CODE OF ETHICS- GUIDELINES FOR DEVELOPING CODE OF ETHICS
A code of ethics is a guidance of principles that are made to help professionals conduct business purely and with integrity. A code of ethics document focuses on the mission and values of the business or organisation. Tells you how professionals are expected to approach problems, the principles of ethics that are based on the organisation’s core values and standards to which the professional is held. A code of ethics which is also referred to as an “ethical code” may cover concepts like business ethics, code of professional practice and an employee code of conduct.
Both business and trade organisations usually have some kind of code of ethics that their employees should follow. Breaching the code of ethics can lead to termination or dismissal from the organisation. A code of ethics is important because it tells you clearly about the rules for behaviour and gives you the groundwork for preventive warning.
Irrespective of size, businesses count on their management staff to set up a standard of ethical code of conduct for other employees to follow. When the seniors adhere to the code of conduct, it tells you how all the other employees are expected to behave.
COMPLIANCE-BASED CODE OF ETHICS
For all business laws govern issues like hiring and standards of safety. Compliance-based codes of ethics not only set rules for conduct, but also determine fines/penalties for violating.
In some fields like banking, specific laws regulate business conduct. These industries form compliance-based code of ethics to execute laws and rules and regulations. Employees normally go through a formal training process where they learn the rules of conduct. Because non-compliance can lead to legal issues for the organisation as a whole, individual workers within the organisation may have to pay penalties for failing to follow guidelines.
This kind of code of ethics is based on clear-cut rules as well as well-defined consequences instead of an individual monitoring personal behaviour. Therefore, despite of strict adherence to law, some compliance-based code of conduct do not promote atmosphere of moral responsibility within the company.
VALUE-BASED CODE OF ETHICS
A value-based code of ethics tells about a company’s core value system. It highlights the standards of responsible conduct as they connect to the larger public good and the surroundings. Value-based ethical codes require a wide range of self-regulation as compared to compliance-based codes. Some codes of conduct have language that explains both compliance and values.
CODE OF ETHICS AMONG PROFESSIONALS:
Financial advisers registered with the securities and exchange commission or a state regulator are bound by a code of ethics called as “fiduciary duty”. This is a legal requirement and also a code for loyalty that needs them to behave in the best interests of their clients.
GUIDELINES FOR DEVELOPING CODE OF ETHICS
Development Process: The first and foremost step in developing a code of conduct is to set up the purpose of the codes and why do they matter. In a survey conducted by KPMG of fortune Global 200 companies, the three most common reason for adopting business codes were to act with respect to the legal requirements, created a shared company culture, and protect as well as improve the reputation of the company. The survey also found out that the most often listed core values of Fortune Global 200 companies are integrity, teamwork, respect, innovation, and client focus. After the purpose is set up, the framework for developing a code needs a complete understanding of the operational and reputational risks a firm faces. The issues explain the objectives of the firm while developing code content, policies, communication, and training that address a person and collective responsibilities regarding management of risk. To achieve the firm’s risk management standards, it is crucial to draft a code that clearly mentions the expectations and guidelines for acceptable behaviour, and gives options for seeking advice for and reporting problems or suspected misconduct. Selecting your language is also very important because, Lehman Brothers’ code of ethics concluded: “finding the right words to express ideas and behaviours is a key strategic action for an organisation.”
Implementation: Based on the analysis and effect of Lehman’s code of ethics has on the corporate culture, the conclusion is “silence can be deadly”., “codes fail when poorly communicated” and “codes themselves cannot create ethical organisations”.
In fact, their research found out that these two actions are key to code implementation:
Communication codes through the right channels and explain why they’re important
Integrate codes into the company’s practices and back it up with enforcement.
Once they are drafted, a firm requires to embed into its culture. The KPMG reports recommends that the code became a “living document to guide and create ethical behaviour throughout the organisation through:
Communication and training
Personnel and other policy measures
Monitoring, auditing, and reporting
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