Ten Benefits of Having an Ethics Code

by Josephson Institute on December 30, 2013

“The single measure that would most improve corporate governance is the establishment by senior management of an ethical business culture.”
2003 survey of corporate directors and general counsel

The point of a corporate ethics code is to promote ethical behavior – not to enhance productivity, profits or public relations.  Still, a sound, well-administered code can benefit a company and its stakeholders in a variety of ways. It can:

  1. Guide employees in situations where the ethical course of action is not immediately obvious.
  2. Help the company reinforce – and acquaint new employees with – its culture and values.  A code can help create a climate of integrity and excellence.
  3. Help the company communicate its expectations to the staff to suppliers, vendors and customers.  Also, by soliciting feedback and questions, a company can use the code to encourage frequent, open and honest communication among employees.
  4. Minimize subjective and inconsistent management standards.  A code explicitly outlines the rights and responsibilities of staff members and helps guard against capricious and preferential treatment of employees.
  5. Help a company remain in compliance with complex government regulations.  The landmark Sarbanes-Oxley Act of 2002 requires public companies to have an ethics code for senior financial officers.
  6. Build public trust and enhance business reputations.  Also, a code helps demonstrate the company’s values to socially responsible investors.
  7. Offer protection in preempting or defending against lawsuits.
  8. Enhance morale, employee pride, loyalty and the recruiting of outstanding employees.
  9. Help promote constructive social change by raising awareness of the community’s needs and encouraging employees and other stakeholders to help.
  10. Promote market efficiency – especially in areas where laws are weak or inefficient – by rewarding the best and most ethical producers of goods and services.

Adapted from Josephson Institute’s Good Ideas for Creating a More Ethical and Effective Workplace, by Steve Nish

Related JosephsonInstitute.org links:

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