Ateneo de Davao University

Senior High School

Business Ethics and Social Responsibility

Handouts

Topic 2: Code of Ethics and Business Conduct

Code of Ethics
When huge corporate scandals began to proliferate, companies began creating communications
propaganda for building corporate reputation. Feeling a need to improve their images and facing
increasing accusations of corruption, businesses turned to ethical codes to publicize their virtues and
create a more positive impression with stakeholders. The debate over ethical code effectiveness
continues up until today.

American ethical codes were first called creeds or credos and those in the 1980s were considered
“legalistic” and “more likely to talk about ethics or the reputation of the company” (Benson, 1988,
p. 308); they showed concern over issues like affirmative action. More recently they were defined as
written documents which attempt to state the major philosophical principles and articulate the values
embraced by the organization (Stevens, 1996). Codes articulate ethical parameters of the
organization – what is acceptable and what is not. Kaptein and Wempe (2002) describe them as
policy documents defining responsibilities of the organization to stakeholders and articulating the
conduct expected of employees. Codes contain open guidelines describing desirable behaviors and
closed guidelines prohibiting certain behaviors. As instruments to enhance social responsibility,
codes clarify the norms and values the organization seeks to uphold (Kaptein, 2004). In contrast,
mission statements articulate the objectives of a company and declare what goals the organization
intends to accomplish (Stevens, 1994). Ethical codes differ from mission statements by articulating
the value system and answering the question, “within what ethical standards and values should the
mission be pursued”? Sufficient new evidence exists to show that corporate codes can successfully
moderate ethical behavior.

What is Corporate Culture?

Culture has a profound influence on all aspects of human behavior. Its impact may be subtle or
pronounced, direct or oblique, or enduring or ephemeral. It is so entwined with all facets of human
existence that it is often difficult to determine how and in what ways its impact is manifested.

Now that you can clearly distinguish between good and bad practices, you need to be able to acquaint
all the members of the corporation of its ideal corporate culture.

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Corporate culture is defined as the values, standards, attittudes and beliefs shared by the members
of an organization. The corporate culture of a company guides its members on the proper way of
handling busines transactions and interacting with fellow members. Barnard, a human relations
theorist, recognized that shared values and meanings, internalized by participants, could constitute a
strong system of control – much more powerful than one based exclusively on material rewards or
on force.

While there are many different types of corporate culture, here are some examples of the common
organizational cultures thar people see frequently in one form or the other.

1. Team-oriented Culture
A team-oriented culture prioritizes the employee’s happiness; these types of organizations believe
that when an employee is happy, they become more productive, and are thus more willing to go extra
mile for their company, and their customers.

A team-oriented culture is characterized by regular socializations with teammates in and outside of

work, employees who interact with different departments, and thoughtful feedback from employees
during surveys.

2. Elite Culture
Organizations that have an elite culture hire only the best qualified individuals, and are expected to
lead the way. This results to fast growth for the company and new ways of doing things. In an elite
culture environment, employees often prioritize work, and are expected to work long hours. High-
input individuals also move up the ranks quickly in this kind of culture.

3. Horizontal Culture
In a horizontal culture environment, everyone is encouraged to pitch in their ideas. This kind of culture
is common among younger companies. Your job title is not very important in horizontal cultures.
Everybody has a voice in the company, and ideas are discussed openly.

4. Conventional Culture
As the name suggests, companies who have a conventional culture work in a more traditional manner.
A dress code is normally employed in companies that espouse this culture, and clear-defined
hierarchies are employed. Banks and schools are examples of companies that have conventional
cultures.

Now that you have been familiarized with different types of corporate culture, it is time to understand
how corporate culture is introduced, especially to those who have been newly hired by the company.
One such means is by crafting and disseminating a proper code of ethics (or Corporate code of
ethics).

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Creating Corporate Code of Ethics

Difference Between Code of Ethics and Code of Conduct

Code of Ethics and Code of Conduct are the standards that a group must adhere to, so as to remain
the member of the organization. The primary difference between code of ethics and code of
conduct is that code of ethics is a set of principles which influence the judgement while the code
of conduct is a set of guidelines that influence employee’s actions.

These statements are formally addressed and need to be accepted by the members when they join the
organization for the first time. These help the business enterprise in regulating the business
efficiently. While code of conduct is something that states organized values, code of ethics is used
to observe ethical norms and gives a foundation to rules of conduct.

Source: [Link]

Can You Combine a Code of Conduct and Code of Ethics?

Yes, in most cases businesses will combine both of these documents into one as there is
significant overlap between them. It is rare to find businesses that have two separate policies. Whilst
they are technically different documents, employees will have less difficulty recalling important
points around conduct and ethics if they have a single document to refer to.

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What to Include Your Code of Ethics and Professional Conduct:
1. The work environment.
Employees should act with integrity, comply with laws, maintain a professional work environment
and comply with company policies. They should treat customers, colleagues, and partners ethically at
all times.

Work Environment Code of Conduct Topics:

• Equal opportunity
• Discrimination and harassment
• Violence policy
• Safety policy
• Substance abuse
• Gambling policy
• Privacy policy
• Misconduct explanation and policy

2. Conflicts of interest.
A company's reputation depends on the actions and integrity of its employees. It is essential that they
avoid relationships and activities that hurt, or appears to hurt, their ability to make objective and fair
decisions.

Conflict of Interest Code of Conduct Topics:

• Corporate asset contributions.
• Running for public office.
• Insider trading and financial interests.
• Investments in company’s employees do business with.
• Employee political interests.
• Significant financial interests in other companies.
• Securities transactions.
• Taking out loans.

3. Protecting company assets.

Employees should always act to protect company assets, including physical, intellectual, and
electronic or digital properties.

Company Assets Code of Conduct Topics:

• Preparing, maintaining, and disclosing accurate records.
• Information security.
• Protecting communication and information technology systems.
• Protecting external communications.
• Use of company property.
• Use of property owned by others.

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 • Facility security.
• Protecting intellectual property.

4. Anti-bribery and corruption.

A company's integrity is essential for maintaining trustworthiness and reputation. Employees should
always do their work fairly, honestly, and legally.

5. Attendance and punctuality.

Employees are expected to be regular and punctual in attendance. This means being in the office,
ready to work, at starting time each day. Absenteeism and tardiness burden other employees and the
company.

6. Absence without notice.

Employees who are unable to work due to illness or an accident should notify their supervisor. This
allows the company to arrange for coverage of their duties and helps others continue to work in their
absence. If an employee does a report for work and the company is not notified of an employee's
status for 3 days, it is typically considered a job abandonment.

7. General harassment and sexual harassment.

This company is committed to providing a work environment free of discrimination and unlawful
harassment. Actions, words, jokes, or comments based on an individual’s sex, race, ethnicity, age,
religion, or any other legally protected characteristic are not tolerated.

8. Cell phone use at work.

Personal cell phone usage during work hours is discouraged, except in extreme cases such as an
emergency.

9. Dress code.
A professional appearance is important when employees work with customers or potential customers.
Employees should be well groomed and dressed appropriately for the business and for their position.

10. Substance abuse.

The manufacture, distribution, possession, sale, or purchase of controlled substances of abuse on
company property is prohibited. Being under the influence of illegal drugs, alcohol, or substances of
abuse on company property is prohibited. Working while under the influence of prescription drugs
that impair performance is prohibited.

11. Tobacco products.

The use of tobacco products on company property, outside of permitted areas, is specifically
prohibited.

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 12. Internet use at work.
Employees may use the Internet when appropriate to access information needed to conduct a business
company business. Use of the Internet must not disrupt or injure the company computer network. Use
of the Internet must not interfere with an employee's productivity.

How to Write a Code of Ethics and Code of Conduct:

1. Review your mission statement and core values.
The goal of a code of ethics is to help employees make decisions that are in line with what the
company or organization values. This should be distilled into your mission statement and core values,
so it's a good place to start.

2. Talk to stakeholders.
What do management, employees, and clients think are the most important values of the company to
uphold? Get input from everyone involved to be sure your code reflects what the company stands for.
You can have them all look at a code of conduct template to get ideas for how their own might look
like.

3. See where other companies have faltered.

Have other companies in your industry had recent ethical failures? Avoid the same pitfalls by covering
these issues in your code.

4. Create a draft code for input and discussion.

Give everyone a chance to help decide on the contents of the code of ethics by inviting them to discuss
and give input on a draft.

5. Create a final draft and share it.

Once you've got a final draft approved, share it throughout the organization. Also, make sure
that a copy of it is added to your employee handbook.

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