the protection of their investment and the information provided to investors about the company’s achievements and prospects.
Suppliers and business partners
Specify the company’s approach to relationships with its suppliers and business partners. This section may refer to payment terms, co-operative efforts (such as those aimed at improving quality and efficiency), and rules governing gifts, hospitality and ‘facilitation’ payments. Clarify the ethical standards expected of suppliers and joint venture partners – for example, whether their standards should be consistent with the company’s own.
Emphasise the importance of obeying the spirit as well as the letter of the law and explain the intended contribution of the company to the social and economic well-being of the societies in which it operates. Include such matters as the company’s environmental policy, its involvement in local affairs and its policy on supporting charities, as well as employee participation in local institutions and other mutually-beneficial partnerships.
A concluding section of the code should cover how it is to be implemented. Include information about what to do if an employee wants advice on a dilemma or wishes to raise an issue in a situation relating to the code. Explain who is responsible for the code’s implementation, and how the company will monitor and review the code as well as what happens if the code is breached.
An issues model
The other principal model used for codes is one based on issues. This type of code normally pulls together policies covering the main ethical issues a company has had to address. As with a stakeholder model, the code should include an introduction by the chairman and/or the CEO, a company profile and a section on implementation.
This type of code is particularly useful if a company wants to emphasise consistency of approach in specific circumstances. A financial services company, for example, might include a reference to money laundering, while a retail goods producer is likely to refer to a returns policy.
Key ethical considerations addressed in issues-based codes
- Bribery and corruption
- Confidentiality issues
- Conflicts of interest
- Discrimination issues
- Environmental stewardship
- Gifts and hospitality policy
- Harassment in the workplace
- Remuneration policy
- Supplier/tendering policy
- Supply chain policy
- Use of communication equipment
- Use of privileged information
- ‘Whistleblowing’ policy
Each company will need to choose which model best suits its individual requirements. Indeed, some choose a hybrid version, using a mixture both models.