UK Companies See The Value of The Code of Conduct As A Promotional Tool – Do You?

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I came across this excellent article by The Red Flag Group called “Compliance Pulse: Codes of Conduct in the UK – A study of 100 codes of the largest companies listed on the London Stock Exchange.” The article outlines a study undertaken in the aftermath of several corporate scandals by UK companies, including the infamous LIBOR scandal, which resulted in a shaken UK public. A number of corporate scandals revealed trade sanction violations, money laundering, the deception of consumers into purchasing unwanted services, and other corrupt and fraudulent practices, which were all ultimately the unfortunate outcomes of failed ethics, governance and compliance structures.

As the study’s author put it:

“To regain the public’s and investors’ trust, companies must now prove that their businesses are built upon a solid foundation of ethics, compliance and strong corporate governance. This study identifies the criteria of the best practices of corporate compliance today, as well as setting benchmarks for evaluating the current state of companies’ preparedness for the tightened regulations.”

The Code of Conduct is such an important document for companies; it’s a cornerstone of the company’s culture and the place where it outlines its values and its commitment to operating with integrity. It’s a key guiding document for employees as it provides them information they need to act with integrity in the workplace and in compliance with laws, regulations and company policies.

And that is how we think of the Code – as a document for employees. However, the Code has a lot of value beyond that, which many companies have realized. The Network has been creating and refreshing Codes of Conduct for years and many of our clients utilize the Codes with external audiences because they are wonderful promotional tools. (If you get a moment, you can check out the excellent work some of my colleagues have done creating Codes for some of the world’s most well-known brands, including DellCSX, Disney and Newell Rubbermaid.)

The 8 Dimensions That Measure Ethics and Compliance Transparency

The authors reviewed the compliance approaches of the 100 largest companies on the London Stock Exchange in eight different categories. Note that these categories are all about whether a company is publicly identifying the particular piece – the CCO, the Code of Conduct, compliance-related reports, etc.

  • Whether a code of conduct (or similar document) existed and was available to the public
  • Whether the company identified its chief compliance officer (or similar position) and, if so, whether their roles and functions were clearly explained
  • Whether the company had a compliance committee (or similar oversight group) that was devoted to the review and improvement of the approach of the firm to compliance
  • The efforts of the company to publicize its corporate social responsibility, anti-corruption practices and compliance
  • Whether the company had a publicly-available report specifically addressing compliance-related matters
  • Whether the company exhibited any form of whistleblower policy or policies on openness and transparency
  • The level of attention paid to compliance issues in the company annual report
  • The overall approach of the company to ethics, compliance and good governance based on viewing all publicly-available material collectively.

The study revealed that 79% of the companies in the group made their Codes of Conduct publicly available. That’s a pretty large percentage so it’s clear that these companies are realizing the benefits of promoting their Codes to audiences beyond employees.

In the US, this is pretty common – and mandated for public companies – but what I found interesting is that the authors had done a previous study with companies in Hong Kong, Singapore and the United Arab Emirates, and found very few companies making their Codes of Conduct available. Perhaps that’s a cultural issue or perhaps those companies simply don’t yet realize the value of the Code as a tool to communicate and promote a company’s values to external audiences.

Unfortunate Findings: Hide The CCO and Scrub Compliance Data

Outside of the Code analysis, there are some other interesting findings. In the US, it’s not hard to find a company’s Chief Compliance Officer, but this study exposed that 70% of the companies were reluctant to identify a CCO in public documents. I found that odd because the value for companies in identifying a senior executive responsible for ethics and compliance, is so similar to the value in promoting the Code; it shows the company’s commitment to it. Why the reluctance?

The study also showed that only a small number of compliance issues were ever mentioned in annual reports; most of those were only published because they were required to be by laws or regulations. However, many companies covered key compliance issues in annual reports including the progress of company wide rollouts of compliance policies, reports received through whistleblower hotlines and statistics about Code of Conduct training.

And since we’re on the subject of training; you know how strongly we feel about Code of Conduct training. It goes hand in hand with the Code. There is no point in rolling out a Code to the employees unless you’re going to augment it with interactive, engaging Code of Conduct training that will drive home the salient points for employees. The training brings the Code to life.

At least these 100 companies seem to be trying to bring the focus back to repairing some of the public’s lost trust in the corporate sector in the UK. Certainly, making their Codes available so the public can see the company’s values is a good first step. Actually living those values will be the only way to truly get the public’s trust back. Only time will tell if they succeed.

Topics:  Best Management Practices, Chief Compliance Officers, Code of Conduct, Ethics, Marketing, Transparency, UK

Published In: General Business Updates, International Trade 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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