Establishment of a Code of Business Ethics

Whenever I think about ethics, I am reminded of the old quote by the Sufi poet Jallaludin Rumi: “Beyond the ideas of doing good or doing evil, there is a field, I will be waiting for you there.” We are in life, sometimes facing ethical dilemmas and we are in this gray field not knowing which direction to take and where it will lead us. Our personal ethics define our personal value systems, character and behavior. In today’s world, with an organization that has its own identity, a code of business ethics is required with which people can identify their value system and expected behavior.

Business ethics defines a moral code of conduct for the company, which specifies that the company must achieve growth and profits in a socially and legally responsible manner and is accountable for its decisions to internal and external stakeholders and the general public. . The London Institute of Business Ethics defines it as: “Business ethics is the application of ethical values ​​to business behavior. It applies to any and all aspects of business conduct, from boardroom strategies and how companies treat their employees and suppliers to techniques sales and accounting practices Ethics goes beyond legal requirements for a business and is therefore about discretionary decisions and value-driven behaviors Business ethics is relevant to both the conduct of individuals and for the conduct of the organization as a whole.

In most countries, the accounting and stock exchange institutes have mandated that every organization should have a code of conduct implemented within the organization. There is no standard code of ethics, and broad guidelines are provided that can be tailored according to the organization’s culture and business requirements. Each organization’s Ethics and Compliance department must prepare a written Code of Conduct and implement it within the organization.

The following section provides the procedure for developing, implementing and monitoring a Code of Conduct. The main step has been mentioned with a brief narrative and the key activities required:

1. Mandate and commitment of senior management: The Code of Conduct defines the core values ​​of the organization, thus impacting the organizational culture. It also has an impact on the organization’s reputation, as it specifies the organization’s stance towards corporate social responsibility. Senior management involvement is imperative to provide direction, funding, and resources.

• Obtain a formal commitment from management and the board of directors to establish the Code of Conduct
• Approval of budgets is required for development, implementation, and regular monitoring.
• Approval is needed to staff the department and establish reporting lines.

2. Preparation of the policy document: The main policy document contains the organization’s values, management’s commitment to them, details of the ethics program and the monitoring process. In addition, all supporting policies are mentioned. For example, if the code specifies fair and equitable treatment of employees, there should be additional policies related to assault in the workplace, diversity, sexual harassment, equal opportunity, etc.

• It is necessary to identify the core areas of the policy document.
• The main policy document should be supported by additional policies to ensure adequate coverage and implementation.
• Compare the policy document with the policy documents of other organizations.
• Incorporates the legal requirements for the policy document

3. Approval of the draft policy document: After completing the policy document and supplementary policies, it must be approved by senior management.

• The draft policy document must be formally approved by senior management, the audit committee, and the board of directors.
• Get feedback from business users to determine if they will face practical difficulties implementing it.

4. Develop an implementation strategy.: An implementation strategy is critical to the success of the program. A project plan should be developed along with the implementation strategy. The involvement of the Human Resources department is essential at this stage, since it will be responsible for implementing the training, incorporating the code of conduct in the appointment letters, establishing the reward system for maintaining ethics and also the reasons for firing employees. employees for unethical behavior. The implementation process will require:

• Structure of the department and personnel needs of the Ethics office.
• Selection of providers for the implementation of hotline and web systems in case it is not being done internally.
• Rewards and recognition system to be established by HR. Ideally, ethical values ​​should be incorporated into the employee scorecard.
• Training deployment strategy including trainers, schedules, material and evaluation system. • Procedures for investigation and reporting of minor and major deviations

5. Training and Awareness: Communication is the key to a successful implementation of the Code of Conduct. Various training methods and sources should be implemented simultaneously to train staff and external stakeholders. A training schedule must be published to implement the training. Explore the following awareness raising ideas and training resources:

• Prepare classroom training material to educate staff on detailed policies.
• Develop a web-based training program that includes ethical testing, case studies, and business scenarios.
• Publish relevant cases of ethical dilemmas on the intranet
• Provide training to existing staff and incorporate the same into induction training for new staff.
• Publish the relevant policies on the web for external interested parties such as suppliers, etc.
• Issue checklists to determine how to make decisions when faced with ethical dilemmas.

6. Implement hotlines and software needed to monitor complaints: The organization has the option of developing a web-based reporting tool in-house or outsourcing it. Whatever the case, final contact details and services should be published throughout the organization to allow staff to report complaints and discuss cases when faced with ethical dilemmas. Do the following two steps to do this:

• Post contact numbers, email IDs and websites for reporting complaints
• Staff available 24/7 for effective monitoring or as per business requirements

7. Report deviations and take corrective actions: Minor and major breaches of the Code of Conduct must be properly investigated. The report must identify the persons responsible for the non-compliance, the level of the non-compliance, the corrective action to be taken and the required modifications to existing policies, if any. Do the following:

• Conduct investigations of reported cases and submit reports to the audit committee and the board of directors.
• Perform root cause analysis to determine the reason for deviations and identify solutions to mitigate risks.

8. Evaluation of commitment to ethical values: Depending on the requirements, periodically, surveys and audits should be conducted to assess compliance with policies and the organization’s general attitude towards ethics. Be aware that having a Code of Conduct does not guarantee compliance, so regular monitoring is required to assess compliance. Adopt the following practices:

• Conduct an Organizational Survey to assess employee understanding and commitment to the Code of Business Ethics.
• Periodically audit the practices followed by comparing them with the policy document.

9. annual update: Policies are dynamic documents subject to revisions based on changes in economic and legal requirements. Do an overall assessment of existing policies on an annual basis and incorporate changes after senior management approval. Also, for all additions and changes, please send a formal communication to staff. Use the following process:

• Conduct an annual policy review.
• Address the gaps and deficiencies identified in the policies
• Obtain management approval for the same
• Implement updated policies and provide staff training.

The advantage of implementing a Code of Conduct is that it enhances the organization’s corporate governance efforts by establishing a uniform set of core values ​​and behavior for all staff. Staff know the correct course of action, who to turn to in a dilemma, and what the risks of engaging in an unethical pattern of behavior will be. Due to this, the reputation and legal risks of the organization are also reduced as it is mandatory for employees to comply with the law.

We welcome your feedback on the methodology. Share best practices if you have been involved in establishing a Code of Conduct for an organization.

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