[author: Patrick Wellens*]
Ethikos (April 2024)
In the previous century, the primary focus for most companies was profit maximization for shareholders. In the last few decades, a shift from shareholder to stakeholder capitalism happened, and the term corporate social responsibility was introduced. It was felt that companies had a broader purpose than profit and should create long-term value for various stakeholders such as investors, employees, suppliers, consumers, customers, patients, government, and nongovernment organizations it interacts with. As sustainability and environmental topics became more prominent, investors, asset managers, and companies started to focus more on environmental, social, and governance (ESG) criteria in assessing company performance.
In addition to the shift in mindset from a stakeholder perspective, companies are inherently part of local and global economies; they are impacted by societal challenges such as wars, climate challenges, demographic changes, global health crises, digital transformation (data privacy and cybersecurity), artificial intelligence, diversity, inclusion, and equity. When making significant decisions, companies should be guided by their values and/or code of conduct or business conduct policy.
The importance of values and codes of conduct
The code of conduct (mostly applicable to internal employees but also extended workforces such as temps, contractors, or leased labor employees), the supplier code of conduct (applicable to suppliers), the company values, and a company’s purpose will provide the foundation and guidance framework for business conduct. Company policies, procedures, and guidelines supplement the code of conduct by providing additional direction on expected behaviors.
I compared the codes of conduct from some of the largest companies in the world (i.e., Walmart, Amazon, Apple, ExxonMobil, Sinopec, Johnson & Johnson, Google, Saudi Aramco, and Shell). Given that all companies must comply with all governmental laws, rules, and regulations applicable to their business, it is not surprising that the codes of conduct all contain similar value statements on:
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Bribery and corruption
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Antitrust
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Global trade laws
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Accuracy of company records and public reporting
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Data privacy law
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Conflict of interest
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Money laundering (where applicable to the industry)
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Insider trading and securities law
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Handling of company assets, including confidential information
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Fair treatment of employees (nondiscrimination, harassment, bullying, inclusive working environment)
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Speak-up culture and nonretaliation against those who speak up and report in good faith compliance incidents
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Commitment to health and safety
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Environmental protection
Interestingly, I could not find the code of conduct from Sinopec on their website.[1] The Amazon Code of Business Conduct and Ethics[2] and Exxon Mobile Code of Conduct[3] did not contain specific paragraphs on compliance with data privacy law, global trade laws, and/or protection of the environment. Only Apple made a specific statement in their Business Conduct Policy[4] on adherence to “Human Rights,” in none of the other companies I found a specific reference.
Besides the abovementioned obvious legal requirements, companies also want to do business ethically and responsibly. As the Google Code of Conduct describes: “It’s impossible to spell out every possible ethical scenario we might face. Instead, we rely on one another’s good judgment to uphold a high standard of integrity for ourselves and our company. We expect all Googlers to be guided by both the letter and the spirit of this Code.”[5]
As a result, in many companies, the code of conduct does not contain detailed ethical guidelines but rather requests employees to evaluate whether any decision they make is legal, whether such decision would be consistent with the company’s code of conduct and values, and whether any decision would be in the best interest of the company.
Most companies have, therefore, defined several values e.g., integrity, excellence, safety, accountability, etc. “These values are the foundation of the Code of Business Conduct and the way a company does business. When faced with any decision, we consider how each option aligns with these values.”[6]
How do you make a code of conduct a living document?
For a code of conduct to be a living document that is used regularly by employees, the following conditions must be met:
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The code of conduct must be adapted considering the company’s divisions, risks, and societal challenges to make the principles and expected behavior relevant for employees. Any generic “boilerplate” wordings are not beneficial.
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The code of conduct must be regularly updated to consider new laws, new risks, increased stakeholder expectations, and/or a company’s changing portfolio, and such changes are to be properly communicated. A company might want to consider organizing workshops or training sessions for employees to ask questions about the new and updated code of conduct.
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When updating the code of conduct, the responsible department (typically compliance) should obtain input from many stakeholders on its content, format, and structure to make it user-friendly and attractive.
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The code of conduct must describe the expected behaviors in a clear and concise form, with examples of do and do not, in an attractive format (graphics, color, symbols). This means the principles should be easy to understand, and the code of conduct does not contain long (legal) text.
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The code of conduct must be easily accessible on a company intranet or website and available in numerous languages.
Conclusion
Companies must not only comply with all governmental laws, rules, and regulations but are also expected to act ethically and responsibly. As a result, companies have built a code of conduct, supplier code of conduct, and values that serve as a North Star and provide guidance for their employees and business partners on how to do business.
With the increasing value of ESG and corporate social responsibility, company stakeholders expect companies to make ethical decisions. Given that it is not possible for a company to spell out every possible ethical scenario, the company values or credo become of utmost importance when evaluating options in business decisions.
Takeaways
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Every company expects to follow all applicable governmental laws, rules, and regulations. Stakeholders (consumers, patients, suppliers, nongovernmental organizations, etc.) often criticize companies for not acting with integrity and/or ethical principles. Given that a company cannot define every possible ethical scenario, a company must define values that will guide the employees in making such ethical decisions. A company must therefore think hard about the values it stands for.
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Companies are part of and affected by societal challenges. Therefore, a company must continuously evaluate and reflect on whether its values and principles are still fit for purpose regarding the increasing expectations from stakeholders.
*Patrick Wellens is currently working as a global compliance business partner for a division of a multinational pharma company based in Zurich, Switzerland. He is the Vice-Chair of Ethics and Compliance Switzerland, co-chair of the working groups “life science” and “anti-corruption,” and Chief Compliance Officer of the Association of Corporate Investigators.
1 Sinopec, “Corporate Culture,” accessed February 28, 2024, http://www.sinopecgroup.com/group/en/gywm/qywh.shtml.
2 Amazon.com, “Code of Business Conduct and Ethics,” accessed February 28, 2024, https://ir.aboutamazon.com/corporate-governance/documents-and-charters/code-of-business-conduct-and-ethics/default.aspx.
3 ExxonMobil, “Code of ethics: Overview,” accessed February 28, 2024, https://corporate.exxonmobil.com/corporate-governance/code-of-ethics#Overview.
4 Apple, Business Conduct: The way we do business, February 2024, https://www.apple.com/compliance/pdfs/Business-Conduct-Policy.pdf.
5 Alphabet Investor Relations, “Google Code of Conduct,” last updated January 24, 2022, https://abc.xyz/investor/google-code-of-conduct.
6 Aramco, Our Code of Business Conduct: ‘Our Code, Our Conduct,’ 2022, https://www.aramco.com/-/media/downloads/who-we-are/our-governance/code_of_business_conduct-2022.pdf.
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