Corporate CODE OF

ETHICS
Chapter-7
https://www.youtube.com/watch?v=-gRLHf6ZBM4
 DEFINITION
Code of Ethics (COE) is a set of rules or guides intended to establish moral standards and decent
behavior in an organization, in simple language is a written document prepared by an organisation that
explicitly states what are the acceptable and unacceptable behaviors of the employees in the organisation.

Code of conduct (COC) is a set of rules outlining the responsibilities of or proper practices for an
individual or organization to be followed. Code of Conduct (COC) as defined by International
Federation of Accountants are Principles, values, standards, or rules of behavior that guide the
decisions, procedures, and system of the organization in a way that (a) contributes to the welfare of
its key stakeholders, and (b) respect the right of all constituents affected by its operation.

● It acts as a golden rule and serves as a framework for ethical decision making within an organisation
● It is a set of rules or guides intended to establish moral standards and decent behavior.
● It is the organization’s commitment to do the right thing and to do the things right
● The content of the code of ethics is tailored to the specificities of the organizational context
and ensuing specific work situations may vary across organizations
 Code of Ethics Vs Code of Conduct
● Code of Ethics
• The code of ethics is the heart and soul of a company.
• It paints a picture of how employees, customers, partners, and
suppliers can expect to be treated as a result.
● Code of Conduct
• Code of conduct is the communication tool that informs internal
and external stakeholders about:
• what is valued by a particular organization, its employees, and its
management?
Common Contents of Code Of Ethics
● Fiduciary responsibilities
● Compliance
● Accounting
● Member communications and confidentiality
● Commitment to learning and skill enhancement
● Absence of prejudice and harassment
● Conflict of interest
● Human Resources
● Social Responsibiity etc….
Essential Components
 RELEVANCY
● Should be relevant to clarify employees desired behavior
● It should be derived from
○ Organisation’s core values
○ Organisation’s purpose and mission
● It must align with values of founder or top management
 CORE-VALUES
● COE should not include solely as compliance documents or
rulebooks, it should also address issues relating to legal and
regulatory matters.
● It should communicate the importance of ethical behavior and
organisation’s core values.
 PLAIN LANGUAGE
● COE should be crafted and drafted in simple and plain language so
that parties know and understand.
● No technical jargon
● It shouldn't be too general as well
● Ethical standards should be communicated to enable them to know
what can and cannot be done by employees
 SPECIFIC DIRECTIONS
● When some situations trigger the temptation to behave unethically;
the code of ethics must provide specific directions and guidelines
about how to behave ethically
● It should help the employee during ethical uncertainties and
ethical dilemmas
Process for preparing COE
Process of Preparing Code of Ethics
● There is no specific way of preparing code of ethics
● There are different ways to structure and prepare the code of ethics
● The preparation of the code of ethics starts with the mention of the company’s
vision/mission statement.
● The mission statement is a document about what the company stands for and
why it exists.
● The mission statement embodies the concern of all stakeholders
● The code of ethics needs to be written not by one person but by the whole
stakeholders.
● Companies should conduct training programs to discuss the drafting of the code
of ethics by seeking constructive and valuable feedback
Process of Preparing Code of Ethics
● For example, Deloitte’s code of ethics:
 A message from the leader or CEO
 A clear-cut mention of the following:
 the company’s mission and vision statement
 Guiding principles
 Its binding commitment to ethics
 Its binding commitment to integrity
 Its binding commitment to quality
 CODE DEVELOPMENT-12 Steps
● Decide on goals and meaning of success
● Get leadership buy-in
● Create a code development task force
● Data intake and analysis -interviews and focus groups
● Keep leadership informed
● Draft your code of ethics
● Submit code to leadership for review
● Field test the code and make any final revisions
● Have the code reviewed by your legal counsel
● Obtain board approval of final draft
● Decide on a communications and education strategy
● Revise and update
 GUIDELINES FOR WRITING A
COE
● Be clear about the objectives that the code is intended to
accomplish
● Get support and ideas from all levels of organisation
● Be aware of latest changes in laws and regulations
● Simple and clear language
● Avoid legal jargon and generalization
● Provide resources for further information and guidance
● Make it user-friendly
● The code should realistically be written by those who use it
Enablers for effective implementation of a code of ethics
I. Organization culture: introduction of code of ethics requires a conducive organizational culture. There are 3Rs for
conducive organizational culture.
 Respect
 Responsibility
 Result
II. Role of leadership and top management: organization leaders and managers must ‘walk the talk’.
 Leadership behavior percolates down the organizational hierarchies till the lowest level.
 Leaders has to build a workplace atmosphere characterized by the following virtues:
a. Integrity: honest and humble
b. Intent: clear motives and agenda
c. Capabilities: qualities and abilities
d. Result: track record and achievement
e. Creating organizational symbols: symbols are those objects, actions, or ideas. Positive symbols includes:-
 Senior executive decision to avoid damages to customer from product tampering
f. Modelling ethical behavior: a leader has a great responsibility than the average employee to live up to ethical standard
and principle. The leader should convey ethical message to others:—
 Doing the right thing and conveying it to others
 Talking more about ethics
 Being approachable
 Treating employees fairly
 Demonstrating through life examples
 Integrating values into decision making activity
Enablers for effective implementation of a
code of ethics
III. Role of Employees in business ethics: employees also need to behave ethically in their approach.
 Employees are involve in day to day transaction concerning the company.
 There are four reasons that tempt employees to commit unethical behavior:
a) A view that activity must somehow be undertaken as it is the individual’s or company’s
best interest
b) A view that the activity is within permissible ethical and legal limit
c) A view that the activity is ‘not damaging’ because it will never be discovered
d) A view that because the company will benefit from the activity, the company will overlook
the unethical behavior and will even shield the person who engages in it.
Thank you!