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Related Topics
- Corporate Values Statements
- Mission and Vision Statements
Description
As corporate conduct has come under increased scrutiny from shareholders and other stakeholders, the pressure to create exemplary codes of conduct has been growing. These codes seek to promote good conduct by setting a common standard for acceptable behavior. A Corporate Code of Ethics will define a company?s core set of values and guiding principles. A code may be a short description of a company?s overall mission and values, or it may be more detailed and describe, at length, the manner in which employees are expected to behave. Through the creation, promotion, and constant modification of a Corporate Code of Ethics, managers can actively manage a company?s values in a similar fashion to how they manage other aspects of their business. Most importantly, by publicly displaying a firm?s commitment to high standards of moral excellence, a Code of Ethics signals that the firm has a concrete and substantial commitment to ethical behavior.
Methodology
To be effective, a Code of Ethics should be written by senior managers in cooperation with Human Resources personnel. The creation of a Corporate Code of Ethics requires managers to:
- Clearly identify and communicate the corporation?s values and overall mission. This requires gathering comprehensive input from managers, employees, and customers, identifying the proper level of specificity and detail for the Code of Ethics and drafting the Code in clear and definitive language easily understood by those inside and outside the firm;
- Increase awareness and understanding of the code. Senior managers should create ethics programs to introduce employees to the code and to facilitate common understanding of the importance and meaning of the code.
- Ensure adherence to the code. Most successful Codes of Ethics are enforced through the creation of a corporate ethics office, committee or taskforce. This individual or group is given responsibility for ensuring the code is adhered to, adjudicating possible ethical violations, and revising and updating the Code of Ethics if needed.
Common Uses
Companies use Corporate Codes of Ethics to:
- Establish and promote a framework for ethical behavior;
- Shape employee decision making and deter employees from acting unethically;
- Build customer and investor confidence;
- Provide better overall service and results for customers;
- Serve as a public relations tool.
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Selected References
Andrews, Kenneth. "Ethics in practice." Harvard Business Review, September 1989, pp. 99-104.
Badaracco, Joseph L. Jr. Defining Moments: When Managers Must Choose between Right and Right. Harvard Business School Press, 1997.
Cottell, Phillip G., and Terry M. Perlin. Accounting Ethics: A Practical Guide for Professionals. Greenwood Publishing Group, Incorporated, 1990.
Gorlin, Rena A. Codes of Professional Responsibility. 3rd Edition. BNA Books, 1996.
Hall, William D., and Arthur Andersen. Making the Right Decision: Ethics for Managers. John Wiley & Sons, Incorporated, 1993.
Lencioni, Patrick M. "Make your values mean something." Harvard Business Review, July 2002, pp. 113-117.
Murphy, Patrick E. Eighty Exemplary Ethics Statements. University of Notre Dame Press, 1997.
Paine, Lynn Sharp. "Managing for organizational integrity." Harvard Business Review, March 1994, pp. 106-117.
Richter, Judith. Holding Corporations Accountable: Corporate Conduct, International Codes, and Citizen Action. Zed Books, 2001.
Trevino, Linda Klebb, Gary R. Weaver, David G. Gibson, Barbara Ley Toffler. "Managing ethics and legal compliance: what works and what hurts." California Management Review, January 1999, pp. 131-154.
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