“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
Companies should have ethics codes 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:
- Guide employees in situations where the ethical course of action is not immediately obvious.
- Help the company reinforce – and acquaint new employees with – its culture and values. A code can help create a climate of integrity and excellence.
- 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.
- 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.
- 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.
- Build public trust and enhance business reputations. Also, a code helps demonstrate the company’s values to socially responsible investors.
- Offer protection in preempting or defending against lawsuits.
- Enhance morale, employee pride, loyalty and the recruiting of outstanding employees.
- Help promote constructive social change by raising awareness of the community’s needs and encouraging employees and other stakeholders to help.
- Promote market efficiency – especially in areas where laws are weak or inefficient – by rewarding the best and most ethical producers of goods and services.