6 Tips for an Effective Code of Conduct

Many companies establish a Code of Conduct as either a matter of course in connection with their compliance program, or because they are legally required to implement one. However, not much value is gained from a code implemented simply to satisfy regulators or stakeholders. Rather, a code's effectiveness is more tangible if created to make an organization's values and expectations an integral part of its culture. Implementing a code of conduct on this basis allows an organization not only to demonstrate integrity, but gain the trust of shareholders, partners, customers and the government.

The following tips can help increase the effectiveness of a Code of Conduct and ensure it serves the purpose for which it was established.

  1. Determine how the Code will be administered. Address the goal of the Code, how it serves the values and purpose of the organization, who must adhere to the Code, methods for reporting and handling violations, etc.
  2. Establish the key elements of the Code. Key elements of an effective Code of Conduct should include —
    • The core values of the organization and a commitment to ethics and integrity;
    • Compliance with applicable laws and regulations;
    • Conflicts of interest and insider trading;
    • Gifts, gratuities, and anticorruption/anti-bribery;
    • Proper use of corporate property and information;
    • Treatment and respect of others in both internal and external business transactions;
    • Transparency, timeliness and accuracy of public disclosures and regulatory reporting;
    • Substance abuse and workplace violence;
    • Political contributions and activities; and
      If applicable, government contracting.
  3. Ensure the Code is communicated effectively. Use communication methods best suited to the audience when distributing information. For example, interactive content — graphics, charts, and videos — may help keep a younger workforce more engaged. Employ a variety of communication methods to ensure all employees receive information in the way they can best absorb it.
  4. Educate employees. Organizations should provide training for employees on the purpose, elements and application of the Code. Regular training for all employees — not just new hires —serves to reinforce the Code and raise awareness and sensitivity to ethical issues.
  5. Ensure code is relevant. Perform regular reviews of the code to ensure it relates to any changes in the business environment, culture or risk levels.
  6. Evaluate effectiveness. Review all the factors that would evidence how ef­fectively a message is being conveyed throughout the organization with a focus on trends rather than averages. What data is reviewed depends on the organization but could include —
    • Review by department, region or employee levels;
    • Measuring and monitoring several key behaviors as representative of overall conformance;
    • Use of human resources data — such as termination reasons — for statistics related to certain behaviors;
    • Review of other information that indicate changes in risk or reveal hidden attitudes within the organization, including hotline activity, corrective actions and/or behavioral survey results; and
    • Elicit employee feedback to help spot enforcement issues and determine whether the Code truly reflects the culture of an organization. Both formal and informal methods of gathering this input are important, including questionnaires, surveys and hotlines for anonymous information and direct conversations or small focus groups to engage employees and let them know their input is valued.

Unfortunately, the approach to developing and implementing a Code of Conduct is unique to an organization and evaluating a code's effectiveness can be difficult.

Topics:  Chief Compliance Officers, Code of Conduct, Compliance

Published In: General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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