ORGANIZATIONAL BEHAVIOR - Business Codes of Ethics

Business Codes of Ethics

by Lisa Nielsen, Demand Media

We are all probably aware of companies that crossed an ethical line by cheating customers, knowingly manufacturing shoddy products, or deceiving stockholders by falsifying financial statements. While business codes of ethics do not prevent all such behavior from occurring, they can help instill an ethical workplace culture. An ethical culture lessens the kind of bad behavior that can put a company in jeopardy.

What business codes of ethics do

Business codes of ethics help define what is acceptable behavior in the workplace. A code that is accepted by employees generally promotes high standards, whether in manufacturing, finance, customer service, or any other functional area of the company. Employees working under the code have a benchmark upon which they can judge their own behavior and that of others within the organization. Additionally, companies with a reputation for enforcing their ethics codes can more easily lay claim to an occupational maturity their competitors cannot.

Informal and formal codes

Most small businesses do not have a formal written code of ethics and instead rely on owners and executives to set the tone concerning what is acceptable behavior at work. Employees understand the informal codes by observing how management acts in workplace situations such as how customers are treated and whether safety procedures are followed. Formal codes are written documents that outline expected behaviors at work. For example, written ethics concerning company finance may include an insistence that all applicable tax law regarding the business be followed. Formal ethics codes usually include penalties for violating the code.

Engaging Employees

LRN, a management consulting firm that helps companies develop ethics codes, states that it is not enough for a company to have a written code. While such a code is a necessary prelude, the real goal is to inspire employees toward the highest moral behavior at work. The code must be taught and promoted so that the code becomes an integral part of the work culture.

Ethics code provisions

Companies categorize code provisions differently depending on their industry, their own goals, regulations and laws governing their industry, and other characteristics that make them unique. Some typical provisions included are those concerning employment practices, vendor relations, communications, conflicts of interest, governmental and environmental issues, and ethical management practices.

Executive responsibility

The executive ranks of a company need to take the lead in developing and living out a business ethics code. It starts at the top. Executives need to ensure that all employees have a hand in the codes' development, but the executives themselves are the ones who need to get the process started and seen to completion.