A code of ethics sets out the expectations that the company has for how employees should behave in any given situation, to assist with decision-making.
So for example, if an employee is offered an expensive gift or hospitality in return for a contract, they will be able to refer to the code of ethics to see whether or not that would be in line with how the company wishes to behave. Even in situations where law, regulation and internal policies do not provide clear instructions, the code should be able to guide decision-making in the right direction. After all, it’s impossible to make rules for every eventuality.
As well as providing guidance to staff, codes can reassure customers, investors, suppliers, partners and even competitors about the expected integrity of how business is conducted. IBE research has shown that in recent years, ‘creating a shared ethical culture’ has become the number one motivation for companies to adopt a code – overtaking ‘providing guidance to staff’ for the first time.
A code of business ethics reflects how the organisation operates its business model – how it relates to the communities in which it does business and how to express the corporate values it considers important.
However, one size never fits all. Each organisation must define its own standards of what it considers to be acceptable ways of conducting its affairs. As each organisation’s values are different, it follows that the code which seeks to embed them must also be unique.
How have codes of ethics evolved?
In the past, codes of ethics were a rarity; if they existed they weren’t well publicised. In this video Simon Webley, discusses how codes of ethics have changed.
Stakeholders are those with whom the organisation has a relationship, and who are impacted by its actions.
Broadly these are:
- Owners or providers of capital (shareholders/investors)
- Suppliers and business partners
- Local or national community (civil society, environment, regulators, non-governmental organisations, media policy makers)
Organisations do not exist in isolation; they depend on society for their franchise, so they need to maintain relationships of trust with a range of stakeholders.
A code of ethics sets out the standards which an organisation expects in line with its core ethical values.
It could be called "The Way We Work Around Here”, or "The [Company] Way”, but it will set out the organisation's obligations and responsibilities to its staff and other stakeholders.
A code of conduct usually has a different purpose and is different in tone. It sets out the obligations of staff to the organisations, and details rules and regulations. Language is typically more formal and legalistic and the layout of the document is more rigidly structured, typically with numbered clauses.