1. Codes of Ethics and Codes of Conduct
Chapter Four
Codes of Ethics and Codes of Conduct
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Copyright © John Wiley & Sons

2. Understand the difference between a Code of Ethics and a Code of Conduct
Explain the importance of code awareness and expectations
Describe the content found in most Codes of Ethics and Codes of Conduct
Create and implement an effective Code of Ethics communication strategy
Conduct an annual employee assessment of the Code of Ethics
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Learning Objectives
Chapter 4: Collins, Business Ethics

3. Difference Between a Code of Ethics and a Code of Conduct
A Code of Ethics briefly describes broad ethical aspirations
It is sometimes referred to as a Values Statement
It has a few general principles to guide behavior that could fit on a business card
These principles describe the kind of people we want to be
The general principles embodied in a Code of Ethics represent aspirations
When faced with an ethical dilemma or ambiguous situation, principles articulated in the Code of Ethics can help guide the decision maker
Chapter 4: Collins, Business Ethics

4. Difference Between a Code of Ethics and a Code of Conduct
A Code of Conduct more extensively describes acceptable behaviors for specific situations that are likely to arise
It is often developed by an employee with legal expertise, provides substance to the Code of Ethics and is usually several pages long
A Code of Conduct applies the Code of Ethics to a host of relevant situations
Chapter 4: Collins, Business Ethics

5. Purpose and Importance of Codes
The extent of an organization’s ethics program is
often related to its size
In the 1960s, only 15 percent of surveyed companies had a Code of Ethics
Now, nearly all Fortune 1000 companies have a Code of Ethics
Begin drafting a Code of ethics when the number of employees reaches about 10
Assign responsibility for managing organizational ethics to a specific individual at the 50-employee level and begin developing some ethics training
Chapter 4: Collins, Business Ethics

6. Exhibit 4.1 Ethics Program Growth and Organizational Size
Insert Exhibit 4.1
Chapter 4: Collins, Business Ethics

7. Purpose and Importance of Codes
Demonstrate Managerial Concern for Ethics
Discuss the organization’s Codes of Ethics and Conduct with new employees to establish ethical expectations
New employees play a pivotal role in helping an organization achieve the highest standards for honesty and ethical behaviors
By discussing the organization’s Code of Ethics and Conduct, managers demonstrate concern that ethical issues will be appropriately addressed
Chapter 4: Collins, Business Ethics

8. Purpose and Importance of Codes
Convey a Particular Set of Values and Obligations
Codes of Ethics clarifies appropriate behaviors and provides employees with clear and consistent moral guidance
It articulates and reinforce a moral consensus
It legitimizes dialogue about ethical issues when challenging situations arise
Employees need a reliable source of information to guide them when ethical issues arise
Chapter 4: Collins, Business Ethics

9. Purpose and Importance of Codes
Meet Legal Requirements and Industry Trends
The Sarbanes-Oxley Act: required all publicly traded companies to disclose whether they had a Code of Ethics for senior financial officers
Many industry associations and professional organizations develop codes as a self-regulating strategy that deflects government regulation
Banks, health care firms, and organizations doing business with municipal, state, and federal governments are required to have an ethics code
Lawyers, accountants, teachers, and social workers who violate their professional code can lose their license
Chapter 4: Collins, Business Ethics

10. Purpose and Importance of Codes
Positive impact on employee behaviors:
Researchers report that organizations with Codes of Ethics have higher levels of employee commitment and greater tolerance for diversity
Within an organization culture of trust, employees are more likely to trust managerial decisions, and managers are more likely to trust employee decisions
Chapter 4: Collins, Business Ethics

11. Code of Ethics Content
Providing employees with a list of prohibitions—things they should not do—can feel oppressive
Make the Code of Ethics an affirmative statement of how employees should act
It’s similar to the difference between a coach telling an athlete not to play badly versus a coach telling an athlete she is playing well and can do even better
Chapter 4: Collins, Business Ethics

12. Code of Ethics Content
An extensive scholarly review of corporate Codes of Ethics, global Codes of Ethics, and business ethics literature found the following six values continually expressed:
Trustworthiness
Respect
Responsibility
Fairness
Caring
Citizenship
Chapter 4: Collins, Business Ethics

13. International Codes
The Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. businesses to directly pay bribes in other nations
The FCPA differentiates bribery from facilitating payments
A bribe is typically defined as providing someone with a monetary incentive to do something contrary to his or her job description
Facilitating payments, which are legal, expedite performance of “routine governmental action”
Some businesses headquartered in the U.S. argued that the FCPA puts them at competitive disadvantage because businesses headquartered in other nations continue to pay bribes as a cost of doing business
Chapter 4: Collins, Business Ethics

14. Code of Ethics Content
American businesses are obligated to obey both U.S. laws and host nation laws, with the higher ethical standards taking precedence
The Caux Round Table spearheaded a collaborative effort to develop the Caux Principles for Responsible Business
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15. Exhibit 4.4a Caux Principles for Responsible Business
Insert Exhibit 4.4
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16. Exhibit 4.4b Caux Principles for Responsible Business
Insert Exhibit 4.4
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17. Creating a Code of Ethics
Following are 13 steps for creating a Code of Ethics as a team-building exercise:
Step 1-Obtain approval
Step 2-Create a code-writing team
Step 3-Gather list of ethical issues from relevant stakeholders
Step 4-Define a “Code of Ethics”
Step 5-Gather a list of ethical behaviors from participants
An ethics code serves as a constant reminder, particularly when the owner is not present
Chapter 4: Collins, Business Ethics

18. Code of Ethics Content Step 6-Determine common themes
Step 7-Draft a Code of Ethics
Step 8-Compare to other codes and modify
Step 9-Compare to other groups
Step 10-Code alignment
Step 11-Code review
Step 12-Code communication strategy
Step 13-Code revision
Chapter 4: Collins, Business Ethics

19. Connecting Code of Ethics to Strategic Planning
Strategic planning integrates an organization’s mission with its vision and provides clear direction on how the organization will progress from its current situation to a highly desired future situation
Connecting the code to an organization’s mission and vision, rather than keeping it separate, establishes credibility and visibility for the Code of Ethics
Mission statements describe what an organization does and for whom
Vision statements describe what an organization aspires to become in the future
Strategic plans are communication devices
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20. Exhibit 4.5: Crafting a Cause-Based Strategic Message
Jim Armstrong’s 10-step process for developing a cause-based communication strategy
Insert Exhibit 4.4
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21. Code of Conduct Content
A Code of Conduct addresses the wide range of legal expectations and ethical risks unique to an organization or job title
Creating a Code of Conduct requires input from top-level executives, corporate lawyers, and human resource personnel
Chapter 4: Collins, Business Ethics

22. Code of Ethics Content
The New York Stock Exchange recommends that a Code of Conduct address the following seven topics:
Conflicts of Interest
Corporate Opportunities
Confidentiality
Fair Dealing
Protection and Proper Use of Assets
Compliance with Laws, Rules, and Regulations
Encouraging the Reporting of Any Illegal or Unethical Behavior
Develop different Codes of Conduct for different business units, work functions, or stakeholders as an organization grows in complexity
Revise the Code of Conduct when new issues arise
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23. Code of Ethics Content
Codes of Conduct are based on shifting moral expectations and legal obligations
New technologies create new ethical dilemmas requiring new ethical guidelines
Insert Exhibit 4.7
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24. Code of Conduct Relevancy
Business Gratuity
A business gratuity is a present, gift, hospitality, or favor for which fair market value is not paid by the recipient
A fine line exists between a business gratuity and a bribe
The general guideline for when a gratuity evolves into a bribe is when the object of value unduly influences buying decisions
Instructing buyers not to accept gratuities from suppliers, and then encouraging salespeople to offer gratuities to customers, sends mixed messages that damage managerial credibility
Organizations need consistent policies to avoid the negative impacts of employees claiming hypocrisy
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25. Code of Conduct Relevancy
A 2009 survey reported that approximately half of all organizations monitor use
Clearly note in the Code of Conduct that the employer’s right to monitor communications on company-owned computers and network systems supersedes employee privacy rights
A 2007 survey conducted by the American Management Association found that 28 percent of the organizations had terminated an employee for inappropriate use
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26. Code of Conduct Relevancy
Association of Consulting Engineers Australia Code of Conduct Policy
Insert Exhibit 4.8
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27. Implementing an Effective Code Communication Strategy
Ethical hypocrisy, the gap between an organization’s formal ethical proclamations and its actual behavior, damages employee morale
Researchers report that people working for a supervisor who encouraged employees to lie about delivery information to clients had less job and organizational satisfaction
Chapter 4: Collins, Business Ethics

28. Implementing an Effective Code Communication Strategy
Elements of an Effective Code Communication Strategy:
Connect the code to the organization’s strategy
Mention the Code of Ethics in job announcements
Introduce the code during employee orientation
Annually distribute the Code of Ethics with a letter signed by a high-level executive emphasizing the importance of applying the code on a daily basis
Chapter 4: Collins, Business Ethics

29. Implementing an Effective Code Communication Strategy
Elements (cont.)
Display the Code of Ethics in newsletters, highly traveled areas, and on stationary and websites
Discuss the code during ethics training workshops
Mention the Code of Ethics in correspondences with suppliers and customers
Evaluate employees on code adherence in performance appraisals
Link code adherence to promotions and merit raises
Annually assess how well the organization embodies the code
Employees are more likely to report a code violation if others in the organization disapprove of the violation, they do not fear retribution for reporting, or the person committing the violation has been given a previous warning
Codes are particularly essential during periods of market and organizational turbulence
Turbulence creates uncertainty and employees can shift into a survival of the fittest mindset
Chapter 4: Collins, Business Ethics

30. Annual Code of Ethics Assessment
Insert Exhibit 4.9
Chapter 4: Collins, Business Ethics