What Is a Code Of Ethics and Does My Business Need One?

Posted by Shannon Walker

on July 11, 2013

What is a code of ethics?

A code of ethics, also known as a code of conduct, is a set of standards adopted to govern the conduct of a group of people. Groups such as national medical associations adopt codes of ethics that govern members in individual practices across many places of employ, while individual businesses may adopt more specific code of ethics to ensure integrity within the company.

How to formulate a code of ethics and make it work for your company

A company’s code of ethics will generally cover behaviour that, while not illegal, is nevertheless harmful to the company and/or its clients. A good code of conduct should include a motivating statement regarding the reason for its existence and the company’s purpose. It should also address the consequences of violating the code as well as ways to report violations of the code. Its language should be clear and avoid meaningless phrases, focusing instead on directly communicating expectations. A code of conduct will not be very useful unless it is widely known and followed; it should therefore be referred to frequently, becoming a part of company culture rather than being read once at hiring and disappearing forever into the bottom of a file cabinet.

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Why should you develop a code of ethics?

The following are several reasons to consider adopting a code of ethics for your company.

Shows employees you are a responsible company:
One reason to develop a code of ethics for your business is that it communicates to employees that your company is committed to doing business responsibly. New employees know right away your company’s standards and expectations. If management adheres strictly to the code of ethics, a culture consistent with the code will grow among employees throughout the company. This kind of company culture creates a kind of positive peer pressure to maintain a high level of work consistent with the values of your company.

Shows customers you value integrity:
Additionally, customers tend to feel reassured by the existence of a code of ethics within a company. They feel that the company values its integrity and will operate accordingly when doing business. Third party groups also tend to look more favourably upon organizations that adopt a code of ethics, appreciating that some attempt is being made to develop a company culture of responsibility and honesty.

Prevents ‘innocent’ violations of ethics:
Another reason to maintain a code of ethics is that they address matters that might not occur to employees on their own. While codes don’t necessarily touch on matters of illegality, they do address important matters that affect the profitability, integrity and reputation of a business. Having a specific code of ethics outlining the specific standards and expectations of your company for your staff will sensitize employees to things that may not have been obvious to them and avoid inadvertent, yet potentially harmful, missteps.

Provides a clear point of reference when enforcing corrective action:
Lastly, another reason to consider keeping a code of ethics as part of your company culture is that such a document will serve as a reference for corrective action or even termination for employees who fail to meet these standards. A widely known code removes anything arbitrary or murky from dealing with an employee who consistently fails to behave in a manner that meets company standards. Even one such employee can potentially cause great harm to a company, but straightforward, objective expectations for employee behaviour provides a solid foundation for catching and addressing this kind of problem.

A business, no matter how big or small, can always benefit from having a clear code of ethics!

A business can always benefit from having a code of ethics in place both to avoid potential problems and to address problems when they arise. If you decide to develop one, consider what would motivate and unite your employees in a company culture consistent with the values you want to maintain throughout your organization.

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