1. The advantages and disadvantages of formal code of
conduct
. THE PROS OF CODES OF CONDUCT
During the last decade, codes of conduct have been mostly
voluntarily adopted by companies that are trying to protect their
interests and, also, in some cases, the public Journal of Public
Administration, Finance and Law Issue 9/2016 127 interest. Thus,
having a code of ethics has become the rule in corporate culture.
However, how well these codes serve companies goals and public
interest alike needs to be seen. Pros and cons have been outlined
by business community, civil society, academia representatives and
different NGOs representatives.
The reasons companies develop codes of conduct are many and
different, illustrating their business conduct policy: to respond
to consumer pressure and social concerns, to avoid negative media,
to improve and protect corporate reputation by emphasizing
corporate social responsibility and community involvement, to limit
negative externalities, and to actually provide for the public
good. At the same time, codes of conduct can be an effective tool
against corporate corruption by keeping under control employees’
behaviour in order to prevent wrongdoing that could have social and
economic adverse effects.
Thus, codes of conduct can be useful for the corporation, its
stakeholders, and the community that bears the effects of
corporation activity.
Empirical studies show that codes of conduct will help cement a
corporation’s good reputation, improve the working climate inside a
corporation and its business performance (Kaptein & Schwartz,
2008). At the same time, the rules of conduct will prevent
unethical and illegal wrongdoing, making employees’ behaviour more
predictable.
As studies show, the main reason companies develop codes of conduct
is to self protect themselves, usually preventing conflict of
interests at company level (Stevens, 1994). Also, a code of conduct
may be used as evidence in a criminal case to show that an employee
had knowledge of a prohibited activity or action and the company
was proactive in preventing it. Main sanctions for the employees
that are breaking conduct rules are: termination, suspension,
demotion, probation, appraisal comments, and other penalties.
THE CONS OF CODES OF CONDUCT
The existence and the use of corporate codes of conduct have been
under scrutiny and critiques have been raised due to the corporate
scandals that in recent years have augmented. These companies had
codes of ethics but they have chosen to ignore them.
Arguments against codes of conduct come both from the public but
also from the business representatives as well.
Codes of conduct proved inefficient since massive scandals such as
Enron accounting scandal or Volkswagen emission scandals
occurred.
It seems that codes have been developed as a mere response to
public and governmental pressure on corporate social
responsibility, generating a trend. In reality, the public believes
that ethics are just ignored by corporations and codes are often
used as a marketing tool, attracting customers’ and investors’
sympathy and thus, promoting the business on ethical grounds.
Codes of conduct are not binding by nature; they are just stating
internal rules that have to be followed by employees. How well
these rules are obeyed remains a matter of internal control and
sanctioning since there is no “ethics police”, external to the
company. Thus, if the company does not encourage its employees to
respect rules of conduct and efficiently monitor it, then they
remain futile (Baker, 2007).
Other criticism focuses on the broad, vague language of the codes,
especially when it comes to stating the rights of the employees and
explaining the mechanism used by the company for self-evaluation.
As a result, codes are not specific enough in order to shape moral
behaviour and to sanction misconduct. At the same time, codes could
be used against employees, containing provisions that limit their
freedom to speak out and unveil unethical behaviour for fear of
retaliation. In short, the content of codes varies greatly since
corporations usually ignore international standards when they draft
their rules of conduct. This makes their worldwide enforcement
difficult, if not impossible.
Codes of conduct should address all employees, not only top
management, since ethics concerns the company as a whole. Also, the
codes that use a top-down approach proved to fail for a number of
reasons. For instance, moral principles and rules are ignored by
management at investors’ pressure. It is the case of Enron
management that choose to ignore the code, serving its interest.
Thus, unless there is commitment from all employees, no matter
their rank, to implement and respect rules of conduct, codes remain
useless.
2 . Should employees participate in mandatory ethical training
?
Answer: Yes, All employees should participate in the mandatory
ethical training because
Consumers today are more conscious of ethical business practices
than ever before. In today’s business world, there is easy access
to information about companies and how they conduct business.
Consumers have become acutely aware of this information and have
made it an important part of where they decide to invest their
money.
Due to the ease of access to information provided by modern
communication, people have become very aware of ethical businesses
and the impact that they have. There are even businesses that were
created to showcase and give awards that highlight companies who
are ethical leaders in their industries. This includes lists like
EthiSphere’s annual ethical company ratings that consumers use to
determine the ethical standing of a company. Companies will promote
these achievements in their corporate literature and their websites
because it has become an essential part of being a successful
company.
Avoiding unethical business practices will not only help to create
a good reputation, but keeps the company safe from litigation.
Money scandals and poor business practices can cause a major loss
in profit. These can lead to a loss in motivation in employees and
ultimately bankruptcy. Maintaining quality and productivity by not
cutting corners can only create a good reputation and preserve a
good code of ethics for the company.
This is why having training in ethics is necessary for a successful
business. They not only help promote awareness to the ethical
practices in the company, but ethics training programs boosts
morale so that employees work more effectively and harmoniously
with their co-workers. Being ethically aware helps to maintain a
positive corporate culture and upholds a strong public image.
Ethics trainings are essential to preserving a positive business
culture and responsive to any ethical dilemmas that could arise.
Communicating ethical business behavior and implementing that
behavior into the workplace is an important business strategy that
can only improve a business. By having these programs in place and
updating them when necessary, companies will flourish and grow into
a thriving and respected business for years to come.
3. How might having a code of conduct help an employee make
decisions when faced with an ethical situation?
Trust is important in all relationships. Can it be further
developed in your work setting? Yes and one way to do so is to
develop a code of ethics.
A purposeful business code of conduct establishes an atmosphere of
commitment in an organization. It not only lays down a strong
cultural foundation for the business, but also helps companies
enforce and implement legal as well ethical policies and procedures
for all kinds of decision making. A purposeful code can build trust
between the organization and a variety of stakeholders affected by
its actions including employees, suppliers, customers, and the
general public. An effective code of conduct establishes the values
of the organization that drives its actions and the principles that
underlie decision making
The business code of conduct becomes the most important part of the
companies 'ethical framework.' A business code of conduct is a
'rule book/guide' that contains all do's and don'ts from legal as
well as ethical point of view and act as check list on what
companies as well as employees can and must enter into. The main
purpose of the conduct code is to act as a detailed description of
what is the most legal and ethical behavior expected out of the
business.
A few advantages of having a business code of conduct are:
It enhances the company's core values, beliefs and sets the right
culture
Gives a vision and a mission to the company
Builds a reputation of the company in the market
Keeps the company and its employee's from violating laws and
regulations
Fosters an environment of trust and ethical behavior
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