The New Top Ten Best Practices for the Code of Conduct
/This is a guest post by Ramsey Kazem, East Coast Vice President at Spark Compliance Consulting
A Code of Conduct is a foundational element of any compliance program. This document articulates a company’s mission, values, and guiding principles. It defines the standards of business conduct expected from the company’s leaders, managers, and employees. Moreover, the Code of Conduct serves as a reference guide for company personnel in exercising their day-to-day job responsibilities and making difficult decisions. Codes of Conduct are not new, but the trends in how you create (or revise) your Code of Conduct have been changing.
The importance of an effective Code of Conduct cannot be overstated. Regulatory agencies, as part of any investigation into misconduct, will scrutinize this document to gauge a company’s commitment to ethical business practices. Also, the Code of Conduct provides a unique opportunity for a company to promote a culture of compliance by clearly communicating what the organization values and believes in. Companies, therefore, are well-served in taking the time to carefully craft a Code of Conduct that inspires its personnel to further the mission of the company. Here are the top-10 new best practices for developing an effective Code of Conduct:
Number 1: Focus on Values and not the Law
Too many companies still have Codes of Conduct that read as a legal treatise or law review article. The best practice now is to include only limited references to legal or regulatory standards, if any. A more effective approach is to articulate the company’s values as a means of communicating permissible or prohibited conduct. For example, instead of citing the Foreign Corrupt Practices Act as the basis for prohibiting corrupt business practices, a company should articulate its commitment to honesty, integrity, and fair dealing in its business transactions.
Number 2: Keep it Short and Focused
Many Codes of Conduct have morphed into mini-novels (without the excitement!) – some coming it at 80 pages long. A Code of Conduct that attempts to address every compliance risk or potential instance of employee misconduct typically results in a very long and overly detailed document. A better approach is to design the Code of Conduct to be short, focused, relevant, and engaging. This is easier said than done as it requires the balance of competing, and sometimes contradictory, factors. The Code of Conduct should be brief but informative, and focused but comprehensive. The following techniques can help achieve this balance:
Using a risk-based approach, limit the scope of the Code of Conduct to the high priority risk areas, employee expectations, and standards of conduct
Use short sentences or bullet points
When articulating broad values, principles, or mission statements, use examples to narrow their focus and demonstrate their applicability to the company’s business activities
Reference and supply a link to policies, procedures and other resources that further explain concepts introduced in the Code of Conduct
Number 3: Create a Framework for How to Think Through Challenging Issues
A Code of Conduct cannot (and should not attempt to) provide an “answer” to all ethical challenges company personnel will confront. Instead, the Code of Conduct should endeavor to create a framework for how to think through challenging issues or ethical dilemmas. The framework should identify important issues or questions to consider, recommend resources to review or access, and explain when and to whom a problem or issue should be escalated.
Number 4: Encourage Employees to Ask Questions
One of the reasons so many Codes of Conduct are overly long is because they are trying to provide an answer to every dilemma. Instead, an effective Code of Conduct should encourage employees to ask questions. To that end, the Code should include clear direction throughout the document for when, how, and to whom (e.g., the employee helpline, a supervisor, the HR Department, etc.) questions should be asked.
Number 5: Be Engaging and Current
Many Codes are trying so hard to be legally precise that they forget the audience that is going to read it. The most effective Codes of Conduct are engaging to the reader. Consider some of the following techniques to enhance your Code of Conduct:
Design the Code in color
Incorporate the company’s logo
Use the company’s color scheme/style elements and brand standards
Include graphics, photos, and embedded videos (for the electronic versions)
Include links to related policies and procedures
Also, the Code of Conduct must remain current and evolve with the changes in the legal and regulatory landscape, the business climate, and the nature, scope, and geographic reach of the company’s business operations. To that end, as a best practice, a company should review and update its Code of Conduct every three (3) to five (5) years.
Number 6: Provide Real Input from Senior Leadership
A company’s senior leaders must actively promote and support the Code of Conduct. An effective method to demonstrate this support is to feature senior leaders in the Code of Conduct in a prominent way. For example, many companies include a photo and a letter from the CEO at the beginning of the document. The letter typically articulates the company’s values, expresses the company’s commitment to ethical business practices, and underscores everyone’s responsibility for complying with the Code. To take this to the next level, feature other senior leaders throughout the Code with their photo and a short quote promoting a company value or a specific directive in the Code. Include personal messages from these leaders about their commitments to show a united front from the C-suite.
Number 7: Actively Encourage Employees to Report Misconduct
A company’s employees not only have the responsibility to comply with the Code of Conduct, but they should be encouraged to report actual or suspected instances of misconduct. As the “eyes” and “ears” of the company, employees across the business are in the best position to observe or identify instances of misconduct. Many Codes vaguely refer to the need to report. They often don’t include specific instructions as to how to do so.
The fact is, employees who need to report misconduct are usually highly stressed. The responsibility to report actual or suspected misconduct should be clearly stated in the Code of Conduct, followed by explicit instructions as to how to report. Telephone numbers, email addresses, and links to the web portal should be included in the Code wherever possible. If you have multiple phone numbers for reporting, add in the top five within the Code, along with a link to other numbers. To facilitate employee reporting, a company must develop and implement a strict non-retaliation policy. This policy should be highlighted throughout the Code of Conduct.
Number 8: Tailor the Content to the Business
Many Codes of Conduct are generic documents drafted by a law firm, and that means that they aren’t specific enough to the business the Code applies to. An effective Code of Conduct must be tailored to the Company’s business practices and activities. For example, instead of referencing generic examples that involve issues not regularly confronted by the business, use examples that are familiar, relevant, and directly applicable to the company’s business activities.
Likewise, instead of using stock photos, consider using photos of actual employees engaging in the company’s business. At the very least, if stock photos are more practical, ensure the photos depict activities relevant to your company (e.g., if a company is in the hospitality industry and most of the employees work in company-owned hotels, do not use photos depicting an office environment or manufacturing facility).
Finally, use terminology that is familiar to your company. If a company refers to its employees, business units or third-parties as “team members”, “customers” or “partners”, these terms should be used in the Code of Conduct – do not default to the generic terms (e.g., “employee”, “business unit” or “third-party”).
Number 9: Include a Q&A or FAQ Section Using Real Questions Where Possible
A question/answer (Q&A) or frequently asked questions (FAQ) section is an effective way to address common questions or issues of concern. To be most effective, the questions presented should raise company-specific inquiries and use real-world examples. To take this to the next level, use actual questions that have been sent to and answered by the Compliance Department (tailored for confidentiality). The Q&As or FAQs can be combined in a single stand-alone section of the Code of Conduct or they can be separated individually and inserted into the section/topic of the Code to which they pertain.
Number 10: Keep it at the Reading Level of the Employee Population
To be effective, a Code of Conduct must be understandable to all to whom it applies. Therefore, a company must carefully consider the reading level and the local language of its employees and draft the Code accordingly. That is, the Code of Conduct should avoid using legal jargon and technical terms and, instead, use plain, easy to understand language. There are programs and consultants that can help you to identify the current reading level of your Code.
It should go without saying that the Code should be translated into the local languages of its employees and be readily available to all.
Implementing these new best practices will ensure your company’s Code of Conduct will be more effective in creating a culture of compliance and furthering the mission of the company.
For a review of your Code of Conduct, or for assistance in updating it, contact info@sparkcompliance.com, or email Ramsey Kazem directly at rkazem@sparkcompliance.com
