Many companies have a Code of Conduct with good wording on ethics and compliance. However, not all companies are good at implementing and enforcing their code. To keep it alive and to prevent it from becoming a paper tiger, the code requires structural implementation.
Why does your company need a Code of Conduct?
In the beginning of the 1990’s almost no company had a Code of Conduct. Companies that had a Code of Conduct would actually have to explain to the outside world why they needed this document. Nowadays, more than 85% of bigger companies have a Code of Conduct and companies that don’t have a code need to explain why they don’t have it. In certain countries legal requirements dictate for a company to have a code, like national Corporate Governance regulations require listed companies to adopt a Code of Conduct.
A Code of Conduct is an excellent tool to provide employees clarity on ethical and compliance requirements. However, the tool works well only if it is properly implemented. Moreover, experience shows that a well written but badly implemented code may have a negative effect on compliance within the company.
How to write a well structured Code of Conduct: From values to rules!
We have assessed hundreds of codes of conduct, assisted many clients with drafting and implementing their codes. Throughout our work, we have seen good codes and codes that were an inconsistent set of rules, ethical claims and wishes all bundled together in one document. We have also seen examples where a company’s legal department would draft a thorough but unreadable policy that no one read or used in daily practice. Most importantly, we learned that effective codes had a smart balance of clarity and detail.
A good structured Code of Conduct should look like this:
Most Codes of Conducts are Paper Tigers because they lack proper implementation
We think that writing a good code is easier than implementing it. Often, a company would put its Code of Conduct on the external website and expect its employees to know and follow the content of that code. When ethical incidents occur, often the code is rewritten by adding new rules. Eventually, this leads to a lengthy code that no one knows: a wild Paper Tiger! The largest Paper Tiger I have ever seen was 128 pages in length!
8 examples of Code implementing action
A good code is not only a well written code but is also properly implemented. Based on our research and experience we see that companies who take ethics and compliance seriously perform a range of activities to keep their code alive. Here are some examples of activities to keep your code alive:
- Distribution to all staff
Example: Japanese companies often demand their employees to have the Code with them at all times.
- Training in applying the code for all staff
Example: during the new employee induction program, the CEO introduces the company’s values and its code of conduct.
- Training in communicating and applying the code for managers
Example: a municipality gives managers several trainings on how to stimulate ethical behaviour in their teams.
- Dilemma training for specific functions
Example: a multinational company gives sales staff specific dilemma training on bribery and corruption.
- Business Ethics & Compliance intranet and internet page
Example: a multinational company has an interactive website that contains policy information regarding topics of the code, examples, guidance, and discussion forums.
- Yearly e-learning with a sign-of for all employees
Example: An international company lets all the employees do a yearly e-learning on the code and let them sign off that they have understood and complied with the code in the previous year.
- Internal audits on the working of the Code
Example: a financial multinational performs operational audits of the implementation and effectiveness of the code.
- External reporting on the effectiveness of the Code
Example: a company reports in its sustainability report about the topics of the code and the incidents of the previous year.
How many of these “living the code”-activities were performed in your company this year? If the answer is less than four, than you might have a large paper-tiger code in your company as well!
- PDF version: “Does your company have a Paper Tiger Code of Conduct?“
- Whitepaper on business codes
- Ethics & Compliance Management Factsheet
- More information on Ethics & Compliance
KPMG, Business Codes of the Global 200, 2008, p.7.
KPMG, Business Codes of the Global 200, 2008, p. 20.