ORGANIZATIONAL BEHAVIOR - What Are the Key Components of a Code of Ethics in Business?

What Are the Key Components of a Code of Ethics in Business?

by Jeri Sullivan, Demand Media

Ethical business practices start with a code of ethics

As infamous cases such as Enron and Goldman Sachs show, code of ethics violations go far beyond the company walls. The code of ethics is the set of behavioral rules employees should follow to ensure the company's values are reflected in all business dealings. Regardless of the size of the business, clearly defined codes and closely monitored transactions should keep your company from violating laws and make it a place where employees feel comfortable doing the right thing.

Values

Business values typically are expressed in terms of how the company performs its day-to-day interactions with suppliers, employees and customers. A primary objective of the code of ethics is to define what the company is about and make it clear that the company is based on honesty and fairness. Another commonly defined value is respect in all interactions, regardless of the circumstances.

Principles

Principles are used to further support the business values by including operational credos employees should follow. Customer satisfaction, business profitability and continuous improvement are key factors in documenting business principles. Corporate responsibility to the environmentally friendly use of natural resources is another business principle that often is found in code of ethics.

Management Support

Manager support of the values and principles may be documented in the code of ethics. Open door policies for reporting ethics violations can be included in the code, along with a process to anonymously report any code of ethics issues. To reflect how seriously management considers the code, some businesses display the code of ethics with management signatures in prominent areas, such as the break room, where employees will see it on a daily basis.

Personal Responsibility

Another component is a statement regarding each employee's personal responsibility to uphold the code of ethics. This may contain information regarding both the legal and moral consequences if an employee violates the code. The requirement to report any violators is normally a component of the ethics code's personal responsibility. This is meant to show that it is not sufficient to merely adhere to the values and principles but to help ensure every employee supports the code of ethics by reporting violators.

Compliance

Any laws or regulations may be referenced as rules to adhere to as part of daily business interactions. The Sarbanes-Oxley Act--which was enacted as a direct result of the Enron case, in which executives falsified financial records to overstate the company's worth--details what financial reporting a company must do. Compliance to all financial reporting and any licensing requirements such as ISO 9000 by the International Organization for Standardization can be documented, along with the expectation that all licenses will be maintained and legal regulations met.