A code of conduct is a business policy that outlines accepted and prohibited employee behavior in an organization. It serves as a statement of what values a company stands for and the ethical as well as business conduct that employees should possess to help achieve the company's vision and goal.
In the US, it's now a legal requirement that all public companies have a code of conduct. It started with the establishment of the Sarbanes-Oxley Act in 2002 which required that all US publicly traded companies have a code of conduct for their directors and senior officers.
Then in 2004, the NYSE and Nasdaq also started requiring that all their listed companies develop a code of conduct for their employees and make the code publicly available.
What about private companies? Does this mean they don't need a code of conduct because it's not a legal requirement for them? Let's talk about improving your ethics and code of conduct compliance efforts.
Note: if you want the best way to get your company complaint, try EasyLlama's code of conduct and ethics training. Our training provides the necessary essential skills they need to build a thriving work culture. Claim a free trial by getting in touch with us today.
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Every Business Needs a Code of Conduct - Here is Why
Having a code of conduct is not just about ensuring compliance in the workplace with existing regulations. It's about ensuring the success of your business. It's about ensuring that your employees don't leave early from work because it's Friday and the supervisor went for a conference.
It's about ensuring that the manager does not use the company car to pick their visiting relatives from the airport just because nobody will know.
Also, according to the Federal Sentencing Guidelines (FSGs), employers that have a code of conduct and that provide ethics training to their employees may avoid up to 95% of potential fines and penalties for violation of federal laws.
Let's say an employee is suing the company for discrimination based on their age. The legal consequences on the company will not be as great if you have a code of conduct declaring the company's stance against discrimination of all types which was further reinforced through employee training.
Here are some other reasons why having a code of conduct is in your organization's best interests.
- Better decision-making by employees - A solid code of conduct will help employees make confident decisions even in ambiguous situations because they are aware of what the company stands for. Let's say the acquisition officer in an automobile company has to choose between two revolutionary products. One promises high returns but it's not environmentally friendly. The other has lower returns but it's more environmentally friendly. Under normal circumstances, this would be a dilemma. But, it becomes incredibly easy if you have a code of conduct that prioritizes environmental conservation over monetary gains.
- Creates a healthy working environment - A well-written code of conduct includes the expected behavior of employees towards other employees. For instance, you can say that your company requires that you treat each other with respect and dignity and that all employees have a right to work in an environment that's free from harassment, discrimination, and bullying.
- Customer attraction and retention - More customers will want to associate with your business if they feel that they are valued. A code of conduct communicates your commitment to customer satisfaction to everyone that reads it including the customer.
- Helps create solid relationships with suppliers and other business partners - Before starting a relationship with your suppliers and other business partners, you can have them review your code of conduct to determine if it aligns with their ethics and business standings. It will then become extremely easy to work with you because they know your expectations of them.
- Solid reputation and relationship with outside stakeholders - Think of the local people neighboring your company. Facing resistance from them is one of the surest ways to go out of business. A code of conduct gives you a chance to get them on board by communicating your commitment, not just to the success of your business but to the wellbeing of the surrounding community.
Unfortunately, just having a code of conduct is not enough to guarantee compliance or the success of your business. What matters is the content of the code and how well it is adopted in your organization.
So, in the next sections, we will look at the components of a great code of conduct and the steps you can take to ensure that your employees adopt and implement the values and rules in your code. But first, let's clear a common misunderstanding. Code of conduct is not the same as code of ethics.
Code of conduct vs code of ethics: What's the difference
Code of conduct and code of ethics are both business policies that govern employee behavior in organizations. The difference is that the code of ethics governs decision-making while the code of conduct governs actions.
Code of ethics only states a company's stance on a particular issue but a code of conduct goes one step further to outline the accepted or prohibited response when that particular issue arises. Let's say a company does not tolerate racism. Their code of ethics will be a declaration against the vice. The code of conduct, on the other hand, will include additional information like proposing the workforce include a certain percentage of people from different races.
How to create a great code of conduct with real impact
The creation of a code of conduct is a procedural process that should incorporate several factors to ensure complete effectiveness.
Here are some guidelines to help you create the perfect code of conduct regardless of whether you are starting from scratch or updating an existing policy.
Clear writing for full comprehension
Complexity is never a good thing when it comes to creating a code of conduct. Well, unless you want the employees to have one look at it and toss it on their desk never to look at it again.
Avoid jargon and legal terms that make it hard for employees to understand the code. Instead, opt for simple explanations using plain and direct English.
Don't directly quote laws and regulations as written in legal documents. Instead, internalize the laws and find a simpler way to include them in your code of conduct in a way that's relatable to the employees.
Some other tips to make your code of conduct clear to understand include using active voice, checking for grammar and syntax errors, using short sentences and short paragraphs.
Attractive visual design
You understand that first impression is important, yes? Well, if you want your employees to give your code of conduct the attention it deserves it has to capture their interest the first time they open it.
Use slides and include images, infographics, and other graphic designs to make the document less bland.
Demonstrate commitment and support from management
Every great code of conduct starts with a statement from the company head acknowledging their commitment towards upholding company values as proposed in the code of conduct and emphasizing the need for employees to do the same.
To the employees, this will serve as motivation to live by the code and to outsiders, it highlights the significance of the code by proving that it comes from the top of the hierarchy.
Include leadership responsibility and expectations
A great code of conduct will highlight the responsibility of management in ensuring compliance to the code of conduct and also employees' expected behavior towards their supervisors.
If the managers and supervisors are not exhibiting the appropriate business and ethical conduct as outlined in the company code, employees are also bound to not take it seriously. It's also the responsibility of those in supervisory roles to train employees on relevant laws and regulations as well as other business policies not included in the code of conduct.
On the other hand, employees have a responsibility not to undermine supervisors and managers as they execute their duties.
And if they have an issue that they need to raise then they should be aware of the right channels to follow in alignment with the code of conduct.
Flexible to meet the needs of a diverse workplace
For full effectiveness, a code of conduct should be created with your workforce and stakeholders in mind. That's how you determine whether what you need is a single document code or a comprehensive code touching on all business and ethical conduct. It's also what will determine if you need a code in different languages.
Specific to a particular industry
While all codes of conduct are created based on the same principles like compliance, integrity, and honesty, you need to tailor your code to your specific industry so that it's more relatable to employees.
Yes, your company is committed to upholding the laws set forth by the government. But, which are these laws?
Sure, your goal is to conduct business in a way that conserves the environment. But, what actions cause pollution, and in which stage of your business process do they occur? Is it during production, usage, disposal, or all of them?
Built upon the company culture
Which values form the foundation of your business? These are the values that define your corporate culture and the code of conduct should be created to reinforce them. Do you pride yourself on being a diverse company that offers equal rights to all individuals regardless of their gender, age, and other social standings?
What's the company's heritage and who are your heroes? All this should be included in a good code of conduct.
The consequence is that the code feels natural to the employees because they are living it and they will, therefore, take it more seriously.
Include accepted and prohibited business conduct
A good code of conduct doesn't just focus on defining the appropriate moral conduct for employees but also business conduct. What is the right or wrong approach to perform a specific task?
For instance, if you are in the food business, your code of conduct should include steps to take to ensure that the finished product is safe for consumption including subjecting it to all necessary tests.
Include consequences for non-compliance
It's not enough that employees know which conducts are acceptable and which are prohibited. What's also important is that they understand the implications of not complying with the code.
And I'm not just talking about disciplinary actions like suspension. Non-compliance may also mean that employees need to undergo retraining or counseling to get back on the right path.
The implications could also be on the business rather than on individuals resulting in lost clients.
For instance, employees need to understand that prioritizing profit margins over common human decency is damaging to the company's reputation and is guaranteed to make the company lose business.
Regular reviews
Once you have a solid code of conduct in place you will need to conduct compliance audits at least once per year to ensure that it is up to date with any new laws and changes in your organization.
An incident may also happen in the organization that was not part of the initial draft or was not properly addressed in the code. That should be your cue to update code so that it's never an issue again. The code should also include policies that discuss anti-bribery and corruption as it is very important in keeping a discrimination-free workplace.
Signature tracking
A code of conduct is not effective until it has been read by your employees and other involved third parties. And one way to do this is by requiring that they sign the code after reading it and then using a policy deployment solution to track the signatures.
Still, this does not guarantee that the employees read the code or they understood it. This is why this next step is really important.
Reinforcing your codes of conduct training
So, you have already created the perfect code of conduct. Great, but, there is one other step you can take to ensure the code is fully effective.
Employee training. This is critical in ensuring that the message you are trying to pass along really hits its target.
It's possible that an employee did not read the written code in its entirety but rather perused through it. Unfortunately, because you have no way of tracking completion progress, you will only realize it when an incident occurs and the employee fails to handle it as required.
Training can help avoid this. The best training programs provide you with a way to track training progress and allow employees an opportunity to seek clarification where they are stuck. gives them a chance to seek clarification.
Better yet, you can go deeper and explore concepts and unique angles that were not included in the code of conduct.
How we can help with our ethics and compliance program
We can help ensure code of conduct compliance in your organization and pass compliance audits through our code of conduct and ethics training program.
The training has been created by HR and management experts who are all too aware of conducts that may compromise your company's mission and goals and conduct that lead to foster corporate growth (add this training to your company's HR compliance checklist!)
By the end of the course, your employees will -
- Understand the meaning of ethics and code of conduct
- Understand the significance and impact of a solid policy
- Know standard behaviors and characteristics that qualify as ethical
- Know behaviors that go against accepted conduct and their consequences.
- Know the appropriate steps to take in case of policy violations
To ensure that the message is clear, we include bite-sized videos depicting real-life scenarios of employees breaking protocols and the appropriate response. This, together with thought-out quizzes, help keep the employees engaged and breathes life into what would otherwise be a boring affair.
EasyLlama's compliance training is compatible with tablets and mobile devices allowing your employees to complete the training from anywhere and at their convenience. We have included text and email reminders to alert employees when they are falling behind on their training. Better yet, the training program provides you with an easy way to track the progress of your employees' training and certify them when they are done. Get your FREE preview today!
