Adopting a code of business conduct and ethics
Why companies must set an appropriate “tone at the
|If there was ever a time when a code of ethics was seen as a “nice to have” rather than a “must have,” that time is past. In today’s complex business environment, companies must commit to building a culture of ethics and compliance – or risk censure from the market. This is so even though businesses are not legally required to develop codes of ethics.
“Good corporate governance is predicated on the behaviour and ethics of every staff member,” asserts Jim Goodfellow, vice-chair and senior partner in charge of Deloitte’s Corporate Governance practice. “While a code of ethics isn’t mandated, several rulings recognize the necessity of fostering a culture of integrity by requiring that every public company disclose whether it has developed a code of ethics for its principal executives and senior financial officers.”
In encouraging this culture of integrity, both boards of directors and management play a key role.
The board’s role in developing a code of ethics
The guidelines also recommend that boards be responsible for monitoring compliance with the code.
Management’s role in implementing a code of ethics
For instance, in addition to assigning a core team to draft the code of ethics, management can support the process by appointing a multi-disciplinary advisory team. This advisory team can help approve the code outline and ensure it adheres to the company’s policies and procedures, as well as with industry standards.
Once a robust draft is presented for approval, management can review the code with an eye to ensuring that the language is simple, concise and readily understood by all employees. Management should also ensure the code applies to all employees and is global in scope.
Finally, it is essential for management to make sure that everyone in the company, from the CEO down, knows the code of ethics and behaves in accordance with it. A proactive internal campaign might include such elements as employee training, management coaching, intranet-based content and printed materials, such as posters and refrigerator magnets. A well-executed, comprehensive plan can help embed the right behaviours within all levels of an organization’s culture.
As the regulatory environment tightens, having a code of ethics facilitates compliance and reduces risk exposure. Savvy organizations are going even further by tasking their boards of directors and audit committees to proactively build and internally communicate these codes to drive higher degrees of employee and customer loyalty, respect for the brand and bottom-line performance.
To learn more about the code of ethics, please visit the Centre for Corporate Governance .
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