Key Components of a Code of Ethics

What are the key components of a code of ethics?

A business code of ethics is the document that provides key principles and values to guide employees’ behavior and decisions in the workplace. Writing a professional code of ethics for an organization can be a tedious and time consuming exercise, but it is necessary if the firm is to realize the success it so much desires. When drafting the document, you need to consider the legal, compliance, and value-based issues that will affect your employees.

This article explains the key components of a code of ethics for a business. Organizations and their ethical committees should consider each component as a critical tool in professional development of employees and relationship building in the workplace.

1) Legal Issues

For business organizations to thrive, they must comply with the law. Legal compliance prevents litigation costs and risks, and ensures that employees are doing the right thing in their professional conduct. It may sound as though it is obvious for employees to know that they are supposed to follow the law, but this requirement should be clearly stated in the code of ethics. The code should clearly express the mandatory requirement for all employees to follow federal and state laws. You do not need to write down all the laws of the land because each legal requirement will be established elsewhere, perhaps through training or induction. Nevertheless, the code of ethics should just mention that following the law is not an option.

2) Compliance and Policy Issues

There are some industry regulations, policies and compliance requirements that a company must follow or risk being fined. Highly regulated industries such as the financial services industry, healthcare, and real estate industries are subject to various regulations. For example, food industry is guided by certain regulations such as food safety standards, health certifications, etc. Ethics committees should understand all the compliance and regulatory requirements of their industry and specific them in their code of ethics. A company like Facebook can specify in their code of ethics that employees should protect the data privacy of employees as required by industry regulators.

3) Value-Based Components

Values are the principles that guide behavior, but they are not legally required. Organizations should include and explain such values as necessary guidelines to promote appropriate culture in the workplace. There are six universal moral values that you should include in your code of ethics as a minimum requirement. They are:

  • Trustworthiness
  • Respect
  • Responsibility
  • Fairness
  • Integrity
  • Honesty

Along with the above, your code of ethics may include other values such as being good citizens, caring, diversity, innovation, creativity, transparency and accountability. You should elaborate on each value so that employees know exactly what the value means to the organization, what they should do and what not to do in each situation, and how to behave when confronted with ethical dilemmas.

4) Consequences of Violating the Code of Ethics

The last component of the code of ethics is the course of action that should be taken if an employee violates any requirement in the code. You don’t just say “employees should not give false information to customers.” You should say what should happen if an employee provides misleading information. The code of ethics needs to specify fair and justifiable disciplinary action for any violation.

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